Higher Firm Value Research Articles

Do common institutional owners' activisms deter tax avoidance? Evidence from an emerging economy

We examine the association between common institutional ownership and tax avoidance in an institutional setting characterized by concentrated ownership and principal-principal agency conflict. We find a negative association between tax avoidance and common institutional ownership, and this relationship is stronger among firms with more analyst coverage and higher concentrated ownership. Overall, our results support the monitoring efficiency of institutions and their role in internalizing the negative externality of a firm's tax avoidance on common-industry peers. Further, the reduction in tax avoidance in firms with common institutional ownership is associated with a higher firm value. By demonstrating the role of common institutional owners in deterring tax aggressiveness, our study sheds light on the principal-principal agency cost of tax avoidance in emerging economies.

Firm valuation in Brazil: evidence of overvaluation in the valuation reports

Under the Agency theoretical framework, information asymmetry is crucial in stakeholders’ conflicts. This problem may be present in the process of firm valuation. This work aims to analyze the determinants of the added value of firm financial experts’ valuations, i.e., the difference between disclosed firm value in the valuation report and firm market value. The study assesses the effect of ownership concentration, firm size, the costs of preparing the valuation report, and stock liquidity estimating a set of econometric models. The sample is composed of all firm valuation reports undertaken in Brazil between 2002 and 2012 with data hand collected from CVM (The Brazilian SEC) website and Economatica database. The results indicate that ownership concentration is directly related to the added value of financial experts’ valuations, indicating a possible problem of information asymmetry that benefits controlling shareholders who may be interested in higher firm valuation. The findings also indicate that firm size, higher cost of the firm valuation process, and firm market liquidity are associated with firm value overestimation. The paper contributes to the literature on firm valuation by using an important database with hand collected data from all firm valuation processes recorded at the CVM. Studies on firm valuation in Brazil are still scarce so that the finding that ownership concentration matters for firm valuation is important by showing that such process may be a source of agency conflicts.

How to monetize data: An economic analysis of data monetization strategies under competition

With data being generated at an unprecedented rate, monetizing data has become a paramount issue in this era of the digital economy. Firms have traditionally leveraged consumer data to improve their product or service offerings and increase their sales revenue, which is indirect data monetization. The recent emergence of online data markets and the data brokerage industry have facilitated direct data monetization, enabling firms to obtain additional revenue by selling their anonymized data directly to data brokers. This study develops a game-theoretic model to investigate the impact of direct data monetization on competition between firms. Our results show that in equilibrium, high-value firms with competitive advantages in product or service value often sell less data than low-value firms, implying that high-value firms rely less on direct data monetization than low-value firms. Surprisingly, as direct data monetization prevails, high-value firms further dominate the market for selling products or services, especially when the data broker's analytics capability is high. This result reveals that data brokers with high analytics capabilities can hinder, rather than facilitate, market competition. Finally, direct data monetization may benefit both consumer surplus and social welfare because it facilitates data-sharing between firms, allowing firms to obtain additional insights to improve their product or service offerings. These findings are explored in-depth, along with different model extensions and their relevant managerial implications.

CORPORATE GOVERNANCE AND ITS IMPACT ON MARKET RETURN AND MARKET CAPITALIZATION IN BANKING SECTOR OF PAKISTAN

This study investigated the influence of corporate governance practices on bank market return and market capitalization in Pakistan. A sample of 19 commercial banks was selected using a simple random sampling method, and data was collected from 2010 to 2020. The study employed pooled OLS, Fixed Effect, and Random Effect models to analyze the relationship. The findings revealed mixed results concerning the impact of corporate governance variables on market return. The regression results highlight the influential role of director compensation and audit meetings on market capitalization, revealing a significant positive correlation with higher firm values. In contrast, variables such as board size, board composition, independent directors, and audit committee size and independence exhibit a lack of statistical significance in their impact on market capitalization. Moreover, board independence demonstrates statistical significance solely under the pooled OLS and Fixed Effect models. Similarly, variables including board size, board composition, director compensation, audit committee meeting frequency, and audit independence display no significant association with market return. These findings align with previous research in the field.

