Corporate Finance Research Articles

Exploring Financial Risk Management: A Qualitative Study on Risk Identification, Evaluation, and Mitigation in Banking, Insurance, and Corporate Finance

The research aims to analyze existing scholarly works to gain insights into risk identification, evaluation, and mitigation strategies. The methodology involves a comprehensive literature search using academic databases such as PubMed, JSTOR, Scopus, and Google Scholar. Inclusion and exclusion criteria are applied to filter relevant sources, and data collection involves reading and critically appraising each selected source. Thematic analysis is employed to identify key findings, themes, and theoretical frameworks. The synthesized findings reveal the importance of risk identification as a fundamental step in effective risk management, encompassing various risks such as credit, market, liquidity, operational, and systemic risks across different sectors. Risk evaluation techniques, including quantitative methods such as value-at-risk modeling and scenario analysis, are crucial for assessing risk impact and likelihood. Risk mitigation strategies, such as financial derivatives, reinsurance, and corporate governance mechanisms, are essential for minimizing risk exposure and enhancing organizational resilience. Challenges such as cybersecurity threats, regulatory complexities, and climate change risks present significant obstacles to risk management. The study highlights the need for integrated risk management approaches that consider emerging threats and uncertainties, promote regulatory cooperation, and leverage technological innovations.

Climate risks and corporate tax shields

ABSTRACT This study investigates the influence of climate risks on the tax shields of US-based firms. The findings show a significant negative correlation between climate risks and debt-related tax shields (DTS), indicating reduced reliance on debt financing due to potential financial risks and regulatory uncertainties. Conversely, non-debt tax shields (NDTS) demonstrate a positive relationship with climate risks, highlighting firms’ proactive efforts to seek tax benefits from alternative sources. Additionally, the study uncovers distinct dynamics for high and low-leveraged firms in utilizing tax advantages. The research contributes valuable insights into the intricate interplay of climate risks, tax benefits, and corporate financing decisions.

Evaluation of Maturity in Environmental, Social, and Governance (ESG) Risks Mitigation and Safety Climate in the Oil and Gas Company, Bojonegoro

Environmental, Social, and Governance (ESG) has become a rapidly growing instrument worldwide, driven by commitments to enhance environmentally sustainable economic growth as outlined in the 2015 Paris Agreement. Companies in Indonesia are increasingly emphasizing the importance of ESG in their business activities due to the potential impact on the environment and society, including the oil and gas companies. Environmental and social risks can affect the sustainability of a company, while safety climate plays a role in the safety and well-being of workers. The study used a descriptive qualitative approach. It also used NOSACQ-50 questionnaires to assess the safety climate and identify environmental and social management system (ESMS) elements using the toolkit from the International Finance Corporation (IFC) at the Bojonegoro oil and gas company. The result of the ESMS IFC matrix concludes that the maturity of Bojonegoro’s oil and gas company in mitigating ESG risks needs to be more prepared to mitigate ESG risks as preparation progresses towards optimal operations, whilst the safety climate has an average score of 3.40, which means that the safety climate can be maintained and developed.

Impact of Audit Fees on Earnings Management and Financial Risk: An Analysis of Corporate Finance Practices

This study employs a robust quantitative ex post facto research design to investigate the complex relationship between audit fees and earnings management. The financial information of 164 firms admitted to the Tehran Stock Exchange (TSE) was used from 2010 to 2019 (pre-COVID period) to achieve the research goal. Analysing data from the Tehran Stock Exchange firms, the study uncovers an inverted U-shaped relationship between audit fees and earnings management. This suggests that moderate audit fees can lead to higher earnings management. Key contributions of this paper include highlighting the role of audit fees in influencing financial reporting quality and risk management, providing empirical evidence on the asymmetric effects of normal and abnormal audit fees on earnings management, and emphasising the need for balanced audit fee structures to ensure financial transparency and mitigate risk. The findings offer valuable insights for academics, practitioners, and policymakers in understanding the nuances of audit fees and their impact on corporate financial practices. This study advances the literature on financial risk management and corporate finance. It emphasises the importance of balanced audit fee structures for management teams, auditors, and policymakers to ensure transparent financial reporting practices.

The impact of FinTech adoption on corporate investment: Evidence from China

This research uses panel statistics of Chinese listed companies between 2010 and 2020 to examine when and how financial technology (FinTech) improves the investment efficiency of firms. We determine that the degree of FinTech is positively related to firm investment efficiency. This correlation tends to occur in areas with low levels of commercialization and urban growth, which is indicative of the broad characteristics of FinTech. Simultaneously, the positive effect of FinTech further strengthens the investment efficiency of enterprises through corporate governance and financing paths.

