Large European Companies Research Articles

Strategic use of provisions: Evidence from European multinationals

Provisions involve a high degree of judgment by corporate managers and substantially affect companies’ reported performance, arguably making them prone to earnings management. To analyze the strategic use of provisions under International Accounting Standard (IAS) 37, we examine the notes disclosures of large European companies that provide detailed information about yearly additions and utilized and unutilized reversals of prior provisions. First, our analysis reveals that firms suspected of earnings management tend to withhold disaggregated information on their provisions. Second, by focusing on firms that disclose detailed information, our study suggests that they strategically adjust provision expenses based on their earnings management incentives. Third, considering the use of provisions over time, we find that firms exhibit increased discretionary additions and decreased unused reversals during exceptionally profitable years, suggesting corporate managers engage in “cookie jar” accounting. In contrast, firms show lower discretionary additions and higher unused reversals in periods when they risk missing earnings benchmarks. Our findings suggest the strategic use of provisions and indicate that disaggregated notes disclosures on provisions can provide relevant insights into corporate earnings management strategies.

Maverick or Front-runner? Army Modernization in Hungary in the Light of the Other Visegrad Countries

This article compares Hungary's defence modernisation policy with that of the other Visegrad countries and finds that Poland has invested the most in developing its military capabilities and, together with the Czech Republic, has benefited considerably from rising international demand stimulated by the war. Both combined the purchase of modern equipment with the award of government contracts to local suppliers. Slovakia followed the same pattern, but without significant export capacity. Hungary, on the other hand, was unable to prevent the collapse of its former defence industry. As a result, its current development programme uniquely integrates the goals of army modernisation with the plan for rebuilding the sector, which relies heavily on the participation of large European companies, whose role is less important in the other countries. Two other distinctive features of the Hungarian modernisation policy are its embeddedness in broader economic and regional policies, and the creation of six distinct territorial clusters where the reorganisation of the sector is taking place.

Relationship between COVID-19 and the credit risk: a case study for EuroStoxx 50 companies

In this paper, we explore the impact of the COVID-19 pandemic on the credit risk of large European companies. We selected corporations belonged to the EuroStoxx 50 Index and whose CDS (Credit Default Swap) may be found in the iTraxx Europe Index. Then we applied the methodology of event studies to our database of companies, chosen as the event, the day of the declaration of pandemic by the WHO. The results indicate that the significance levels of the CAR (Cummulative Abnormal Default) show that the impact on the credit risk of the companies, as measured by the change in the spread of CDS, is important and depending on the sector in which the corporation is included.

Role (in-)congruity and the Catch 22 for female executives: how stereotyping contributes to the gender pay gap at top executive level

We examine to what extent the gender pay gap at top executive level is linked to gender stereotypes, i.e. to societal beliefs about the attributes women and men possess and the roles they ought to perform. We theorize that, even at the highest hierarchical level of an organization, executive functions are gender stereotyped: some (such as IT) are considered typically ‘masculine’, while others (such as human resources) are considered typically ‘feminine’. We argue gender stereotyping at the executive level to be related to pay such that masculine functions are paid more than feminine ones. Referring to role congruity theory, we further argue that women are paid better when they hold less masculine and therefore more role congruous functions. We find supportive evidence for both predictions when studying large European companies across the years 2014 to 2018. Pay data for 353 executives were linked to results of a survey in which participants were asked to rate the masculinity of the areas of responsibility of different executive functions. We find an empirical pattern that reflects a Catch 22 situation in which women executives appear unable to increase their pay by switching to more masculine functions that are, on average, better paid.

THE ARCTIC IN 2022: RESULTS AND PERSPECTIVES

The Arctic has always been in a focus of close attention for the Russian leadership. The article examines the international aspects of the Arctic, analyzes the updated Arctic strategies and policies of countries (India, USA, Finland, the Faroe Islands, the European Union) and their improvements, and the withdrawal of several large European and Asian multinational companies from Arctic projects in the Russian Arctic after the start of a special military operation (SMO). It is emphasized that foreign states continue to increase their military presence in the Arctic, especially in its western part. The situation in the Arctic region was greatly complicated by the accession of Finland and Sweden to NATO, which strengthened the Arctic capabilities of the alliance and created real military threats to Russia in the Arctic direction. Using the examples of the decisions of the Government of the Russian Federation in 2022, the authors analyze the problems of the development of the Russian Arctic, especially those related to the development of the Northern Sea Route and of some of the territories of the Russian Arctic zone for the next 15 years. The article focuses on the nature of the activities of the country's leadership, ministries and departments, legislative authorities, representatives of business and public organizations for the integrational development and assimilation of the Arctic, in light of the unfavorable international events of 2020–2022. It is noted that the real impact of the SMO on the Arctic region can be only determined by its final results.

