Increase In Firm Value Research Articles

Valuation effects of emissions reduction target disclosures

• Emissions reduction target disclosures (ERTD) increase firm value. • The valuation premium is higher for aggressive emissions reduction targets. • The valuation premium is primarily driven by an increase in expected sales. • ERTD do not affect expectations of operating costs and the firm's cost of equity. • Industry competition and pollution intensity are negatively related to the premium.

Can regulation enhancing the shareholder franchise increase firm value?

Can regulation enhancing the shareholder franchise increase firm value?

Does managerial ability increase or decrease firm value?

ABSTRACT Recent studies have revealed the bright side and dark side of managerial ability, while its effect on firm value remains unclear. We find that managerial ability is positively associated with firm value, and the association is positively (negatively) moderated by ownership concentration (firm size and board independence). Moreover, the positive effect of managerial ability on firm value is greater with increased economic policy uncertainty. Overall, our findings highlight the importance of superior managers in enhancing firm value, especially in challenging environment.

Does winning a CSR Award increase firm value?

This study explores the effect of winning a corporate social responsibility (CSR) Award on firm value. Drawing on the stakeholder value maximization view of stakeholder theory, we analyze a sample of 14,039 US firm-years between 2002 and 2018 and find that winning a CSR Award is value enhancing. We further offer evidence that demonstrates how the CSR dimensions of environmental, social and governance criteria influence the CSR Award–firm value nexus. Our results are supported by a series of robustness tests. As CSR Awards are typically awarded to firms that excel in CSR, our findings are expected to encourage managers to pursue CSR more rigorously so as to attain high firm value.

Does Board Demographic Diversity Enhance Cognitive Diversity and Monitoring?

ABSTRACTWe examine whether board demographic diversity enhances cognitive diversity (measured as director dissent in the boardroom) and monitoring. At the director level, we find that individual directors who are dissimilar relative to other board members in terms of tenure and experience are more likely to dissent. At the board level, boards composed of directors who have heterogenous tenure, experience, and gender are more likely to dissent. We also find that stock market reactions to director resignation announcements are more negative for directors who have ever dissented than for other directors. Moreover, following dissent-driven proposal rejections, firms experience an improvement in value and internal governance and a decrease in risk. The results suggest that directors who have diverse qualifications and skillsets as well as the inclusion of female directors enhance cognitive diversity, and that this enhanced cognitive diversity helps increase firm value and monitoring effectiveness.JEL Classifications: G30; G32; G34.

기업의 부동산보유가 기업가치에 미치는 영향*

According to the agency theory, a high-quality monitoring system can reduce self-interest of a manager and increase firm value. In this perspective, the study investigates whether a high-level of corporate governance can offset negative effects of corporate own real estate on firm value. The findings are as followed; First, it is found that KOSPI firms

Can green credit increase firm value? Evidence from Chinese listed new energy companies.

Green credit plays a crucial role in reducing energy consumption and environmental degradation in China. Using data on China's new energy listed companies from 2007 to 2018, this study explores the impact of green credit on new energy firms' value, as well as the mediating effects of financing constraints and external supervision on the relationship between green credit and new energy companies' economic benefits. Our results suggest that green credit significantly improved new energy firms' value, and this positive impact can last over the long term. The above result is robust to using alternative measures, replacement of fixed effects, exclusion of abnormal samples, and placebo test. Additional tests reveal that green credit improves new energy companies' value by alleviating financing constraints and strengthening external supervision. Finally, green credit's value-enhancement effect is heterogeneous, depending on corporate property rights, business life cycle, implementation of Green Credit Guideline policy, and the firms' geographical location. Our conclusions suggest that government should not only pay attention to the continuity of green credit commitment but also the mitigation of financing constraints and improvement of external supervision for new energy companies. Moreover, heterogeneous factors should be considered to formulate and calibrate related policy rather than a one-size-fits-all policy.

