Firms In Countries Research Articles

The interaction effect of family ownership, board gender and skills on CSR strategy with ESG performance: evidence from ASEAN-5 countries

Purpose This study aims to examine how corporate social responsibility (CSR) strategy impacts environmental, social and governance (ESG) performance in public listed firms across the Association of Southeast Asian Nations (ASEAN)-5 countries. Additionally, it examines the interaction effect of family ownership, board gender diversity and board skills on the relationship. Design/methodology/approach This study used a fixed-effect panel regression to analyse 1,212 observations collected from ASEAN-5 public listed firms, covering the years 2017–2022. To address the endogeneity problem, this study used a two-step GMM. Findings The findings indicate that the ESG performance of firms in ASEAN-5 countries is significantly and positively influenced by their CSR strategy, suggesting that robust CSR strategies lead to superior ESG performance. Family ownership is found to weaken the positive impact of CSR strategy on ESG performance, indicating that family firms prioritize CSR less. Furthermore, female and skilful boards are more likely to implement effective CSR strategies, as reflected in their improved ESG performance. Practical implications This study urges firms, particularly family-owned firms, to enhance their CSR strategy. It also recommends that policymakers integrate gender diversity and a variety of skills into corporate boards, possibly by revising regulatory frameworks and corporate governance guidelines. Originality/value The results of this study are novel and specifically tailored for ASEAN firms. To the best of the authors’ knowledge, this study is among the first to examine the roles of board skills, gender diversity and family ownership in the relationship between CSR strategy and ESG performance in the ASEAN context.

ISO 14000 as a driver of sustainability: Exploring its alternative drivers beyond ISO 9000 standards

This study replicates and extends Corbett and Kirsch (2001) and Vastag (2004) using a new data set to investigate the drivers of ISO 14000 certification diffusions using decision tree analysis. The findings indicate that at the national level, ISO 14000 certification diffusions are influenced by factors other than ISO 9000 certification diffusions, such as the number of environmental treaties signed and ratified, industrial activities as a percentage of GDP, and GDP per capita, thus provides a range of managerial insights and enhances scholarly understanding of sustainability beyond the influence of ISO 9000. Future studies might extend the countries included in this study to see if the results are the same. Future research may include other factors like a country’s Environmental, Social, and Governance (ESG) indicators to better understand its commitment to sustainability, including environmental sustainability. The country’s culture may influence customers, investors, and other stakeholders’ knowledge and desire for sustainable practices and inspire firms to obtain ISO 14000 certifications. Since larger firms may seek ISO 14000 certification, future studies may evaluate the influence of the number of large firms in various countries as drivers of ISO certification diffusions.

Corporate Social Responsibility and Country Governance: An International Comparative Study Amid the COVID-19 Pandemic

This paper assesses the association of ESG scores with stock returns and highlights the moderating role of the COVID-19 pandemic and the country’s governance. The study uses panel data regression models to assess the relationship between ESG factors and stock returns, focusing on the moderating role of country governance and the COVID-19 pandemic. The results reveal that governance quality significantly enhances the positive effects of ESG practices on returns, particularly during times of crisis. These suggest that higher overall ESG scores are related positively to financial performance, and this relation is enhanced during the COVID-19 pandemic. Specifically, the two dimensions of ESG that matter most are environmental and governance. Country-level governance is important because firms in well-governed countries amplify the benefits of high ESG scores. The opposite is true for the higher controversies scores, whose bad financial outcome is magnified during the pandemic. These results present an argument for the resilience of firm financial performance, dependent on strong ESG practices and governance frameworks. This holds great interest for investors and policymakers in associating good ESG considerations with the effective management of financial risks, leading to sustainable returns during periods of widespread economic uncertainty.

Does climate risk influence analyst forecast accuracy?

We examine how climate risk influences analyst forecast accuracy proxied by forecast error and dispersion. Using country-level climate risk estimated with time trends in droughts, we find that analyst forecasts are less accurate for firms in drought-prone countries. This effect of climate risk is stronger when climate risks are denoted in earnings forecasts, and when firms’ home countries have greater reliance on hydroelectric sources in electricity generation, more important agricultural and food industries, and active stances concerning climate change. Overall, our findings suggest noteworthy implications of climate risk on the financial markets via analyst forecast accuracy.

Do US cross-listings, IFRS adoption and domestic investor protection impact earnings management?

