Firms Face Research Articles

Is Liability of Foreignness Always Bad for Firms? A Study of the Influence of Top Management Team Foreignness on Corporate Greenwashing

ABSTRACTThis study investigates the impact of top management team (TMT) foreignness on corporate greenwashing. Drawing on social identity theory, we argue that foreign TMT members, suffering more from individual liability of foreignness (LOF), adopt a more cautious approach to uncertain environmental disclosures and are more concerned with preventing corporate misbehaviors. These lead foreign TMT members to communicate companies' environmental initiatives in a more honest manner, thereby effectively reducing corporate greenwashing. We further propose that the negative relation between TMT foreignness and greenwashing will be strengthened when a firm faces higher earnings pressure and operates in a less marketized environment, as these conditions exacerbate individual LOF on foreign TMT members. Empirical analysis of a sample of Chinese listed companies from 2010 to 2022 confirms our arguments, suggesting that hiring foreign executives can be an effective strategy for mitigating greenwashing, particularly in contexts where individual LOF is more pronounced.

Competing Bandits: The Perils of Exploration Under Competition

Most online platforms learn from interactions with users, and engage in exploration : making potentially suboptimal choices in order to acquire new information. We study the interplay between exploration and competition : how such platforms balance the exploration for learning and competition for users. We consider a stylized duopoly in which two firms face the same multi-armed bandit problem. Users arrive one by one and choose between the two firms, so that each firm makes progress on its bandit problem only if it is chosen. We study whether competition incentivizes the adoption of better algorithms. We find that stark competition disincentivizes exploration, leading to low welfare. However, weaker competition incentivizes better exploration algorithms and increases welfare. We investigate two channels for weakening the competition: stochastic user choice models and a first-mover advantage. Our findings speak to the competition-innovation relationship and the first-mover advantage in the digital economy.

Building organizational knowledge in corporate entrepreneurship: role of time and commonality

Purpose How much should existing firms explore while venturing into new businesses? This study builds an organizational learning-based model for corporate entrepreneurship by applying and extending the seminal March (1991) simulation model. This paper aims to analyze the impact of the exploitation-exploration mix (commonality) on organizational knowledge across the short- and long-term. Design/methodology/approach The study uses a two-stage stochastic simulation approach to model adaptive processes related to learning within organizations. In Stage 1, an organization with no initial knowledge is allowed to achieve equilibrium against the realities associated with the first business. In Stage 2, a new reality is introduced, corresponding to the new business. The new corporate venture is, then, allowed to achieve a new equilibrium knowledge by varying commonality across time. Findings The findings suggest that, in the long term, increasing exploitation builds optimal knowledge only when the new and old businesses are very similar. Organizations where employees learn slowly from the organization (low socialization rate) while the organization learns fast from employees (high organizational learning rate) generate optimal steady-state organization knowledge. However, firms face a temporal dilemma. In the short term, firms with low socialization rates and high organizational learning rates fare worse than other configurations. Research limitations/implications Corporate entrepreneurship efforts encompass various conflicts between knowledge sharing and temporality. These conflicts are especially important in technology-driven industries and firms. The study adds a detailed understanding regarding various learning configurations using which firms can respond to new business opportunities and their impact (across time) on knowledge. Practical implications The study provides important inputs to managers and academics, alike, on the tricky nature of managing and maximizing corporate entrepreneurship efforts in knowledge-intensive and technology industries. This paper isolates specific firm knowledge-based dilemmas on the optimal approach toward corporate entrepreneurship ventures over time and commonality. Originality/value The study extends March’s seminal 1991 study on a single business to corporate entrepreneurship settings using a set of stochastic simulations. In doing so, the study adds to the corporate entrepreneurship as well as knowledge management literatures. This paper explores various scenarios emerging from time, organizational code commonality and match between business realities and arrive at optimal knowledge configurations for each scenario.

