Mining Firms Research Articles

Green research and development (R&D) investment and its impact on the market value of firms: evidence from South African mining firms

The importance of global corporate green research and development (R&D) investment is gaining momentum and South Africa is no exception. This paper examines growing economic perceptions that green financial and stock-market systems result in heightened corporate hyperopia and therefore increase long-term and future green investment associated with R&D. It reports on the findings of a survey of 14 South African mining firms listed on the Johannesburg Stock Exchange SRI index. The study found, that, these firms’ market value showed a positive association with Green R&D. It also revealed increased Green R&D activity among large mining firms in the country and that they are highly likely to maintain their level of such investment in the coming years. The study's outcomes thus add to the body of empirical knowledge on firm hyperopia in relation to corporate greening initiatives.

Executive compensation among Australian mining and non-mining firms: Risk taking, long and short-term incentives

How firms determine the pay of their executive employees is a vital research area. In the Australian context, mining firms form a large portion of listed companies. These miners tend to have more volatile earnings, operate with less certainty and higher risk in relation to capital investment. We look at a sample of ASX listed miners and non-miners from 2005 to 2013. We note that miners pay their CEOs less (AUD 1m vs AUD 1.5m for non-miners) overall. However, we also note that miners tend to use enhanced contingent long-term remuneration arrangements to significantly boost the pay-performance relationship compared to non-miners particularly during the pre-GFC period. Curiously, non-miners tend to have more generous short-term contingent arrangements linking executive pay and performance. The GFC, as an event, has adversely impacted these arrangements, lessening the generosity of pay-performance among miners, while enhancing these arrangements among non-miners. Overall, the results of the study provide support for optimal contracting theory and do not generally support the managerial power approach for both mining and non-mining firms.

The commodity super price cycle and real options: Implications for the Greeks of mining firms

The Real Options Approach (ROA) to the management and valuation of mining firms should impart a distinctive pattern to the time path of the Greeks displayed by such firms during the recent price super cycle. This paper simulates the delta, gamma, vega and rho of a gold mining firm holding a portfolio of heterogeneous mines over the recent gold price cycle, to find out the telltale signs that the ROA should leave on the trajectories exhibited by such variables during that period. We show that the ROA and the standard NPV approach to mine management and valuation predict markedly different trajectories for the Greeks.

Do Intellectual Capital, Corporate Social Responsibility, and Good Corporate Governance Affect Indonesia's Mining Companies Value?

Objective - The purpose of this study was to analyze the effect of Intellectual Capital (IC), Corporate Social Responsibility (CSR) disclosure, and Good Corporate Governance (GCG) on the value of mining companies (as measured by Tobin's Q) listed in Indonesia Stock Exchange period 2011-2015. Methodology/Technique - Intellectual capital was measured by Value Added Capital Employed (VACA), Value Added Human Capital (VAHU), and Structural Capital Value Added (STVA). CSR disclosure was measured using Global Reporting Initiative index. GCG was proxied using independent commissioner, managerial ownership, audit committee, and institutional ownership. Empirical analysis was conducted using linear multiple regression analysis. The samples consisted 15 mining firms. Findings - The results showed that VACA, VAHU, and institutional ownership had a positive and significant effect on company value. STVA and independent commissioner have a positive but insignificant effect on company value. Audit committee and managerial ownership have a negative and insignificant effect on company value. Novelty - The study suggests managers to improve the company value by investing IC subcomponents; that is, physical capital and human capital and also add the number of shares held by institutions. Type of Paper: Empirical Keywords: Company Value; Corporate Social Responsibility; Good Corporate Governance; Intellectual Capital. JEL Classification: M14, M41, M51

Association of CSR Disclosure with Accounting Conservatism : A Study of Select Indian Mining Firms

The aim of the present study was to obtain evidence of the influence of corporate social responsibility (CSR) disclosure on accounting conservatism (AC). Measurement of conservatism was done by the use of discretionary accruals. The measurement of CSR reporting is based upon the guidelines issued by the Global Reporting Initiative (GRI), obtaining data from annual reports of different mining firms. The population considered in this study were Indian mining companies enlisted in PROWESS IQ database for the period from 2000-2015. This study used purposive sampling method for data collection for 34 mining companies. The results of this study indicated a significant negative relationship existing between accounting conservatism and CSR disclosure.

Stock Market Response to Potash Mine Disasters

We examine the stock market reaction to natural and man-made disasters in potash mines. We use a sample of 44 mining accidents worldwide over the period 1995-2016. A quarter of the accidents were the result of a natural disaster, such as flooding, that often ended in the closure of the potash mine. The remaining accidents were caused mainly by human error, and almost 50% were work accidents often associated with serious injury or death. On average, mining firms experience a drop in their market value of 0.89% on the day of a disaster. However, we observe a significantly stronger response of the stock market to natural events. Indeed, the regression analysis confirms that the firm’s market loss is significantly related to the seriousness of the accident. On the other hand, we do not find any other micro- or macro-level factors that determine the stock market reaction following a disaster.

