Market Value Of Firm Research Articles

Firm Inattention and the Efficacy of Monetary Policy: A Text-Based Approach

Abstract This paper provides empirical evidence of the importance of firm attention to macroeconomic dynamics.We construct a text-based measure of attention to macroeconomic news and document that attention is polarized across firms and countercyclical. Differences in attention lead to asymmetric responses to monetary policy: expansionary monetary shocks raise market values of attentive firms more than those of inattentive firms, and contractionary shocks lower values of attentive firms by less. Attention also mitigates the effects of macroeconomic uncertainty on firm performance. In a quantitative rational inattention model that is calibrated with this new text-based measure, inattention drives monetary non-neutrality. As average attention varies over the business cycle, so does the efficacy of monetary policy.

Corporate Social Responsibility and Organization Behavior: Research Assessment

This review analyzes how the organization uses CSR initiatives to impact consumer buying behavior. The research papers that focused on the key domains related to the relationship between CSR, firm market value, and different attributes of organizational behavior concerning corporate social responsibility were selected for review. The investigation was performed by analyzing 50 empirical articles found in primary journals. Taxonomy is developed based on the analysis. The current study demonstrated the role of organization strategies in assessing CSR structure. Managers should monitor various important factors in modulating the impact of consumer characteristics and purchase intentions

Navigating market waves: How CEO political ideology shapes the currents of innovation-induced tourism value

The upper echelons theory postulates that the cognitive frameworks of top executives shape organizational decisions and behaviors. Based on this theory, this study contributes to the literature by analyzing the effects of the chief executive officer's (CEO) political ideology and political climate on variations in the market value of tourism firms resulting from their innovation activities. An empirical application was conducted on major U.S. hotel companies that have traded on the stock market for the last 25 years (1998–2022) and made innovation-related announcements. This application shows that, although the implementation of innovative activities positively affects a firm's market value, both the CEO's political ideology and the political climate influence the degree of change in the said market value. This study has fundamental theoretical implications for upper echelons theory by improving the understanding of how cognitive diversity derived from political ideology influences decision-making and its outcomes.

The Price to Book Value Still Influenced by The Main Factors on SDG's?

Objectives: This study aimed to obtain empirical evidence and analyze the influence of Return on Assets (ROA), Loan to Deposit Ratio (LDR), and Debt to Equity Ratio (DER) on Price to Book Value (PBV) in state-owned banks listed on the Indonesia Stock Exchange from 2011 to 2021. Theoretical Framework: The research is grounded in financial performance and valuation theories, emphasizing how internal financial ratios impact the market valuation of firms, particularly in the banking sector. Method: This research design is quantitative. The data used in this research comes from financial reports registered on the IDX. The data that has been collected is then analyzed descriptively. Results and Discussion: The analysis revealed that ROA significantly affects PBV, indicating that higher profitability leads to higher market valuation. Conversely, LDR and DER do not significantly impact PBV, suggesting that liquidity and capital structure are not primary determinants of market valuation in the context of these banks. The simultaneous effect of ROA, LDR, and DER on PBV was also observed. Research Implications: These findings suggest that investors and financial analysts should focus more on profitability metrics such as ROA when evaluating the market value of state-owned banks. The insignificance of LDR and DER implies that other factors may play a more crucial role in influencing PBV in this sector. Originality/Value: This study provides updated empirical evidence on the determinants of PBV in the context of Indonesian state-owned banks, contributing to the existing literature on bank valuation and offering practical insights for investors and policymakers.

From liability to asset: A receiver’s perspective on eponymy signals and market value

ABSTRACT Drawing on signaling theory and literatures from eponymy and branding, we take a receiver’s perspective to explicate how signaling eponymy impacts venture market value at harvest. To untangle the mixed findings on the effects of eponymy, we take a contingency approach and theorize that firm age plays a key role in how the eponymy signal will be perceived by valuators. Employing a novel dataset of 471 acquired private firms, our analysis reveals that while the market value of eponymous firms declines early in the life cycle, past a threshold their value begins to increase. This suggests that at that point, eponymy becomes an asset and adds value to the firm. We establish this nadir at a firm age of 44.

When is blockchain worth it? Value and risk drivers of corporate blockchain announcements

In the era of emerging technologies, many firms explore the role of blockchain technology and its impact on corporate market value. Past research has shown that companies benefit from executing blockchain projects, but little is known about specific value and risk drivers. Hence, we provide evidence for several conditions under which blockchain provides additional firm market value. Moreover, we test whether blockchain announcements lead to changes in the systematic risk of firms. Theoretically founded on the resource-based view, we utilize the event study methodology, supplemented by a multivariate regression and a firm’s beta analysis. We find that stock markets react positively to corporate blockchain news if the announcement is related to a blockchain consortium or partnership, is declared by a tech company, or if the announcement is a follow-up announcement to initial blockchain news. Moreover, our findings show that blockchain announcements do not lead to significant changes in a firm’s systematic risk.