Perbandingan Kinerja Keuangan Perusahaan Pulp dan Kertas di Indonesia

The paper industry plays a crucial role in supporting the economy, particularly in Indonesia, through the printing, packaging, and export-import sectors. However, technological advancements have introduced new challenges, demanding companies to manage resources efficiently and improve financial performance. This research adopts a descriptive comparative method, analyzing the financial performance of five pulp and paper companies: PT Indah Kiat Pulp & Paper Tbk, PT Alkindo Naratama Tbk , PT Suparma Tbk, PT Fajar Surya Wisesa Tbk, and PT Toba Pulp Lestari Tbk. The study uses financial reports from 2019 to 2023 and evaluates liquidity, solvency, profitability, and activity ratios. Results indicate that INKP demonstrates the best liquidity, SPMA excels in activity efficiency, and SPMA also leads in solvency ratios. INKP records the highest profitability. Major challenges include raw material price fluctuations, market demand shifts, and sustainability requirements. The study concludes that to enhance competitiveness, companies should improve asset management and optimize financial structures. This approach aims to help firms face industry competition and seize future opportunities.

Green Credit Policy and Firms' Green Total Factor Productivity: The Mediating Role of Financial Constraints

In recent years, environmental pollution has emerged as a critical global challenge, prompting increasing attention toward the Green Credit Policy as a tool for environmental regulation. These policies aim to align financial systems with sustainability objectives, yet their impact on corporate development remains controversial. This study adopts the Propensity Score Matching-Difference-in-Differences (PSM-DID) method to analyze the effects of the Green Credit Policy on the green total factor productivity (GTFP) of Chinese listed companies over the period 2007–2022. The results reveal that while the Green Credit Policy is designed to enhance environmental performance, they have exacerbated financing constraints for enterprises, leading to a significant decline in GTFP. This negative impact is particularly pronounced in large enterprises and firms in eastern China, regions often subject to stricter environmental regulations. In contrast, the ownership type - whether state-owned or non-state-owned - does not significantly influence the outcomes, suggesting the pervasiveness of financing constraints across firms. The findings underscore the critical need for policymakers to design targeted green credit strategies that account for regional and enterprise-specific characteristics. For example, tailoring green finance mechanisms to address the challenges larger enterprises or firms face in economically developed regions could mitigate unintended consequences. Moreover, the study highlights the importance of integrating financial support mechanisms, such as tax incentives, subsidies, or green innovation funds, into the future Green Credit Policy. Such measures can promote investment in green technologies by alleviating financial pressures and fostering environmental and economic goals. Ultimately, this study advocates for a balanced, context-sensitive approach to green finance, ensuring sustainable development without compromising firms' productivity.

Organizational models for advancing technological innovations: A configurational approach

AbstractNovel technologies are emerging and evolving at such a rapid pace that it is difficult for companies and society to absorb them. Large mature organizations can be displaced if they fail to learn about, develop, and adopt new technologies, yet they struggle to do so. What is the best approach? Clearly there is no single best answer. This paper examines organizational models that companies have experimented with for leveraging technological discoveries and inventions to create strategic innovations that fuel new growth opportunities. I adopt Kanter's concept of newstreams as the guiding lens, because it addresses the challenges that mature firms face in their attempts to create new platforms of growth that emerging technologies enable, while maintaining the health of the mainstream core business. This notion demands an extension of ambidexterity theory beyond the exploration/exploitation dichotomy, recognizing that creating new streams of growth that ultimately become part of the mainstream organization requires elements of exploitation to enhance reliability and predictability that the mainstream requires. Five organizational approaches for SI that have been observed in practice are described and considered in light of three elements that, together, can be thought of as comprising a technological innovation strategy: (a) type of ambidextrous approach the firm adopts, (b) type of technology (general vs. special purpose), and (c) targeted market (internal vs. external). By combining theory and observation, configurations of ambidexterity type, technology type, and target market are proposed, as well as expected outcomes for each. I offer these as a research agenda whose outcome can provide important guidance to organizational leaders who are attempting to build capabilities for technological innovation that will secure their organizations' future health.

