Firm Value Creation Research Articles

Digital Transformation and Discourses of Change Commodify Finnish Public Education

AbstractEcosystemic cooperation among the state, municipalities, and commercial actors is evident in the public education of Finland. The edu-ecosystems can include firm interdependences, value creation, co-specialisation, and co-evolution with an aim to sell products and services to the global market as well as to open up markets in a particular country. Here, we examine the discourses through which commercial actors promote the change or transformation of public education. With support from the state, commercial organisations—whether for-profit, non-profit or private or state-run—have a strong agenda to change ‘old-fashioned’ education into one that better serves the twenty-first century work life. The state and municipalities are gatekeeping the businessing around education, but commercial actors would prefer more opportunities to cooperate with public education institutions. It is noteworthy that commercial actors are gaining greater access to public education policymaking through ecosystems, and hence, have greater influence in redefining and commodifying education. Yet, there is a lack of public conversation about the commodification of public education in Finland.

How Do Institutional Investors Perceive Mandatory ESG Disclosure: Evidence From SEC’s Mandatory Climate Change Disclosure Proposal

This study examines how institutional investors perceive the SEC’s mandatory climate change disclosure proposal, announced on March 21, 2022. The findings show that investors of US public firms with higher institutional ownership react less negatively to the proposal despite overall negative market reactions. Additional tests show that the main results hold even if an endogeneity concern and greenhouse gas contributors’ effect were tested with the cross-sectional regression models. This research sheds light on the lack of consensus on the impact of institutional investors on ESG disclosure for US public firms, providing evidence that institutional investors contribute to the long-term sustainability and value creation of portfolio firms.

Intellectual capital as a driver of value creation in Serbian entrepreneurial firms

PurposeThis paper analyses the role of intellectual capital (IC) as a factor of the financial performance of entrepreneurial firms, which are recognized as the main drivers of economic growth and employment.Design/methodology/approachThe sample consists of 188 business owners from Serbia. The primary data are collected using the questionnaire, while the secondary data come from the annual financial statements of their companies. The elements of IC as independent variables are grouped into three components: human, structural and relational capital; sales revenue and operating profit CAGR (5y) are used as dependent variables, while company size and industry type are used as control variables. Statistical analysis involves factor and regression analyses.FindingsThe results reveal that IC components contribute to the long-term financial performance of entrepreneurial firms. Specifically, the following elements have positive effects on financial performance: knowledge of the entrepreneur, process improvement and organisational culture. On the other hand, entrepreneurs’ social skills and tenacity were found to have a negative impact on revenue and operating profit growth, while support from informal networks had a negative effect on the growth of sales revenue.Originality/valueThis study aims to fill a gap in the literature on the impact of IC on the financial performance of entrepreneurial firms.

Corporate social initiatives and wealth creation for firms-an empirical examination

Purpose This study aims to examine whether social initiatives adopted by firms lead to improved financial performance. The authors analyse the impact of different elements of social initiatives on wealth creation for firms in terms of operating and market performance. Design/methodology/approach The study is based on the social initiative scores of over 4,500 firms collected from Thomson Reuters' ESG database. The study uses two-stage least squares (2SLS) to analyse the relationship between social initiatives and firm performance. Findings Profitable, mature, capital intensive and firms with high sales growth rate tend to invest more in social initiatives. Firms with high agency costs invest in social initiatives for workforce efficiency, maintaining human rights and product responsibility. The study documents evidence that social investments are value creating mechanism for firms which leads to improved financial performance in terms of operating and stock market performance. Firms with high dividend intensity invest in social initiatives for workforce welfare and human rights initiatives. Investment in employee well-being and community initiatives results in intangible benefits such as improved stock market valuation. Practical implications The research model has not considered the impact of intervening variables to understand the relationship between corporate social performance and corporate financial performance. Social implications Firms ought to recognize that social investment is beneficial in terms of value creation of firms as stock market perceive such investments favourably. Firms must focus more on community development initiatives and workforce initiatives for the value creation of firms compared to investments directed towards human rights initiatives and product responsibility initiatives. Originality/value This study focusses exclusively on the social dimension of the CSR activities. The authors examine the impact of social welfare scores on firm performance by analysing the valuation effects on scores representing workforce, human rights, community and product responsibility. Moreover, the paper also examines the impact of a new dimension of product responsibility on firm performance. They also focus on both aspects of financial performance in terms of operating performance (proxied by ROE) and the joint impact of both operating and market performance (proxied by Tobin’s Q). This paper contributes to the research on the linkage of social performance to financial performance by observing that firms with high agency cost characteristics tend to invest in social initiatives for work force efficiency, maintaining human rights and product responsibility.