PurposeThis paper investigates the impact of International Financial Reporting Standards (IFRS) adoption and domestic investor protection on the relationship between United States (US) cross-listing and earnings management.Design/methodology/approachThe paper applies ordinary least squares (OLS) regression analyses to a matched sample of cross-listed and non-cross-listed firms from 2000 to 2018, covering 38 countries.FindingsWe find that US cross-listed firms have lower real earnings management. The results also show that real earnings management is lower for US cross-listed firms that adopt IFRS and from high domestic investor protection countries. Our results further show that real earnings management is higher when cross-listed firms use Level 1 American Depository Receipts (ADRs) to cross-list but adopting IFRS and high domestic investor protection help reduce real earnings management. Using the SEC’s Rule 12h-6 as a quasi-natural experiment, we document that post-12h-6 Rule, firms in high domestic investor protection countries experience a reduction in both accruals and real earnings management. However, the result is the opposite in countries with low investor protection.Originality/valueOur findings have implications for regulators and policymakers on the impact of ADR levels and Rule 12h-6 on earnings management.

The impact of energy diversification on firm performance: The moderating role of corporate social responsibility

This paper examines the impact of diverse consumption of energy sources on firm performance, focusing on the moderating role of corporate social responsibility (CSR). The paper uses 45,579 firm-level panel data samples across 56 developing and developed economies from 2002 to 2021. It is observed that the impact of energy diversification in improving firms' performance (measured by the return on assets, return on equity, sales growth, and Tobin's Q) is more potent in firms with higher CSR engagement. The moderating effect of CSR is also more pronounced among firms in high energy-consuming industries than in low energy-consuming ones. Finally, the moderating role of CSR activities is more substantial for firms in countries with individualistic and long-term-oriented cultures.

INVESTMENT POLICY, GEOPOLITICAL RISK AND THE ROLE OF INSTITUTIONS: INTERNATIONAL EVIDENCE

In today’s world, given the increasing importance of geopolitical risk (GPR), this study investigates the impact of GPR on corporate investment, or capital expenditure, of nonfinancial firms considering institutional settings. Utilising data on 337,399 firm-years from 42 countries for the period 1996-2021 (retrieved from Datastream), empirical findings show that firms in higher GPR countries present fewer investment opportunities. Namely, firms use capital expenditures as a substitute for GPR. Next, the negative impact of governance on capital expenditures across the whole sample remains for the firms in civil law countries. However, it reverts to positive for those in common law countries. In other words, capital expenditures are a substitute for (outcome of) governance in civil (common) law countries.Overall, investors should be concerned about the level of GPR, governance, and legal system when determining where to invest. Policymakers should consider GPR and institutional quality to attract foreign investors.

Why do some African firms export? The role of regional economic communities?

AbstractThis article examines whether African manufacturing firms are strategically located for regional market access. The study uses a large dataset from the World Bank Enterprise Surveys and is based on 6800 firms from 26 African countries. The study findings show that firms located in countries with dual membership to Regional Economic Communities (RECs) exhibit a significantly higher propensity to export than firms in countries affiliated with a single REC. Additionally, our findings suggest that RECs enhance export participation by mitigating customs delays. However, constraints in the business environment can hinder the propensity of firms to export. In particular, the study identifies informal competition and power outages as substantial barriers that increase the cost of doing business and diminish the potential benefits of REC membership. These results underscore the importance of advancing economic integration across Africa to bolster export participation. Additional improvements in the domestic business environments should address the constraints that hinder firms' international competitiveness.

The effects of takeover laws on corporate financing policies: global evidence

Using a cutting-edge estimation method to address heterogenous treatment effects arising from differential treatment timing, we examine the effect of international takeover laws on corporate financing. We find that firms reduce their equity financing in response to takeover laws. Further analyses indicate that takeover laws’ negative effect on equity financing is more pronounced for firms with higher financial constraints and for firms in countries with strong investor protections.

Business strategies, bureaucratic ties, and firms’ innovation novelty: insights from the World Bank enterprise survey

We draw intuitions from the systemic perspective of innovation to develop and test a conceptual model aimed at examining the various factors capable of influencing the novelty of innovations within firms in Visegrad countries. The empirical results based on the analyses of about 2,132 firms revealed that organisational strategies, external collaborations, engaging in research and development, and the legal status of firms marginally influence innovation novelties. Contrary to our expectations, we found that intellectual property rights and bureaucratic ties do not significantly influence innovation novelties. Business cities are also positively correlated with firms’ innovation novelties whilst legal status is not. The main practical implication of the research is that firm managers in the Visegrad Group aiming to improve and sustain the novelty of innovations should consider strengthening their external collaborations as well as having business strategies that must include innovations as well as research and development (R&D). We discuss some implications for theory and policy.