Operational excellence in African markets: unveiling its drivers, processes and impacts through a mixed-methods approach

Purpose The aim of this study is to explore the concept of operational excellence (OPEX) in the context of African businesses. It seeks to identify the main themes, topics and trends within the OPEX discourse and to uncover emerging areas and potential directions for future research. By emphasizing the unique challenges and opportunities in African markets, this study aims to broaden the understanding of OPEX and its applicability in diverse business environments. Design/methodology/approach This study adopts a mixed-methods approach, combining qualitative and quantitative analyses. Using topic modeling and text analytics, the study examines a range of scholarly literature and social media content. The methodology involves a meticulous extraction and analysis of data from peer-reviewed journals, alongside an exploration of themes emerging from social media, blogs and forums. This approach allows for a comprehensive understanding of OPEX trends in both academic and practical contexts. Findings The study reveals that OPEX in African businesses is intricately linked with innovation, strategic leadership, cultural dynamics, global market integration and data analytics. Key findings include the importance of integrating cultural understanding into operational strategies, the role of adaptive leadership in navigating the African market and the necessity of aligning operational processes with global trends, innovations and data-driven insights. The research also highlights the unique challenges African firms face, such as balancing local and global business practices, leveraging cultural diversity for competitive advantage and harnessing the power of data analytics for OPEX. Originality/value This research contributes original insights into the understanding of OPEX in African business contexts, an area that has been relatively under-explored in existing literature. It offers a novel perspective by integrating academic and practical viewpoints, thereby providing a more holistic understanding of OPEX. The findings have significant implications for both business leaders and researchers, offering strategic directions for firms operating in or with African markets and suggesting new avenues for academic inquiry in the field of OPEX.

Does interest rate liberalization affect corporate debt structure?

AbstractThis study examines how interest rate deregulation affects debt structure of Chinese listed firms through two quasi‐natural experiments: the cap removal (2002–2006) and floor removal (2011–2015). Following deregulation, risky firms increase short‐term debt while decreasing long‐term and total debt, whereas non‐risky firms exhibit opposite patterns. These changes are influenced by collateral requirements, industry cluster proximity, bank relationships, and ownership structure. The divergent outcomes reflect increased borrowing costs for risky firms and reduced costs for non‐risky firms due to enhanced banking competition. Post‐liberalization, risky firms face reduced risk exposure but increased asset‐liability mismatches, while experiencing declining growth prospects. Conversely, non‐risky firms demonstrate improved growth prospects and higher profitability with increased long‐term debt. These findings illuminate how banking sector liberalization shapes corporate financial strategies.

Nurturing sustainability practices: a qualitative inquiry into environmental innovations as a catalyst in manufacturing enterprises in an emerging economy

PurposeThis study explores how medium and large manufacturing firms integrate environmental innovations to foster sustainability practices. It seeks to uncover the specific challenges these firms face and the strategies they employ to effectively implement sustainable initiatives in response to growing environmental pressures.Design/methodology/approachUsing a qualitative phenomenological approach, the study analyzes twelve detailed case studies, engaging in conversational interviews to capture the lived experiences of key stakeholders. Through direct quotations and thematic analysis, the research offers in-depth insights into the practical implementation of sustainability practices driven by environmental innovations.FindingsThe study identifies those environmental innovations – both in products and processes – are critical drivers for addressing specific sustainability challenges. Firms that successfully implement these innovations do so by leveraging internal resources and external collaborations, which enable them to navigate environmental regulations, reduce waste and enhance operational efficiency. However, the findings also highlight significant barriers such as financial constraints and resistance to change within traditional manufacturing systems.Research limitations/implicationsThe study is limited by the use of a convenience sampling method and potential biases in interview responses. Future research should adopt more robust sampling techniques and explore longitudinal impacts to mitigate subjectivity and enhance generalizability.Practical implicationsThe findings offer practical insights for manufacturing firms seeking to implement sustainability practices. By understanding the mechanisms through which environmental innovations can be integrated into their operations, firms can develop more effective strategies for enhancing environmental performance.Originality/valueThis study contributes original insights into the strategic application of environmental innovations within the manufacturing sub-sector. It highlights the role of innovations in overcoming sustainability challenges, offering a nuanced understanding of how firms can align operational goals with environmental imperatives.

