Firm Value Research Articles

The bright side of supplier concentration: Investor attitudes towards the reopening policy in China

Supplier concentration (SUC) has disadvantage of vulnerability along with cost savings and efficiency. While current scholarship focus on the vulnerability of firms with centralized suppliers during the COVID-19 epidemic, there is no empirical study that explores the impact of post-disaster SUC on firm value as countries removing regional isolation policy. I focus on the impact of COVID-19 reopening policy on investor attitudes towards SUC after the resolution of a supply chain disruption crisis. I try to examine whether investors still perceive SUC as a risk signal or as a positive signal for rapid recovery. Using the event shock of China’s reopening announcement and data on A-share listed companies, I find that SUC has a positive impact on cumulative abnormal returns at reopening. I also find that positive effect of SUC is more prominent for firms that benefit from a larger reduction in transaction costs due to the reopening policy. I also analyze the moderating effect and find that information intermediaries such as analysts and media attention amplify the positive effects of SUC. My research provides new perspective on achieving post-disaster value enhancement through SUC.

The Effect of Sustainable Business Practices on Company Value in Indonesia Stock Exchange Sri-Kehati Index Companies

The purpose of this study was to examine the effect of economic, environmental, social, and governance performance on firm value moderated by PROPER and COVID-19 in listed companies included in the SRI-KEHATI index for 10 consecutive years. The type of research used is quantitative research using hypothesis testing of the effect of the independent variable on the dependent variable with moderation of certain variables. The research variable includes the dependent variable, firm value, independent variable, which is economic, environmental, social, and governance performance (EESG), as well as moderating variables, PROPER and COVID-19. Purposive sampling is used through certain criteria, contain public companies included in the SRI-KEHATI index group for 10 consecutive years This results in a total 130 samples (13 companies during the 2012—2021) The data analysis used are descriptive statitisical and multiple regrssion. The results of this study are (1) economic, environmental, and governance performance have a significant positive effect on firm value. However, social performance does not have a significant positive effect on firm value; (2) PROPER is proven to moderate the positive effect of governance performance on firm value, but not the effect of economic, environmental, or social performance; (3) COVID-19 is not moderate the positive effect of economic, environmental, social, and governance performance on firm value The implication of this study are (1) the implementation of sustainable business practices in economic, environmental, social and governance aspects is an important thing that must be implemented by companies in order to create a sustainable business; (2) PROPER can strengthen environmental management governance performance; (3) The dimensions and indicators used can serve as a reference for the company in sustainable business practices and as a basis for investors to make investment decisions; and (4) To be the basis of reference for the company, investors, and regulators.

Human Capital Culture and Firm Value in Indonesia’s Agribusiness: Aligning HRM Practices with Sustainable Development Goals

This study explores the impact of human capital culture on firm value within Indonesia's agribusiness sector, focusing on employee compensation, care, and training. In alignment with Sustainable Development Goals (SDGs) and Indonesia's Vision 2045, the research examines how these human resource management (HRM) practices influence two key financial metrics: market value and total assets. Using secondary data from 2019 to 2023, the study applies panel data regression to assess the effects of compensation, employee care,training and earnings after tax (EAT) on firm value. The findings reveal that compensation significantly impacts both market value and total assets, while EAT positively influences market value. However, the effect of training on firm value is not immediately observable, suggesting a lagged impact. These results underscore the critical role of employee compensation in enhancing organizational performance and financial outcomes in agribusiness. The study provides valuable insights for policymakers and industry leaders aiming to align HRM practices with sustainable economic growth.

Political corruption and cost stickiness: Evidence from China

AbstractThis study investigated the effect of local corruption on the cost behaviour of publicly traded firms in China over the period from 2007 to 2017. Our findings show that firms situated in regions with higher corruption levels tend to exhibit greater cost stickiness, primarily driven by managerial empire‐building incentives and rent‐seeking behaviours. This effect is particularly pronounced in firms subject to greater government intervention, weaker internal controls, fewer political connections, and less market competition. Furthermore, this corruption‐induced cost behaviour is found to negatively impact firm value. The results underscore the critical role of institutional environments, particularly corruption, in shaping corporate cost management strategies. This study provides valuable insights into how corruption influences economic outcomes for firms and offers guidance for managers, regulators, and investors to address these challenges and optimise cost management practices.

