Corporate Financial Decision-making Research Articles

The Impact of Investor Sentiment on Corporate Financial Decision-making: Taking New Media Platforms as an Example

In accordance with the theory of asymmetry, this article studies the impact of investor sentiment on the proportion of corporate accounts receivable. During the research process, 2617 listed companies in the Shanghai and Shenzhen A-share markets from 2011 to 2022 were selected as samples. The article constructs a multiple regression model, selects investor sentiment as the core explanatory variable, accounts receivable ratio as the dependent variable, and adds revenue growth rate, largest shareholder shareholding ratio, price to book ratio, and cash flow ratio as control variables. Descriptive statistics, analysis of Correlation, test of collinearity, analysis of regression, test of heterogeneity, and analysis of robustness are used to explore the financial indicators and financial decisions of enterprises; Research has indicated that a negative correlation exists between investor sentiment and the proportion of corporate accounts receivable. Meanwhile, there are also certain differences between state-owned enterprises and non-state-owned enterprises. Based on this, this article proposes relevant improvement suggestions for enterprises, investors, and regulatory authorities, which will help facilitate the healthy and stable development of the capital market.

Pension Insurance Contribution and Corporate Maturity Mismatch of Investment and Financing: Evidence from Contribution Rate Reduction in China

ABSTRACT Pension insurance contribution is an important factor affecting corporate financial decision-making. This study investigates the influence of the pension insurance contribution rate reduction policy on the corporate maturity mismatch between investment and financing. We found that the pension contribution reduction policy reduces actual contribution burden of firms, and the average actual contribution rate decreases by 0.26% after the nominal rate is reduced by 1%. However, the policy also significantly aggravates the corporate maturity mismatch of investment and financing, which survives a battery of robustness tests. The positive effect of pension insurance contribution rate reduction on the maturity mismatch of investment and financing is more apparent in private, smaller-scale firms and in firms with higher ownership concentration and lower management incentive levels. The pension contribution reduction policy strengthens long-term investment tendency by reducing the actual contribution burden of companies and shortens debt maturity by increasing principal-agent costs. The results of this study provide a new perspective for understanding the mismatch between corporate investment and financing.

Legal Dynamics and Financial Strategy: Understanding Corporate Responses to Global Regulatory Environments

This paper examines the complex interplay between regulatory compliance, legal frameworks, and corporate finance strategies within a global context. Through a detailed exploration of the impacts of regulations on corporate financing, the role of corporate governance in shareholder value maximization, the strategic use of cross-border investment and legal arbitrage, and the intricacies of financial reporting standards and corporate accountability, this study sheds light on how legal considerations shape corporate financial decision-making. Specific attention is given to the effects of debt financing and bankruptcy laws, equity financing and securities regulations, and the classification and regulatory treatment of hybrid financing instruments on corporate capital structure and financial flexibility. By integrating academic insights and practical examples, this paper contributes to the understanding of the symbiotic relationship between legal frameworks and corporate finance, highlighting the strategic responses of corporations to legal challenges and opportunities. The findings underline the importance of a sophisticated understanding of legal and regulatory environments in crafting effective corporate finance strategies, offering valuable insights for academics, practitioners, and policymakers.

Impact of corporate disclosure on dividend policy: a novel setting of COVID-19-related disclosure by Vietnamese listed firms

Purpose This study aims to investigate whether the extent of corporate disclosure, proxied by COVID-19-related disclosure, affects the dividend policy of listed firms. Design/methodology/approach The study uses a multinomial logistic regression model to examine the relation between corporate disclosure and the dividend policy of the 100 largest market-cap firms in Vietnam in 2021. The COVID-19 pandemic, with its unique impact on business operations, serves as the backdrop for this analysis. Findings The findings indicate that firms with more extensive COVID-19-related disclosure are more inclined to distribute dividends in the form of stocks or cash instead of omitting them. Originality/value This research contributes to the understanding of how corporate disclosure practices influence a firm’s financial decisions, particularly in the context of the COVID-19 pandemic. The findings hold implications for corporate financial decision-making during times of macroeconomic shock.

The Evolution of FinTech and its Effects on Financial Decision Making: A Systematic Literature Review

The development of FinTech technology has changed the financial landscape, having a significant impact on individual and corporate financial decision-making. Through a systematic literature review, this research investigates the evolution of FinTech and its effects on financial management behavior, product preferences, investment decisions, and consumer confidence. FinTech has improved accessibility, product innovation, data analysis, competition in the market, and security, while also raising challenges such as data security issues and the risk of bias in decision making. With a deeper understanding of this relationship, steps can be taken to maximize the benefits of FinTech while minimizing the risks.