The Impact of Debt Policy, Dividend Policy, and Investment Decisions on Value Creation (Study of Coal Mining Companies listed on the IDX for the 2018-2022 Period)

The aim of this reseacrh is to identify and analyze the combined impact of debt policy, dividend policy, and investment decisions on value creation, the influence of debt policy on value development, and the influence of dividend policy on value creation. The study also aims to investigate the influence of investment choices on value generation. We conducted this study at coal mining businesses listed on the IDX between 2018 and 2022. This study had a sample size of seven coal mining companies. The preliminary findings indicate that debt management has a significant and favorable influence on value generation. Similarly, the policy regarding dividends also has a positive and significant impact on value creation. Furthermore, investment decisions have a positive and significant impact on value creation for coal mining firms listed on the IDX between 2018 and 2022.

Artificial Intelligence-based Business Model Innovation and the Creation and Capture of Firm Value

Artificial Intelligence-based Business Model Innovation and the Creation and Capture of Firm Value

Value chain management practices and value creation in sub-Saharan African apparel firms

Purpose: This study explores value chain management (VCM) practices in the sub-Saharan African apparel industry, developing a strategic framework to enhance value creation.Design/methodology/approach: A quantitative research design was adopted, surveying 430 managers across the apparel value chain. Data were analysed using factor, correlation, and regression analyses to ascertain the impact of VCM practices on value creation. However, it is essential to notice that the study’s findings are limited to the sub-Saharan African context and may not directly apply to other regions.Findings/results: The analysis revealed a strong correlation between specific VCM practices, such as information sharing, incentive realignment, agile manufacturing, and value creation. These practices help firms to navigate the industry’s complexities and leverage regional opportunities.Practical implications: The study provides a valuable framework for managers, highlighting customer-centricity and strategic sourcing strategies. These strategies are crucial for enhancing operational efficiency and competitive positioning in the global market.Originality/value: The study offers original insights by empirically validating VCM practices and their contribution to value creation within the sub-Saharan apparel sector. The strategic framework fills a gap in the literature and aids the sector’s integration into the global value chain.

Why do firms list their shares in the US? The role of political uncertainty

PurposeThis paper investigates the effect of political uncertainty on the decision to cross-list in the United States (US).Design/methodology/approachTo reach our paper aim, we use a sample of 589 non-US firms cross-listed in the US for the period from 2000 to 2019. We perform logit regression and use several political uncertainty proxies, including US election presidential years, political voting margin and the political uncertainty index from Baker et al. (2002), as a continuous measure of general political condition (Francis et al., 2021).FindingsWe find the following results. Non-US firms are less likely to cross-list their shares when US political uncertainty is high. We also find that the decision to cross-list is driven by price informativeness as a channel that can explain the role of political uncertainty. Our results are robust to the endogeneity concern. In addition, we find that political administration (Democrats vs Republicans) significantly affects the decision to cross-list. More particularly, we show that firms are more likely to cross-list their shares in the US when Democrats win the elections. Moreover, we find that cross-listed firms exhibit lower valuation compared to their non-cross-listed peers when US political uncertainty is high.Originality/valueUsing a unified framework of non-US firms cross-listed in the US, this paper contributes to different strands of the literature. Our first main contribution adds to the literature on cross-listing by providing, in our knowledge, the first evidence regarding the relation between cross-listing and political uncertainty. We add to the existing literature by showing that US political uncertainty significantly determines the decision to cross-list and value creation for cross-listed firms. Whether and how managers alter their strategic decision behavior in such settings is less clear. Hence, our paper contributes to the literature by documenting how political uncertainty impacts cross-listing decision and shapes management guidance decisions. Second, this study joins a growing body of literature that examines the real impact of economic policy uncertainty (EPU) on economic outcomes. We provide empirical evidence suggesting that cross-listed firms exhibit lower valuation during period of high political uncertainty due to decreased price informativeness.

Antecedents and consequences of intellectual capital: a systematic review, integrated framework, and agenda for future research

AbstractThis study systematically reviews the fragmented field of Intellectual Capital (IC) to clarify its antecedents and outcomes. Using a hybrid method that combines bibliometric analysis and a framework-based approach, it examines 170 peer-reviewed articles, focusing on key articles, authors, countries, journals, and themes in IC research. The study introduces a comprehensive framework, summarizing the core elements of IC and providing a foundation for future theoretical, empirical, and conceptual research. Six main clusters were identified through co-citation analysis: three related to IC antecedents, particularly board gender diversity, and three concerning IC consequences, notably firm performance. This research maps out existing gaps in the literature and suggests integrated pathways for advancing IC knowledge. It contributes significantly to IC studies by synthesizing a vast array of literature into an integrated framework, offering new insights that both challenge and complement existing narratives. This framework not only elucidates IC's foundational aspects but also sets a strategic direction for future investigations. The findings underscore the evolving nature of IC research and highlight crucial antecedents and consequences. The study bridges academic research with practical applications, emphasizing IC's role in boosting firm competitiveness and value creation. While recognizing its methodological limitations, the study calls for a diversified perspective in future IC research, aiming to deepen the understanding of IC.