The impact of information infrastructure on firm market value: evidence from Chinese listed firms

ABSTRACT Based on the data of Chinese listed companies from 2010 to 2017, we empirically study the impact of information infrastructure on firm market value. Using the construction of 4 G base stations since 2014 as a quasi-natural experiment, we prove that information infrastructure significantly increases firms’ market value through the continuous difference-in-differences method. Heterogeneity analysis shows that the policy effect is more pronounced for large firms, non-state-owned firms, and firms in high-competitive industries. The underlying mechanism is that information infrastructure can promote digital transformation of firms, enhance firms’ level of innovation and production efficiency. Our study provides new perspectives and policy implications on how information infrastructure development can enhance firms’ market value.

The Role of Environmental Costs on the Relationship Between Good Corporate Governance and Firm Value During Covid-19 Conditions

The Role of Environmental Costs on the Relationship Between Good Corporate Governance and Firm Value During Covid-19 Conditions

Levels of mandatory CSR compliance and the payoff: evidence from India

Purpose This paper aims to examine the diverse levels of corporate social responsibility (CSR) expenditure among Indian companies and its influence on their performance. The study aims to determine whether exceeding the mandatory CSR spending limit provides an edge to companies that outperform in enhancing corporate firm value. Design/methodology/approach A dynamic model using system generalized method of moments (GMM) was used to analyze a balanced panel data set of 191 firms over seven years, spanning from 2016 to 2022. Return on assets was used as a proxy to gauge financial performance. At the same time, the study also examined the robustness of the results by considering return on equity and Tobin’s Q as additional measures. Findings The study results indicate that, in a mandatory CSR setting, all companies are generally perceived as performing and reporting on CSR equally. Hence, it will not make any payoff, although few companies outperform. Therefore, companies should differentiate themselves regarding CSR spending and reporting to claim a competitive advantage in the market. The study also suggests that the payoff of mandatory CSR expenditure for both performing and outperforming companies is reflected more in non-quantifiable firm characteristics than in measurable performance metrics. Research limitations/implications The period of study covers 7 years, i.e. 2015–2016 to 2022–2023. This may limit capturing long-term CSR practices and firm performance trends. Additionally, data from only 191 Indian companies restrict generalizability; future research should include diverse geographic regions with mandated CSR spending to provide a more comprehensive view. In subsequent studies, contextual factors like regulatory changes and macroeconomic conditions could be considered moderating variables. Practical implications The study provides valuable insights to top management, indicating that spending beyond the threshold limit of mandatory CSR spending does not enhance corporate firm value. Instead, this additional investment may yield benefits in the form of goodwill and reputation over the long term. Social implications This study assists corporations in optimizing their CSR strategies to enhance their social and financial performance impact. Moreover, the study suggests ways to improve the CSR payoff and the need for increasing stakeholder satisfaction. Originality/value The study provides original insights into the relationship between mandatory CSR spending and firm performance in the Indian context, revealing that CSR spending does not significantly impact financial metrics, and it highlights the importance of considering a non-quantitative matrix to enhance the firm value in a mandatory CSR setting.

MEDIATION OF EFFICIENCY IN GREEN BANKING ON THE FIRM VALUE OF CONVENTIONAL BANKING

This study aims to investigate the effect of green banking on firm value with bank efficiency as a mediating variable. The research approach used is quantitative with a sample consisting of 12 conventional banks from 48 annual reports and sustainability reports of banking companies in Indonesia. The data were analyzed using SEM-PLS. The test results show that green banking and bank efficiency have a significant positive effect on company value, green banking has a significant positive effect on bank efficiency and bank efficiency is unable to mediate the relationship between green banking and company value. This study shows the benefits of implementing green banking which is currently being carried out by the government and proves that environmental aspects have an important role for the sustainability of a business, so that the company does not only focus on financial performance but also on environmental aspects.