Legal eVault: Decentralized Legal Document Storage and Access Framework using Blockchain

The legal sector is notorious for its vast paperwork, posing significant challenges in storage, organisation, accessibility, and management of sensitive documents. Legal firms face immense pressure to efficiently maintain and secure confidential documents over time. Blockchain technology presents a promising solution to these issues. By utilizing a decentralised ledger, it removes the necessity for a central authority, ensuring that documents stay accessible even if conventional servers go offline. Blockchain secures information through encryption and hashing, safeguarding data integrity and confidentiality. The Legal eVault utilizes a permissioned blockchain to securely manage document metadata while storing actual documents off-chain, enhancing storage efficiency and privacy. Role-Based Access and Security model (RBAS) mechanism is implemented to allow document access to only authorized personnel, ensuring confidentiality and compliance. This framework addresses critical concerns in legal document management by providing a transparent, auditable, and tamper-resistant system. By reducing reliance on intermediaries, blockchain enhances trust in legal transactions and improves overall efficiency in document handling.

Green Technology Investment and Production Decisions Considering Stochastic Demand and Firms' Decision Preferences Under Cap‐and‐Trade Regulation

ABSTRACTThis paper investigates how finite rational firms optimally respond to market potential under cap‐and‐trade regulation, considering stochastic demand. Using the mean–variance model framework, we develop an optimization model for green technology investment and production by finite rational firms with different decision‐making preferences. The main results indicate: (1) Under stable demand, firms investing in green technology gain more profits and consumer surplus, however, the effectiveness of carbon emission reduction depends on the market potential size. (2) Under stochastic demand, optimal decisions resulting from firms' varying decision preferences systematically deviate from those of risk‐neutral firms and often demonstrate firms' risk‐averse tendencies that lean towards conservatism. As external factors change, there can even be a reversal in technology investment with an increase in demand uncertainty that amplifies this systematic deviation. (3) Taking firms with different decision‐making preferences as the starting point, this study further analyses the distortion effect of the firm's risk attitude on the optimal technology investment and production decisions, enriching the related research on the joint decision‐making risk model of clean production. And it is more pertinent to the complex situation firms face in the real situation with decision‐making. (4) This study provides a theoretical basis and practical reference for the finite rational firms facing green technology investment choices. Considering the risk‐averse characteristics of firms, this study suggests that the government should establish a risk‐sharing mechanism to weaken the deviation of stochastic demand from the optimal decision‐making of firms or implement certain subsidy policies to protect the profit level of firms.

Exploring incumbent firm and disruptive innovation factors and reactions: A preliminary literature review of disruption research in the last 20 years

In an era characterized by digital transformation and rapid technological advancement, understanding the phenomenon of disruptive innovation (DI) and shedding light on its evolution and implication for incumbent firms is paramount. This study employs a preliminary literature review to identify key works and methodologies in DI research; it delves into empirical analyses, qualitative studies, and theoretical reviews to identify key trigger events, domains, and methodologies associated with DI. Cross-industry findings reveal the critical importance of aligning innovation with domains related to value creation models, digital technologies, and organizational culture. Incumbent firms face challenges from overlooked trigger events such as customer changing needs, business model innovation by entrants, new disruptive technologies, management perception and business performance. The research underscores the complexity of DI and suggests a need for business model adaptation from incumbent firms, emphasizing a shift towards customer orientation and dynamic capabilities. This study contributes to the strategic management literature by proposing avenues for further exploration, including the development of a conceptual model to guide strategic decision making in a situation of disruption.

