Corporate Decisions Research Articles

Foreign investors’ perception of ESG controversies in Brazil

We study international minority shareholders' perception of ESG controversies in the Brazilian market, focusing on Vale S.A. and JBS S.A. We analyze 1757 votes cast by international investors from 2013 to 2022. Vale S.A. received more attention from the investors, reaching 72% of the total dissenting votes. Our sample includes 54 funds managed by 28 investors. DWS Investment GmbH and the University of California are the investors most concerned with Vale S.A. and JBS S.A.'s ESG controversies. The German investor DWS Investment GmbH represents 26% (14) of the total funds and 76% of the total flow of dissenting votes. We find that foreign institutional shareholders are well-informed and engage in dissent voting against management, with detailed justification based primarily on Vale S.A. and JBS S.A.'s severely controversial ESG issues. With greater foreign scrutiny and investors engaged in challenging corporate decisions, Brazilian companies should significantly develop their governance structure by improving ESG practices and aligning minority shareholders' interests. Finally, Brazilian companies should use this learning curve window of newly adopted practices aligned with high-quality international standards, avoiding the possibility of greenwashing.

Judicial independence and earnings management

AbstractWe investigate the crucial relationship between judicial independence and corporate earnings management, utilising China's staggered judicial delocalisation reform. We establish a causal and negative relationship between the judicial independence of local courts and corporate earnings management. Channel analyses demonstrate that judicial independence limits local government officials' capacity to interfere in corporate decisions and increases the ex post legal risks for information distortion. This effect is particularly pronounced among non‐state‐owned enterprises and in regions with stronger institutional frameworks. These findings highlight the indispensable role of judicial independence in fortifying the rule of law and reducing corporate information distortion.

Optimal dynamic pricing and green design under carbon-reduction competition considering social influence

The concept of green design is a design idea that focuses on environmental protection and sustainability. Green design has become the core competitiveness of enterprises. So this paper explores competitive pricing and green design strategy of firms in the context of carbon reduction. In the analysis of the effect of social influence, consumer environmental awareness is also considered. And two research scenarios are examined: Price competition in single carbon reduction scenario; Competition in pricing and green level under dual carbon reduction scenario. The results indicate that social influence and consumer environmental awareness interactively and significantly affect corporate decisions; Social influence positively promotes firms’ profit and is not always disadvantageous for competitors’ profit; In equilibrium, when one firm makes a green transformation, it achieves the win-win situation of not only improving environmental performance but also maximizing economic benefits. However, the induced environmental improvements and economic benefits of competitive enterprises are not necessarily ideal. The study results provide optimal strategies for competitive and environmental actions of enterprises, and also provide management insight for the sustainable development of enterprises.

The Boundaries of Directors' Duty of Diligence: Responsibility Determination from the Perspective of Corporate Decision-Making Mechanism

Although China's Company Law has established a basic framework for the duty of care of directors, there is still a lack of clear and specific standards for the boundaries and responsibility determination of the duty of care under the decision-making mechanism in the specific implementation process. This involves disputes over the allocation of corporate decision-making power and the choice of judgment criteria. The choice should be made based on the company's objective reality. Examining the composition of the elements of responsibility, subjectively it should be gross negligence and non-bona fide, and objectively, when evaluating whether the director has been diligent, one should not simply judge from the outcome, but should delve into the considerations and efforts in the decision-making process to fairly evaluate whether the director has fulfilled their duty of care. The business judgment rule essentially reduces the requirements of the duty of care for directors and serves to block liability. Therefore, the determination of responsibility should be lenient rather than strict. By constructing a scientific, reasonable, and flexible determination mechanism, the optimization and upgrading of corporate governance are promoted.