Founding-family-controlled firms, intergenerational succession, and firm value

Using a unique, hand-collected data sample and panel-data econometric techniques, we analyse the impact of founding-family control and intergenerational succession on the value of Chilean listed companies. After controlling for firm- and ownership-specific characteristics, we find an inverse U-shaped relationship between a founding family’s degree of ownership and firm value. Hence, family ownership at first increases firm value. However, when family ownership exceeds a threshold of about 38 percent of outstanding shares, the family takes advantage of its power in the firm and extracts wealth from minority shareholders. Further, if the founder of the company is the CEO or chairman of the board, firm value increases. However, family businesses with a subsequent-generation owner-manager destroy value.

Board reforms and debt choice

In this study, we examine the impact of board reforms on the choice between bank and public debt. Using a large sample of firm-year observations from 29 countries and a difference-in-difference setting, we find that major board reforms lead to a decrease in bank debt ratio, particularly in companies where bank debt is used for monitoring purposes, suggesting that bank debt and board reforms are substitutes for monitoring managers' actions. We also find that board reforms' adoption is associated with a facilitated access to alternative financing sources with better terms than bank debt. In an additional analysis, we show that the decrease in bank debt ratio is stronger for firms with higher information opacity and those in countries with strong institutional environment. More importantly, we provide evidence that the decrease in bank debt post-reform increases firm value, indicating that the substitution between bank monitoring and board monitoring is a value-enhancing decision. Taken collectively, we conclude that the need for bank monitoring is endogenously determined by the strength of alternative governance mechanisms (i.e. board governance).

Corporate Governance, Profitability, Media Exposure, and Firm Value: the Mediation Role of Environmental Disclosure

This study aims to examine and analyze environmental disclosure's effect in mediating the relationship between corporate governance, profitability, and media exposure towards firm value. Total 135 samples of companies that have been listed on IDX in 2015 - 2019 were obtained and analyzed using multiple linear regression. This study showed that corporate governance and profitability increase firm value as investors tend to see corporate governance and profitability as a signal in determining investing decisions. Meanwhile, media exposure and environmental disclosure cannot increase firm value. This study also finds that corporate governance decreases ecological disclosure. Meanwhile, profitability and media exposure cannot increase firm value. Thus, this study also proves that corporate governance, profitability, and media exposure cannot increase firm value through environmental disclosure.

Motivating Managers to Invest in Accounting Quality: The Role of Conservative Accounting*

ABSTRACTAlthough internal control over financial reporting has gained increasing regulatory attention, its enforcement is far from perfect; thus, firm‐specific incentives to management become important to increase the quality of financial reports. We study how owners can motivate managers to invest in accounting quality even though it is costly to the managers. Using an agency model, we establish that a sufficiently conservative accounting system (which understates performance) is necessary to induce a manager to invest in accounting quality, and more conservatism increases this investment. The reason is that higher accounting quality mitigates the expected reduction of the manager's compensation from conservatively measured performance. Higher accounting quality makes the performance measure more precise, and the owner optimally lowers incentives, even though that entails some loss of productivity. In total, more conservatism increases both firm value and accounting quality. Our findings suggest that striving for neutral accounting can counteract incentives to improve accounting quality, and they provide support to using conservatism as a metric of financial reporting quality in empirical studies.

The value of marketing innovation: Market-driven versus market-driving

In recent years, significant managerial attention has been paid to marketing innovation; however, the academic literature has remained silent on the value of marketing innovation and often assumes that it is too trivial and tactical to create a substantial impact on firm value. This study attempts to address the research gaps by answering two research questions: (1) Does marketing innovation increase firm value? and (2) if yes, how does marketing innovation add value to firms? Building upon market orientation theory and the marketing-finance interface literature, we classify two types of marketing innovation—market-driven and market-driving—and assess their impact on firm value through the mediating effects of cash flow drivers and investigate how such an impact is influenced by the three market forces—demand uncertainty, technological turbulence, and competitive intensity. With a large panel dataset consisting of 4772 new products in the consumer-packaged-goods (CPG) industries from 1985 to 2010, our study reveals that market-driving marketing innovation, which is associated with the effectiveness of firm value creation, contributes six-fold more to firm value than market-driven marketing innovation, which is associated with the efficiency of firm value creation. This study also reveals the differential moderating effects of the three market forces: when an industry faces high demand uncertainty, both types of marketing innovation strengthen their positive impact on firm value; in an industry marked by technological turbulence, only market-driving marketing innovation increases firm value; but, in an intensely competitive industry, only market-driven marketing innovation increases firm value.