Effects of CEO Duality, Board Independence, Ownership Concentration, Company Age on Profit Persistence and Firm Value: An Empirical Study of Manufacturing Companies in West Java, Indonesia

This research examines the dual effect of CEO, board independence, ownership concentration, and company age on earnings persistence and firm value in manufacturing companies in West Java, Indonesia. The study conducted a survey of 78 manufacturing companies in West Java in 2022. The results show that CEO duality has a negative effect on earnings persistence, while board independence has a positive effect on earnings persistence. Ownership concentration has no significant effect on earnings persistence, and company age has a positive effect on earnings persistence. In addition, board independence and company age have a positive effect on firm value, while CEO duality and ownership concentration have no significant effect on firm value. These findings suggest that companies with separate CEO and board chairman positions and higher board independence are more likely to have persistent earnings and higher firm value. The study also implies that company age plays an important role in determining earnings persistence and firm value.

Green Accounting and Firm Value

Objective - The environment is one of the more interesting issues to discuss, especially if it relates to companies' accounting issues. This study was conducted to determine the effect of green accounting implementation on firm value. Methodology/Technique – Firm value is measured using Tobins-Q, and green accounting is measured by ratings based on PROPER. Multiple regression analysis was used, and 35 manufacturing companies were sampled in this study. Findings - The results of this study show that green accounting can increase firm value. Companies that apply green accounting have a higher firm value because information about environmental costs is additional information for stakeholders when making decisions. If the company does not incur environmental costs, it is considered bad for investment. Novelty - Green accounting is still new, so this study was conducted to provide an overview of green accounting and firm value. Companies implementing green accounting will increase their firm value and help preserve the environment. It is hoped that Indonesian accounting organizations will develop standards regarding green accounting. Type of Paper: Empirical. JEL Classification: F64, L50, M14, Q52, Q56 Keywords: Green Accounting; Firm Value; Green Investment; PROPER; Indonesia Reference to this paper should be referred to as follows: Alexander, N. (2023). Green Accounting and Firm Value, Acc. Fin. Review, 7(4), 12 – 18. https://doi.org/10.35609/afr.2023.7.4(2)

Keeping up with the CSR Joneses: The impact of industry peers on focal firms’ CSR performance

Using US-listed firms from 2000 to 2015 as a sample, we report a strong enhancing effect of industry peers’ corporate social responsibility (CSR) performance on focal firms’ CSR performance. Firms improve their CSR performance by ~10.15% standard deviation when other peer firms in the same industry increase their CSR by one standard deviation. Moreover, this peer effect is more substantial when the peer firms are closer to focal firms, are included in SP500 index, and have a relatively larger size than focal firms. Focal firms are less likely to follow industry peers if they are industry leaders, have stronger earnings capacity, occupy foreign business and receive fewer analyst followings. Finally, firms following industry peers’ CSR policies achieve less product market shares and poorer performance, but a higher firm value. We suggest that executives should not blindly follow peer firms’ suit and strategically invest in CSR to achieve higher competitiveness.

Development of zinc oxide nanoparticles as safe coating for the shelf life extension of grapes (Vitisvinifera L., Red Globe) fruits

