Firm Responses Research Articles

Corporate social responsibility and pay ratio: why do socially responsible firms pay their employees more

Corporate social responsibility and pay ratio: why do socially responsible firms pay their employees more

Are Environmental and Socially Responsible Firms More Resilient? Korean Firms during the COVID-19 Crash

Are Environmental and Socially Responsible Firms More Resilient? Korean Firms during the COVID-19 Crash

Corporate Social Responsibility and Pay Ratio: Why Do Socially Responsible Firms Pay Their Employees More

Corporate Social Responsibility and Pay Ratio: Why Do Socially Responsible Firms Pay Their Employees More

Business as Usual? Firm responses to the Earned Income Tax Credit

Business as Usual? Firm responses to the Earned Income Tax Credit

Don't Throw the Baby Out with the Bathwater: Firm Response to Downstream Product Shocks

Don't Throw the Baby Out with the Bathwater: Firm Response to Downstream Product Shocks

The Speed of Firm Response to Inflation

The Speed of Firm Response to Inflation

Solving the choice puzzle: Financial and non-financial stakeholders preferences in corporate disclosures

The paper delves into the relationship between accounting conservatism, valued by financial stakeholders, and corporate social performance (CSP), esteemed by non-financial stakeholders. This study assesses the potential impact of financial reporting practices, specifically accounting conservatism, on a firm’s CSP activities, which has significant implications for diverse stakeholders. Employing an accrual-based proxy for accounting conservatism and the social contribution value per share from the Shanghai Stock Exchange as a proxy for CSP, the study utilizes a sample of 25,490 year-company observations of A-share listed companies on China’s Shanghai and Shenzhen stock exchanges spanning from 2008 to 2019. Empirical findings indicate a negative correlation between accounting conservatism and CSP. The study suggests that higher levels of social performance are associated with reduced conservatism in financial reporting, indicating that firms prioritize CSP over the interests of financial stakeholders by adopting less conservative financial reporting policies. Aligned with agency theory, these results underscore that socially responsible firms are less inclined to employ accounting conservatism in reporting earnings. This study establishes a connection between firms’ unconventional and less traditional activities, such as CSP, and conservative financial reporting, offering valuable insights for investors, analysts, and regulators. AcknowledgmentThis paper is co-funded by the European Union through the European Education and Culture Executive Agency (EACEA) within the project “Embracing EU corporate social responsibility: challenges and opportunities of business-society bonds transformation in Ukraine” – 101094100 – EECORE – ERASMUS-JMO-2022-HEI-TCH-RSCH-UA-IBA / ERASMUS-JMO-2022-HEI-TCHRSCH https://eecore.snau.edu.ua/

Geopolitical Decoupling in Global Production Networks

This article introduces the concept of geopolitical decoupling in global production networks (GPNs). Geopolitical decoupling is imposed on coupling participants by geopolitical forces that pressure transnational corporations to exit host regions/economies by cutting investment, production, and trade links with host country firms and industries. It also aims to disrupt inside-out trade, investment, and production links of host country firms abroad. The article identifies the basic features of geopolitical decoupling, the central role of states in geopolitical decoupling, the strategic responses of firms to deal with decoupling pressures, and the state strategies to cope with the negative effects of geopolitical decoupling in affected regions/economies. Empirically, the article investigates geopolitical decoupling on the example of the Iranian automotive industry, which experienced three geopolitical decouplings from automotive industry GPNs since 1979. It demonstrates the short- and long-term effects of geopolitical decoupling and recoupling on the Iranian automotive industry in the context of the strategic responses by the state and the political struggles over the nature of the state industrial development policy in Iran.

Good morning, sunshine: How time‐of‐day of complaint submittal can affect customer satisfaction with company response time

AbstractTraditional models of consumer behavior assume that customers perceive factors, e.g., time, in a rational manner throughout the day. For example, the same time period of an hour should, fundamentally, be evaluated as the same as an hour in the afternoon. Yet, across three experimental studies, we find evidence counter to this belief. Under the theoretical framework of the categorization of time, we posit that the unconscious categorization of time influences our satisfaction with company response time due to perceptions of time and resource depletion. We empirically demonstrate that the time‐of‐day of complaint submission impacts satisfaction with company response time such that the same company response time will be perceived as more satisfying in the morning than when received in the afternoon. This previously overlooked relationship builds on a robust and growing literature examining timing strategies in service recovery. We provide both low/no‐cost initiatives as well as strategic timing prioritization for marketing practitioners to maximize customer satisfaction with firm response time.

Firm responses to a more generous insurance against high sick pay costs

This paper investigates how firms respond to a more generous insurance against high sick pay costs. We exploit a reform that introduced different thresholds for insurance reimbursement depending on firm size. By comparing employees in smaller firms with employees in large firms over time, we evaluate the effects of the reform. We find evidence of an increase in absence in middle-sized firms (an average 42 employees) but not in smaller firms. Our results suggest that this discrepancy may be due to the higher production costs associated with absences in smaller firms. The estimated positive effect in middle-sized firms is driven by new hires. These employees are not selected differently, but the probability of separation the following year is lower if they have reported sick. This suggests that the generosity of the insurance affected the probability of separation related to revealed absence.