The Arctic in 2022: results and prospects

The article examines various aspects of the Arctic in 2022, analyzing the withdrawal from Arctic projects of several large European and Asian multinational companies, the termination of scientific cooperation and the fundamental changes in the activities of the Arctic Council (AC). The results of the development of the Russian Arctic are summarized (growth in cargo turnover, approval of the plan for the development of the NSR until 2035, development of the Arctic territories). Particular attention is paid to the threats in the Arctic, defense, and security issues.

From Deindustrialization to a Reinforced Process of Reshoring in Europe. Another Effect of the COVID-19 Pandemic?

In the middle of the 20th century, economic theories predicted an evolution towards development that involved the tertiarization of the productive structure, with industry losing weight to the benefit of commerce and services. This model justified the deindustrialization of countries when, promoting globalization, large companies relocated production phases to third countries to take advantage of lower labor costs. Since the Great Recession and aggravated by the COVID-19 pandemic and other economic factors, globalization seems to be entering a new phase in the third decade of the 21st century, in which Global Value Chains are changing to become even more regional and reshoring is a strategy increasingly employed by large European and North American companies. In the medium term, this global change will have a considerable impact on land systems on a global scale in what could be a new reindustrialization of the old continent. The article presents an investigation carried out on the impact of reshoring in leading European companies in six different industrial branches. The results of the research show how the relocation of the industry in the most developed countries is an incipient trend practiced by the leading European companies.

THE MODERN ARCTIC: GLOBAL BIPOLARITY OR BIPOLAR DISORDER?

After February 2022, the situation in the Arctic begins to acquire some features of a hybrid war, which speak of new negative trends taking place in the region. Many large European and Asian companies from unfriendly countries have left or declared their intention to leave economic projects in the Russian Arctic. Interaction with the foreign scientific community in the field of Arctic research has almost ceased. The well-established algorithm of the Arctic Council’s activities was violated (in March, the participation of Western countries in the events of the chairmanship of the Russian Federation in the Arctic Council (2021–2023) was terminated; in June, the activities of the Council were resumed, but without the participation of Russia; the European Union is trying to increase its influence on Denmark, Sweden and Finland, which are founding members of the Arctic Council). In the summer, a conflict arose and was partially resolved in the Arctic related to the blocking by Norway of Russian cargo sent for Russians and employees of the Arktikugol trust in the village of Barentsburg on Spitsbergen under the pretext of implementing EU sanctions. Under these conditions, Russia is working out additional specific steps to ensure state interests in the Arctic in the socio-economic and defense spheres. According to the authors, a sharp increase in tension is possible in the Arctic after the successful completion of Russia’s special military operation in Ukraine.

Is There a Role for HRM in Corporations’ CSR Strategies? An Analysis of the Sustainability Reports

A significant degree of confusion regarding the relationship between human resources management (HRM) and corporate social responsibility (CSR) persists in research and practice. Drawing on sustainability reports of large European companies, we examine how HRM’s role is presented in connection to CSR. The links between sustainable HRM and CSR are scarce but exist. Our analysis makes three contributions. First, HRM fulfills its CSR role toward employees as internal stakeholders through implementing standard human resources (HR) practices that ensure employee employability, safety, health, and wellbeing without playing a strategic role in CSR. Second, employees are seen as objects of CSR activities rather than active subjects. Third, the CSR–HRM relation is ad hoc and unsystematic; the system-level integration of CSR and HRM remains obscure; and the incorporation of CSR and sustainable HRM does not take place. We suggest that sustainable HRM characteristics would allow HRM to play a more active role in the development and implementation of CSR strategies. Sustainable HRM characteristics could elevate the role of HRM and different HR activities toward a more substantial and strategic role in CSR that is more externally orientated. We call for more empirical research on CSR strategy–sustainable HRM linkage.