A Comparative Study on the Determinant Factors of Social Responsibility Performance in Individual Firms of Main Countries

ABSTRACT This paper analyses the relationship between ESG performance and its determinants from the data of 658 U.S. firms, 353 Japanese firms, 78 Chinese firms and 68 Korean firms, over the 2011 to 2021 period. An empirical analysis of this study's results is as follows. The policy factors are significantly positively related to the ESG in the firms that have shown a decrease in their grade and the firms with ESG performance grades that have increased. More specifically, firms also show a significant strong positive relationship between the specific fields within the ESG pillars and the policy dimension.

Using machine learning to identify and measure the family influence on companies

Many studies have focused on family firms. Yet, grasping the nature of these organizations remains challenging because firms’ familiness can take many forms, which are hard to trace with traditional data. We use ChatGPT – an application of machine learning – to try to unravel the complex and intangible influence of families on firms in large datasets. Whereas it often classifies family firms consistently with equity criteria, ChatGPT appears able to gauge families’ legacy and values. Hence, it detects more family firms in countries where families have a strong influence on firms even without large equity stakes. Also, ChatGPT often treats lone-founder firms as non-family firms, whereas it assigns a higher family score to firms that are eponymous, heir-led, and with multiple family directors. Finally, classifying family firms using ChatGPT provides financially relevant information to investors.

Impact of the environmental ESG pillar on firm sustainability: Empirical research in the V4 countries

The research aimed to define the impact of the environmental pillar of ESG principles on the sustainability of firms in the V4 region and quantify the impact of certain factors on the perception of firms’ sustainability. To this end, a questionnaire survey on the attitudes of managers and business owners was conducted in February 2024 in the Czech Republic, Slovakia, Poland and Hungary. Data were collected using the Computer Assisted Web Interviewing (CAWI) research method. The distribution of respondents by country was as follows: there were 338 respondents from the Czech Republic, 349 from Poland, 312 from Slovakia and 321 from Hungary. Correlation analysis and linear regression analysis were used to test the scientific hypotheses. The results suggest that firms that focus on the environmental education of employees, use green practices, provide truthful information about environmental impacts, and spend adequate costs on environmental protection are more likely to achieve sustainable growth. On the other hand, there appears to be no affect on corporate sustainability from policies pertaining to managing the company in accordance with specific regulations, minimising the environmental impacts of business activities, intensively addressing the energy efficiency of company buildings, and using renewable energy sources. In conclusion, firms in the V4 countries focus on that aspects of Pillar E that affect sustainable growth but do not significantly increase costs or increase the overall complexity of processes.

Secrecy culture and sensitivity of investment to stock prices: Evidence from emerging markets

This paper investigates the effect of secrecy culture on the relationship between corporate investments and stock prices. We argue that managers from secretive cultures are more likely to rely on stock prices as an additional source of information, thereby leading to greater sensitivity of their investments to stock prices. Consistent with our arguments, we show that firms headquartered in countries with higher levels of secrecy culture exhibit stronger sensitivity of corporate investments to stock prices. Our results hold across various estimation strategies, in different sub-samples and for alternative proxies of secrecy culture and corporate investments. Furthermore, we show that investments exhibit greater sensitivity to stock prices of peer firms in countries that score high on secrecy.

Does democracy shape international merger activity?

Democracy matters for international merger activity. Using a sample of 101,834 cross-border deals announced between 1985 and 2018, we show that merger flows predominantly involve acquirers from more democratic countries than their targets. This result is primarily driven by a “pull” factor: firms in countries with weaker democratic institutions attract more cross-border deals. We find evidence of bonding as the key mechanism behind this effect. The democracy effect is stronger when target countries have weaker corporate governance standards. Furthermore, target abnormal returns around deal announcements increase with the difference in democracy between acquirer and target countries. Importantly, differences in investor protection or economic development do not directly explain the democracy effect. Combined, our findings imply that democracy is a fundamental, yet previously overlooked, determinant of cross-border mergers.

Does aid for trade promote FDI from enterprises of donors to recipient countries? Based on the spatial spillover effect of China's Aid for Trade

AbstractThis paper investigates the direct and spatial spillover effects of China's Aid for Trade (AfT) on Chinese enterprises' foreign direct investment (FDI) in recipient countries. The results show that China's AfT can effectively promote FDI by Chinese firms in recipient countries, and the promotion effect is determined by both the direct effect and the spatial spillover effect. The mechanism test finds that China's AfT can promote FDI by Chinese firms through improving the infrastructure of the recipient countries and enhancing the image of the residents of the recipient countries toward China. The study suggests that the introduction of spatial spillover effects in the study of aid is of great significance in promoting the development of research in the field of aid. This paper enriches the conclusions of aid research in the field of economics on the one hand and broadens the boundaries of aid effectiveness research on the other hand.