The Impact of Voluntary Reporting on the Creation of Firm’s Value: A Longitudinal Study

The primary objective of this study is to scrutinize the relationship between voluntary reporting and the creation of firm value within the context of Bangladesh. To achieve this, thirty banks listed on the Dhaka Stock Exchange have been chosen as the focal point of investigation, covering the time span from 2016 to 2020. The study relies predominantly on secondary data extracted from the annual reports of the selected banks. The measurement of voluntary reporting is conducted through the utilization of a checklist comprising 116 information items. Panel data regression models are employed to rigorously test the formulated hypotheses. The aggregate-level analysis of voluntary reporting practices reveals an average reporting level of approximately 55.40%. However, the results from the panel data regression analysis indicate that the voluntary reporting level does not exert a statistically significant influence on company value. This research contributes to the existing body of literature by providing empirical evidence that, in the case of a developing country such as Bangladesh, voluntary reporting alone does not lead to a substantial increase in firm value. The findings underscore the importance of considering contextual factors and the specific economic landscape when assessing the impact of voluntary reporting practices on firm value in diverse settings.

Intangible assets and their effects on business performance: an analysis for Colombian companies

Intangible assets (IAs) are fundamental for the creation of firm value. However, the literature is inconclusive regarding the relationship between IAs and profitability. This paper uses financial data from Colombian firms from 2005 to 2015 to determine if this relationship exists. Thirty dynamic panel models have been used to see whether IAs are related to Return on Equity, Return on Assets, Earnings Before Interest and Taxes, Earnings Before Interest, Taxes, Depreciation, and Amortization, Gross margin, and Net margin. The results, despite a limited sample size and missing variables, are related to the literature in that they signal the negative relationship between IAs and profitability. Thus, the capitalized value of IAs seems to negatively affect Colombian firms' performance in the short and long term.

Relationship between SMEs’ ESG performance and value creation in China: the moderating role of government subsidies

This paper uses Chinese small and medium enterprises (SMEs) as a research sample to explore the relationship between environment, social responsibility, governance (ESG) performance and firm value creation and to test the moderating effect of government subsidies. In addition, we classify government subsidies into innovation, social responsibility, and development subsidies using a Biterm Topic Model (BTM) to explore the heterogeneous moderating effects. The results show an inverted U-shaped relationship between ESG performance and value creation in Chinese SMEs. Government subsidies have a significant moderating effect on the inverted U-shaped curve of ESG performance and value creation, and the moderating effect of different government subsidies also varies. An increase in social responsibility subsidies makes the curve inflection point shift to the left, an increase in development subsidies makes the inflection point shift to the right and the curve steeper, and innovation subsidies have no moderating effect.

The Impact of Corporate Governance Mechanisms on Value Creation in Family Firms: Evidence from an Emerging Economy

Corporate governance (CG) is a system by which firms are directed and controlled. Through its mechanisms, it ensures optimal levels of efficiency, exploits opportunities, and prevents conflicts of interest between directors, shareholders, and stakeholders. The studies do show a positive relationship between CG and performance, but they are conducted in developed countries with stable legal and economic environments. Thus, CG contributes to the value creation (VC) of the firms. But in family firms, the concentration of power resulting from the overlapping of its subsystems (family, business, and ownership) influences the functioning of CG, and probably, VC. Setting goals, monitoring results, or controlling performance can be some of its forms. But we do not know the influence in emerging countries.The aim of the study is to empirically analyze the financial contribution of CG mechanisms to the VC of listed family firms in a Latin American economy. The results show the importance of the size of the board of directors, the participation of independent directors, and the duality of the chief executive officer. All the latter are important, considering the high representation of the family firms, their traditional concentration of power, the level of legal or regulatory weakness level, the uncertainty and instability of market conditions. The study is relevant due to the lack of evidence in emerging markets.