Supply-chain finance digitalization and corporate financial fraud: Evidence from China

Recently, supply chain finance (SCF) digitalization, which integrates emerging digital technologies with traditional SCF, has been attracting worldwide attention. While previous studies have highlighted the adoption of SCF digitalization, little is known about how it shapes corporate behaviors. Using a sample of Chinese A-listed firms from 2008 to 2021, this study investigates the relationship between SCF digitalization and corporate financial fraud. Based on the results of the propensity score matching and difference-in-differences approach and mechanism analysis, SCF digitalization is found to inhibit corporate financial fraud by reducing a firm's relational transactions with its suppliers and customers. Additionally, cross-sectional analysis reveals that the governance effect is more pronounced for small- and medium-sized enterprises and for companies with higher information asymmetry, more financial linkages, and lower financial flexibility. Overall, our findings facilitate the understanding of how the digital economy influences corporate behaviors.

Education Research and Policy: A Commentary on Jabbar and Menashy’s “Economic Imperialism in Education Research: A Conceptual Review”

In light of recent suggestions by Jabbar and Menashy that economics has colonized other social sciences and influenced the way policymakers enact education reforms, I examine the question whether economic imperialism warps education policy. For many reasons, I find the hypothesis unrealistic. It ignores that the term “economic imperialism” implies that there is a deliberate or concerted attempt among economists to subjugate other social scientists. It is weakened by the acceptance and enduring application of economic theory in law, psychology, corporate finance, sociology, healthcare, and so on. And it erodes one of the pillars upon which the academy rests: the collaborative production of knowledge which requires interactions and exchanges. I contest the claim that economics has taken over other disciplines and undermined the education reform process. I disagree that an overreliance on economic theory suffuses policymaking, and I find it hard to believe that by focusing primarily on economic outcomes, policymakers disregard other important aims of education. The hypothesis that the preponderance of economics in education policy is attributable to its usefulness is intrinsically realistic and avoids all undue antagonisms.

Green finance pilot policy and corporate environmental social responsibility: empirical evidence from China's green finance reform and innovation pilot zones.

The establishment of green finance reform and innovation pilot zone (GFRIPZ) is a pivotal strategy for harmonizing the twin goals of economic prosperity and environmental preservation. By applying panel data on Chinese A-share listed firms from 2011 to 2022, this study examines the influence of China's green finance pilot policy on corporate environmental social responsibility (ESR) using a difference-in-differences (DID) model. The study's findings indicate that the green finance pilot policy promotes corporate environmental social responsibility. The results remain robust after a series of robustness tests. Moreover, mechanism analysis reveals that the pilot policy promotes firms' ESR through three key channels: financing constraints, green innovation, and corporate governance mechanisms. Additionally, analyst attention can positively moderate the promotional effect of the green finance pilot policy on corporate ESR. Furthermore, this study reveals that the green finance pilot policy's impact on corporate ESR is more pronounced among large-scale firms and firms operating in regions characterized by stringent environmental regulations and greater marketization. The empirical findings present evidence for enhancing ESR through the implementation of the green finance pilot policy in China and offer insights for refining the green finance system.

How Did CEOs Learn Not to Diversify? Institutional Change and MBA Corporate Finance Textbooks

How Did CEOs Learn Not to Diversify? Institutional Change and MBA Corporate Finance Textbooks

Analysis of the Impact of Artificial Intelligence Technology Enablement on Corporate Financial Management

Analysis of the Impact of Artificial Intelligence Technology Enablement on Corporate Financial Management

Inhibit or stimulate? Green credit guidelines and corporate financialization

Although the green credit guidelines (GCGs) can force firms to engage in green transformation, it is still unknown whether the GCGs inhibit or stimulate corporate financialization. This research explores the effects and mechanisms of GCGs on financialization of heavy polluters using difference-in-differences estimators. The results indicate that the GCGs tend to strengthen heavy polluters’ motivations for precautionary saving and stimulate them to allocate liquid financial assets, while weakening their motivations for investment substitution and inhibiting their speculative allocation of financial assets. After several robustness tests, these conclusions remain valid. The mechanism tests suggest that the guidelines affect corporate financialization through increased financing constraints and reduced agency costs. Further analysis reveals that both types of financial asset allocation used by heavy polluters increase their levels of total factor productivity and green innovation. Heterogeneity analysis demonstrates that the impact of GCGs is more pronounced in nonstate-owned enterprises and firms which are located in regions with underdeveloped financial development and weak environmental law enforcement. In summary, this research explores the differentiated impacts and economic outcomes of GCGs, which not only provides insights into how financial institutions prevent corporate credit risk and achieve the targeted implementation of GCGs but also has certain reference value for the rationalization of asset allocation and green transformation for heavy polluters.

