Corporate Decision-making Processes Research Articles

Board of director characteristics and corporate labour investment efficiency: empirical evidence from European-listed firms

Purpose Prior work has shown that the board of directors can alleviate market imperfections that lead to capital investment inefficiency. The authors extend previous work by exploring how board characteristics influence the efficiency of human capital investment, a critical production factor that has remained insufficiently examined. Specifically, this study aims to investigate how board activity, size, the presence of a separate chairman, female directors and board independence affect firm labour investment efficiency in the European context. Design/methodology/approach The sample contains 4,331 firm-year observations traded on the STOXX® Europe 600 index from 2009 through 2022. This paper applies a lagged ordinary least squares (OLS) regression to test the proposed hypotheses. It also uses a dynamic panel generalised method of moments (GMM) regression to tackle potential endogeneity concerns. Findings The results show that board gender diversity and the level of independent directors are positively linked to labour investment efficiency, whereas board size and meeting frequency are negatively related to labour investment efficiency. Meanwhile, the presence of a separate chairman on the board does not appear to be significantly associated with labour investment efficiency. In additional subgroup analyses, the authors find that board gender diversity mitigates managers’ inclinations towards both overinvestment and underinvestment in labour. The authors also find that the level of independent directors helps greatly in reducing the underinvestment in labour, while it fails to attenuate the overinvestment in labour. Moreover, the authors find board size to be significantly associated with the tendency to make suboptimal labour decisions, manifesting as both overinvestment and underinvestment in labour. Finally, the results show that board meetings are significantly associated with overinvestment problems, while underinvestment problems seem to be unrelated to meeting frequency. Practical implications The empirical results have implications for policymakers and market participants in Europe. Firstly, firms may improve the efficiency of their labour investments by increasing directors’ independence and adding more female voices to corporate boards. Secondly, the evidence shows that some board attributes, such as board activity and size, do not necessarily have a beneficial impact on corporate decisions, particularly labour investment decisions. Finally, market participants are likely to benefit from this paper by understanding the role of board attributes in promoting the efficient allocation of firm resources. Originality/value This paper makes two significant contributions. Firstly, it extends the literature on the role of boards of directors in shaping corporate decision-making processes, particularly concerning human capital investment decisions within European firms. By doing so, the authors provide new evidence confirming that certain board attributes, such as board size, director independence and board gender diversity, are important for optimising firms’ resource allocation. Secondly, although numerous studies investigate boards’ role in capital investment decisions, relatively few empirical studies exist on the role of boards in labour investment decisions. This paper, therefore, tries to tackle this void in the literature by investigating firms’ decision-making concerning labour investments.

Firm-level climate change risk and adoption of ESG practices: a machine learning prediction

PurposeBy combining the notion of prospect theory with advanced machine learning algorithms, this study aims to predict whether financial institutions (FIs) adopt a reactive stance when they perceive climate change as a risk, consequently leading to the adoption of environmental, social and governance (ESG) practices to avoid this risk. Prospect theory assumes that decision-makers react quickly when decisions are framed as a risk or threat rather than as an opportunity.Design/methodology/approachWe used a sample of 168 FIs across 27 countries and seven regions over the period 2003–2020. To conduct our empirical investigation, we compared the prediction accuracy of various machine learning algorithms.FindingsOur findings suggest that out of 12 machine learning algorithms, AdaBoost, Gradient Boosting and XGBoost have the most precision in predicting whether FIs react to climate change risk in adopting ESG practices. This study also tested the overall climate change risk and risks associated with physical, opportunity and regulatory shocks of climate change. We observed that risks associated with physical and regulatory shocks significantly impact the adoption of ESG practices, supporting prospect theory predictions.Practical implicationsThe insights of this study provide important implications for policymakers. Specifically, policymakers must take into account the risk posed by climate change in the corporate decision-making process, as it directly influences a firm’s adoption of corporate actions (ESG practices).Originality/valueTo the best of our knowledge, this is the first study to investigate the firm-level climate change risk and adoption of ESG practices from a prospect theory perspective using novel machine learning algorithms.

