Disciplinary Effect Research Articles

Climate litigation and financial markets: A disciplinary effect?

Climate litigation has witnessed a surge in recent decades, raising questions about its economic and financial implications. This paper investigates the disciplinary effect of climate litigation on corporations, focusing on stock price movements for targeted firms and their industry peers in response to announcements of lawsuit filings and negative court decisions. By using a combined event study and panel regression methodology for 77 lawsuit filings and 19 negative decisions that occurred between 2005 and 2021 in North America or Europe, we find that market reactions are quite limited. On average, lawsuit filings do not lead to stock price declines for targeted entities and their industry peers, indicating a lack of perceived financial threat by financial markets. Negative court rulings, while slightly affecting targets, do not result in spillovers to industry peers. However, nuances emerge, revealing that an increased frequency of lawsuits filings generates stronger stock declines for the industry around new filings. Regarding claims, legal actions seeking compensatory damages result in more negative stock returns when initiated. Also, lawsuits brought by individuals and NGOs, as opposed to government bodies, lead to stronger negative market reactions towards targets and peers around both filings and negative decisions. In the end, despite attracting significant media attention, our findings suggest that the disciplinary effect of climate litigation has been relatively weak thus far.

„Wider den nächtlichen Unfug“ – Die Bielefelder Straßenbeleuchtung von 1853 bis in die 1880er Jahre als versicherheitlichende Infrastruktur und Mittel der Selbstdisziplinierung

ZusammenfassungDieser Artikel beschäftigt sich mit dem Wandel von Sicherheitsbedürfnissen und technologischen Möglichkeiten im Zuge der Industrialisierung anhand der Etablierung der Bielefelder Straßenbeleuchtung im 19. Jahrhundert. Er zeigt, wie die Entwicklung von der Öl- hin zur Gaslaterne zusammenfiel mit einem veränderten Sicherheitsbedürfnis im städtischen Bürgertum. Mit den technischen Möglichkeiten der Gasbeleuchtung konnte nunmehr der nächtliche städtische Raum durchdrungen werden und dadurch einerseits marginalisierte und als Sicherheitsrisiko wahrgenommene Personengruppen sichtbar gemacht sowie auf der anderen Seite dem Licht inhärente disziplinierende Bestrebungen bei den Bürger*innen internalisiert werden. Waren die städtischen Bevölkerungen der Vormoderne und des frühen 19. Jahrhunderts Laternen noch skeptisch oder ablehnend gegenübergestanden, so war bereits Mitte des 19. Jahrhunderts ihre Installation Teil von dezidiert stadtbürgerlichen Forderungen nach mehr persönlicher, ökonomischer und Verkehrssicherheit. So wandelte sich die Laterne von einem Instrument des vormodernen Sichtbarmachens zu einem Instrument beständiger Sichtbarkeit in der Moderne. Dies führte zu neuen Konfliktlinien, da die Expansion der Beleuchtung nicht so umfassend verlief wie vom Stadtbürgertum gefordert. Hier zeigt das Beispiel Bielefeld neben Wandel und Konjunkturen von Versicherheitlichungsbedürfnissen im Zuge der Industrialisierung auch, dass eine Internalisierung obrigkeitsstaatlicher Vorstellungen keinesfalls die Abwesenheit von Konflikt bedeutete. Anhand von Verwaltungsakten und Eingaben wird aus der Perspektive der Historischen Sicherheitsforschung unter Rückgriff auf Foucaults Konzept der Gouvernementalität die Geschichte der Bielefelder Straßenbeleuchtung in den Kontext eines größeren Wandels von Sicherheit, Technik und urbaner Raumgestaltung gesetzt. Die Ergebnisse zeigen, dass Technik- und Infrastrukturgeschichte wesentlich dabei helfen, die Erkenntnisse der Historischen Sicherheitsforschung zu vertiefen und zu kontextualisieren. Techniknutzung und -erwartungen waren durch eine bisweilen prekäre Allianz verschiedener Akteursgruppen ein wesentlicher Bestandteil eines neuen Sicherheitsverständnisses als auch der sozialsegmentierten Ordnung des urbanen Raums.