The effects of zinc oxide nanoparticles coating (NZO) developed from chitosan (CH) with incorporation of bergamot essential oil (BO) were investigated to extend the shelf life of grapes (Vitisvinifera L., Red Globe). Treated and untreated grapes were determined for some postharvest and phytochemical properties such as decay incidence, firmness, polyphenol oxidase enzyme activity (PPO), proximate analysis, and sensory evaluations. Besides, that microbial growth against S. typhimurium bacteria was also evaluated during 16 days of storage period of grapes at 25 °C. Descriptions of coating treatments were the following; control “COL” (distilled water/glycerol (1%)/acetic acid (0.5%)); chitosan “CH” with priority 85% (1%), distilled water/glycerol (1%)/acetic acid (0.5%); chitosan/nano zinc oxide (1%), partial size of (15 nm) “CH-NZO;” chitosan/nano zinc oxide/bergamot oil (1%) “CH-NZO-BO.” The control treated berries started to rot after 7 days; the noted highest corruption on 16th day s of storage (32.51). While CH berries coated became rotten after 9 days, those coated with CH–NZO and CH–NZO–BO achieved the lowest decay incidence percentage with no remarkable differences after 16 days (10.11% and 9.13%), respectively. The loss of firmness value was more seriously considered for the COL berries 3.84 N after the 16th day. On the other hand, the highest firmness value was for CH–NZO–BO which recorded 8.27 N. In the same trend, CH and CH–NZO achieved similar values after 16 days (6.31 N and 6.98 N), respectively. The lowest PPO activity was observed for COL berries at 0.31 Unit/Minute after 16 days of storage. Though, the highest activity was recorded by CH–NZO–BO treatment at 0.99 Unit/Minute. The content of proteins was between 2.32 and 3.04%, fats between 0.30 and 0.43%, and total carbohydrates between 78.47 and 78.65% on the 16th day of storage. The highest reduction in the numbers of microbial growth 2.78 Log CFU/Berry occurred by coating with CH–NZO–BO at the end of the storage period, while no inhibition was detected with COL and CH treatments which recorded 4.99 and 4.69 Log CFU/Berry, respectively. The visual aspect in COL samples showed a serious reduction of 1.10 with high rates of dehydration and browning, while CH-NZO–BO samples showed the highest rate of 4.33. CH–NZO–BO samples also showed a relatively high rate of firmness of 4.11, crunchiness of 3.92, and sourness of 3.53. CH–NZO recorded the highest rates for juiciness 4.15 and sweetness 3.51. Though, the CH–NZO–BO coating can be recommended for food industry.

ANALYSIS OF THE EFFECT OF CORPORATE SOCIAL RESPONSIBILITY (CSR) ON RISK, PERFORMANCE, AND COMPANY VALUE (GOOD MANAGEMENT THEORY BASED TESTING)


 
 
 
 The polemic of the company's existence in the community can provide both positive and negative aspects. The company certainly provides goods and services that are needed by the community, but on the other hand, it is not uncommon for people to get bad impacts from the company's business activities. Environmental pollution, products that endanger health, exploitation of labor and irresponsible use of energy are examples of negative forms caused by companies. Many companies are seen as contributing to economic and technological progress, but are criticized for creating social and environmental problems. Then how to make the implementation of this Corporate Social Responsibility program run well? First, the company must empower the community in market development programs and image formation to the community (Community Development Program).
 According to good management theory and Slack Resource Theory, the company will first focus on the company's performance according to the slack resource theory, and the company will prioritize its focus on social performance (CSR) according to the principles of good management theory. Empirical evidence obtained that a high firm value does not guarantee the existence of corporate responsibility. On the other hand, companies that implement Corporate Social Responsibility will affect the value of the company.
 
 
 

Trading on Talent: Human Capital and Firm Performance

Abstract How is technically skilled human capital reflected in firm performance? We leverage a uniquely detailed employer–employee matched dataset to measure US firms’ technical human capital in information technology (IT), Software Engineering, Mobile Networks, Data Analysis, and Web Development. All five technical skillsets are associated with higher firm valuations. However, they negatively forecast both financial and operational performance in the future. For example, a one-standard-deviation increase in employees with IT skills corresponds to 2.2% higher Tobin’s q but predictable future returns of –10 basis points per month. Our results are stronger in tighter labor markets, in firms with more cash, and during time periods when each technical skillset is especially popular. These patterns suggest that the market expects too much from popular technologies, leading to over-valuation. Overall, our results highlight how corporate over-investment can extend to intangible capital such as skilled employees.