State ownership and SMEs’ performance in Vietnam

The debate on the impact of state ownership on firm performance has drawn considerable interest from both scholars and professionals in the field of corporate finance. However, prior research has primarily focused on listed firms, whose characteristics differ from those of small- and medium-sized enterprises (SMEs). Hence, this paper investigates how state ownership influences SMEs’ performance. The sample includes 5,092 firm-years from over 2,000 SMEs with state ownership in Vietnam from 2013 to 2019. The model was estimated using three regression methods, including fixed effects, random effects, and pooled ordinary least squares. The results show that state ownership is positively associated with SMEs’ performance. This finding implies that state ownership creates competitive advantages for SMEs rather than reducing their performance. Therefore, policymakers should consider the advantages and disadvantages of privatizing state-owned SMEs or reducing state ownership in these enterprises. Moreover, investors should divert their capital to state-owned SMEs and increase their value.

Impact of Monetary Policy on Corporate Capital Structure Adjustment in a Financial Development Environment

This study aims to investigate the impact of monetary policy on the adjustment of corporate capital structure within the environment of financial development, focusing on listed companies at the Shenzhen Stock Exchange. Utilizing data from 2011 to 2021, the research employs regression analysis and generalized method of moments (GMM) to explore how quantity-based and price-based monetary policies influence capital structure adjustments. The findings indicate that changes in monetary policy significantly affect corporate capital structure adjustments. Specifically, quantity-based monetary policies accelerate these adjustments, though their impact is moderated by the level of financial development. In contrast, price-based monetary policies consistently exert a positive influence on capital structure adjustments. This study contributes to the understanding of monetary policy's role in corporate finance, providing empirical evidence from China's evolving financial market.

Can green finance policies accurately promote corporate environmental investment?—a comprehensive evaluation from multiple aspects

The 28th United Nations Climate Change Conference, held in the United Arab Emirates at the end of November 2023, stated that climate action cannot be delayed and the financing and investment situation for adapting to climate change needs a qualitative leap. Vigorously developing green finance is one of the important ways to achieve this goal. The core question of this paper is: Can green finance policies promote enterprises’ environmental investment? This article uses the formal implementation of the “Green Credit Guidelines” in 2012 as a quasi-natural experiment, bases on the micro data of A-share listed companies from 2004 to 2020, and adopts the difference-indifferences propensity score matching method (PSM-DID) to explore the role of green credit policy in guiding corporate environmental protection investment from multiple dimensions. The research shows that the implementation of the “Green Credit Guidelines” has promoted corporate environmental protection investment to a certain extent, and the conclusion still holds after a series of robustness tests. Heterogeneity tests found that the impact of green credit policy on corporate environmental protection investment varies significantly among different ownership enterprises and enterprises in different regions. Further research shows that the Green Credit Guidelines are regulated by macro and meso factors. From the perspective of mechanism, this paper finds out the mechanism of promoting enterprises’ environmental protection investment at the micro level. At the macro level, economic policy uncertainty and monetary policy tightening affect the degree of corporate environmental protection investment. At the meso level, the government’s attention to environmental protection determines the behavior of local enterprises, which in turn affects the attitude of enterprises towards environmental protection investment activities. At the micro level, the implementation of green credit on the one hand exacerbates the problem of corporate financing constraints, making companies have incentives to invest in environmental protection to alleviate this problem. On the other hand, it will also promote changes in innovation and capital factors in enterprises, directly increasing corporate environmental protection investment. This paper is helpful for the theoretical circle and management departments, so as to provide reference for the government to issue relevant policies.

How does ESG performance determine the level of specific financing in capital structure? New insights from China

Sustainable finance has gained attention as investors emphasize environmental, social, and governance (ESG) factors in investment decisions. Understanding ESG's impact on corporate financing is crucial for stakeholders. However, evidence on ESG and capital structure, especially in Chinese enterprises, is limited. This study investigates the link between ESG performance and capital structure in Chinese firms, focusing on debt and equity financing. Using panel data from 2010 to 2022 and the system GMM model, the study controls for firm-specific factors. Results show environmental and governance scores negatively relate to debt financing and positively to equity financing. Social scores show no significant impact on debt but a positive one on equity financing. All ESG indicators positively relate to the debt-to-equity ratio, highlighting sustainability's role in capital structure decisions. These findings guide policymakers in incentivizing sustainable practices and help corporate leaders align financing strategies with sustainability goals, supporting long-term growth and stakeholder value.