Integrating the Roles of Corporate Social Responsibility Disclosure, Good Corporate Governance, and Firm Size on Corporate Value Creation: Perspectives from Indonesia Energy Companies

This study aims to examine the moderating roles of firm size on the maximization of firm value with corporate social responsibility disclosure and good corporate governance in the energy sector companies. The population of this study consisted of energy sector companies listed on the Indonesia Stock Exchange from 2019 to 2023. The sampling method employed was purposive sampling by curating samples from the population that met predetermined criteria. The sample used in this study amounted to 80, with details of 16 companies meeting the criteria over the 5-year research period. The analysis techniques in this study were descriptive analysis and quantitative analysis (classical assumption test, moderation regression analysis, and hypothesis testing) utilizing STATA version 17. The results of this study uncovered that the implementation of good corporate governance exerted a positive and significant effect on the creation of firm value, and firm size could moderate the relationship between good corporate governance and firm value. Additionally, the relationships between corporate social responsibility disclosure and firm value, moderated by firm size, did not exhibit significant relationships.

A Microfoundation Perspective on Business Model Innovation: The Cases of Roblox and Meta in Metaverse

This article investigates the microfoundations of business model innovation (BMI) by unveiling the main micro factors explaining macro variables that in turn influence innovation in value creation and capture mechanisms of firms’ business models (BMs). Specifically, through the analysis of two companies innovating their BMs in metaverse setting (i.e., Roblox and Meta), the article provides and discusses a model bridging macro variables and micro factors. Indeed, first the model illustrates macro variables influencing innovation in value creation (i.e., technological infrastructure and knowledge management) and in value capture (i.e., stakeholders readiness and stimulation of interest). Second, the model clarifies how each of these macro variables is explained by two types of microfoundations, as individual microfoundations, pertaining with skills and actions of individuals, and relational microfoundations, relative to relationships among individuals. Our findings contribute to both BMI and microfoundation literature, by assessing, on the one hand, the macro variables driving innovation in value creation and value capture, and, on the other hand, the micro factors explaining such innovation. Moreover, the article suggests managers how to intervene on specific micro factors to drive the macro-level outcome of BMI.

Is ESG disclosure creating value propositions for the firms? An SLR and meta-analysis of how ESG affects the financials of a firm

This systematic literature review (SLR) delves into the evolving landscape of environmental, social, and governance (ESG) disclosures and their consequential effects on the financial performance of firms. As sustainability considerations increasingly influence investment decisions, corporations are compelled to integrate ESG factors into their reporting practices. The primary objective of this research is to comprehensively analyze existing literature, elucidating the patterns, trends, and key insights surrounding ESG disclosures and their repercussions on financial outcomes. The study employs a systematic approach to identify, evaluate, and synthesize pertinent research articles, academic papers, and industry reports. It explores the multifaceted dimensions of ESG disclosures, encompassing environmental stewardship, social responsibility, and governance practices. The analysis spans diverse sectors, examining how ESG reporting has become a crucial component of corporate transparency and stakeholder engagement. The review aims to distill overarching themes from the literature, providing a nuanced understanding of the relationship between ESG disclosures and financials. Preliminary findings suggest that ESG disclosures are positively associated with enhanced financial performance, fostering long-term value creation for firms. However, variations exist in the significance of these relationships across industries and regions. Furthermore, the review highlights the emergence of standardized frameworks and reporting guidelines as essential catalysts for advancing ESG disclosure practices. This research contributes to the ongoing dialogue on sustainable finance by consolidating diverse perspectives and methodologies found in the literature. The synthesis of existing knowledge seeks to inform future research directions, guide corporate practices, and assist policymakers in shaping frameworks that promote responsible and transparent business conduct. In total, 650 articles were reviewed to explore the effect the ESG disclosure has on the financial performance of the firms.

The effect of ownership concentration on firm risk and value: evidence from Germany

Aim: This paper aims to understand the effects of between ownership concentration on firm risk and value.
 Design / Research methods: The author focuses on the largest publicly listed 91 German corporations in the time period 2010 to 2021. The resulting sample contains between 928 and 1051 observations and is analysed through a pooled OLS regression analysis. Ownership concentration is measured in terms of the number of blockholders, the size of the largest shareholder, and the Herfindahl Index of the ten largest shareholders. Firm value is captured with Tobin’s Q and firm risk is computed as the annualised daily stock price volatility.
 Conclusions / Findings: It is found that ownership concentration affects firm risk significantly negatively. Moreover, results suggest an inverse U-shape relationship between ownership concentration and firm value. This relationship can be explained by combining the negative effects of rising ownership concentration on firm risk with its implications for the creation of firm value.
 Originality / Value of the article: The German market has used to have a network-like structure with a concentrated ownership structure. However, over the past two decades, it transformed towards a more Anglo-Saxon-like and market-based structure with a rather dispersed ownership structure. Furthermore, factors which govern the relationship between ownership concentration are used to explain parts of the relationship between firm value and ownership concentration in a new way, thereby adding value to understanding the latter, highly debated, relationship.