Developing a battery of measures for unobtrusive indicators of organisational culture: a research note

Measuring organisational culture is important for detecting the values and practices that increase organisational risk (e.g., unethical conduct). Self-report methods (e.g., surveys) are mostly used to study culture: however, due to reporting biases and sampling limitations, and the rapid advance of digital data, researchers have proposed unobtrusive indicators of culture (UICs; e.g., drawn from social media, company reports, executive data) as a supplementary methodology for identifying organisations at risk of failure. A UIC is a single measure of organisational culture drawn from data collected without engaging employees, and research using UICs is in its nascent stage. Although various data sources have been established for studying culture unobtrusively, researchers have yet to explore the application of multiple UICs drawn from different data sources. To investigate this, we developed an experimental battery of 83 UICs drawn from seven data sources (e.g., company earnings calls, employee online reviews, executive data), applying diverse analyses (e.g., natural language processing, quantitative analysis of behavioural data) to measure eight dimensions of culture (e.g., governance, integrity). We then applied the battery to assess 312 large European companies. We found that the UICs could distinguish between companies and different industries, and one dimension (customer focus) was associated with an outcome variable commonly used in culture research (Return on Capital Employed). However, we were not able to establish a coherent set of statistically reliable dimensions due to the clustering of UICs by data source. This clustering likely occurred because data sources reflected the values and practices of different stakeholders (e.g., employees, managers), which underscores a conceptualisation of culture that is focused less on shared values across an institution, and more on the values, priorities, and practices experienced by different sub-groups. Future research could structure UICs according to data sources and apply UICs to examine the causes of organisational failure.

Executive compensation in Europe: realized gains from stock-based pay

Shareholder value ideology and the rise of executive pay are widely acknowledged but only partly explored aspects of financialization. This paper adds to the empirical evidence on the extent to which stock-based pay incentivizes and rewards corporate executives, demonstrating that CEO pay, and hence pay inequality, is substantially under-stated in Europe. It shows that the actual realized gains (that is, take-home compensation) from stock-based pay of CEOs in the largest European companies are underestimated by the use of ‘fair value’ measures, in the case of some countries dramatically. We base our work on a sample of 301 large, publicly-traded companies listed in the S&P Europe 350 index from 11 EU countries. We document that on average half of the total compensation of the European CEOs in our sample is stock-based, measured by actual realized gains, with differences among countries. Based on our work, we argue that realized gains measures of CEO pay should be the standard for assessing the incentives and rewards of senior corporate executives in Europe. We consider this to be a preliminary step to question shareholder value-based corporate strategies in Europe.

The relevance and comparability of corporate financial reporting regarding renewable energy production in Europe

Renewable energy sources (RES) are a solution to the energy crisis in Europe. Their recognition and measurement from a financial perspective can pose significant challenges for managers and accounting professionals. Large European utility companies must present their financial statements in accordance with the International Financial Reporting Standards. We investigated the degree to which RES-linked financial disclosures in the corporate reports of European energy producers were relevant and comparable for the financial year 2020. Our sample consisted of 16 of the largest European utility companies. Based on a qualitative analysis, we compiled a set of 16 key financial elements to be disclosed concerning RES deployment. We found that the comparability of the financial information related to RES is relatively low. The inconsistent specification of reportable segments and the unclear formulations regarding RES investments diminish the comparability of financial statements. We provided several recommendations on improving the financial reporting linked to RES business activities. This is a new area of research that could have an impact on the industry’s degree of transparency and facilitate a sustainable energy transition.

Research of strength capabilities of building steels under temperature effects

The use of information technologies in construction makes it possible to assess the strength capabilities of various classes of reinforcement in order to use the full strength potential of steels laid down at the production stage. The information obtained during the study of the properties of steels is important both for building structures and for metals used in the manufacture of load-bearing car bodies, in the construction of which high-strength steels are also used. In terms of the quality of the steels produced, the Russian industry is among the leaders in the world along with the largest European companies. The high characteristics of steel make it possible to expand the range of their application, both in conditions of elevated and in conditions of low temperatures.