The Integration of Sustainability and ESG Accounting into Corporate Reporting Practices

Purpose: The purpose of this study is to investigate the integration of sustainability and Environmental, Social, and Governance (ESG) accounting into corporate reporting practices. It explores the significance, challenges, and benefits associated with this integration, focusing on how it impacts transparency, accountability, and stakeholder engagement in corporate environments. Research Design and Methodology: The study employs a qualitative literature review methodology, involving comprehensive searches of academic databases, journals, and other relevant publications. The selection of literature is guided by predefined criteria, and data collection involves reading and critically analyzing scholarly articles, reports, and documents to extract pertinent themes and insights. Findings and Discussion: Key findings from the study highlight the growing recognition among companies of the importance of sustainability reporting. Despite the benefits, challenges such as issues with data accuracy, comparability, and integration into corporate decision-making processes persist, which can hinder the effectiveness of sustainability reports. Implications: The study suggests that to overcome these challenges, organizations need to adopt integrated reporting frameworks, comply with regulatory requirements, engage more effectively with stakeholders, and leverage technological innovations. These steps will help maximize the value derived from transparent and accountable ESG disclosures, ultimately enhancing company reputation, improving risk management, and boosting stakeholder engagement.

Redefining “Core Competencies”: Labor Market Intermediation in Outsourced Warehouses

Abstract For nearly a half century, questions of why and how firms navigate the “make-buy” decision have animated fields as varied as industrial relations and economic geography. The idea of “core competencies” became the dominant explanation of corporate decision-making processes, where any activity deemed outside of the central specializations of the firm is a possible candidate for outsourcing. Coupled with the focus on short-term profit taking, corporate leaders have grown increasingly focused on shedding less-profitable activities and shifting supply-chain risk—leading to high levels of lead-firm influence over subcontracting markets and the cost-based competition that permeates them. This paper examines the role of third-party logistics companies (3pl s) in the warehousing sector. It argues that efforts to contain operational costs increasingly are focused on labor and that the ability to access and deploy low-cost labor is among the “core competencies” touted by many 3pl s in the warehousing sector.

Risk Management Committee Gender and Likelihood of Financial Distress of Listed Deposit Money Banks in Nigeria

This study explores the effect of risk management committee gender diversity on the likelihood of financial distress among listed deposit money banks in Nigeria. The study utilizes the Nigerian Code of Corporate Governance 2018 as an instrumental variable to address endogeneity concerns related to the self-selection of gender diversity on the risk management committee. The dependent variable is the likelihood of financial distress, while the independent variable is the gender composition of the risk management committee. The sample size consists of 12 listed deposit money banks, and the data covers the period from 2017 to 2021. The analysis employs a two-stage regression analysis technique. The findings of this study reveal a significant positive effect of risk management committee gender on the likelihood of financial distress among listed deposit money banks in Nigeria. This suggests that a higher representation of a particular gender in the risk management committee is associated with an increased likelihood of financial distress. The results have important implications for policymakers, regulators, and banking institutions in Nigeria. The study highlights the need to consider gender diversity in risk management committees as a potential driver of financial distress. The findings call for proactive measures to promote a more balanced gender representation and inclusion in corporate decision-making processes within the banking sector. The findings emphasize the significance of gender diversity in risk management practices and provide valuable insights for stakeholders seeking to enhance risk assessment and mitigate the occurrence of financial distress in the banking sector.

Effect of country governance on firm performance

This study examines the effect of country-level governance quality, moderated by culture, on firm performance. The sample included data from 2,511 publicly-traded companies from nine countries from 2009 to 2018, totaling 15,981 firm-year observations. The data to estimate firm performance were collected from the Refinitiv database, while metrics for country governance and cultural dimensions were obtained from the World Bank and Hofstede Insights, respectively. Multiple linear regression models were used to analyze the relationship between country-level governance indicators and firm performance, including the moderating role of culture. The main results showed that governance indicators have a positive and statistically significant relationship with the performance of the analyzed firms. In most of the estimated models, culture has shown to have a positive moderating effect on the relationship between country governance and performance. This research provides evidence that the governance environment in which firms operate influences their performance, suggesting that managers’ knowledge about the specific organizational environment of regions or countries is vital in the corporate decision-making process.