Environmental, Social, and Governance Performance and Value Creation in Product Market: Evidence from Emerging Economies

Using a unique sample of 13,412 firm-year observations from 19 countries of the emerging economies for the period of 2011 to 2019, we investigate the association between the firms’ environmental, social, and governance (ESG) performance and their value creation in the product market. Specifically, we first used the pooled OLS regression model for panel data as our baseline model and found that ESG performance (as well as its pillars) has a strong positive effect on the future value creation of the firms in the product market. We also conducted some additional analyses using various regression models, as well as adopting multiple tests for endogeneity, and the additional analyses revealed that the results are robust under different scenarios. Overall, the findings of this study highlight the importance of firm-level ESG performance for the value creation of firms in the product market in emerging economies and have theoretical and practical implications for academic researchers, market participants, and government entities in studying, evaluating, and governing firms’ ESG performance and reporting.

Do pressure-sensitive institutional investors moderate CSR decisions towards value creation of Indian firms?

Purpose Research on the significance of corporate social responsibility (CSR) and value creation is nascent as compared to CSR and financial performance. The concept of value is also evolving because of changing business environments, globalization and the expanded idea of CSR. Nowadays, managers expect a more quick, pragmatic approach to satisfy valid stakeholder claims while simultaneously creating competitive advantage through reputation and investor value. The paper aims to examine the impact of CSR on the market and sustainable value creation through CSR expenditure in India and the moderating role of pressure-sensitive institutional investors (PSII). Design/methodology/approach The study used panel data regression methodology on a sample of 1,845 non-financial Indian firms from 2015 to 2021. Findings CSR creates market and sustainable value for non-financial Indian firms in line with stakeholder theory. The authors find a positive moderating role of governance represented by PSII on CSR and market value creation but not on sustainable value. Research limitations/implications The study is based on secondary data. CSR, despite being a regulatory obligation, provided long-term benefits that increased their sustainable growth rate. The results highlight the importance given by financial markets to CSR activities. Other types of institutional investors can also be examined in future research. CSR can be embedded in the core operations of the firm, which can help in fostering a culture of sustainability and responsible business practices that benefit firms and society as a whole. Tax incentives can be provided to firms investing in CSR. Practical implications CSR provides long-term benefits to the firm, which enhances the goodwill and integrity of the firm in the market. The results reveal that besides capital market investors, firms are subject to the scrutiny of consumers, communities and the government as expectations rise and information spreads faster, which can have repercussions. CSR helps in meeting such expectations and the perceived value of the firms. Managers and chief executive officers (CEOs) can pay attention to the type of institutional investors like PSII, which can be formed as a part of the firm’s CSR strategy. Social implications The positive impact of CSR on sustainable value expresses a long-term management orientation based on the improvement of stakeholder relations and the associated environmental impacts referring to cohesion and consensus, market opportunities and strengthened reputation and image. A sustainable company involves a conscious and continuing effort in the equilibrium between contrasting stakeholders’ expectations in an attempt to optimize value creation. Tax exemption can be provided for CSR activities. Originality/value The authors contribute to the scant literature on CSR and value creation, especially sustainable value, as most of the prior studies are not empirical on sustainable value in the Indian context. Managers and CEOs can pay attention to the types of institutional investors like PSII, which can be formed as a part of the firm’s strategy.

Shareholder value maximization via corporate ESG performance: evidence from mergers and acquisitions in China

ABSTRACTThis study investigates the role of environmental, social, and governance (ESG) performance in shaping shareholder value during mergers and acquisitions (M&A) processes. Drawing on data from Chinese publicly traded companies, we demonstrate that firms with robust ESG performance exhibit a heightened ability to fulfill their commitment to maximizing shareholder value. These findings align with stakeholder theory, which posits that organizations prioritizing ESG considerations are more likely to generate greater returns for their shareholders. Moreover, our analysis reveals that the positive impact of high ESG performance on valuation is magnified in cases where the acquiring firm is either a non-family business or a state-owned enterprise (SOE). Additionally, we find that the influence of corporate ESG performance on value creation becomes more pronounced when the acquiring firm boasts higher levels of transparency and a favourable reputation. This research contributes to the limited body of literature exploring the connection between ESG initiatives and M&A practices, as well as enriches our understanding of firm investment behaviour and value creation, particularly within emerging markets.