Intelligent financial decision support system based on big data

Abstract In the era of big data, data information has exploded, and all walks of life are impacted by big data. The arrival of big data provides the possibility for the realization of intelligent financial analysis of enterprises. At present, most enterprises’ financial analysis and decision-making based on the analysis results are mainly based on human resources, with poor automation and obvious problems in efficiency and error. In order to help the senior management of enterprises to conduct scientific and effective management, the study uses big data web crawler technology and ETL technology to process data and build an intelligent financial decision support system integrating big data together with Internet plus platform. J Group in S Province is taken as an example to study the effect before and after the application of intelligent financial decision support system. The results show that the crawler technology can monitor the basic data and the big data in the industry in real time, and improve the accuracy of decision-making. Through the intelligent financial decision support system which integrates big data, the core indexes such as profit, net asset return, and accounts receivable of the enterprises can be clearly displayed. The system can query the causes of financial changes hidden behind the financial data. Through the intelligent financial decision support system, it is found that the asset liability ratio, current assets growth rate, operating income growth rate, and financial expenses of J Group are 55.27, 10.38, 20.28%, and 1,974 million RMB, respectively. The growth rate of real sales income of J Group is 0.63%, which is 31.27% less than the excellent value of the industry 31.90%. After adopting the intelligent financial decision support system, the monthly financial statements of the enterprises increase significantly, and the monthly report analysis time decreases. The maximum number of financial statements received by the Group per month is 332, and the processing time at this time is only 2 h. According to the results, it can be seen that the intelligent financial decision support system integrating big data as the research result can effectively improve the financial management level of enterprises, improve the usefulness of financial decision-making, and make practical contributions to the field of corporate financial decision-making.

Economic Policy Uncertainty and Corporate Inefficient Investment: A Research Based on Fixed Effects Model with Evidence from China

Investment decision-making is the core of corporate financial decision-making, which has a vital influence on investment income and shareholder wealth. This paper will use the fixed effects model to study the relationship between policy certainty and inefficient investment of enterprises, and the data of Chinese companies used are from the CSMAR database. This article first studies the correlation between inefficient investment and policy uncertainty. Based on the research on the relationship between economic policy uncertainty and corporate inefficient investment, this paper finds that economic policy uncertainty has a negative impact on the investment efficiency of enterprises. This conclusion is still valid after a series of robustness tests, including adding some omitted variables and fixed effects of the research year and industry. And through heterogeneous analysis, this paper finds that the investment efficiency of small-scale and low-quality auditing companies is more affected by economic policy uncertainty.

Role of Gender-Based Emotional Intelligence in Corporate Financial Decision-Making.

PurposeBusiness competition is getting more intense nowadays, and corporate survival is getting harder; consequently, corporate managers have to make financial decisions in complex and globalized scenarios. As a result, in order to compete in today’s global economy, businesses are contemplating incorporating behavioural components of human psychology into their decision-making processes. Corporations are masters of quantitative analysis, but they rarely pay attention to behavioural elements of organizational success. Emotional intelligence is important in many parts of life; therefore, it is crucial to look at its dimensions when it comes to corporate financial decision-making.MethodsA simple random sampling technique was used to collect data from 200 senior-level managers from the corporate sector located in the twin cities of Rawalpindi and Islamabad of Pakistan. SPSS version 22 was used to test the hypotheses.ResultsResults of the study show the gender-based variation in corporate financial decision-making detailing the higher impact of EI of males on CFD than their counterparts in the corporate sector organizations. The elements of self-awareness, empathy, motivation and self-regulation affect the financial decision-making of both the genders with varying degrees of influence, whereas social skills do not affect CFD of both genders.ConclusionThe study findings explicate that the influence of self-awareness and empathy constructs of EI on corporate financial decisions is stronger in female managers than their male counterparts. However, male managers exhibit a significantly stronger influence of motivation, social skills, and self-regulation dimensions on their financial decisions compared to female managers in a corporate setting. Overall, the impact of EI on CFD is slightly higher in male managers. These empirical outcomes imply that organizations should assess the employees not only for technical skills but also based on their emotional intelligence during the recruitment process.