Effect of integrated financial reporting on firm value with the role of adjusting corporate governance in companies listed on the Iraqi stock exchange

The issue of conflict of interests between shareholders and managers and the mechanism of corporate governance as a solution to reduce agency costs associated with it is one of the important issues that has attracted the attention of many researchers and experts due to its effect on the performance of companies. The purpose of this research is the effect of integrated financial reporting on company value with the role of adjusting corporate governance in companies listed on the Iraqi Stock Exchange. The current research is applied in terms of purpose and descriptive and correlational in nature. The time domain of the research covers a period of years, from the beginning of 2016 to the end of 2022. The studied sample included 10 companies that were selected by systematic elimination method. The results of the test of research hypotheses indicated that corporate governance does not have a modifying role in the effect of integrated financial reporting on the value of the company. It seems that in the Iraqi capital market, integrated financial reporting tools cannot help the shareholders in evaluating the company's value, and other factors affecting the stock price (company's value) are considered by the shareholders.

Environmental regulation, ESG, and firm value: evidence from China

ABSTRACT Companies are facing increasing environmental regulatory risk, but the literature has rarely studied how firms respond to this type of risk. This paper uses China’s Central Environmental Protection Inspection (CEPI) as an exogenous shock and explores the role of ESG engagement in mitigating the environmental regulatory risk. Our main findings are as follows. First, the CEPI reduces the market value of companies by 1.8%, or about $153,000 million. This implies that environmental regulation reduces firm value in the short run. Second, those with higher ESG scores suffer lower value degradation from the CEPI, implying that ESG plays the moderating role. Mechanism analyses suggest that ESG mitigates environmental regulatory risk by placating the government, but not by placating the public. This paper reveals a new role for ESG, i.e. buffering negative shocks from government environmental regulations. Meanwhile, our research provides helpful policy implications for governments and firms in developing countries to achieve sustainable development.

Integrated Reporting, ESG Disclosure, Forecast Accuracy, and Firm Value: Profitability as Moderating Variable

Objective: This study investigate how the quality of IR and ESG disclosures can affect the level of information asymmetry and enhance legitimacy and signal about firm value. Theoretical Framework: IR will increase the company's transparency to stakeholders so that reduces the problem of information asymmetry and long-term business value creation. SDGs encourages organizations to pursue credentials by implementing ESG to increase corporate credibility. High profitability can provide positive signals that encourage managers to implement IR and submit ESG reports, thereby reducing information asymmetry and increasing firm value. Method: Based on data from the IDX database, this study analyses companies that are members of the LQ45 group. We have collected annual reports and sustainability reports for the period between 2013 and 2022. Results and Discussion: IR quality has a negative influence on FA and firm value, while ESG disclosure has a positive influence on FA and firm value. Profitability variable is able to strengthen the effect of IR quality and ESG disclosure on FA. Therefore, IR quality and ESG disclosures have a strong influence on FA. Research Implications: Theoretically, this study’s result strengthen the study of legitimacy and institutional theories in explaining the relationship between IR quality and sustainability disclosures on information asymmetry and firm value in the long run. Practically, it highlights the importance for managers to enhance IR and ESG disclosures, thereby promoting corporate transparency and accountability. Originality/Value: This considers profitability variables to understand the motives and drivers of managers to implement integrated reporting formats and deliver sustainability reporting.