The Role of Political Connections and Family Ownership in Increasing Firm Value

In the face of business competition, a company strategy is needed by seeking and exploiting opportunities in the business environment, one of which is through political connections. Ownership structure plays an essential role in the company to determine the firm performance. The high concentration of family ownership has the power to reduce agency conflicts between management and stakeholders in a company. Concentrated ownership can serve as corporate governance mechanism for better and effective monitoring of management. This study was conducted to determine empirical evidence of the effect of political connections and family ownership structure on firm value. The sample in this study was 390 data of the manufacturing company. The data analysis used is moderating regression analysis. The results of this study are a positive influence of political connections and family ownership structure on firm value. The results showed that the more the company had a strong political connection and was controlled by the family, the more the firm value would increase. The interaction of political connections can strengthen the influence of family ownership on firm value. It proves that the family ownership structure plays a role in determining political connections in Indonesia, especially in manufacturing companies. The existence of empirical evidence that shows that the firm value controlled by a politically connected family is higher than companies that are not connected politically, which implies investors to invest in companies that are politically connected and companies controlled by families with majority ownership because it is proven to increase firm value.

THE EFFECT OF MANAGERIAL OWNERSHIP, DIVIDEND POLICY AND DEBT ON FIRM VALUE: THE INDONESIA STOCK EXCHANGE CASES

This study aims to analyze the impact of managerial ownership, dividend policy and debt on firm value. Using a sample of 15 companies with an observation period of 8 years (2011-2018), this study finds that managerial ownership and debt policy have a negative effect on firm value. Meanwhile, dividend policy has a positive effect on firm value. This study stresses that the objective of the managerial ownership program to reduce the potential for agency conflicts and increase firm value has not been optimal. This, based on the findings in this study, is caused by the relatively small portion of managerial ownership in the sample companies, which is only about 5 percent of the total share ownership.

Does Diversification of Share Classes Increase Firm Value?

Firms can issue stocks classified in many ways, including in terms of voting rights, dividend rights, redemption rights, and conversion rights. This study investigates the desirability of giving firms greater freedom to choose their share classes. Making use of the setting created by the 2011 Commercial Act amendment that significantly relaxed regulation over share classes in Korea, we study the motivation behind and the effect of adopting two newly emergent classes: preferred stocks convertible to voting stocks at the discretion of management and preferred stocks redeemable at the discretion of investors. We find that firms adopt the former for managerial entrenchment purposes and destroy firm value, while firms adopt the latter in times of financial constraint but fail to arrest the decline in firm value.

Leverage dan growth opportunity mempengaruhi nilai perusahaan melalui profitabilitas

Companys value is a reflectiond or good name of company. The company value means a lot to investors and potential investors. This researcsh aims to examined the effect of leverage and growth opportunityd on corporate value through profitability. In this studys, the populations of consumer goods companies listesd on the Indonesia Stock Exchange in the 2015-2017 period is used. This study used 15 companies as samples. Data processing techniques using path analysis. The results of the leverage study have a negative effect on profitability. A high amount of debt reduces profits. Growth opportunity affects profitability. Increase in assets increases profits. leverge has a negative effect on firm value. A high amount of debt reduces the value of the company. Growth opportunity has a positive effect on firm value. An increase in assets or sales increases the value of the company. Profitability has an effect on firm value. Profits increase firm value. The effect of leverage on firm value with profitability as an intervening variable is not proven. Profitability indirectly has no effect on the relationship between leverage and firm value. The effect of growth opportunity on firm value with profitability as an intervening is proven. Indirectly, profitability affects the relationshipd of growth opportunitsy and firm value. Companies must have right strategy in terms of using funds from outside the company to increase company value.