Corporate Social Responsibility and Tax Avoidance: Do Socially Responsible Firms in Indonesia Pay More Taxes

The practice of tax avoidance in companies has increased since 2000, and has harmed the country's economic development. Tax avoidance is as vital as environmental issues, in this case it is interpreted as a form of Corporate Social Responsibility (CSR) report. This research tries to analyze environmental, social, and governance performance that influences tax avoidance activities in companies, with a sample of 86 companies listed on the Indonesia Stock Exchange in the past 10-year period, namely 2013-2022. The research method used is quantitative, using data obtained from financial reports, annual reports, and other quantitative data through the Refinitiv Eikon database. The data analysis technique used is panel regression using the Eviews 9.0 application. The research results show that the level of CSR reporting based on ESG performance has a negative effect on tax avoidance practices. A low level of CSR reporting actually indicates high tax avoidance, meaning that CSR disclosure or reporting is only a formality for compliance with policy, but the level of tax avoidance is actually quite high. This is a form of action from the company to maximize the gaps that exist in tax laws and regulations in Indonesia. This research also shows that CSR disclosure is reflected in ESG performance, so it is necessary to expand other variables over a certain time span. Further research can also be carried out using other methods, with the hope that the research results can make a positive contribution to both stakeholders and the company.

The Impact of Government Participation in Ecological Championship on Heavily-Polluting Corporate Earnings Management: Evidence from China’s National Civilized City Award

This study investigates the response of heavy-polluting firms to the political costs associated with local government participation in the ecological championship, with a specific focus on China’s National Civilized City Award. Employing the fourth national civilized city selection as a quasi-natural experiment, the results reveal that heavy-polluting firms in cities with the prestigious National Civilized City Award title engage in income-decreasing earnings management to respond to rising political costs resulting from the National Civilized City Award campaign. Our findings are robust across various sensitivity analyses. Furthermore, we identify that the impact of the National Civilized City Award campaign on corporate earnings management is particularly pronounced among sub-samples characterized by non-state ownership, high visibility, and strong incentives for promoting local officials. Our study further elucidates that the increased political costs faced by heavy-polluting firms can be attributed to the local government’s efforts to subject them to more stringent environmental enforcement to pursuing the honor of National Civilized City Award. This study contributes to the existing literature on the political cost hypothesis and provides a new perspective for understanding the impact of environmental regulation on corporate.

Firm Responses to Nonprescriptive Pollution Regulation: Evidence from China’s Corporate Social Responsibility Reporting Mandate

ABSTRACT We employ China’s mandatory corporate social responsibility (CSR) reporting requirement as a natural experiment to evaluate firm-level responses to a Chinese rule that required public firms to issue CSR reports beginning in 2009. Our difference-in-differences analyses of firm-level data indicate that firms required to issue CSR reports decreased overall pollution levels after the mandate. Conventional wisdom (the “Traditional View”) argues that pollution reductions cannot be achieved without profit sacrifice. Conversely, under the Porter Hypothesis, non-prescriptive regulations can stimulate innovations that improve process efficiency and lead to both pollution reductions and improved long-term shareholder returns. Our results reveal evidence of reduced asset returns among firms required to issue CSR reports after 2008, consistent with both hypotheses. However, consistent with the Porter Hypothesis and not the Traditional View, positive three-day stock returns surrounding the release of CSR report information suggest that shareholders favorably view the overall long-term effects of required CSR reports.

On the evolutionary interplay between environmental CSR and emission tax

This paper analyses the steady-state industry configuration of an oligopoly composed of profit-seeking (PS) and environmentally socially responsible (ECSR) firms in an evolutionary setting. Within this industry, an emission tax is levied, and firms may invest in emission abatement technology to reduce the tax burden. Our main findings show that, despite the commitment towards emission abatement, an ECSR firm may end up polluting more than its PS counterpart, leading to ill-fated effects on the environment. In contrast, the introduction of an emission tax puts competitive pressure to ECSR firms by inducing PS firms to invest in emission abatement. The industry configuration that minimises the environmental damage (and maximises social welfare) is mixed, with a small but relevant share of ECSR firms, combined with the adoption of a tax on emissions.