Decline in Gold Prices, Tax Receipts and Employment: Which Adaptation Strategy for Burkina Faso?

Since 2007, Burkina Faso’s mining sector has been growing quickly, with gold replacing cotton as its biggest export. However, the decline in gold prices since 2012 has hit the Burkinabe economy hard. Using a static calculable general equilibrium (CGE) model, the study evaluates the macroeconomic and sectoral effects of this shock and the recent revision of its mining code. The results show that the decline in global gold prices has significantly reduced employment and income. In this context, a tax policy based solely on increasing taxes on production in the gold sector increases government revenues and a decline in total unemployment and in the income of gold mining firms. More pronounced but similar results are found when only considering application of a tax on profits of mining firms. Finally, a combination of production and profit taxes does not lead to higher employment and government revenues.

Expanded eco-efficiency assessment of large mining firms

Assessing eco-efficiency of companies is important to ensure the creation of wealth without compromising the needs of future generations. This work aims to extend the eco-efficiency concept by including in the assessment new features related to environmental benefits and environmental burdens. This concept is implemented using an innovative Directional Distance Function model, which searches for improvements in the magnitude of the indicators and in the composition of the resources consumed. This framework can help firms to become more sustainable by replacing non-renewable inputs with “greener” alternatives. We present an empirical application to large mining companies. Different scenarios regarding managerial priorities for adjustments to firms' economic and environmental indicators are explored. The results obtained and their managerial implications are discussed in the context of mining firms activity.

Measuring the Economic Effect of Alien Tort Statute Liability

In Kiobel v. Royal Dutch Petroleum Co., the US Supreme Court dramatically restricted the scope of the Alien Tort Statute (ATS), holding that the statute does not permit victims of human rights abuses to sue foreign corporations for violations of international law that took place entirely abroad. We draw on three unique characteristics of the decision to estimate its effect on companies’ valuations. First, we show that extractive industry firms with headquarters abroad experienced larger cumulative abnormal returns following the ruling. By contrast, similar US-based firms—which generally remain subject to ATS liability—did not benefit from the decision. Second, we demonstrate that foreign-based firms benefited both on the final decision date and on the earlier date when the Court slated the case for reargument on the issue of extraterritoriality. Third, we show that this effect varied with the human rights records of host countries: mining firms based abroad with subsidiaries in countries with poor human rights records benefitted most. Although our results cannot resolve debates over the merit of ATS suits, we do show that the Kiobel decision mattered: for foreign firms, it decreased the cost of doing business under regimes with records of human rights violations. (JEL G14, K13, K33, K41, L72)

How does coal-electricity price linkage impact on the profit of enterprises in China? Evidence from a Stackelberg game model

To mitigate the serious conflicts between market-driven coal prices and state-administered electricity prices in China, two kinds of mechanism of coal-electricity price linkage (CEPL) policies were proposed by the Chinese government in 2004 and 2012, known as CEPL-2004 and CEPL-2012 respectively. The present study proposes a Stackelberg game model to investigate the profit changes of two CEPL mechanisms caused by different production strategies of coal mining enterprises and coal-fired power plants when coal prices rise. The findings show that CEPL policy is conducive to reducing profit loss during coal price rises for coal-fired power plants. However, the equilibrium profit of coal mining firms will decrease without CEPL policy if coal prices rise. Furthermore, the equilibrium profit of the coal-fired power plants will decline when coal prices rise by 5–10% but profit decline is less than in the case of maintaining electricity production.

Productivity Growth and Input Demand: The Effect of Learning by Doing in a Gold Mining Firm in a Developing Economy

ABSTRACTThis paper analyzes the effect of learning by doing (LBD) on the firm’s productivity growth and its input demand decisions. The results indicate that LBD is an important determinant of the firm’s productivity growth. The contribution of LBD to the firm’s productivity growth is about 5.6%. Another observation is that LBD has a decreasing effect on the firm’s cost of production – a finding which is consistent with the results of many studies. Also, an increase in LBD measured by cumulative production increases the firm’s demand for capital, and decreases the firm’s demand for labor. Lastly, LBD has a significant effect on the firm’s elasticity of scale. A fundamental message derived from the study is the confirmation that the firms should invest in more large capital equipment, embark on new processing techniques, and create an environment that is conducive to on-the-job learning.