The effectiveness of risk management system and firm performance in the European context

PurposeThe purpose of this paper is to study the effectiveness of the risk management system in the European context, especially with regard to the risk management committee, the uncertainty of the environment and company performance. In summary, it evaluates European companies listed on the stock exchange in France, Germany and the United Kingdom to determine how risk management systems influence financial companies' performance.Design/methodology/approachTo study the effectiveness of risk management systems and their influence on performance, the large companies selected in our sample are fairly representative of the European market, according to the Dutch indices of each country (SBF 120 in France, HDAX 110 in Germany and FTSE 100 in United Kingdom).The empirical evidence is based on an international quantitative analysis, using a data set involving 320 companies listed on the stock exchange over a ten-year period from 2005 to 2014.FindingsThe results indicate that the establishment of a risk management and control system by a company positively influences its management, and its performance level and value creation also improve. The results of this study demonstrate a significant strengthening of the role of the risk management committee in the three countries. The surveillance function is reinforced, and in particular, the internal control system is accentuated.Research limitations/implicationsThis study has some limitations that can form leads for future research. One of these limitations is the sample size. The authors have represented the European context by three countries that certainly constitute great European powers, but have regulations different from other countries. The company size is also a possible research element. Indeed, risk management system varies between large, small and medium-sized enterprises, so it is important to study each type of company well.Originality/valueThis study identifies the risk management committee as a mechanism of control that is highly important in the company, and it proposes an international framework that comparatively and empirically evaluates how the risk management system used in large European companies can improve their financial performance.

Board demographic diversity and human rights reporting in Western Europe

PurposeThis paper aims to examine the relationship between board demographic diversity and human rights reporting for a sample of large Western European companies.Design/methodology/approachGrounded on resource dependence theory, the authors hypothesize that greater gender, age and nationality diversities will translate into enhanced levels of human rights reporting. The authors use ordinal logistic regression analysis to analyze the association between these types of board diversity and such reporting.FindingsThe findings suggest that the companies in the sample attribute little importance to the reporting of information pertaining to the issue of human rights. They also suggest that only the diversity of nations represented in the board of directors is significant in explaining this type of reporting.Research limitations/implicationsThe sample includes only large companies from Western Europe and the analysis covers only one year.Originality/valueTo the best of the authors’ knowledge, this study provides the first empirical analysis of factors influencing human rights reporting conducted on a multiple-country setting. It is also the first investigating the association between boards of directors’ demographic diversity and such reporting.

Methodology for managing the quality and competitiveness of innovative projects in Africa

The article presents a methodology for managing the quality and competitiveness of innovative projects in Africa. One of the main directions chosen by the authors to solve this problem is the development of tools for an objective assessment of the competitiveness of innovative projects. With their help, it is important to constantly improve the quality management methodology and the competitiveness of innovative projects in Africa in the context of market relations. Despite all these economic difficulties in Africa, young people are always looking for innovative companies and are always looking for unique ideas to guarantee their position in the local market and even in the global market, such companies are even becoming a tough competition for large European companies. Successful innovation projects in Africa, in addition to their national significance, are the most necessary reasons to strengthen the competitiveness of companies and increase their value in national and international markets. At the same time, the lack of municipal assistance for innovation, the lack of partnership between universities and industrial enterprises, and the lack of development of institutions that Finance basic research lead to a technological lag in comparison with competition, and, consequently, the results of scientific research deteriorate technical and industrial activities. The main goal of the methodology for managing the quality and competitiveness of innovative projects is to ensure the improvement and continuation of innovative activities. This technique helps to ensure the continuity of the improvement process. The goals set by African company managers are to manage the company operationally as a lever of acceleration through quality and competition policies and to make decisions about the proper functioning of the company, taking into account its development goals.

Acceptable levels of tax risk as a metric of corporate tax responsibility: theory, and a survey of practice

Abstract Prescribed levels of acceptable tax risk are increasingly used to articulate degrees of corporate tax responsibility, but the theoretical basis for doing so is not well established. This article (i) develops a theory of the relationship between tax risk and tax responsibility and (ii) shows that acceptable levels of tax risk could be used as a meaningful metric for these purposes, provided that the filing positions a n ticipated from proposed planning are reviewed against the prescribed level of acceptable risk without taking into account any mitigation of the risk factors that are introduced by the planning. Further, the article reviews the evolving tax risk policies of 20 large European companies, showing that while some progress is being made towards meaningful discourse, even the companies with the most well-developed policies are still making their claims in such a way as to conflate socially responsible tax behavior with diligence in implementing antisocial tax behavior.