Control rights and cash dividends: A moderating effect of product market competition

This study aims to investigate the impact of control rights held by actual controller on dividends in China, and further explores whether this impact is affected by product market competition from both industry competition (IC) and corporate market power (MP) perspectives. The results show a positive relationship between control rights and dividends in both state-owned and non-state-owned enterprises, and the mechanism is dividend tunneling rather than governance. Moreover, IC has a disciplinary effect on dividend tunneling by the controllers, and MP weakens the positive relationship, which is associated with the promotion of stock liquidity, information disclosure quality and financial risk.

Reducing the number and the size of sovereign defaults in the world: Long-term trend or temporary phenomenon?

The paper explains the current global trends, which consist in a decrease in both the number and the size of defaults. For this purpose, a new approach to modeling the probability and the size of defaults based on nonlinear models (generalized additive models) has been applied. The obtained empirical estimates confirm the significant nonlinearity of the relationships between factors. Based on the proposed approach, it is possible to detect the disciplinary effect of the rate of increase in interest expenses and confirm the significance of the rate of debt accumulation as a development of previous works. We have found that the main contribution to this trend is made by the institutional factor — government efficiency: the more effective the government is, the better it ensures debt sustainability, reducing both the number of defaults and their size. Another important factor is the soft monetary policy of developed countries. It affects the default size, reducing it, but is not the reason for the decrease in the number (probability) of defaults in the world. Thus, the current trend is long-term and shows the progress of some countries and international organizations in reducing risks to global financial stability.

Firm leverage and employee pay: The moderating role of CEO leadership style

We investigate how a CEO's leadership style moderates the relationship between leverage and average employee pay. We first show that the relationship between leverage and average employee pay is negative, consistent with the leverage disciplinary hypothesis. Next, we examine how CEO leadership style moderates this negative effect. We find that CEOs with more charisma reduce the disciplinary effect of leverage. The humane CEOs of companies with more debt sharpen the disciplinary effect by paying their employees less for increased risk of job loss that comes with high leverage. An important policy implication is that CEO leadership style can influence the outcome of labor management negotiations regarding employee pay.

Information processing costs and credit ratings: evidence from investor interactive platforms in China

We examine the impact on bond credit ratings of reduced information processing costs from two investor interactive platforms in China, i.e. ‘Easy Interaction’ and ‘e-Interaction’. These online platforms provide investors with a channel to directly communicate with listed companies and learn much of corporate operations. Replies and explanations from management assist investors in integrating disclosed information and reducing information processing costs. The reduced costs likely impose reputational concerns on credit rating agencies (CRAs), leading to more stringent rating standards and less rating inflation. We find that more interactions result in lower credit ratings of corporate bonds. This effect is more pronounced for bonds rated by global-partnered CRAs and bonds whose issuers have higher information complexity, and less pronounced for bonds whose issuers have official consultation websites. Further analyses show that reduced information processing costs are associated with more information contents in rating downgrades and timelier ratings. Our findings provide evidence for the disciplinary effect of reduced processing costs on CRA behavior.

Agency conflicts, financial constraints, and dynamic q-theory

We develop a dynamic q-theoretic model where equity financing is uncertain and investment is delegated to a self-interested manager. We find that agency conflicts generate more volatile investments, and equity financing uncertainty can discipline managerial discretion and mitigate overinvestment issues. The disciplinary effect reduces future liquidation risk, thus weakening the manager’s hedging incentives. Furthermore, more prudent investment alleviates precautionary motives, and shareholders optimally reduce cash holdings to avoid managerial cash diversion. As a result, our finding provides a potential rationale behind the mixed empirical findings on corporate governance and cash holdings.