국내기업 에너지효율 투자 의사결정 단계별 주요 동인의 상대적 중요도 분석 : 퍼지계층분석을 활용하여

Energy efficiency is considered a priority because it is not only a management target for companies, but also an effective means for the government of Korea to reduce greenhouse gas emissions and implement carbon neutrality. For this, it is necessary to identify in detail drivers that have a positive impact on energy efficiency-related investments by companies and shift to the development of sophisticated policies that can promote these drivers. Under these circumstances, this study contributes to providing basic data that the government can use as reference data for developing policies to improve corporate energy efficiency by determining drivers that can lead to investments for improving energy efficiency at each stage of corporate decision-making. To this end, we first assumed the company’s decision-making process leading to energy efficiency investments and then selected drivers that have a positive effect on each stage following a literature review. Further, since the government is paying considerable attention to energy efficiency as a means of implementing carbon neutrality, we divided the responding companies on the survey into large emitters of GHGs and small emitters and analyzed the results. Additionally, to improve the reliability of the results, we calculated the relative importance of each driver by applying a fuzzy analytic hierarchy process. We found that an energy price-related driver is more important for large emitters of GHGs. By contrast, we found that small emitters of GHGs placed increased importance on energy audit-related driver, energy efficiency policy-related driver, and technology identification driver. This study provides a framework for the government to take more sophisticated approaches toward developing policies for corporate energy efficiency improvement by identifying drivers that have a positive impact on the implementation of energy efficiency investments at each stage of the corporate decision-making process.

Impact of Artificial Intelligence on Corporate Board Diversity Policies and Regulations

With the use of artificial intelligence (AI) technologies in company activities, discussions on how to use AI in company management have emerged. Although AI is not legally recognised as a director in company law, there are examples of robot directors such as Vital, which have managed to get a seat in the corporate boardroom. Today, AI is on the verge of playing an important role in corporate governance. However, whether it has a seat on the board of directors or an important role in decision making is still a hot topic. Another critical discussion in the field of corporate governance in recent years is board diversity, which aims to improve the corporate decision-making process and create efficiency. This article attempts to anticipate the potential impact of AI on corporate board diversity policies and regulations. Therefore, this article seeks to examine the effects of the inevitable use of AI in the corporate decision-making process on corporate board gender diversity discussions and regulations under three possibilities: AI as a board member, AI as an enabler to assist a decision maker or AI being used to help decision making such as selecting board members.

The Relationship between Big Data and Decision Making. A Systematic Literature Review

The increasing use of big data within the economics field has led academics and professionals to broaden the investigation of its consequences in corporate decision-making processes. Until now, scholars and managers have been focused only on the technical aspects of big data, without emphasizing the influence they exert on the effectiveness of decision-making systems. Firstly, this paper aims to review the literature which concerns the study of the relationship between the use of big data and its effectiveness in corporate decision-making system. Secondly, it provides relevant evidence to analyze whether big data acts as a facilitator for the implementation of advanced decision-making models and eventually how. In this aspect, our work identifies the key factors that support the corporate decision-making process by proposing a possible corporate governance model. The theoretical framework that we have adopted relies on big data management studies, with a specific focus on the implications which show that the use of big data can generate the decision-making dynamics of companies and organizations. The current paper provides both theoretical and managerial contributions to the literature on big data and decision making, defining future perspectives to advance knowledge in this research area.

From intuitive to data-driven decision-making in digital transformation: A framework of prevalent managerial archetypes

The use of analytics in corporate decision-making processes demands a paradigm shift within companies, and particularly among their top executives. Corporate leaders represent a major lever for this change. Therefore, a deeper understanding of their managerial capabilities, characteristics and contribution in this context is required. Aiming to provide actionable guidance on how to manage the shift to data-driven decision making, this study helps to develop a more profound understanding of this emerging managerial role by examining managerial success factors following a semi-structured interview approach. With insights from interviews with 32 top executives from Germany across different industries, this paper research proposes four managerial archetypes that are relevant to mastering the digital transformation towards analytics-based decision-making processes. Furthermore, it sheds light on the characteristics, capabilities, and contributions of the four archetypes—Analytical Thinker, Coach, Guide, and Strategist. Although the archetypes have differentiated attributes and qualities, all four seem of importance in manifesting analytics in organizations. Our findings provide guidelines to assess the top management's abilities to manage digital transformation projects. Furthermore, the results serve as basis for future empirical research on the human aspect of analytical capabilities regarding leadership.