Family Firm Value in the Acquisition Context: A Signaling Theory Perspective

Drawing on signaling theory, we explore the signaling effect of family firm status on firm value in the acquisition context as well as important contingencies influencing the signal’s effectiveness. Based on a sample of 486 observations of acquisitions in France, Germany, Italy, and Spain from 2011 to 2019, our empirical results suggest that acquirers purchase family firms at a higher firm value than non-family firms. This relationship is moderated by the target firm’s financial performance (i.e., high vs. low) and listing status (i.e., private vs. public) prior to an acquisition, as well as the type of acquirer (i.e., financial vs. non-financial) and the acquirer’s geographic location (i.e., cross-border vs. domestic). Our study’s findings suggest that family firm value is driven not only by the characteristics of the family firms that become acquired but also by the characteristics of the acquirers as they influence the effectiveness of the family firm signal.

INVESTIGATION OF CHANGES IN ANTIOXIDANT ACTIVITY AND PROTEIN DIGESTIBILITY OF WHEAT BREADS INCLUDING SPIRULINA PLATENSIS AND PROTEIN EXTRACTS FROM SPIRULINA PLATENSIS DURING IN VITRO DIGESTION

In this study, wheat breads including Spirulina platensis (SP) and protein extracts from Spirulina platensis (SPE) at levels of 0.125%, 0.25% and 0.50% were prepared and textural, volume, color and sensory properties were determined. Moreover, changes in total phenolic content (TPC), antioxidant activity (AOA) and in vitro protein digestibility (PD) of breads were investigated during in vitro digestion. The sample with the highest firmness value was control (919.4 g, p≤0.05). Breads with SP and SPE had higher volume than control (p≤0.05). The L* (52.2±1.0) and b* (18.9±0.2) values were the lowest for bread with SPE-0.25 (p≤0.05). The AOA of breads (SP-0.125, SP-0.5 and SPE-0.25) increased after in vitro gastric digestion (p≤0.05). The SPE-0.50 was the most preferable in terms of sensory properties. The SPE-0.125 had the highest TPC and breads including SPE at all levels had higher AOA than control and breads with SP after in vitro intestinal digestion (p>0.05).

Do all institutional investors care about corporate carbon emissions?

This paper investigates whether institutional investors promote the abatement of corporate carbon emissions. Using firm-level data on the U. S from 2007 to 2017, we find that institutional investors help reduce carbon emissions. The result is more pronounced in firms with more independent (investment companies, investment advisors, and pension funds), long-term, and monitoring institutional ownership. Our result holds when we employ a quasi-natural experiment and the difference-in-differences approach to address endogeneity. The channel analysis documents that institutional investors help reduce carbon emissions by reducing energy consumption. We also find that shareholder activism is a proximal monitoring mechanism through which institutional investors influence firms to achieve better carbon performance. Finally, our results show that the advantage for institutional investors from reducing carbon emissions is higher firm value.

Pengaruh Profitabilitas Dan Leverage Terhadap Nilai Perusahaan

This research aims analyze the significance of the effect of profitability and leverage on firm value. This research methods uses descriptive and quantitative. Analysis of the data well-used data panel regression. The results found that profitability have a significant effect on firm value. While the leverage variabel shows a significant effect to firm value. This is related to firm values. Property and real estate company is expected to consistently ameliorate the performance in order to improve profitability and leverage on firm value. Higher profitability and leverage, the higher firm value.

Firm‐Level Climate Change Risk and CEO Equity Incentives

AbstractWe document evidence that CEOs who lead firms that face higher climate change risk (CCR) receive higher equity‐based compensation. Our finding is consistent with the compensating wedge differential theory and survives numerous robustness and endogeneity tests. The result is more prominent for firms that are socially responsible, susceptible to higher environmental litigation and part of the non‐high‐tech industries. Furthermore, we find supportive evidence that firms offering higher equity incentives to their CEOs for managing higher CCR are usually better off in the long run via a lower cost of equity capital and higher firm valuation.