Are companies better off with AI? The effect of AI service failure events on firm value

PurposeAs more firms adopted AI-related services in recent years, AI service failures have increased. However, the potential costs of AI implementation are not well understood, especially the effect of AI service failure events. This study examines the influences of AI service failure events, including their industry, size, timing, and type, on firm value.Design/methodology/approachThis study will conduct an event study of 120 AI service failure events in listed companies to evaluate the costs of such events.FindingsFirst, AI service failure events have a negative impact on the firm value. Second, small firms experience more share price declines due to AI service failure events than large firms. Third, AI service failure events in more recent years have a more intensively negative impact than those in more distant years. Finally, we identify different types of AI service failure and find that there are order effects on firm value across the service failure event types: accuracy > safety > privacy > fairness.Originality/valueFirst, this study is the initial effort to empirically examine market reactions to AI service failure events using the event study method. Second, this study comprehensively considers the effect of contextual influencing factors, including industry type, firm size and event year. Third, this study improves the understanding of AI service failure by proposing a novel classification and disclosing the detailed impacts of different event types, which provides valuable guidance for managers and developers.

Blockchain for supply chain: performance implications and contingencies

PurposeThis study aims to examine the performance implications of blockchain implementation in the supply chain and explore how blockchain functions and supply chain processes of blockchain implementation moderate the effect on firm performance.Design/methodology/approachUsing 220 blockchain implementations announced between January 2015 and December 2022, we use the event study methodology to estimate the effects of blockchain implementation on the firm value. Regression analyses are conducted to examine the moderating effects of blockchain functions and supply chain processes.FindingsFirst, there is a positive and statistically significant relationship between blockchain implementation in the supply chain and firm value. Second, we find that abnormal returns from blockchain implementation are higher when used with blockchain’s contract automation function and applied in downstream processes, supporting the moderation effects.Originality/valueThe study provides empirical evidence on the effects of the blockchain implementation on firm performance, taking into account the complexity of blockchain functions and supply chain processes. It enriches the current understanding of how blockchain implementation in the supply chain contributes to firm value.

Idiosyncratic factors that shape shareholder reward policies in capital intensive companies

This study empirically explores multiple company-specific determinants of dividend distributions and stock buybacks, by utilizing a panel dataset of maritime shipping companies and a panel dataset of matched companies from various industries, as well as by employing Generalized Method of Moments instrumenting for endogeneity. The results provide evidence that idiosyncratic factors, such as the reputation of dividend distribution, firm market value, free cash flow, firm profitability, analyst’s coverage, free float, firm size, leverage, firm liquidity, stock liquidity, collateralizable firm assets, risk, investment opportunities, institutional ownership, and firm performance, are important antecedents of dividend distributions in both capital intensive and diverse industries. Moreover, the reputation of stock buybacks, firm market value, free cash flow, analyst’s coverage, free float, firm size, leverage, firm liquidity, stock liquidity, collateralizable firm assets, risk, institutional ownership, and firm performance, are important determinants of stock buybacks in capital intensive industries. Lastly, the reputation of stock buybacks, firm profitability, analyst’s coverage, free float, firm size, leverage, stock liquidity, collateralizable firm assets, risk, investment opportunities, institutional ownership, and firm performance are important factors of stock buybacks in diverse industries. These empirical findings enrich the literature and yield practical implications for principal officers and investors as discussed herein.

Value relevance of cost of environmental damage

Purpose This paper aims to assess whether environmental (carbon) damage costs affect firm value and ownership. Design/methodology/approach This paper uses fixed-effects panel models and difference-in-differences design to tease out essential effects based on 69,352 sampled firm-year observations from 2004 to 2022. It uses Trucost data on the dollar cost of environmental damage at the firm level. Findings Using proprietary environmental damage costs data on US firms from Trucost, this paper finds that firm value is negatively associated with environmental (carbon) damage costs, with additional tests suggesting that the association is causal. Institutional investors increase their relative holdings following environmental shocks that reveal financial benefits to internalizing or reducing these costs. Originality/value Knowing the significance of the cost of environmental damage at the firm level is important for corporate managers, regulators and investors’ decision-making. However, this has yet to be researched. This paper contributes to the understanding of financial economics.