The gender pay gap in European executive boards: the role of executives’ pathway into the board

We provide cross-country evidence on the gender pay gap on executive boards in large European companies and show that the pathway into the board – internal promotion versus external recruitment – matters for the size of the gap. We find evidence that among executives, women are paid less than men – especially when they were recruited from outside. Since for external candidates, gender stereotyping, and discrimination might be more pronounced than for internal candidates, our results support a power-and-discrimination-based view rather than a market-based view. Our empirical analysis is based on individual pay data for 359 executive board members in 75 firms in six countries (UK, France, Germany, Italy, Spain, and Switzerland) from 2011 to 2014. We find an unadjusted pay penalty for women of around 17% and an estimated adjusted gender pay gap of around 11%. The size of the adjusted gender pay gap crucially depends on the executives’ pathway into the board: Among the executives who were recruited from outside the firm, women receive an estimated 19% less than men. Our article suggests that the pathway into the board matters for women’s bargaining position and should be explored in future studies.

Is corporate governance relevant to the quality of corporate social responsibility disclosure in large European companies?

PurposeThis paper aims to report on the quality of corporate social responsibility (CSR) disclosure in S&P Europe 350 companies. The paper also examines the impact of corporate governance structure and other firm-specific characteristics on the quality of CSR disclosure in European companies.Design/methodology/approachThe paper uses a disclosure index adopted from Jizi et al. (2014). Moreover, the paper contributes to the CSR disclosure literature by developing a new index that includes all the aspects introduced by the Global Reporting Initiative version 4.The data of CSR reporting are manually collected from the firms’ reports. The population and sample of this study are related to 350 companies operating in 16 European countries. Tobit regression analysis is used to test the hypotheses.FindingsThe results reveal that directors’ ownership, the presence of a CSR committee and firm size positively affect the quality of CSR reporting. Further testing of the independent variables on each CSR sub-category is made. The CSR sub-categories used are, namely, community involvement, employees, environment, social product and service quality, supply chain sustainability and business ethics. The presence of a sustainability committee inside the company is the only factor that shows a strong positive effect on the disclosure of every CSR sub-category and the CSR inclusive index.Research limitations/implicationsThe limitations of this research are that it focuses exclusively on the effect of the internal corporate mechanisms on the quality of CSR reporting; disregarding the economic, institutional, political and cultural factors that can play a role in influencing sustainability reporting of the companies.Practical implicationsBetter CSR disclosure leads to the firm having a better image in the society; this, in turn, has implications on firm performance, attracting funds, as well as recruiting and retaining high profile employees. Stakeholders are placing cumulative significance to corporate transparency particularly in the area of CSR. Managers should exert more efforts into not only improving the disclosure of the various facts of CSR but also into using the various media available for disclosure. Companies should take the initiative of establishing a CSR committee to ensure effective formation and implementation of CSR policies and disclosure of CSR activities.Social implicationsThe CRS research itself bears the merit of social implications. Moreover, the findings of this research pave the way for future researches to examine the effect of the adoption of global CSR initiatives and frameworks on the quality of CSR reporting.Originality/valueThis paper contributes to the CSR disclosure literature by developing a new index that includes all the aspects of CSR and exploring the relation between the rarely explored “presence of sustainability committee” and CSR disclosure, as well as testing a vast number of CSR sub-categories that is not extensively covered in previous studies. Moreover, the paper covers a large sample of companies across 16 European countries, in terms of their stand-alone sustainability reports, dedicated chapters of CSR in annual reports, integrated reports, website CSR information and any attachments/links provided on the websites for further CSR documents, brochures or data sheets.

Concept of Organic Architecture in the Second Half of the XXth Century in the Context of Sustainable Development

The article defines the most essential elements of the organic architecture concept. Features of organic architecture appearing in the works of architects of the second half of the twentieth century are specified in the context of sustainable development. We consider T. Alberts to be the representative of this period and the study of his works enables us to define these elements more precisely. The authors refer to the following features of organic architecture of the second half of the twentieth century: current development of regional types of organic architecture, which are opposed to globalistic and postmodern trends; organization of international community of organic architecture followers; dominance of complex rather than single structures in the projects of organic architecture representatives including landscape, water, greenery and other elements; intensification of the attention to a human as a consumer of architecture; utilization of organic architecture as the element for building up the image of large European companies; intensification of the architects’ attention to technological and economic indices in projects in contrast to the emphasis on the aesthetics of forms in the early twentieth century. These regularities would help understand the principles of organic architecture in connection with sustainability.