The impact of corporate social responsibility on green innovation: a test based on meta-analysis

Purpose This study aims to investigate the impact of corporate social responsibility (CSR) on green innovation by considering the three dimensions of green innovation cognition, behavior and outcomes and to explore the role of situational and measurement factors in this relationship. Design/methodology/approach This study adopts a meta-analysis method to integrate 208,997 observations from 48 independent empirical studies on CSR and green innovation. Findings CSR positively affects green innovation cognition, behavior and outcomes. Additionally, the relationship between CSR and green innovation is stronger in Western cultural background than in Eastern ones. The impact of CSR on green innovation is also more significant in small and medium-sized enterprises (SMEs). Moreover, this study shows that the correlation between CSR and green innovation is stronger when the source of data is primary data and when green innovation is measured by non-patent methodologies. Originality/value This study elucidates the impact of CSR on green innovation and further clarifies the potential reasons for the divergent findings in existing related studies. The article enriches the theoretical results related to CSR and green innovation and provides valuable insights and references for corporate decision-makers.

Sustainable public policy instruments: revealing global interest in circular economy and eco-innovations

The concept of eco-innovation has become increasingly popular as the industrial industry should move toward sustainability. For businesses to establish core competences in the circular economy model, eco-innovation strategies are crucial components. Academicians are now studying the information behind these corporate decisions, with a growing body of work on the topic. The main goal of the study is to reveal and describe the development and interest in the topic of ecological and environmental innovations through bibliometric analysis. The bibliometric analysis is used to reveal the prevailing trends in the fields of sustainability, sustainable development, green economy, and eco-innovations. The fundamental techniques of comparison, induction, synthesis, analysis, and deduction are applied. In addition, the authors focused on bibliometric analysis, as it allows the processing of huge amounts of data and the creation of scientific maps. The development process in various countries around the world is diverse. Environmental and ecological innovations appear to present a substantial challenge. The prioritisation of the circular economy is also observable in scientific publications and in the academic sphere. Bibliometric analysis reveals the increasing popularity of the circular economy and ecoinnovations among authors, indicating the unavoidable need to tackle a more sustainable approach to economic and production activities.

Does CEO age matter in auditor choice and audit pricing? The role of CEO dominance

PurposeThis study examines the impact of the age of the chief executive officer (CEO) on the demand for audit quality, as reflected in auditor choice and audit fees. Furthermore, the study investigates whether CEO dominance moderates the association between CEO age, auditor choice and audit fees.Design/methodology/approachUsing a sample of 14,066 firm-year observations from 2000 to 2017, the study employs logistic regression and ordinary least squares (OLS) regressions to estimate the research models. The study also employs various techniques to address the endogeneity issue in the findings.FindingsUsing industry specialist auditors and brand name (Big 4) auditors as proxies, the study finds that firms with older CEOs are more likely to appoint higher-quality auditors. The study also finds that firms with older CEOs pay higher audit fees than firms with younger CEOs, which is likely to be due to increased demand for higher-quality audits and to risk aversion among older CEOs. In addition, the study finds that CEO dominance attenuates the positive association of CEO age with auditor choice and audit fees. The findings are found to be robust in our analyses, which address the endogeneity issue with firm fixed effects, two-stage least squares (2SLS) regression and entropy balancing. In addition, the study provides evidence that the positive association between CEO age and audit pricing persists when firms replace younger CEOs with older CEOs.Research limitations/implicationsThe study’s findings suggest that the United States (US) Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) may need to be more cautious when monitoring financial statements from firms with younger CEOs.Originality/valueThis study contributes to a growing stream of research investigating the links between managers’ idiosyncratic age differences and the quality of financial reporting and corporate decisions.

Business Group Affiliation and Board Independence in India: The Effects of Structural and Situated Attention