Trade-Off Variables and Market Value: An Estimated Panel Data Study of Quoted Small and Medium Scale Enterprises from Nigeria

This study was undertaken to examine the relationship between trade off variables and market value of quoted small and medium scale enterprises in Nigeria. Secondary data obtained from financial statement of 10 quoted small and medium scale enterprises from 2009 – 2018. Market value was modeled as the function of, non-tax shield, business risk and tangibility. Panel data methods were employed while the fixed and random effects models were used as estimation technique at 5% level of significance. Fixed effects, random effects and pooled estimates were tested while the Hausman test was used to determine the best fit. Panel unit roots and panel cointegration analysis were conducted on the study. The study found that trade off variables has significant relationship with market value of the small and medium scale enterprises. From the regression summary, we conclude that, trade off variables have significant relationship with market value of the small and medium scale enterprises. We recommend that financial managers should institute sound, efficient and coherent capital structure management policies such that will enable them determine the right mix or combination of debt, equity or both that will enhance firms’ value in Nigeria. Firm should expand to a level it does not result to diseconomies of scale and the eventual fall in the value of the small and medium scale enterprises. Government and policy makers should provide an enabling market environment capable of enhancing easy source of capital to enhance firm value in Nigeria. Management of the small and medium scale enterprises should employ more of long-term debt than equity capital in financing their operations, because it results in higher small and medium scale enterprises value. Corporate financial decision makers should employ more of long-term-debt than equity in their financial option. This is in line with the pecking order theory. Management of the small and medium scale enterprises should compare the marginal benefit of using long-term-debt to the marginal costs of long-term-debt before concluding on using it in financing their operations. This is because as shown by this work, long-term-debt impact positively on firm’s value unlike equity capital.

The Peer Effect of Targeted Poverty Alleviation Activities of Listed Firms

Targeted poverty alleviation is a major transformation measure for China to overcome poverty. Prior literature on the motivations of listed firms participating in targeted poverty alleviation mainly focuses on firms’ own characteristics, such as financial performance, property right, and managerial heterogeneity. It assumes that firms make their targeted poverty alleviation decisions independently, without considering the mutual impact between different firms. Firms intend to learn and imitate the activity of other firms in the same industry or the same region in the process of decision-making and implementation. This phenomenon is called the peer effect. Firms often consciously pay attention to the practice of competitors, and ultimately produce interactive decisions. Based on the data of Chinese listed firms from 2016 to 2019, this paper empirically tests whether the targeted poverty alleviation activity of listed firms has the peer effect, and further explores its mechanism, influencing factors and economic consequences. The results show a significant positive industrial peer effect of targeted poverty alleviation activities of listed firms. The investment and amount of targeted poverty alleviation in the same industry will significantly positively affect the targeted poverty alleviation decision of other firms. The mechanism test shows that social learning and competitive pressure are the main reasons for the peer effect of targeted poverty alleviation activities of listed firms. Considering the types and quality of targeted poverty alleviation, we find that the peer effect is mainly reflected in the non-industry-development investments instead of industry-development investments. We do not find a significant peer effect in the quality of targeted poverty alleviation of listed firms. Further analyses show that state-owned firms, firms with more financial constraints , and firms with less information transparency tend to imitate peer firms’ targeted poverty alleviation activities. In addition, targeted poverty alleviation activities based on the peer effect have a positive impact on firm value. The contribution of this paper is as follows: First, from the perspective of firm interaction, this paper expands the research on the influencing factors of targeted poverty alleviation, makes up for the deficiency of the existing research on the driving factors of targeted poverty alleviation, which only focuses on the characteristics of firms themselves, and helps to deeply understand the motivation of firms to fulfill their social responsibility. Second, the existing finance literature mainly investigates the peer effect in corporate financial decision-making and corporate governance mechanism, while this paper expands the field of peer effect from the perspective of corporate social responsibility. Third, in terms of practical significance, this paper provides decision-making reference for the regulatory authority to encourage and guide listed firms to participate in the practice of targeted poverty alleviation and give full play to the role of capital market in consolidating the national poverty alleviation achievements.

CEO organizational identification and firm cash holdings

As the decision-makers and implementers of a firm’s financial strategy, executives play a critical role in cash holding activities, and their psychological characteristics have a major impact on cash holdings. This paper investigates the association between CEO organizational identification and firm cash holdings. The empirical results show that CEO organizational identification is negatively associated with firm cash holdings, and the negative association is more pronounced when the level of financial development is higher and economic uncertainty is lower. Further analysis reveals that the higher a CEO’s organizational identification, the higher the firm’s R&D investment and capital expenditure, and high CEO organizational identification can increase the value of firm cash holdings. Overall, our findings supplement the literature on organizational identification and cash holdings, and on the effect of executives’ psychological characteristics on corporate financial decision-making.