Environmental disclosure on mandatory and voluntary reporting of Portuguese listed firms: the role of environmental certification, lucratively and corporate governance

Purpose This study aims to construct two environmental disclosure indices (EDI), one obtained from the mandatory reporting (annual report) and the other from the voluntary reporting (sustainability report), to compare their evolution. In addition, the authors developed and evaluated a conceptual model that aims to analyse if the two EDI are affected by industry, environmental certification, lucratively and corporate governance attributes. The legitimacy, signalling and voluntary disclosure theories are used to support the theoretical relationship between the company’s characteristics, corporate governance and environmental disclosure. Design/methodology/approach Using the content analysis technique, the authors have developed two indices to assess the level of environmental disclosure in the companies’ mandatory and voluntary reporting. In addition, to analyse the determinants of EDI, the authors applied the technique of multiple linear regression using panel data. Findings Based on Portuguese listed companies (Euronext-Lisbon), the results, from 2015 to 2017, exhibited an increase of 14.6% and 25.8% for the EDI obtained from the annual reports and for EDI obtained from the sustainability reporting, respectively. In addition, the results revealed that the environmental certification, lucratively, number of members on board and number and proportion of women of the board directors tend to affect the annual reporting EDI. Regarding the sustainability reporting EDI, the results showed that the environmental certification, lucratively and proportion of independent members of the board of directors have an impact on it. Research limitations/implications The study focuses on quantitative rather than qualitative disclosures and it brings some insights to the theoretical field. Practical implications The results obtained can assist corporate decision-making processes regarding the improvement of environmental disclosure, both on the mandatory annual report and on voluntary sustainability reports. Originality/value This study brings new perspectives to this topical issue in accounting. Originally, this study is applied to Portuguese listed companies and it shows different trends and determinants of environmental disclosure when included in the annual reporting or sustainability reporting.

The Association between Board Gender Diversity and Corporate Investment Efficiency

We investigate the relationship between board with female outside directors (FODs) and firms’ investment efficiencies using the firms listed in KOSPI from 2015 to 2019. We find that the association between firms with FODs and their investment efficiencies is generally insignificant although we find a weak negative association with under-investment. Then, we conduct the additional analyses to see if the association between them would be different in firms with high agency costs arising from excess free cash flow. Interestingly, we find that firms with FODs are negatively associated with over-investment as well as under-investment but the association is only pronounced in firms with higher level of free cash flow. The results of this study continue to maintain when we employ propensity score matching approach to address self-selection bias. Overall, our evidence supports the prior studies suggesting the positive aspect of gender-diverse boards in corporate decision-making process. That is, gender diversity may enhance board‘s governance roles, providing implication that female outside directors in boards can add a value to a firm needing a strong governance mechanism. This could be of interest of regulators and policy makers while considering the adoption of female quota system in the board of directors in listed firms.

The Evolving Delaware Books and Records Jurisprudence and the Caremark Conundrum

Corporate litigation increasingly operates through stockholders’ books and records inspection these days. The rise and expansion of stockholders’ rights to information from corporations have been among the most significant developments, albeit underappreciated, of late under Delaware corporate law jurisprudence. In the aftermath of a few mid-2010’s Delaware Supreme Court corporate law seminal decisions that heightened the pleading standards for stockholder plaintiffs to challenge a wide range of intra-corporate business transactions, the Delaware courts have consistently relaxed the interpretation of a statutory rule (Section 220 of the Delaware General Corporation Law) that grants stockholders a qualified right to inspect corporations’ books and records. This judicial re-balancing of the pendulum, has provided pre-complaint discovery to stockholders seeking to prepare for potential fiduciary-breach litigation. Equipped with strengthened pre-filing discovery tools, stockholders use such access to broad range of intra-corporate materials to substantiate their allegations in order to overcome Delaware’s laxed standard of reviews of corporate transactions, as well as monitor the corporate decision-making process. In this edition of Equity Chambers, Lee Rudy and Eric Zagar, two of the most seasoned stockholder plaintiffs’ litigation counsel, provide an insider’s perspective of Delaware books and records rapid changing doctrinal landscape. In addition, they discuss the clash between corporate litigation actors in the lead plaintiffs process context, as well as the current state of director oversight liability claims.