ABSTRACTResearch Question/IssueThis study examines how business group affiliation shapes firm attention and consequently influences firms' compliance with board independence requirements.Research Findings/InsightsUsing a longitudinal sample of Indian listed firms, we find that group‐affiliated firms are more likely to comply with board independence requirements than nongroup firms, especially when the affiliated firm is larger or when a greater proportion of firms in the business group has adopted an independent board structure. However, the likelihood of compliance in group‐affiliated firms is subject less to the influence of the industry compliance norm. We also document that group‐affiliated firms are less sensitive to the influence of the industry task environment than stand‐alone firms. Other things being equal, the influences of industry complexity, munificence, and dynamism on compliance are smaller in group affiliates.Theoretical/Academic ImplicationsOur study contributes to the attention‐based view by extending the structural attention argument from organizational structures within firm boundaries to organizational forms across firm boundaries. We argue that the network structure of business groups shapes affiliated firms' attention focus and consequently affects their compliance patterns. We also highlight the joint effects of structural and situated attention on shaping organizational decisions. We reveal that the interplays of business groups' organizational form and industry contexts give rise to distinct compliance patterns between affiliated and unaffiliated firms and among different types of group‐affiliated firms. As such, we supplement prior corporate governance literature by stressing the influences of inter‐organization networks and industry task environment on board structure.Practitioner/Policy ImplicationsOur study indicates that inter‐organizational networks affect compliance with corporate governance regulations. Thus, the government could utilize inter‐organizational relationships and peer influence to encourage compliance. Our study also highlights the impact of industry environments and business group structure on board composition and managers' cognitive limitations that prevent them from attending to all situational cues. Thus, it is essential for managers to allocate their scarce attention to scanning various domains of their firms' external environments and internal circumstances when making strategic and corporate governance decisions.

Political governance and firm performance in China: Evidence from a quasi-natural experiment

The involvement of the Communist Party of China in corporate decision-making has formed a corporate governance model with “Chinese characteristics” that diverges from commonly studied governance models. This paper aims to provide direct insight into China’s corporate governance model by examining how the involvement of Party organizations in corporate governance influences the performance of private firms. To address endogeneity concerns, we use a quasi-natural experiment (i.e., sudden deaths of board directors) that leads to an exogenous change in the proportion of Party directors. Using difference-in-differences estimation, we find that an increase in the proportion of Party directors (i.e., stronger political governance) improves private firms’ performance. This finding is robust to various tests. Moreover, the channel analysis suggests that the Party organization performs advisory and supervisory functions in corporate governance. Last, we present evidence that the excessive involvement of the Party organization in corporate governance also imposes political costs on private firms.

Foreign business exposure, policy uncertainty, and investment allocation decisions of Chinese multinational corporations

Using unique subsidiary-level data of 3863 Chinese non-financial firms from 2000 to 2019, we document that the multinational firms have 5.3 % higher capital expenditures than domestic firms, relative to the average. After decomposing firms' investment into domestic and offshore investment, we find that the increased capital expenditure of multinational firms results from their offshore investment allocation in response to policy uncertainty in the domestic market. Our analysis suggests that, in the face of domestic uncertainty, multinational firms switch to their offshore markets as a means to reallocate investment, rather than in response to offshore investment opportunities, access to foreign capital, or domestic competition. Overall, this paper helps us better understand the real options theory in the context of international business.

PREDICTING INSOLVENCY IN BRAZILIAN COMPANIES USING MACHINE LEARNING:

Corporate insolvency prediction serves as a valuable strategic parameter to proactively identify financial and managerial risks. Recent approaches to bankruptcy prediction have predominantly leveraged machine learning algorithms, demonstrating superior predictive accuracy compared to conventional methods. This study highlights the effectiveness of the Random Forest methodology in insolvency assessments. Consequently, an exploratory analysis was conducted to evaluate the feasibility of employing a bankruptcy prediction model within the scope of publicly traded Brazilian companies using machine learning techniques. The sample is made up of companies with delisting status on the B3 stock exchange due to insolvency, between 2005 and 2018, a period in line with the enactment of Brazilian legislation on the subject. Evaluation of the model in Brazilian companies revealed an accuracy of 98% in predicting bankruptcies, highlighting the effectiveness of the Random Forest model as a valuable resource for investors, corporate decision makers and interested parties. This research contributes significantly to the discourse surrounding the adoption of machine learning tools in the field of bankruptcy prediction in the Brazilian business scenario.