Impact of regional environmental non-governmental organization density on green innovation and firm value

Impact of regional environmental non-governmental organization density on green innovation and firm value

Moderating Effect of Corporate Governance on the Relationship between Social Sustainability Reporting and Firm Value: Evidence from the Nairobi Securities Exchange, Kenya

Purpose: The main purpose of this study was to examine the moderating effect of corporate governance on the relationship between social sustainability reporting and firm value among companies listed in the Nairobi Securities Exchange, Kenya. Methodology: The study's target population include all 64 NSE-listed companies. The study employed secondary data collected by the use of the annual reports sourced from NSE and firms’ websites for eleven (11) years from 2012-2022. Content analysis technique was employed for the collection of secondary data using data collection sheets. This research used a longitudinal research approach and correlation research design. Results: The study found that social sustainability reporting had an insignificant effect on firm value among companies listed on the Nairobi Securities Exchange. Additionally, corporate governance was shown to have no significant moderating influence on the relationship between social sustainability reporting and firm value. Conclusion/Implication: These findings suggest that companies should reconsider the relevance and quality of their social sustainability reports to better align with stakeholder expectations. Enhanced transparency and storytelling regarding social impacts are necessary to improve investor engagement

CSR as a mediating to company characteristic, corporate governance, and firm value

Investors use the company's value as a benchmark to assess financial performance. Therefore, we must conduct research that uncovers factors capable of enhancing the company's value. Moreover, the majority of research conducted to date has primarily focused on direct testing. This research aims to explain the mechanism of comprehending factors in generating company value based on the signaling theory framework. This study investigates the effect of corporate social responsibility (CSR) practices, as well as mediators such as profitability and size, on firm value in manufacturing firms that have listed their shares on the Indonesia Stock Exchange (BEI). The data analysis was performed using the EViews application based on the collected sample of companies in the period 2019–2022. The results of this research indicate that the level of profitability, company size, and corporate governance effect firm value components directly. This study also suggests that, in line with the signaling theory stream of research, corporate social responsibility (CSR) acts as an important channel to bind the profitable and large-sized firms along with governance mechanisms through the utilization of signals by investors about influential variables such as profitability levels or company size; overall governance practices enacted.

CEO Connectedness and Firm Transparency

ABSTRACTOur research reveals that CEO connections with Audit Committee directors, established through past employment, education, or social organization memberships, significantly impact firm transparency. These connections increase the likelihood of firms issuing less transparent and readable financial reports. Furthermore, these connections are linked to decreased long‐term firm value and increased crash risk. Our findings underscore the crucial role of CEO connectedness in corporate disclosure transparency and firm value. We employed multiple methodologies to address endogeneity concerns. Our results remain robust.

PENGARUH KINERJA KEUANGAN TERHADAP NILAI PERUSAHAAN (Studi pada Perusahaan Sektor Properti dan Real Estate yang Terdaftar di Bursa Efek Indonesia Periode 2022-2023)

The worth of a firm is a crucial element. This is because it can reflect how well a corporation performs. Company performance consists of various components, one of which is financial performance. Investors often use financial performance as a parameter when making stock investment decisions. This study aimed to prove whether financial performance affects the value of companies in the property and real estate sector listed on the Indonesia Stock Exchange from 2022-2023. The population observed in this study is all companies in the property and real estate sector listed on the Indonesia stock exchange for 2022-2023. The sample collection uses certain criteria better known as purposive sampling, so there are 60 sample companies, and the total research data is 120. The analysis method is done by applying the classical assumption test and multiple linear analysis, with a decision stating that the data is normally distributed and free from all symptoms of basic assumptions in regression analysis. Hypothesis testing reveals that partial results of liquidity, profitability, and activity variables can affect firm value, while solvency variables cannot affect firm value. For simultaneous testing, liquidity, solvency, profitability, and activity variables can affect firm value. The outcomes of this study are expected to participate in the development of financial theory which will certainly help enrich the understanding of how firm financial elements influence value and can accommodate financial analysts in making more informed decisions.