The Impact of Regulation on Innovation

We present a framework that can be used to assess the equilibrium impact of regulation on endogenous innovation with heterogeneous firms. We implement this model using French firm-level panel data, where there is a sharp increase in the burden of labor regulations on companies with 50 or more employees. Consistent with the model’s qualitative predictions, we find a fall in the fraction of innovating firms just to the left of the regulatory threshold. Furthermore, we find a reduction in the innovation response of firms to demand shocks just below the threshold. Regulation reduces aggregate innovation by 5.7 percent. (JEL D22, K31, L11, L25, L51, O31, O34)

High-speed rail, technological improvement, and PM2.5: Evidence from China

This study estimated the effects and mechanisms of high-speed rail (HSR) connectivity on the city air quality in China. The Difference-in-Difference model are used to explore the effects, we found that on average, the city's PM2.5 concentration declined by 2.8 % after the opening of HSR, however, this impact varies depending on whether the city is part of the Ecological Economic Zone and the marketization degree. We further explored that HSR can affect local PM2.5 concentrations by changing firm's technical level. In instrumental variables regression and robustness testing, the conclusion remains unchanged. The results highlight the significance of considering firm responses to HSR in understanding the spatial patterns of air pollution in China.

Can CSR constrain accruals and real earnings management during the COVID-19 pandemic? An international analysis

PurposeThis paper aims to provide insights into the complicated relationship between earnings management (EM) and corporate social responsibility (CSR) during the financial downturn caused by the COVID-19 pandemic.Design/methodology/approachParametric t-tests and non-parametric Wilcoxon rank-sum tests accompanied by ordinary least squares regression analysis, augmented with Newey–West procedure approaches, are used for a sample that consists of 1,984 firms from 47 countries for the period of 2014–2020. EM was proxied once with discretionary accruals using the modified Jones model (1995) and once with real earnings management (REM) using the Roychowdhury model (2006). This study uses environmental, social, and governance scores from the Thomson Reuters database as a proxy for CSR.FindingsThe results reveal that firms tend to engage more in EM practices during the pandemic and that more socially responsible firms tend to be honest and transparent during the financial reporting process. Interestingly, it was found that more socially responsible firms engaged less in REM practices during the pandemic.Research limitations/implicationsThe findings of this research help lenders, investors, policymakers and managers gain a better understanding of EM practices during a negative shock and shed light on the importance of CSR in being ethical.Originality/valueThe findings extend both the literature on the role of CSR in promoting financial reporting quality and the literature on the impact of COVID-19 on accrual and REM practices.

Perlindungan Hak Asasi Manusia Pekerja Migran Di Qatar Terhadap Sistem Kafala Berdasarkan Konvensi International Labour Organization Nomor 143 Tahun 1975 Tentang Pekerja Migran

Introduction: Migrant workers have human rights that must be respected and protected.Purposes of the Research: This paper aims to find out and analyze the regulations on the protection of the human rights of migrant workers in terms of ILO Convention Number 143 of 1975 concerning migrant workers and to find out and analyze the kafala system in Qatar contrary to ILO Convention Number 143 of 1975 concerning migrant workers.Methods of the Research: The method used is a normative juridical research method using a case approach and a statutory approachResults of the Research: The results of the study show that the ILO Convention 143 of 1975 concerning Migrant Workers has guaranteed the respect and protection of the human rights of migrant workers, while the Kafala system is based on the Qatar Constitution which is based on Islamic sharia law where the legal relationship between the employer (insurer) and the worker (insured) must be mutually agreed upon. in the contract (agreement) in the principle of trust (sponsorship) imbued with the spirit of religiosity, but in practice its implementation has been misused by employers and companies for the benefit of their personal gain so that they are no longer trustworthy in carrying out their responsibilities as stipulated in the Kafalah system. The Kafala system needs to be reviewed and evaluated by the Government of Qatar so that in its application it is no longer misused. Meanwhile, the ILO needs to provide a firm response to the occurrence of human rights violations of migrant workers in Qatar so that they do not happen again in the future.

Tax compliance and firm response to electronic sales monitoring

AbstractThis paper analyzes how firms respond to an Internet of Things technology that reduces significantly the tax authorities' marginal cost of monitoring firm activity. More precisely, we analyze how mandating every restaurant of a single Canadian province to have sales recording modules (SRMs) affects restaurant sales, expenses and profits. We estimate that SRMs increase reported sales by 5.8% to 9.8% on average and that this increase is almost completely offset by an equal increase in expenses, including wages. As a result, the firms' taxable income remains mostly unchanged. Our results suggest that sales tax remittance enforcement at the firm level spills over to other firm stakeholders, such as employees and suppliers. Overall, the one‐time cost of the device needed to monitor sales more efficiently is small compared with the recurring benefits for tax authorities.

Exchange rate shocks, multinational firms and access to finance

AbstractI estimate the effect of financial constraints on the response of firms that import inputs to a large exchange rate depreciation. Using data from a census on Indonesian firms, I find that while domestic importers face lower value added due to a rise in their costs of production, foreign‐owned importers fare better: they are more likely to sustain higher value added, hire more labor and use more materials than domestic owned firms. These effects are driven by firms in industries with high demand for external finance, emphasizing the importance of access to finance in mitigating the impact of trade and credit shocks. This suggests another channel through which FDI can add value to a firm in a developing country, particularly with the increasing importance of trade in intermediate goods.