Does Expected Tax Burden Discourage Corporate Investment? Explanation Based on Private Benefits of State-owned Shares

Based on the unique ownership structure of stated-owned enterprises（SOEs）in China, we examine the influence of expected tax burden on corporate investment decisions. Prior researches indicate that the efficiency of SOEs is lower than non-SOEs, which is proved in stock market as well（Wu, 2012; Yao and Zhang, 2001）. There are two explanations for this phenomenon: property right view and policy burden view. The property right view believes that the main reason for the SOEs’ low efficiency is unclear definition of property rights in SOEs（Zhang, 1997）. However, the policy burden view instead argues that excessive social responsibility and lack of reasonable market evaluation index lead to the low efficiency of SOEs（Lin et al, 1998）. In this paper, we find that SOEs care tax when they make investment decisions, which is consistent with the policy burden view. We also indicate that the main reason for this phenomenon is a unique agency problem caused by the fact that the state is the controller of SOEs, which is also consistent with the property right view. We analyze state ownership structure from a tax perspective, examine the influence of the expected tax burden on corporate investment decisions, and then integrate two explanations mentioned above. In traditional corporate finance theory, both state-owned and non-state-owned controlling shareholders have indiscrimination. Both of them get returns on investment according to the proportion of shares, and the private benefits of control at the same time. However, compared with other types of shareholders, the governments, as the ultimate controllers of SOEs, can not only get equity gains and control rights, but also get tax revenues paid by the companies. Although the governments can also obtain tax benefits from private enterprises, it is difficult for the governments to ensure tax revenues by intervening directly in business decisions of the private enterprises. In contrast, in the SOEs, the governments as the controlling shareholders can directly intervene in the business decisions of SOEs, so as to ensure the implementation of the tax revenues. Unlike the equity gains and the private benefits of control rights, the tax benefits are monopolized by the state. Therefore, the tax benefits could not be incorporated in the market price, which makes the market value underestimate the overall value of the state-owned controlled shareholders to a certain extent. When there is a conflict between tax benefits and returns on equity, the governments are more inclined to get exclusive tax benefits. The private benefits for state-owned holding rights cause the special agency problems between state-owned controlling shareholders and minority shareholders. This paper aims to clarify and analyze how agency problem affects corporate（especially SOEs）investing decisions. This paper takes the sample of listed companies from 2004 to 2013, and compares the relationship between corporate investment and expected tax burden under different ownership structure of listed companies（hereinafter referred to as ‘investment-expected tax burden sensitivity’）. We find that, compared with private holding listed companies, investment-expected tax burden sensitivity of SOEs is significantly reduced; when infrastructure investment return rate of local government is higher, that is to say the tax revenue demand of the local governments is bigger, the effect of state-owned shareholders on investment-expected tax burden sensitivity is weaker. The empirical results of this paper support the theoretical hypothesis that private benefits implied by tax is one of the important differences in the property control of listed companies in China. Therefore, tax should not be ignored when comparing and analyzing the different ownership structure and its mechanism of action. From the perspective of governmental exclusive right of taxation, this paper points out that there is a unique agency problem between state-owned controlling shareholders and other shareholders in SOEs. We study the role of ownership structure in corporate financial decision-making, especifically corporate investment decisions, from a perspective of tax benefits under the specific background in China. This paper tries to provide empirical evidence and new research perspective for further investigation into the effect of ownership structure on corporate financial decisions.

Measuring client-based corporate reputation in B2B professional services: scale development and validation

Purpose– The purpose of this paper is to develop and validate a client-based reputation of business-to-business professional services firms scale (PSF-Rep) which measures clients’ perceptions of the reputation of professional service provider firms. So far, no multidimensional scale exists in the literature to measure the reputation of professional service firms, although the reputation dimensions of importance are likely to be very different from other settings.Design/methodology/approach– From an initial pool of fieldwork-based items, an 18-item PSF-Rep scale is developed, which is validated using several samples – corporate financial decision-makers’ views of their accounting firms in a US national sample and organizational clients of one large legal firm with national presence.Findings– The four-dimensional PSF-Rep scale meets all established reliability and validity criteria. Further, reputation and its dimensions (using PSF-Rep) are positively associated with important marketing outcomes, including word of mouth, loyalty intentions, trust and share of wallet.Originality/value– As professional service markets become more competitive, firms recognize the importance of a good reputation in attracting customers. This research is the first to propose a psychometrically robust measure to capture client-based reputation of business-to-business professional services firms.