Pre-LBO Credit Market Conditions and Post-LBO Target Behavior

In the context of leveraged buyouts (LBOs), this paper empirically studies the relation between pre-buyout credit market conditions and the post-buyout behavior of target companies, employing a supervisory dataset to overcome limited data availability for post-buyout target financial information. We propose an LBO-specific measure of (changes of) credit market conditions---the short-term (6-month) change of credit spreads leading up to buyout close. Using this proposed measure, we show that loosening pre-LBO credit market conditions, which are related to higher buyout leverage consistent with the literature, are associated with poor post-LBO (operating) performance of the target company. These results support the narrative of agency costs of debt such as risk shifting and debt overhang but are inconsistent with theories of disciplinary effects of debt. We provide further evidence supportive of the theories of agency costs of debt and some results favorable to the risk shifting story.

Dynamic heterogeneous panel analysis of financial market disciplinary effects on fiscal balance

Dynamic heterogeneous panel analysis of financial market disciplinary effects on fiscal balance

Everyday migration hierarchies: negotiating the EU’s visa regime

Critical security studies have shed invaluable light on the diffuse governmental technologies and pernicious effects of the EU’s bordering practices. While scholars have focused upon the experience of precarious migrant groups, this article suggests that extending our critical gaze to include seemingly privileged migrants can further understanding of just how far the insecurity produced by the EU’s migration regime reaches. Focusing on the migration process of international students in Norway, this article inquires into how these migrants experience, theorize and negotiate the EU’s visa regime and its governmental technologies. We show how their subjective understandings of ‘broad’ and ‘narrow’ hierarchies of the visa regime play out in their bureaucratic encounters, influencing their everyday lives. Ultimately, the article shows how the regime’s disciplinary effects extend further than prior critical research has appreciated.

Organization Capital and Corporate Governance

Management with high organization capital, which can be seen as an indicator of superior internal governance, can be expected to exhibit a preference for cash reserves to safeguard assets and mitigate the risk of underinvestment. However, external parties may see high cash reserves as a risk factor for the agency problem. Strong external governance can mitigate the preference of management with high organization capital for cash reserves. The empirical analyses show a positive association between the organization capital of U.S.-listed firms and their cash reserves when controlling for multiple variables. Furthermore, through employing the hostile takeover threat index, I reveal the disciplinary effects of strong external governance. This study adds to the existing literature investigating corporate governance that is useful in corporate decision making.

Board structure and financial performance in the logistics sector: Do contingencies matter?

Drawing on agency, stewardship, and contingency theories, this study examined whether board structure is associated with corporate financial performance and—if so—whether firm size and leverage (i.e., contingencies) moderate this association in the logistics sector. Hence, the study aimed to provide implications for board configuration and performance enhancement at varying levels of firm size and leverage. The data were retrieved from the Thomson Reuters Eikon database, and the generalized method of moments (GMM) estimator was applied to these data. The results revealed that while independent directors augment corporate financial performance, female directors and chief executive officer (CEO) duality do not. The first moderation analysis concerning firm size indicated that women drive firm performance in neither large nor small firms with the exception of sales revenues, which they improve in large firms. Independent directors, on the other hand, were shown to drive firm performance in larger firms. CEO duality was revealed to be particularly influential in boosting sales revenues in large logistics firms. The second moderation analysis detected no disciplinary effect of leverage on board structure in the logistics sector. Based on the findings, theoretical, managerial, and policymaking implications are suggested for the logistics sector.

Competition laws and corporate risk-taking around the world

Using a new dataset on international competition laws, we examine the relationship between country-level competition laws and corporate risk-taking in 58 countries from 1990 to 2010. Consistent with the disciplinary effect hypothesis, we document robust evidence of a negative relation between corporate risk-taking and the stringency of competition laws. The negative relation between competition laws and corporate risk-taking is more pronounced among financially constrained firms and less pronounced among firms situated in high-trust jurisdictions. Further analysis shows that competition laws affect corporate risk-taking by mitigating agency problems and enhancing information transparency. Overall, these findings are consistent with the view that competition plays a critical external corporate governance role in shaping corporate behaviors.