Extreme Weather and Firm Market Value: Roles of Corporate Social Responsibility and Stock Analyst Attention

ABSTRACT The outbreak of extreme weather events is increasing in frequency for the last decade, resulting in tremendous human and industrial losses worldwide. Evaluating and managing the effects of such events are highly urgent matters for firms, but the literature on this topic is limited. In this study, the effects of extreme weather events on the stock market performance of firms were estimated to provide a foundation for exploring how to manage such effects. From the perspective of the shareholder view, the heterogeneous effect of corporate social responsibility (CSR) on stock performance associated with extreme weather events were examined. Data on natural disasters that were caused by six types of extreme weather and occurred between 2001 and 2021 in China were used to construct a database of 2,718 Chinese listed manufacturing firms and 23,529 observations regarding the potential effects by extreme weather events. An event analysis indicated that the extreme weather events bring an average of 0.97% drop in the stock performance of potentially affected firms for the month that the event starts and the next month. A subsequent cross-sectional analysis revealed that a high CSR level is associated with low market value during extreme weather events, while a high level of stock analyst attention alleviates the negative effect of CSR on the stock performance of extreme weather events. This study enriches the existing literature and offers practical insights for managers in the fields of CSR and operations management, highlighting the complex dynamics between CSR activities, analyst attention, and stock market performance during extreme weather events.

Corporate tax avoidance and firm value: The moderating role of environmental, social, and governance (ESG) ratings

AbstractIn this study, we examine how managers in firms that have practiced tax avoidance strategically use sustainability activities together with their tax avoidance practices. More specifically, we investigate the moderating impact of ESG on the association between tax avoidance and firm value. Using a sample of French‐listed companies during the years 2012–2021, we hypothesized and found that ESG rating negatively and significantly moderates the relationship between corporate tax avoidance and firm market valuation. Overall, our results suggest that investors reward firms for good ESG performance, perceiving such companies as more valuable. However, when these firms engage in higher tax liabilities, the positive effect of ESG on firm value is slightly reduced. This nuanced insight highlights the importance of considering how tax strategies interact with ESG initiatives in shaping overall firm value. This study, thus, provides theoretical and practical consequences that will encourage businesses and politicians to promote sustainable development. Our findings remain robust to an array of tests, including a number of different tax avoidance measures and potential endogeneity problems.

The impact of quality awards on the financial performance of manufacturing industries. Evidence from the Delta region of China

Following provincial quality awards announcements, this study explores whether winners’ financial performance is significantly impacted by the quality award, using OLS and PSM-DID techniques. A placebo parallel trend model is adopted to re-estimate dynamic firms financial performance and test the robustness of the findings. The results show that the quality award significantly impacts manufacturing firms’ financial performance. The regional quality award has significant positive benefits for first-time winners and winning firms located in the Delta region of China. There is a significant positive relationship between the firms’ financial performance and the achievement of quality awards in the long run. The findings expand the research to the relationship between quality awards and firm market value in various institutional contexts. The positive association between a quality award and financial performance confirms the implication for policymakers and the government that a reasonable quality award reduces the quality problem, increases firm value, and supports the awards mechanism in China.

Women on board and business performance

PurposeThis study aims to examine the association between women on board and business performance. It also aims to investigate the impact of corporate social responsibility (CSR) and female directors on stock prices, including the function of female directors in moderating the CSR–market performance link that ultimately provides valuable insights into the impact of gender diversity on corporate boards.Design/methodology/approachData from US publicly listed firms between 2000 and 2018 were collected and analysed using OLS regression, median regression, M-estimator regression and MM-estimator regression at 70% and 95% efficiency. In this study, firm market value was measured through Tobin’s Q, board diversity with ISS database and CSR strength and concern with the KLD database.FindingsThe results indicated that CSR positively impacts market performance by 3.1%, female board representation positively influences market performance by 4.8% and female board members strengthen the CSR–market performance relationship by 1.0% while playing a moderating role. Overall, these studies demonstrated the significance of female boards of directors for enhancing market performance.Research limitations/implicationsThis study used the data of US-listed firms from 2000 to 2018. The results have contributed to the ongoing discussion about the importance of gender diversity in boards and its influence on firm success. Further research works are suggested to expand the analysis by including other countries or considering additional factors that may influence the association between CSR, board representation of women and market share.Practical implicationsThis study is essential for investors, legislators and CSR institutions in developed countries. The favourable impact of female board presence on market performance and the enhancement of the CSR–market performance relationship highlight the necessity of encouraging gender diversity on boards of directors and CSR activities.Social implicationsThis study emphasises the significance of gender balance on corporate boards in solving important social challenges including climate change, resource scarcity and gender equality. Companies can actively assist in addressing global issues and improving the well-being of stakeholders by promoting gender-diverse boards and encouraging CSR efforts.Originality/valueTo the best of the authors’ knowledge, this study is the first study demonstrating that gender diversity on corporate boards moderates the significant association between CSR performance and profitability in the USA. It has contributed to the expanding body of information regarding the moderating influence of female directors on firm value and stronger evidence for female directors in the governance of businesses.