Does Board Independence Increase Firm Value? Evidence from Closed-End Funds

AbstractResearchers disagree about the impact of board independence on firm value. The disagreement generally stems from the endogenous nature of board appointments. I add new evidence to this discussion by using a sample of closed-end funds to document the value-enhancing effects of independent boards. Using cross-sectional, difference-in-differences, and instrumental variables techniques, I address these endogeneity concerns and find consistent evidence that board independence is associated with higher firm value.

The Effect of R&D and the Control–Ownership Wedge on Firm Value: Evidence from Korean Chaebol Firms

Cases have been reported in which research and development (R&D) investment, the core activity for a firm’s sustainable growth, deteriorate rather than increase firm value. This study illuminates the cause of such cases in terms of the control–ownership wedge. How expensed and capitalized R&D affect firm value are examined separately for cases in which the wedge is high and low. In an analysis of Korean chaebol firms, when the wedge is high, significant negative relationships appear between expensed R&D and firm value, while no significant relationship appears between capitalized R&D and firm value. When the wedge is low, expensed R&D does not show any significant relationship with firm value, while capitalized R&D shows significant positive relationships with firm value. This confirms, first, that in cases of high wedge, suboptimal R&D decisions are made, in which the manager can discretionally determine investment targets or projects. Second, this indicates that even in cases of low wedge, the positive relationship between R&D and firm value does not appear in expensed R&D. This study suggests that investors and regulatory authorities should pay close attention to the initial stage of R&D in firms with high control–ownership wedges for sustainable economic growth.

Managing Negative Celebrity Endorser Publicity: How Announcements of Firm (Non)Responses Affect Stock Returns

Celebrity endorsers can cause negative publicity that can spill over to the endorsed brand. However, little is known about the economic effects of firm reactions to these events. This study fills this gap and estimates how announcements of firms’ reactions (yes versus no), timing (slow versus fast), and type (maintain/suspend versus no reaction) affect daily abnormal stock returns (ARs) following negative publicity. Using 128 events of negative endorser publicity between 1988 and 2016 affecting firms in 230 cases, this study offers new and economically relevant insights. The most surprising finding is that firms can gain value depending on their response. Announcements of firms’ reactions positively affect ARs, especially if they occur quickly after negative publicity surfaces. The analyses reveal that fast (slow) announcements of firms’ reactions increase (decrease) firm value by 2.10% (−1.88%) over the next four trading weeks. Results also show that issuing statements suspending or maintaining the endorser both yield more positive ARs than not reacting at all. Further analyses identify conditions under which the stock market rewards maintaining or suspending an endorser. Firms have more positive ARs when they (1) suspend higher-blame endorsers, (2) suspend endorsers whose negative publicity is related to their occupation, (3) maintain endorsers with a high product fit, and (4) do not suspend apologetic endorsers. This study discusses implications for theory and practice and provides a strong empirical foundation for understanding the consequences of firm reaction announcements to negative celebrity endorser publicity.This paper was accepted by Juanjuan Zhang, marketing.

Does Captive Insurance Improve Firm Value? Evidence from S&P 500 Companies

Abstract This study investigates whether the use of captive insurers affects firm value for companies included in the S&P 500. Companies may use a captive insurance subsidiary to retain their risks for a lower cost than they would pay in premiums to a third-party insurer. Although captives are present in more than one-third of all firm-years between 2000 and 2016, this study fails to find evidence that owning a captive increases firm value effectively. Additional analysis reveals that firms that are larger, are listed on the New York Stock Exchange (NYSE), and have smaller proportions of capital expenditures and cash reserves tend to use captives. Overall, the results are inconsistent with previous research indicating that the market reacts positively to captive formation around the formation date. This suggests that incentives other than shareholder value maximization may have encouraged the use of captives during the sample period.