Determining the impact of taxation on corporate financial decision-making

This PhD project contributes to the corporate finance literature by analyzing several issues related to the impact of taxation on the financial decision-making of companies. The main research question of this doctoral project is twofold. First, I analyze how the heterogeneity among national tax systems distorts the financial decisions of a multinational enterprise. I investigate the consequences of a series of alternative international tax designs on the strategy of a multinational enterprise regarding the cross border distribution of its investment and the choice of its financing behavior. I analyze inter alia a combination of an Allowance for Corporate Equity and a Comprehensive Business Income Tax and the introduction of a system of Consolidation and Formulary Apportionment. Moreover, I investigate how international tax consolidation can tackle the distortion related to heterogeneous national tax systems.Secondly, I empirically measure how the tax discrimination between debt and equity affects the capital structure of a company by comparing the debt ratio of treatment and control companies before and after the introduction of an equity tax shield (difference-in-differences regression). Consistent with the theoretical prediction, the estimated results show that the introduction of an equity tax shield has a significant negative effect on the debt ratio of a company. This effect amounts to approximately 2-7%, meaning that a classical tax system encourages companies to use on average 2-7% more debt than when there is an equal tax treatment of debt and equity.JEL Codes: F23, G32, H25, H32, K34

A comparison of workplace safety perceptions among financial decision-makers of medium- vs. large-size companies

This study, through a random national survey in the U.S., explored how corporate financial decision-makers perceive important workplace safety issues as a function of the size of the company for which they worked (medium- vs. large-size companies). Telephone surveys were conducted with 404 U.S. corporate financial decision-makers: 203 from medium-size companies and 201 from large companies. Results showed that the patterns of responding for participants from medium- and large-size companies were somewhat similar. The top-rated safety priorities in resource allocation reported by participants from both groups were overexertion, repetitive motion, and bodily reaction. They believed that there were direct and indirect costs associated with workplace injuries and for every dollar spent improving workplace safety, more than four dollars would be returned. They perceived the top benefits of an effective safety program to be predominately financial in nature – increased productivity and reduced costs – and the safety modification participants mentioned most often was to have more/better safety-focused training. However, more participants from large- than medium-size companies reported that “falling on the same level” was the major cause of workers’ compensation loss, which is in line with industry loss data. Participants from large companies were more likely to see their safety programs as better than those of other companies in their industries, and those of medium-size companies were more likely to mention that there were no improvements needed for their companies.

Corporate financial decision makers' perceptions of their company's safety performance, programs and personnel: Do company size and industry injury risk matter?

Top-level managers make important decisions about safety-related issues, yet little research has been done involving these individuals. The current study explored corporate financial decisions makers' perceptions of their company's safety and their justifications for these perceptions. This study also explored whether their perceptions and justifications varied as a function of company size or industry injury risk. A total of 404 individuals who were the most senior managers responsible for making decisions about property and casualty risk at their companies participated in this study. The participants took part in a telephone survey. The results suggest that corporate financial decision makers have positive views of safety at their companies relative to safety at other companies within their industries. Further, many believe their company's safety is influenced by the attention/emphasis placed on safety and the selection and training of safety personnel. Participants' perceptions varied somewhat based on the size of their company and the level of injury risk in their industry. While definitive conclusions about corporate financial decision makers' perceptions of safety cannot be reached as a result of this single study, this work does lay groundwork for future research aimed at better understanding the perceptions top-level managers.

Corporate financial decision-makers’ perceptions of workplace safety

This study, through a random national survey, explored how senior financial executives or managers (those who determined high-level budget, resource allocation, and corporate priorities) of medium-to-large companies perceive important workplace safety issues. The three top-rated safety priorities in resource allocation reported by the participants (overexertion, repetitive motion, and bodily reaction) were consistent with the top three perceived causes of workers’ compensation losses. The greatest single safety concerns reported were overexertion, repetitive motion, highway accidents, falling on the same level and bodily reaction. A majority of participants believed that the indirect costs associated with workplace injury were higher than the direct costs. Our participants believed that money spent improving workplace safety would have significant returns. The perceived top benefits of an effective workplace safety program were increased productivity, reduced cost, retention, and increased satisfaction among employees. The perceived most important safety modification was safety training. The top reasons senior financial executives gave for believing their safety programs were better than those at other companies were that their companies paid more attention to and emphasized safety, they had better classes and training focused on safety, and they had teams/individuals focused specifically on safety.