Increased Company Performance through Macroeconomics Sales Forecasting: A Case Study

Traditional planning in the business environment is used to allocate and coordinate resources mainly on basis of company-internal data. Thereby, a general weakness is that macroeconomic changes, due to business cycles, are not taken into consideration and the chance to take advantage of the associated effects on the revenues of an individual enterprise is missed. Including a macroeconomic trend analysis in business planning fosters the objectivity to create a solid basis for a corporate decision-making process. This paper deals with the Economic Trend Outlook Model which allows to consider macroeconomic influences on the company-specific capacity planning. In doing so, a company can turn into a proactive organization that makes use of advanced trend information and improves the individual forecasting accuracy. Thus this paper describes the method behind this strategy and introduces a stepwise approach using the examples of two company cases.

Rise of the machines: towards a conceptual service-robot research framework for the hospitality and tourism industry

PurposeThis study aims to introduce a conceptual framework for service robot (SR) acceptance by customers, employees and policymakers – a framework to help determine corporate decision-making on SR workplace integration.Design/methodology/approachThis study reviews SR adoption literature within the tourism and hospitality industry. These SRs may have some level of artificial intelligence capability and possibly anthropomorphic (e.g. humanoid) or zoomorphic (e.g. animal-like) features, contingent on task and design choices. The study then identifies factors that potentially influence employee and consumer acceptance and experiences of SR, as well as policy and compliance factors and all elements of the corporate decision-making process concerning SR adoption in the hospitality setting.FindingsThis paper reviews the obstacles and benefits of SR adoption in the hospitality industry based on employee, consumer and public policy considerations.Research limitations/implicationsSRs are increasingly deployed within hospitality and tourism settings. Future studies should further explore the value-adding functions of SRs implemented in existing hospitality operations.Practical implicationsHospitality and tourism industry practitioners should integrate the dimensions in the conceptual framework to make fully informed decisions on SR adoption.Originality/valueTo the best of the authors’ knowledge, this is one of the first studies to provide a holistic SR adoption framework offering theoretical and practical implications for ongoing SR research and implementation.

A Study on Customer Analytics Initiative (WCAI) and its Impact on the Brand of Wharton Business School

The Wharton Customer Analytics Initiative (WCAI) is the leading academic research center that focuses on the development and application of customer analytics methods. WCAI is the leading academic research center in the world that focuses on the development and application of customer analytics methods. The innovative Research Opportunity Platform and the crowd sourcing approach to R&D, WCAI helps academic researchers from around the world understand how to effectively monetize consumer data collected by developing and applying new predictive models to businesses. The authors couple their work with companies and researchers around the world with a variety of co-curricular student programs that facilitate talent development and recruitment. Started with a generous donation from Wharton alumnus Art Bilger and his wife, Dahlia, and with an executive relationship with Omnicom Group, Inc. WCAI has a significant impact on data-driven corporate decision-making processes and on the dissemination of vital information to managers, students, and policy-makers. Customer Analytics refers to the collection, handling, evaluation, and systematic exploitation of a company's granular data regarding the behaviours of its customers. In this paper, we analyzed the features and impact of the Wharton Customer Analytics Initiative (WCAI) on different stakeholders

A Study on Customer Analytics Initiative (WCAI) and its Impact on the Brand of Wharton Business School