A Code of Ethics for the social performance profession

I advocate for the establishment of a Code of Ethics for social performance professionals, particularly in the extractive and energy industries where faster and more production is essential for the energy transition. Demand for social performance practitioners is increasing. As the profession evolves, it faces significant challenges due to a lack of standardised qualifications and frameworks. In this opinion piece, I underscore the critical role social performance professionals play in advising corporate decision-making and the necessity for professionalisation of the field. A Code of Ethics recognises three unique aspects of social performance practice that demand specific ethical guidance: multi-stakeholder accountability, complex power dynamics, and consideration of long-term impacts. The concept of ethical maturity in practitioners’ decision-making processes is discussed, and a set of ethical principles proposed, illustrated with practical scenarios. I conclude by emphasising that a well-defined Code of Ethics is essential for building a profession that is valued for its accountability, integrity and culture of ethics. Dialogue among practitioners and stakeholders is crucial to ensure that the code reflects the complexities of social performance practice and contributes to responsible business practices.

Do Titans Deliver the ESG Promise? Societal Recognition and Responsible Corporate Decisions

Do Titans Deliver the ESG Promise? Societal Recognition and Responsible Corporate Decisions

The Perverse Valuation Effect on Mergers and Acquisitions in Europe

We investigate the macroeconomic and financial determinants of mergers and acquisitions (M&A) in Europe and address the gap in understanding how financial market dynamics influence corporate decisions. While previous literature has examined macroeconomic factors affecting M&A, the impact of (10-year government) bond yields remains underexplored. We fill this gap using panel data of 21 European Union Countries over 2006:Q1–2022:Q2. Across different model specifications we find that bond yields and real gross domestic product growth are robust determinants of M&A, even after controlling for other determinants. A novelty of our study is that rising and higher bond yields are associated with a reduction in M&A activity because investors are shifting their portfolios out of bonds and into riskier assets like equities, thereby increasing acquisition costs. We denote this as a “perverse valuation effect” offering new insights into M&A dynamics.

Corporate culture and investment inefficiency

Using an aggregate measure of corporate culture, we find that firms with stronger corporate culture encounter lower investment inefficiency. We show that reducing information asymmetry or engaging in tax avoidance are two potential channels through which corporate culture reduces investment inefficiency. Further analyses reveal that the aforementioned relationship is more pronounced for firms with lower local religiosity, firms with less corporate social responsibility engagement, and financially unconstrained firms. Overall, our findings contribute to the literature stressing the importance of corporate culture for corporate decisions and outcomes, and hence, for adding value.

Bibliometric Mapping of the Relationships Between Accounting, Professional Accountants, and Sustainability Issues

The accounting profession plays a crucial role in serving public interest by establishing the foundation for sustainable development and taking on social responsibility. The growing focus on sustainability practices of companies and stakeholders has also had a significant impact on the role of accounting and professional accountants. This has led to increased expectations for greater involvement in integrating sustainability into corporate decision making at every level. We used a bibliometric analysis of academic literature as a research method to identify the relationships between accounting, professional accountants, and sustainability issues (APASI). Bibliometrix R-package and VOSviewer were used to achieve the proposed objectives. This study analyzes the performance of the scientific literature, establishes the conceptual, intellectual, and social structure of research, and identifies new research directions. A period of 37 years (1987–2024) is taken into consideration, with 2556 documents and 859 sources extracted from the Web of Science database analyzed. We offer, in an original manner, descriptive statistics and relevant landmarks of the sources, authors, publications, organizations, and countries that have contributed significantly to the development of research in this field. Interested researchers have the opportunity to identify scholars for potential collaborations and valuable study resources.

Does waste disclosure waste?

AbstractThis study investigates the motivations behind firms disclosing their waste production. Analyzing data from S&P 500 companies spanning from 2010 to 2018, we explore the influence of board characteristics on this corporate decision. Our findings reveal that firms with a higher proportion of female directors or independent directors, the establishment of a sustainability committee, and external verification of their sustainability reports are more inclined to disclose their waste production. Further examination demonstrates variations in these trends across firms with distinct characteristics. In particular, the impact of female directors proves especially significant for larger, younger firms with higher leverage, a greater number of employees, or firms compliant with the Global Reporting Initiative (GRI). Conversely, the presence of a sustainability committee appears to have a more pronounced impact on smaller, younger, and less profitable firms that do not comply with GRI standards.