The impact of corporate governance on firm performance: panel data evidence from S&P 500 Information Technology

This research is important for both the academic and business environments due to the extraordinary results obtained. Additionally, the significance of the study is also attributed to the addressed topic, which is intensively studied in the world of corporate finance. The primary aim of this research is to scrutinize a cohort of 66 information and technology (IT) companies, all of which are constituents of the American Standard and Poor’s 500 Index (S&P 500). The study period spans two decades, covering the years 2003–2022. To summarize the outcomes, the analytical framework incorporated linear models with both fixed (fe) and random effects (re), as well as quantile regression models. This study's key outcomes highlight that firm size, sales growth, current ratio, long-term debt to capital, free cash flow, asset turnover and receivable turnover, board meeting frequency, female board representation, chief executive officer age, audit committee independence, and the presence of compensation and nomination committees, alongside a pandemic indicator, positively impact firm performance. Conversely, firm age, dividend payout ratio, effective tax rate, board size, chief executive officer duality, and corporate social responsibility committee presence have negative effects on performance. Also, regarding quantile regressions, CEO duality significantly influences companies with high profitability rates, and companies with low to medium profitability rates are more strongly and negatively influenced by board size. The implications of the core policy in this research focusing on corporate governance will consider certain rules and guidelines regarding financial transparency and protecting shareholders' interests. Additionally, it will take into account the independence of the board of directors and the presence of its committees, as well as ethical leadership practices.

Voluntary food safety information disclosure and corporate financing structure: based on the perspective of trade credit

ABSTRACT The voluntary disclosure of food safety information by companies has attracted significant attention. We empirically examine the impact of voluntary food safety information disclosure (VFSID) on corporate financing structure from the perspective of trade credit. We discover that VFSID reduces corporations’ reliance on trade credit. We find that VFSID reduces corporations’ reliance on trade credit by facilitating additional bank credit. We also observe that the impact of VFSID on corporate trade credit is particularly pronounced for enterprises that disclose more material information and possess stronger motivation for financing structure adjustments. We further explore the economic consequences and find a significant reduction in the cost of corporate financing when corporate trade credit decreases due to VFSID. Our findings enrich the literature on VFSID and financing structure, verify the substitution relationship between bank credit and trade credit, and provide empirical evidence to optimize the financing structure of corporations, reduce the cost of corporate financing, and promote the smooth flow of the supply chain cycle.

Dividend Announcements and Share Price Dynamics: Unraveling the Connection

This research paper delves into the dynamic landscape of dividend decisions in 2023, exploring the intricate interplay between market price of select equity shares and dividend announcements. In the ever-evolving global economy, firms face multifaceted challenges and opportunities that shape their dividend policies. Employing a comprehensive analysis of recent data, this study investigates the influence of dividend decisions and their implications on shareholder value. Through meticulous examination of dividend patterns across various industries, this research uncovers novel insights into the shifting paradigms of dividend distribution. The paper strives to establish a connection between market price in taking dividend decisions, shedding light on the delicate balance companies must strike between rewarding shareholders and ensuring sustainable financial growth. Incorporating recent data, this paper contributes to the academic discourse on corporate finance and also offers practical implications for businesses navigating the complex terrain of dividend decisions.

Do Dividend Announcement Impact Share Price?

This research delves into the intricate landscape of dividend decisions in 2023, exploring how declaration of dividends impact share price. In today's dynamic global economy, companies encounter multifaceted challenges and opportunities that influence their dividend policies. Using recent data analysis, this study investigates the dividend decisions and their effects on both firm performance and shareholder value. By meticulously examining dividend patterns across various industries, this research uncovers fresh insights into the evolving strategies of dividend distribution. Additionally, the paper analyzes how investor sentiment and market volatility influence dividend policies, emphasizes the delicate balance companies must strike between rewarding shareholders and ensuring sustainable financial growth. Using quantitative data, this research offers a nuanced understanding of the contemporary factors guiding dividend choices, presenting valuable insights for corporate leaders, investors, and policymakers. Through the incorporation of recent data and subsequent analyses this paper contributes not only to the academic discourse on corporate finance but also provides practical implications for businesses navigating the intricate terrain of dividend decisions in 2023.

Financial Constraints and Corporate Finance: Insights from Nepalese Firms

The purpose of this study is to investigate how managers navigate the capital market amidst financial constraints. Expanding upon the findings of Graham and Harvey (2001), Campello et al. (2010), and Bancel and Mittoo (2014), we confine our attention to Nepal as a developing nation. Our approach encompasses criteria and delves into the challenges associated with securing financing, utilizing descriptive analysis. The study entailed surveying 198 financial executives using a structured questionnaire. Among the respondents, nearly half of them indicated that they experienced financial issues at a specific point in time. The survey focused on the financing challenges that managers face when considering potential projects for their undertakings. The findings revealed that managers prioritize the use of internal equity, followed by external equity, and lastly, debt. Interestingly, this order contradicts the hierarchical theory. Financially constrained firms identified several major obstacles when raising funds from banks, including high interest rates, lengthy banking processes, and bank fees. Additionally, it has been uncovered that maintaining financial flexibility and considering firm size are crucial factors for the company in addressing their financial shortfall.