The Wharton Customer Analytics Initiative (WCAI) is the leading academic research center that focuses on the development and application of customer analytics methods. WCAI is the leading academic research center in the world that focuses on the development and application of customer analytics methods. The innovative Research Opportunity Platform and the "crowd sourcing" approach to R&D, WCAI helps academic researchers from around the world understand how to effectively monetize consumer data collected by developing and applying new predictive models to businesses. The authors couple their work with companies and researchers around the world with a variety of co-curricular student programs that facilitate talent development and recruitment. Started with a generous donation from Wharton alumnus Art Bilger and his wife, Dahlia, and with an executive relationship with Omnicom Group, Inc. WCAI has a significant impact on data-driven corporate decision-making processes and on the dissemination of vital information to managers, students, and policy-makers. Customer Analytics refers to the collection, handling, evaluation, and systematic exploitation of a company's granular data regarding the behaviours of its customers. In this paper, we analyzed the features and impact of the Wharton Customer Analytics Initiative (WCAI) on different stakeholders.

Does social capital influence corporate risk-taking?

This paper explores the influence of social capital on corporate risk-taking using a large sample of publicly traded US firms. We predict that firms with high social capital display a higher level of risk-taking behavior. Consistent with our prediction, we find a negative relationship between corporate risk-taking and social capital. This paper shows that the social environment transmits valuable capital to individuals and thereby influences their corporate decision-making process. We also find that the combined effects of excessive risk-taking and social capital result in value destruction to the firm. Our test results are robust to alternatives measures of risk-taking, addressing endogeneity issues, and alternative model specifications. The paper contributes to the finance literature by demonstrating social capital as an important determinant in the corporate decision-making process, particularly in corporate risk-taking decisions.

Digital production innovation projects – The applicability of managerial controls under high levels of complexity and uncertainty

PurposeThe purpose of the present study is to assist academics and practitioners in supporting and managing digital production innovation projects using managerial controls. The focus is on projects that deliver innovations containing new combinations of physical, digital and/or cyber-physical components, developed to be used within a production system. More specifically, this paper aims to explore the applicability of different managerial controls for managing and supporting digital production innovation projects, i.e. projects that are characterized by high levels of complexity and uncertainty.Design/methodology/approachThis is a multiple-case study in which interview data was collected from five digital production innovation projects in two manufacturing firms. The empirical data was used to analyze success factors, challenges and obstacles in different phases of the studied projects, and to connect these to the application of different types of managerial controls.FindingsThe findings provide an increased understanding of who to control, what to control and how to control in digital production innovation projects.Research limitations/implicationsThis paper is focused specifically on the perception of managerial controls in digital production innovation projects and has not explicitly focused on manufacturing companies' intended usage of managerial controls. This paper's focus on manufacturing companies with producing customers and on projects developing solutions for their respective customers' production systems also encourages further studies at other companies undergoing a comparable transition. Given the necessary system perspective on managerial controls that is being highlighted, this paper emphasizes further research needs on how firms can also apply managerial controls to support external collaborations.Practical implicationsThe results have a number of managerial implications regarding digital production innovation projects. The most prominent findings revealed the importance of giving attention to the managerial controls related to the decision-making process and the involvement from stakeholders outside the organization itself. In particular, it was shown that managerial controls securing a more holistic involvement in the decision-making process should be applied, and that managerial controls suitable for customers and partners need to be developed.Originality/valueThe study is among the first studies to focus on the application and perceived effectiveness of managerial controls in digital production innovation projects. The ways in which managerial controls are applied to collaborations with customers and partners and the ways in which action, cultural and personnel controls are combined and aligned to support the corporate decision-making process particularly stand out as essential for manufacturing companies' Industry 4.0 transition.

Disordered Punishment: Workaround Technologies of Criminal Records Disclosure and the Rise of a New Penal Entrepreneurialism

AbstractThe privatization of punishment is a well-established phenomenon in modern criminal justice operations. Less understood are the market and technological forces that have dramatically reshaped the creation and sharing of criminal record data in recent years. Analysing trends in both the United States and Europe, we argue that this massive shift is cause to reconceptualize theories of penal entrepreneurialism to more directly address the role of technology and commercial interests. Criminal records, or proxies for them, are now actively produced and managed by third parties via corporate decision-making processes, rather than government dictating boundaries or outsourcing duties to private actors. This has led to what we term ‘disordered punishment’, imposed unevenly and inconsistently across multiple platforms, increasingly difficult for both government and individuals to control.