Optimal extraction policy when the environmental and social costs of the opencast coal mining activity are internalized: Mining District of the Department of El Cesar (Colombia) case study

Several articles have confirmed the social and environmental consequences of opencast coal mining. The main purpose of this study is to simulate the optimal extraction policy of coal mining with and without the internalization of the environmental and social monetary costs that occur in the Mining District (located in the central part of the Department of El Cesar) using discrete dynamic programming (backward recursion, discrete state Markov decision model and Bellman equation). Results indicate that the private optimal of the overproduction policy for the terminal phase of the resource extraction program can be reduced once the negative externalities produced by mining practices are internalized into the cost function of the mining investment companies in Colombia. This means that if there is an increase in the total cost of extraction to offset the environmental and social impacts generated, the negative externalities would be less than or equal to the current level. Likewise, profits would continue being positive for the mining firms at the Mining District.

When “one thing (almost) leads to another”: A micro-level exploration of learning linkages in Brazil's mining industry

This paper explores the nature of learning linkages through a qualitative and empirically grounded study of three sets of interactions in Brazil's mining industry and finds that: (1) these linkages vary along a spectrum of progressive levels of knowledge intensity, provide a basis for cumulative innovative activities within the mining industry, and are likely to influence innovation in other industries; (2) however, there is local failure for either the government or large corporations to implement proactive policies to support these linkages; (3) nevertheless, an intrinsic motivation among industry stakeholders (including universities) to develop these linkages through relational embeddedness exists, as they react to creative knowledge needs and pressures for cost-reduction or seek to grab opportunities; as such, relational embeddedness appears to offset the absence of policies. However, proactive policies are needed for the expansion and long-term sustainability of these linkages. Policymaking should include government and large mining firms, as well as local suppliers and universities, and build on intrinsic motives and small achievements incrementally. This paper contributes to extending our understanding of the intricacies of learning linkages development in the mining industry. Understanding and illustrating this process is key to strategize policies oriented to industrial development, particularly in resource-rich developing countries.

Resilient Settler Colonialism: “Responsible Resource Development,” “Flow-Through” Financing, and the Risk Management of Indigenous Sovereignty in Canada

This essay interrogates aspects of the recent reconfiguration of Canadian environmental resource governance in relation to Indigenous sovereignty, rights, and struggles for self-determination in the context of mining and mineral exploration. I am especially interested in the targeting of expressions of Indigenous sovereignty as threats to the “resilience” of the national economy and attempts to “manage” Indigenous sovereignty and rights through mechanisms of resource governance. I focus primarily on a set of changes made to “flow-through share” financing arrangements that allow mining firms to raise capital on the basis of tax credits for expenditures incurred in relation to engaging Indigenous rights in the mineral exploration process. I suggest that flow-through financing is a method for “risk managing” exposure to the threat of Indigenous sovereignty in the interests of mining capital and the state that produces effects of crown sovereignty. In closing, the essay considers relationships between the neoliberalization of Canadian environmental governance and settler colonialism.

Is Sustainability Performance Comparable? A Study of GRI Reports of Mining Organizations

The objective of this study is to analyze the measurability and interfirm comparability of sustainability performance through the qualitative content analysis of 12 sustainability reports of mining firms using the Global Reporting Initiative (GRI) guidelines. The systematic comparison of information disclosed in 92 GRI indicators sheds light on the reasons underlying the impossibility of rigorously measuring and comparing the sustainability performance of firms from the same sector, which are supposed to be strictly following the same reporting guideline. These reasons include qualitative aspects of sustainability, lack of compliance with GRI protocols, indicator contingency, ambiguous or incomplete information, data heterogeneity, and report opacity. The study makes it possible to return to the very notion of sustainability, its meaning, and flexible application by organizations. The results are discussed from three different theoretical perspectives (functionalist, critical, and postmodern), each of which proposes possible and complementary explanations of the main findings.

Business Use of Special Provisions for Accelerated Depreciation: Section 179 Expensing and Bonus Depreciation, 2002-2009

This paper examines business use of special provisions for accelerated depreciation that have been passed into law over the past decade -- bonus depreciation and expanded Section 179 expensing limits. Tax data over the 2002-2009 period reveal that corporations, pass-through entities, and individual filers have tended to use Section 179 expensing in the 60 percent to 80 percent range, both in terms of the numbers of firms and relative to total allowed investment amounts. For bonus depreciation, in the years 2002-2004 and 2008-2009, the effective takeup rates were lower than observed for Section 179 expensing. The number of firms using bonus for eligible investment generally was in the 40 percent to 50 percent range, while the use of bonus depreciation relative to the amount of eligible investment generally was in the 50 percent to 60 percent range for C corporations and S corporations but was at lower rates of about 30 percent to 40 percent for partnerships and individuals. Probit analysis of C corporation data from 2008 is consistent with theoretical priors that bonus depreciation use is limited by firms in a loss position, and by firms with net operating loss carryforwards. The analysis also is consistent with a positive relationship between bonus use and conformity of state tax laws with Federal treatment regarding bonus depreciation; average equipment investment life; the size of the firm; and for manufacturing and mining firms relative to other industries.