Board Diversity and Firm Value: Evidence From Nepalese Financial Institutions

The purpose of this paper is to provide empirical evidence on the relationship of board diversity of corporate board with the value of financial institutions in Nepal. The sample comprises 38 financial institutions listed in NEPSE with 380 firm-years observation for the period 2011/12 to 2020/21. Balance panel datasets were employed to investigate using multiple regression models to examine the relationship between board diversity (female and minority directors) and firm value measured by Tobin's Q and MBR. The result shows a significant positive relationship between firm value and the presence of both female and minority directors. Moreover, the evidence supports that the presence of female directors in the boardroom effect more in the firm market value than as compare to the minority directors. Furthermore, the study concludes that control variables like board size, presence of independent director and firm size have positive significant effect on firm value, but leverage has significant but negative relation with the firm market value of financial intuitions in Nepal. The study result has the practical implication for government, policy makers and regulating authorities in formation of diverse board that can increase the firm value and performance. It also provides additional insight to the corporate governance literature and helps to fill the gap on board diversity and firm value in Nepalese financial institutions.

The value relevance of voluntary disclosure through social media platforms: Evidence from European Union listed firms

This paper examines whether the level of voluntary disclosure through social media platforms provides value-relevant information. Economic theory suggests that information is value relevant whether it signals for something capable of increasing firm market value. Based on a sample of 200 European Union listed firms over the 2020–2022 period, we find that more voluntary disclosure through social media platforms increases firm market value, thus suggesting that it contains value-relevant information. Empirical evidence holds to several robustness checks, such as endogeneity tests, alternative regression specifications, and cross-sectional analyses. We further examine whether the level of voluntary disclosure through social media platforms influences the relation between current returns and future earnings. We find that more voluntary disclosure improves the association between current returns and future earnings to the extent that current returns are more informative about future earnings. This study adds to the growing academic debate on the role of social media usage for firm value.

Analysing the Firm Value Effects of Environmental, Social and Governance Disclosure: Empirical Study of Indian Firms

The present research aims to analyse the effect of environmental, social and governance (ESG) disclosure on firm value using a sample of Indian-listed firms. The current research adopts cross-sectional regression analysis approach to analyse the financial data of 940 sample firms. The market-to-book value ratio and Tobin’s Q ratio are considered as market value indicators whereas ESG disclosure has been measured as indicator variable from annual report. The results conclude that ESG disclosure has significant positive effect on the market value of the sample firms. Further, the study also analyses the effect of carbon-sensitivity on this relation and found that carbon-sensitive firms experience lower intensity of the positive effect on firm value as compared to others. The findings provide significant implications for managers who can use ESG related disclosures to enhance the firm value. Besides, policymakers can also use the present findings to convey the positive impact of ESG performance and thereby improve the adoption of sustainable and socially desirable business practices. The present study provides pioneering evidence on the firm value effect of ESG disclosure in the context of one of the largest growing economies. The ESG disclosure and firm value nexus has been underexplored in emerging countries, and hence present research adds value to the existing literature.

Reward or punishment? The impact of heterogeneous environmental regulatory intervention on the firm market value

AbstractEnvironmental regulations are important organizational strategic drivers. Environmental regulatory mechanisms include “carrots” or “sticks”—they can be incentive or coercion‐based. This study empirically investigates stock market reactions to various environmental regulatory mechanisms. Using a sample of 334 environmental regulatory events reported by 212 listed Chinese firms between 2010 and 2020, we find that monetary reward has a greater positive market reaction towards governmental reward than non‐monetary reward. We also find that governmental operational disruption penalties have a greater negative market reaction than operational non‐disruption penalties. Governmental levels of the environmental regulation implementation subject do not play a moderating role in the relationship between governmental regulations and firm market value. These findings provide various policy and organizational insights as businesses seek to meet legitimacy gains in response environmental regulatory mechanisms.