The impact of economic uncertainty on corporate ESG performance: Global evidence

This paper examines the impact of economic uncertainty on firms' overall environmental and social governance (ESG) performance in 3448 companies in 40 economies from 2006 to 2022. It is found that the overall ESG performance of corporations improves with increasing economic uncertainty for both, but more so in developed countries than developing countries. Higher competition further strengthens this relationship indirectly in developed countries but directly weakens it in developing countries. The results are also robust to run different model specifications, samples, and time selections. The findings are consistent with the Stakeholder Theory in developing country firms and a larger group of developed country firms. The results also highlight the substantial influence of economic uncertainty on corporate ESG policies, shedding light on the uncertainty-mitigating aspects of corporate ESG performance.

The mediating role of risk management in the relationship between audit committee effectiveness and firm sustainability performance

Purpose This study aims to investigate the direct relationship between audit committee effectiveness and sustainability performance and the mediating role of risk management in the relationship between audit committee effectiveness and firm sustainability performance. Design/methodology/approach The Hayes Process regression mediation model was used in this study. The data included 2,590 firm-year observations from 518 publicly non-banking and finance companies on the Indonesia Stock Exchange from 2017 to 2021. Findings This study proves the important role of risk management in mediating the effect of audit committee effectiveness on firm sustainability performance. Audit committee effectiveness was found to positively and significantly affect risk management. However, the effect of audit committee effectiveness on firm sustainability performance was statistically insignificant. The robustness checks and additional tests support all the main regression results. Research limitations/implications Sample firms from Indonesia were used as representatives of developing countries. Further research may use more sample firms from multiple countries or provide a comparative study between firms in different countries. Practical implications The authority must enhance the audit committee’s role in risk management quality due to the indirect effect between the audit committee and sustainability disclosure. It should also expand the audit committee’s role to include sustainability disclosure. Social implications This study could increase community awareness of firm sustainability. Where a company is required to provide more eco-products, stakeholders are, therefore, expected to have more equal concerns. Originality/value To the best of the authors’ knowledge, this study is the first to examine risk management as a mediator of the effect of audit committee effectiveness on firm sustainability performance.

Can rising urban house prices actually limit the outward FDI by firms in a home country? A story from China

We investigate the effects of rising urban house prices on manufacturing firms’ decisions on outward foreign direct investment (outward FDI) in a home country. By utilizing the panel data of Chinese industrial enterprises in 2005–2013, our estimates suggest that, for every 210 manufacturing firms or 13 listed companies in China, one firm will forgo outward FDI when house prices double. As a result, there could have been 95 percent more manufacturing firms or 70 percent more listed firms conducting outward FDI if house prices remained unchanged during the study period. To address potential endogeneity issues, we exploit a fixed-effects instrumental variable model, a difference-in-differences strategy, and housing discontinuities at provincial borders among neighboring city/county pairs. To elucidate potential mechanisms, we employ the “Olley and Pakes” covariance to assess resource allocation efficiency and observe its negative correlation with house prices. Furthermore, we delve into the impact of house prices and resource allocation efficiency on TFP, and find that house prices and TFP are negatively correlated, while resource allocation efficiency and TFP are positively correlated. Finally, heterogeneity analyses reveal that rising house prices exert a stronger negative influence on outward FDI entry for firms that are less productive, larger, domestically-owned, more closely linked to the real estate industry, labor-intensive, and in industries with higher levels of outward FDI participation. These results underscore the fact that rising house prices could exacerbate resource misallocation, leading to a decline in enterprise TFP and subsequently reducing their outward FDI.

Membership duration of tourism firms in the United Nations Global Compact Programme

This study examines the membership duration of travel and leisure (tourism) firms in the United Nations Global Compact Sustainability Reporting Programme between 2007 and 2020. Important factors of duration include firm characteristics (such as size and ownership) as well as contextual country-specific elements relating to environmental progress and control of corruption. Data originate from 693 member firms entering the programme at any point during the analysis period. Estimation results, based on the Cox proportional hazard model, show that tourism firms in countries that decouple emissions from economic growth are more likely to endure in the programme. A high level of corruption control in the home country is also associated with a significantly higher probability of membership duration. Larger firms, publicly listed firms and members of local Global Compact networks are also more likely to remain in the programme. Control of corruption is only important for duration outside the OECD; meanwhile, environmental performance at the country level is crucial independent of location. Environmental performance is particularly significant in more recent years, in parallel with an accelerated green transition in many countries.