The impact of explicit CSR regulation: evidence from China’s mining firms

Purpose– With its rapid economic expansion and its growing environmental and social issues, China has introduced explicit corporate social responsibility (CSR) regulations since 2006 as part of its social harmony policy. The purpose of this paper is to examine the CSR disclosure practices of the historically unaccountable mining firms in China’s current regulatory context.Design/methodology/approach– The sample covers all 60 listed mining firms on the Shanghai and Shenzhen Stock Exchanges between 2007 and 2012, totalling 360 firm-year observations. The authors adopt the “Chinese CSR Report Preparation Guide” as the benchmark for content analysis. To strengthen the analysis, the authors apply binary logistic regression with the determinants of state government, social responsibility index, and cross-listing overseas status.Findings– The authors discover that mining firms rapidly adopt CSR disclosure in response to the regulatory pressures from the state government and the stock exchanges to maintain legitimacy and survival prospects. However, the quality of CSR disclosures becomes a new concern.Research limitations/implications– The most environmentally and socially sensitive mining sector can provide good samples of firm CSR practice in the second largest economy. Although mandatory requirements may result in the firms’ passive compliance, strict regulation is still the key to the changes in corporate accountability and transparency. China may need to strengthen its CSR regulation for its sustainable growth in the coming Asian Era.Practical implications– In the institutional context of China, the imposition of strict regulation seems to be the key to improving CSR practice. However, the mandatory requirements may also result in passive compliance without effective change in corporate accountability and transparency. The sustainable development of the mining sector and advocacy of CSR behaviour require cooperation at national, social and corporate levels.Originality/value– This study contributes to the evolving CSR literature about China and the literature from an industry perspective where governance and regulation are highly influential. The methodology may also enrich future research in the area with a fairly long sample period.

Analyzing the efficiency performance of major Australian mining companies using bootstrap data envelopment analysis

We identify the balance of efficiency gains and losses for 33 Australian mining firms over the period 2008–2014 using bootstrap data envelopment analysis (DEA). We ascertain which companies climbed the efficiency ladder and which companies slipped back in efficiency over time. We find that mining companies involved in metal processing or mining services have been more efficient than those involved in exploration and extraction activities. Assuming variable returns to scale (VRS), on average, we find that mining firms could improve their performance between a minimum of 17% in 2010 and a maximum of 34% in 2008, relative to the best practice performers. We find that, overall, most mining companies became more efficient over time, with the top performers generally maintaining a ranking in the top third of companies in terms of efficiency throughout the period.

The moderating role of firm age in the relationship between R&D expenditure and financial performance: Evidence from Chinese and US mining firms

We examine the impact of Research and Development (R&D) on the profitability and sales of mining firms in China and the United States (US) and the moderating effect of firm age using Coarsened Exact Matching (CEM). For the combined panel of 168 major US and Chinese mining firms, we find that, on average, a firm engaging in R&D activities earns 4% to 11% higher sales and generates 4% to 13% more profits than firms that do not engage in R&D activities. We also show that, in the mining industry, firm age moderates the relationship between R&D activities and financial performance. A comparatively mature R&D active firm earns 4.4% more profit and generates 7.2% more sales than a younger non-innovative firm. The turning point at which R&D activities switch from making a negative, to positive, contribution to profit and sales is 37years and 22years, respectively. Our results are consistent with the liability of newness, meaning that firm investment in R&D takes time to have a real impact on bottom line measures of financial performance. We conclude with a discussion of the practical implications of our results for Chinese and US mining firms.

Factors Explaining Firm Investment: An International Comparison

<p>This paper examines the determinants of firm investment decision. Our study analysed four countries: Moldova, Romania, Russia and Serbia. The sample contains 170 firms for each country for a period of 8 years from 2003 to 2010. Using the data panels method, the empirical results indicate that profitability positively and significantly influences the firm investments for the markets of Moldova and Romania under two alternatives, and for the other countries under one specification. However, the positive effect of cash holdings is only observed for the firms of Moldova and Serbia. Furthermore, the higher the size of the firms of all countries is, the more the managers are encouraged to invest more. Finally, the sensitivity analysis of our models on activity sectors, shows differences in the factors explaining the investment decision for the market of Moldova. Indeed, profitability significantly and positively explains firm investment for the service and real estate sectors. This result is found for other countries for two sectors. In contrast, for country Russia, an increase in the profitability for mining and agriculture firms, does not stimulate managers to invest more.</p>