Relationship of Working Capital Management and Leverage on Firm Value: An Evidence from the Indonesia Stock Exchange

The owners' prosperity level represents the high firm value. Investors' primary focus has shifted to the firm's value. The firm's value reflects the prosperity of its shareholders and investors. One of the primary company goals is to obtain maximum profit from business activities. However, the purpose of establishing a company is not only to achieve maximum profit but also to increase the prosperity of parties related to the company's business activities, such as shareholders and stakeholders, so that the company's value increases. Thus, the current investigation examines the relationship between working capital management and leverage towards firm value in the Indonesia Stock Exchange. This quantitative study utilized secondary data from the Central Bureau of Statistics of Indonesia from 2016 to 2020. The data were analyzed using time series regression by assisting econometrical software, namely EVIEWS-10. The results indicated that Working Capital Management positively and significantly affects firm Value. Besides that, leverage has a negative and significant effect on Firm Value. Also, profitability moderates the relationship between working capital and firm performance. Besides that, profitability does not moderate the relationship between leverage and firm performance. In conclusion, this study has identified the important factors influencing firm value, and leverage has not affected firm value. The findings of this research can be used as the basis for making investment decisions. The aspect measures the ability of the company's assets to generate a return on the investment made in the company's asset instruments.

Pengaruh Manajemen Laba, Ukuran Perusahaan, Corporate Social Responsibility Terhadap Nilai Perusahaan (Studi Empiris Pada Perusahaan Sektor Pertambangan Yang Terdaftar Di Bei Tahun 2018-2020)

The main goal of every company is to optimize the company's profit as well as the wealth of its shareholders. Companies with high firm value will maximize the welfare of their shareholders, as a result, investors will be interested in investing in similar companies. There are several factors that can affect the value of the company which includes earnings management, firm size and corporate social responsibility. The purpose of this study was to determine the effect of earnings management, firm size, corporate social responsibility on firm value. The approach in this study uses a quantitative method approach. The population in this study are all companies in the mining sector listed on the Indonesia Stock Exchange in 2018-2020 totaling 48 companies. By applying the purposive sampling technique for sampling, 17 companies were obtained for 3 years, so the number of samples was 51. The data quality test uses the classical assumption test and the analysis technique uses multiple linear regression analysis. The results of this study indicate that earnings management has no significant effect on firm value, firm size has a positive and significant effect on firm value, and corporate social responsibility has no significant effect on firm value.

The Effect of Option Grants on Managerial Risk Taking: A Review

This article presents a systematic review of the theoretical and empirical literature on option grants and managerial risk taking. One of the objectives is the motivation of further research on the topic. Risk-averse managers hold less diversified portfolios and, thus, tend to take less risk than optimal for shareholders. More option grants may encourage risk taking and result in higher firm value or alternatively increase the sensitivity of wealth to stock-price fluctuations mitigating overall risk-taking incentives. The net effect of options on risk-taking behavior is, therefore, ambiguous and calls for more empirical investigation. This is crucial for fiscal policymaking and regulation reforms. Yet, establishing a causal link between option granting and managerial risk taking has been challenging due to reverse causality, omitted correlated variables and measurement errors. In this review, we revisit the VegaDelta question by synthesizing the relevant research in economics, finance and accounting. We find that the empirical literature has successfully utilized natural experiments (e.g., regulation changes) to better establish causality, even though some mixed results are also documented. Finally, we also emphasize potential future research avenues especially relating to accounting disclosure, earnings management and tax policy.

The effect of trademark breadth on IPO valuation and post-IPO performance: an empirical investigation of 1510 European IPOs

Trademarks differ in breadth and can cover a wide range of categories of goods and services. We draw on real options theory and argue that greater trademark breadth constitutes a valuable real option that is associated with higher firm valuation and performance. We analyze a sample of 1510 firms that went public in Europe between 2002 and 2015 and find a positive effect of trademark breadth on initial public offering (IPO) valuation and post-IPO performance. We implement a contingency analysis to contrast real options and signaling theory and find stronger support for the real options perspective.

Mind the chair-CEO age dissimilarity: an implicit internal monitoring mechanism

ABSTRACT Age dissimilarity is an important indicator of executives’ heterogeneity and cognitive conflict. Using Chinese-listed firms between 2005 and 2020 as sample, this paper finds that greater chair–CEO age dissimilarity results in more board monitoring and higher firm value. In addition, the board monitoring plays a mediating role in explaining the relationship between age dissimilarity and firm value. However, the effect of age dissimilarity may be opposite when the chairman is younger than the CEO.