Sonic Legal Spaces

This essay explores the contestation and liberatory potential of various sounding and listening practices within the metropolitan area of Chicago, especially in relation to the city as a racialized legal space of segregation, gentrification, and private property. While considering listening in terms of the individual or community is important, we should also consider how the state listens and what disciplinary effects such listening enacts vis-á-vis legal definitions of noise. What counts as sound or noise, far from abstract fact, is determined by social dispositions of taste materialized into cultural preferences that are further concretized into municipal ordinances. While this essay attends to the sonic legal space of the city as regulatory, it also examines the role sound plays in setting up the potential for radical encounters and speculative relationalities. As such, it outlines a form of sonic mutuality that refuses to gloss over the challenges of living in a noisy city while also refusing the state’s authority to transform social disputes into criminal matters. Sonic mutualism requires new orientations to the problem of overlapping sonic desires within the complexities of urban life. How might we understand our sonic dispositions and tastes apart from the territorial logics of capital, property, and control? What might it look like to form extralegal social arrangements that mediate conflicting audio desires beyond criminalization? To ask these types of questions is to challenge the reduction of the city to an abstract zone of commerciality, and instead hear the city as a sonic commons.

Algorithmic management and the politics of demand: Control and resistance at Uber

Arguably the world's most iconic platform organization, Uber relies on a disaggregated labour force and a technology application accessible to users on mobile devices. The company contracts with over three million drivers worldwide and has curated an infrastructure of platform-based control characterized by algorithmic processes. The effects of this new wave of control on the driver-led workforce are unclear. Drawing on interviews with 36 Uber drivers, mainly from Australia and France, this research investigates how the ‘gig economy’ workforce engages with platform-based control. We find that the platform organization's control algorithms operate with strong disciplinary effects. Drawing on Foucault's concept of self-formation, we examine worker responses to the new order of work. We highlight the way workers engage in practices to ‘take care of oneself’, by enduring, subverting or exiting the conditions of algorithmic management. We find that these practices are related to the distance embedded in the field between management and the workforce. In this way, we argue that the gig economy operates differently upon the ‘governable self’ and urge caution in relation to the use of algorithms to control at a distance.

The Corporate Opportunity Structure for Shareholder Activism: How Activist Hedge Funds Exploit Board Demographic Diversity

Inspired by research on social movements, we extend the idea that activists look for opportunities to target firms to the realm of financially motivated shareholder activists. Focusing on activist hedge funds, we argue that hedge fund campaigns are more likely to succeed when boards are slow and less united and that, compared with more homogeneous boards, demographically diverse boards tend to act more slowly and with less unity. Although these attributes make demographically diverse boards more effective under “normal” circumstances, they become a liability in confrontations with activist hedge funds. We, therefore, hypothesize that when subject to governance and performance problems, firms become more likely targets of activist hedge funds when they also have demographically diverse boards. To further probe our theory, we explore the opportunity recognition of activist hedge funds in two ways. First, we posit that this opportunity will be recognized and exploited primarily by experienced activist hedge funds. Second, we argue that activist hedge funds’ opportunity recognition is correct in so far that demographically diverse boards respond to activism campaigns in ways that are likely to benefit activist hedge funds. Using data on United States-based activism campaigns, we find support for our theory. By simultaneously studying problems and opportunities, this study establishes a foundation for examining when the disciplinary effect of shareholder activism may go awry and reveals why a strict business case for demographic diversity may be insufficient to align all shareholders behind board diversity. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.1679 .