Mapping The Growth of ESG Research: A Bibliometric Analysis Using Bradford's, Lotka's, and Zipf's Laws

Objective: The objective of this study is to investigate the growth and development of research on Environmental, Social, and Governance (ESG) factors using bibliometric analysis. The aim is to understand the publication trends in ESG research and identify influential authors, key themes, and opportunities for future studies. Theoretical Framework: The research is grounded in key bibliometric laws such as Bradford's law (journal productivity), Lotka's law (scientific productivity of authors), and Zipf's law (word frequency analysis). These laws form the basis of the study and provide a solid framework for understanding the evolution of ESG research. Method: This study adopts a bibliometric analysis approach, using data from the Web of Science and Scopus databases. A total of 699 articles from 345 journals and 1,574 authors were analyzed. Techniques like citation analysis, co-citation analysis, bibliographic coupling, and network analysis were employed to assess publication patterns and collaborations. Data was processed using R software and Bibliometrix. Results and Discussion: The results reveal a significant increase in ESG-related publications, particularly after 2013, with annual growth of 39.97%. The study identifies influential authors, such as Hebbe and Buallay, and explores the themes of sustainability, corporate social responsibility, and governance. In the discussion, the results are contextualized within the broader ESG framework, highlighting the role of ESG in corporate behavior and investment strategies. Research Implications: The study provides insights into how ESG research can inform policy-making and corporate decision-making. The findings highlight the importance of ESG factors in sustainable development and suggest future research avenues in areas like digital transformation, entrepreneurship, and innovation. Originality/Value: This study contributes to the literature by offering a comprehensive overview of ESG research, utilizing innovative bibliometric techniques to track its evolution. The originality lies in the use of multiple bibliometric laws to analyze ESG trends, making it valuable for researchers and practitioners looking to understand current and future directions in ESG.

Portfolio location-related decisions: do proximities matter?

PurposeThis paper aims to examine the relationships between how family owners perceive different aspects of proximity to their territory of origin and the location-related decisions of family business portfolios.Design/methodology/approachBy using the data collected from 112 family business portfolios (FBP), the authors carry out an empirical analysis to test the proposed hypotheses. The results are robust across a battery of robustness analyses performed by the authors.FindingsThe analysis reveals a heterogeneous relationship between the different dimensions of proximity and the maintenance and location of portfolio business units. Specifically, we reveal that entrepreneurial families’ social and institutional proximities to their founding territory have a positive influence on their decisions related to investing and maintaining their business portfolio.Originality/valueThese findings open the black box of how business decisions are affected by how business owners perceive their contexts, providing new insights into how corporate decisions in understudied business organisations, business groups, are shaped by the ownership’s proximity to territories.

The influence of external factors on corporate strategy and strategies for adaptation in light of the global challenges

This study investigates the influence of external factors on corporate strategy and explores strategies for adaptation in the face of global challenges. The primary objective is to analyze how various external variables including economic conditions, technological advancements, regulatory shifts, and socio-cultural changes affect corporate decision-making and strategic planning. Utilizing a quantitative research methodology, the study involved a structured survey distributed to a sample of 116 corporate executives across diverse industries, allowing for a comprehensive analysis of the data collected. Statistical techniques were employed to identify correlations between the external factors and the strategic adaptations implemented by organizations. The findings reveal that economic fluctuations and rapid technological innovations are the most significant external influences on corporate strategies. Companies that proactively respond to these changes tend to exhibit greater resilience, enhanced market competitiveness, and improved long-term sustainability. The research underscores that organizations that incorporate external insights into their strategic planning are more capable of developing effective responses to evolving challenges. To address these findings, the study offers several recommendations: organizations should enhance their agility by investing in thorough market research and establishing flexible strategic frameworks that can swiftly adapt to external changes. Furthermore, fostering a culture of innovation and continuous learning within the organization is crucial for navigating the complexities of global challenges effectively. By embracing these adaptive strategies, companies not only prepare themselves to confront immediate challenges but also position themselves favorably for future opportunities in a rapidly changing environment. Ultimately, this research contributes valuable insights to the literature on corporate strategy, emphasizing the necessity of understanding external dynamics and implementing adaptive strategies for organizational success in today’s competitive landscape. The study provides a foundation for further exploration into how organizations can strategically navigate external influences while maintaining agility and responsiveness in their operations.