Advancing Cybersecurity Governance: Adaptive Resilience and Strategic Third-Party Risk Management in Financial Services

As cyberattacks increase, banks and financial firms face new challenges. This research aims to improve cybersecurity by integrating adaptive resilience and strategic third-party risk management into current systems. This study uses thorough qualitative research methods to assess existing frameworks, identifying shortcomings that put companies at more risk. Findings reveal that firms using adaptive resilience - where governance policies adjust with real-time threat information and post-incident evaluation after incidents are much better at preventing and addressing cyber attacks. This paper stresses the importance of including third-party risk management in a comprehensive governance framework, as weaknesses in these relationships often lead to breaches. This study contributes critical insights and a strategic framework for financial institutions to bolster their defenses against sophisticated cyber threats, ensuring sustained resilience and security.

CEO Dismissals and Financial Restatements: The Role of Ethical Governance and Board Dynamics

AbstractThis study re‐examines the relationship between CEO dismissals and financial restatements using a new, comprehensive dataset covering S&P 1500 firms from 2000 to 2018. This dataset offers several advantages over previous research: it provides precise data on CEO dismissals, enables large‐sample analysis and includes detailed reasons for executive departures. Our findings confirm a positive relationship between financial restatements and CEO dismissals, with a heightened likelihood of dismissal in recent years reflecting increased board attention to ethical issues. Additionally, restatements are revealed to amplify the negative impact of weak financial performance on CEO turnover, as CEOs of poorly performing firms face a higher risk of dismissal after a restatement, whereas strong financial performance generally offers protection. Furthermore, we explore how board characteristics affect this relationship and reveal significant heterogeneity in board responses. Specifically, female board representation, directors’ financial expertise, CEO–board connections, directors’ experience with prior fraud incidents, and multiple directorships all moderate the likelihood of CEO dismissal following restatements. These findings provide new insights into the complex interplay among financial performance, ethical governance and board dynamics in CEO turnover decisions.

Corporate social responsibility and insider horizon

Corporate social responsibility and insider horizon

Environmental credit regulatory policies and bank loans of heavily polluting firms

Environmental credit regulatory policies and bank loans of heavily polluting firms

Matching workers to firms facing budget constraints

Matching workers to firms facing budget constraints

Revealing the secrets of working capital: A comparison between sharia-compliant and conventional firms

Revealing the secrets of working capital: A comparison between sharia-compliant and conventional firms

The Marginal Value of Cash: Corporate Savings, Investment, and Financing

The fact that internal liquidity is a key source of corporate funding puts the marginal value of cash at the center of a variety of firm decisions, including investment, payout, financing, savings, and risk management policies. The marginal value of cash is inherently a dynamic concept, because a firm facing financing frictions has to be forward-looking, managing its asset and liability structures in a unified framework and carefully trading off the use of liquidity across time and states. We present a dynamic framework for corporate liquidity management and survey the related literature, with a focus on the determinants of the marginal value of cash and its ubiquitous role in firm decisions.

Analysing the Impact of Capital Structure on Firm Value: A Study in Corporate Finance

Abstract: This study investigates the relationship between capital structure and firm value across various industries. Using a cross-sectional quantitative analysis, the research examines how different levels of debt, equity, and financial leverage affect firm value, measured by market capitalization and Tobin's Q. The findings suggest that firms with moderate debt levels experience enhanced firm value, benefiting from the tax shields provided by debt without incurring significant financial distress. However, excessive financial leverage negatively impacts firm value, as firms face increased risk of financial instability. The study supports key theories such as the trade-off theory and pecking order theory, demonstrating that capital structure decisions are influenced by factors such as firm size, profitability, and industry characteristics. The implications for corporate managers and investors include optimizing debt-equity balance to maximize firm value while managing financial risk. Future research should focus on industry-specific dynamics and longitudinal analyses to further explore these relationships.