Trademarks and firm market value: Evidence from new trademark-firm linked data in China

A growing stream of research conducted in developed economies has shown that trademarks are positively related to firms' market value. However, we have limited understanding of whether this finding might apply to emerging economies, many of which have developed their own unique trademark regimes and are currently experiencing exponential growth in trademark registrations. In this study, we address this gap by constructing a new dataset that links trademark registrations with listed firms in China—the first of its kind for Chinese trademarks. Using this dataset, we find that in-use trademarks (trademarks being used by firms), as well as unused trademarks registered for a firm's current businesses, are positively related to firm value; further, the strength of IPR protection in subnational regions (provinces in China) amplifies these relationships. By contrast, unused trademarks that are not registered for a firm's current businesses have no impact on firm value. We also find that trademarks and patents complement each other in enhancing firm value. We call for more future research attention to trademarks in emerging economies to improve existing understanding of the important role trademarks play in these fast-growing markets often featuring unique IPR regimes.

Problems Associated with Productivity and Profitability: A Study of The Listed Cement Companies in Bangladesh

The main objective of the study is to find out the key problems associated with the productivity and profitability of cement industry in Bangladesh. The respondents include 100 executives and officers of different levels selected randomly from different listed cement manufacturing firms of Bangladesh. Finally, the data have been tested with 20 variables collected from literature review and discussion with expert people. Reducing a large number of variables into fewer factors was achieved through the use of factor analysis. The study identified five factors i.e., Planning and Controlling Factor, Utility Factor, Financial Factor, Opportunity cost factor and Market factor are significantly influencing the productivity and profitability of cement industry in Bangladesh. The study suggests to focus on the identified factors in order to achieving greater productivity and profitability as well as maximizing the market value of the cement manufacturing firms in Bangladesh.

FIRM VALUATION WITH DATA ENVELOPMENT ANALYSIS: BORSA IṠTANBUL EXAMPLE

Objective of this study is to present an example of firm valuation with Data Envelopment Analysis (DEA), which is an alternative and new firm valuation method, and to contribute this limited field of research area with new findings. With this objective in mind, after giving information about the theory of valuation, market-based valuation, DEA and methodology of firm valuation with DEA, BIST 100 indexed firms in Borsa Istanbul are valued with DEA in this study. Results shows that 69% of the estimated value ranges and 73% of the maximum values estimated cover the market values of the relevant firms. It can be said that this method, which is understood to have more successful estimation results in case the number of firms in peer groups increases, is a very useful method for testing the results obtained from other firm valuation methods.

When attention to climate change matters: The impact of climate risk disclosure on firm market value

Concerns about climate change and its potential economic impact have prompted policymakers and institutions to introduce standards and principles to encourage the disclosure of company risks related to climate change. Past research demonstrated that such disclosure positively impacts firm stock prices. This study analyzes the magnitude and significance of climate risk disclosures within 10-K and 10-Q reports of U.S. companies through the application of novel methods in text mining and social network analysis. Furthermore, it measures the level of attention directed towards climate change at the firm level by analyzing transcripts from earnings conference calls. The study contributes to the literature by investigating the effect of climate risk disclosure on firm market value and considering where such disclosure occurs. The findings demonstrate a positive relationship between climate risk disclosures and firm value. However, this relationship can turn negative when the attention to climate change intensifies. The results of this study are of particular relevance for practitioners and policymakers who are provided with a novel instrument to quantify the magnitude of climate change risk disclosure in textual data. Regulators can identify firms particularly exposed to climate change and create incentives for disclosure, especially when firms may be disincentivized to share information about climate change risks.

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.

How APIs Create Growth by Inverting the Firm

Traditional asset management strategy has emphasized building barriers to entry or closely guarding unique assets to maintain a firm’s comparative advantage. A new “inverted firm” paradigm, however, has emerged. Under this strategy, firms share data seeking to become platforms by opening digital services to third parties and capturing part of their external surplus. This contrasts with a “pipeline” strategy where the firm itself creates value. This paper quantitatively estimates the effect of adopting an inverted firm strategy through the lens of application programming interfaces (APIs), a key enabling technology. Using both public data and those of a private API development firm, we document rapid growth of the API network and connecting apps since 2005. We then perform difference-in-difference and synthetic control analyses and find that public firms adopting public APIs grew an additional 38.7% over 16 years relative to similar nonadopters. We find no significant effect from the use of APIs purely for internal productivity: the pipeline strategy. Within the subset of firms that adopt public APIs, those that attract more third-party complementors and those that become more central to the network see faster growth. Using variation in network centrality caused by API degradation, an instrumental variables analysis confirms a causal role for APIs in firm market value. Finally, we document an important downside of public APIs: increased risk of data breach. Overall, these facts lead us to conclude that APIs have a large and positive impact on economic growth and do so primarily by enabling an inverted firm strategy. This paper was accepted by D. J. Wu, information systems. Funding: This work was partially supported by Mulesoft and Apigee Corporation. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4968 .