Hidden hurt: A qualitative study of the microaggressions experienced by disabled children in education in China

BackgroundMicroaggressions are brief, commonplace indignities expressed through verbal or behavioral means. In China, microaggressions have proliferated with the wide implementation of education protection policies for disabled children (including learning in regular classes (LRC), special school education (SSE), and home-delivery education (HDE)), resulting in severe consequences. However, related issues have not been discussed yet. ObjectiveThis study explores concrete forms of microaggressions that disabled children have experienced under three educational policies. MethodsWe took a qualitative phenomenological approach and used semi-structured interviews to collect data. 22 disabled children, their guardians, and eight educators from three compulsory education schools in Jinan, China, were included in this study. ResultsMicroaggressions are categorized into three types: microassaults, microinsults, and microinvalidations. In LRC, typical microaggressions include the microassaults of refusal, extra requirements, avoiding needs, and accusations; the microinsults of labeling, differential patronization, and over-protection; and the microinvalidation of suspicion. In SSE, typical microaggressions include the microassaults of refusal, belittling, hiding, and ignoring; the microinsults of assumptions of low intelligence, ignoring, and distancing; and the microinvalidation of suspicion. In HDE, typical microaggressions include the microassaults of denial of privacy and denial of expression; and the microinsults of infantilization and blame. ConclusionsThe microaggressions that disabled children experience under educational policies produce serious disciplinary effects. To eliminate microaggressions, it is necessary to publicize the new disability rights paradigm, engage disabled children and their families in participation in the political process, develop demand-oriented assessment criteria, and standardize educators' discretion.

Can Short Selling Improve the Quality of Information Disclosure in Clarification Announcements by Firms Faced with Market Rumors?

ABSTRACT Using a sample of clarification announcements by Chinese listed companies and a difference-in-differences approach, this paper discusses the impact of short selling on corporate clarifications. The results show that short selling pressure disciplines managers’ clarification behaviors. Pilot firms are more likely than non-pilot firms to release timely, detailed, and technical clarification announcements, indicating that the ex-ante pressure of short selling improves the quality of information disclosure in clarifications. The results are robust to the use of a propensity score matching sample, the exclusion of extraordinary sample periods, controlling for the category of rumors, and the adoption of the double selection approach. The disciplinary effect of short selling on the quality of information disclosure in clarifications is more significant for companies with higher CEO equity-based incentive ratios, higher stock liquidity, and higher media coverage than for other companies. More intensive short selling activities, implying an increased ex-post threat of short selling, also lead to improvement in the disclosure of clarifications. Additional research shows that the improved disclosure increases stock price informativeness, and short selling enhances this effect.

When Do Controlling Shareholders “Over-invest”? The Disciplinary Effect of Product Market Competition

This study examines the effect of the interaction between controlling shareholder ownership and product market competition on investment inefficiency in Korea. Consistent with classical agency theory, this study finds that the lower the controlling shareholder ownership, the greater the overinvestment. However, this relationship strengthens in noncompetitive markets but disappears in competitive markets. This suggests that product market competition has a disciplinary effect on the incentive of controlling shareholders to pursue private benefits. This study has implications for the disciplinary effect of competition and expands the literature on agency theory in emerging countries with concentrated ownership structures.

Does common ownership constrain managerial rent extraction? Evidence from insider trading profitability

This study identifies a new economic benefit of common institutional ownership, which refers to the increasingly contentious phenomenon of U.S. firms sharing stockholders with their industry competitors. We find a significantly negative relation between common ownership and insider trading profitability. The disciplinary effect of common ownership on opportunistic insider trading is particularly evident when the information effects of common ownership are greater, when common owners are more likely to benefit from positive governance externalities, and in the subset of trades made by opportunistic insiders. Using the exogenous variations in common ownership induced by financial institution mergers, we conduct a difference-in-differences analysis and find consistent results. We also provide evidence that common owners encourage firms to impose ex-ante restrictions on insider trading and take ex-post actions to discipline opportunistic insiders by voting against management. Overall, our findings suggest that common institutional shareholders have information advantages, governance incentives, and effective means to constrain opportunistic insider trading.