Public Firms Research Articles

CEO 조절 초점 성향이 CSR 활동에 미치는 영향에 관한 연구

Drawing on upper echelon theory, this study examines whether CEO regulatory focus, one of a CEO’s psychological characteristics, affects CSR activities. Specifically, we argue that CEOs with high promotion focus, which is defined as “a sensitivity to gains and a desire for advancement and growth,” will prioritize strategic CSR activities. In contrast, CEOs with high prevention focus, which is defined as “a sensitivity to losses and a desire for stability and security,” will emphasize defensive CSR activities. Using data from Korean public firms included in the Korea Economic Justice Institute (KEJI) Index from 2014 to 2019, we found support for our theory. In addition, we found that, when the CEO is also the chairperson of the board, the relationship between CEO prevention focus and defensive CSR becomes stronger, while a CEO’s education level weakens the relationship between CEO promotion focus and strategic CSR activities, along with the relationship between CEO prevention focus and defensive CSR activities. Our study makes an important contribution to upper echelon research, CEO regulatory focus research in particular, by confirming the important role of a CEO’s psychological characteristics in CSR research. This study also demonstrates that it is necessary to take a multifaceted approach to CSR activities, while prior CSR research took a combined approach to CSR activities.

Does buying green pay off? Stock market reactions to green acquisitions

As sustainability trends gain momentum, more businesses seek to expand their green business portfolios by acquiring firms with green technologies or green brands. However, the financial impact of this green marketing strategy is unclear. Utilizing event study methodology and the two-stage Heckman selection model, this study investigates stock market valuations of 182 announcements about green acquisitions from US public firms between 2000 and 2018. We report several interesting findings. First, we find that green acquisitions are accompanied by positive stock market reactions. Second, the stock market reacts more favorably to acquirers with a higher level of marketing capability and a lower level of innovation capability when green acquisitions are announced. Third, industry sensitivity moderates the effects of the two aforementioned organizational capabilities on the stock market return−green acquisition relationship. We gain insight into investor responses in the context of green acquisitions through the lens of marketing and innovation capabilities. The findings enrich research in the domain of marketing−finance interface and sustainability marketing by shedding light on the short-term green acquisition–firm value relationship.

Is hiring fast a good sign? The informativeness of job vacancy duration for future firm profitability

Job vacancy duration reflects the time a firm spends searching, selecting, and hiring for a job opening. Capturing vacancy duration using the creation and deletion dates of job postings by US public firms, we examine the informativeness of vacancy duration for future firm profitability. We find that while firms that quickly fill low-skill job vacancies exhibit higher future profitability, firms that take more time to fill high-skill jobs exhibit higher future profitability. Our cross-sectional analyses across the benefits and costs of candidate selection and performance expectations suggest that the informativeness of vacancy duration comes from its reflection of firms’ hiring strategies. That is, firms expecting higher profitability recruit more intensively to avoid the opportunity cost associated with vacancies for low-skill jobs and to ensure the selection of high-quality workers for high-skill jobs. Further analyses show that the implication of job vacancy duration for future profitability is not incorporated timely in the capital markets, as evidenced by pessimistic analyst forecasts and positive earnings announcement returns in future quarters for firms with short (long) durations for low-skill (high-skill) jobs. These results demonstrate the informativeness of job vacancy duration for firm profitability and advance the understanding of firms’ hiring strategies.

Political Corruption and Accounting Conservatism

We investigate how local political corruption shapes corporate financial reporting conservatism. Using a large sample of U.S. public firms, we find that firms located in areas with higher levels of political corruption tend to adopt greater accounting conservatism. We also find that firms in more corrupt areas bear greater political expropriation costs. Further analysis reveals that the positive effect of corruption on conservatism is stronger for firms with less bargaining power against corrupt officials, firms with lower public visibility, and firms with weaker dependence on the government for sales. Overall, our findings support the expropriation hypothesis that corrupt officials have incentives to expropriate resources from local firms, which induces them to adopt more conservative reporting strategies to shield their assets.

Relationship Institutions: Evidence From IPOs

Using a sample of newly public firms, we study the firm–institution relationship and its effect on firm value and the real decision channels through which this effect takes place. In contrast to the conventional measure of investor horizon that primarily focuses on investor portfolio share turnover, we suggest an alternative measure based on the investment horizon between institutions and firms to capture the firm-institution relationship. Our study shows that relationship institutions, defined as institutions that maintain their positions in a firm after its initial public offering, contribute positively to firm value. Relationship institutions enhance firm value through increased investments by the firm, better acquisition decisions, higher overall payout, and lower firm risk. The positive effects of relationship institutions are reflected in higher future stock returns and are not sensitive to the alternative explanation of institutional relationships, institution types, institution share turnover, blockholding status, and alternative cut-off time in relationship definition. JEL Codes: G23, G31, G32, G34

Circular economy practices and corporate social responsibility performance: the role of sense-giving

ABSTRACT The circular economy (CE) has recently emerged as an innovative business model for firms to transform corporate social responsibility (CSR) into actions. Existing research tends to examine the CSR advantages of short-term CE practice adoptions, remaining silent on the benefits and drivers of their long-term implementation. This study fills the gaps by investigating the impact of the long-term adoption of eco-design (ECO) and reverse logistic (RL) practices on firm CSR performance and exploring the moderating roles of four sense-giving activities. Using a balanced panel dataset of 132 manufacturing public firms in China and a fixed-effects model, we find that: 1) the frequency of ECO and RL practice adoptions significantly improves firm CSR performance; 2) goal setting for CE performance, CE education and training, and employee feedback on CE practices positively moderate the RL-CSR relationship, while employee feedback on CE practices positively moderates the ECO-CSR relationship. This study has significant implications for both research and practice in the increasingly important domains of CE and CSR management.

Cheers for Initial Public Offerings? Unpacking Employee Satisfaction Decrease in Newly Public Firms

Cheers for Initial Public Offerings? Unpacking Employee Satisfaction Decrease in Newly Public Firms

Stakeholder Pressure and Its Effect on Sustainability Report

The quality of corporate sustainability reports in Indonesia is unfortunately found to be lacking, with a rating of only 53.6%. This is significantly lower compared to the average of other Southeast Asian countries. However, stakeholders are becoming more aware of their role in encouraging public companies to disclose sustainability information. This study intends to look at the quality of sustainability reports released by Indonesian public firms, as well as the impact of stakeholder pressure on these reports' quality. Data from annual and sustainability reports of businesses listed on the Indonesia Stock Exchange between 2016 and 2020 are used in the research, which is based on GRI's G4 guidelines and the GRI Standards 2016. The study looks at numerous stakeholder pressures, including pressure from creditors, media exposure, the Big Four accounting firms, employees, consumers, environmentally sensitive industries, and shareholders. The results show that companies with significant media coverage typically produce sustainability reports of high quality. However, pressure from other stakeholders has not been found to have a significant impact on the quality of these reports. This study provides valuable insights into the state of sustainability reporting in Indonesia and aims to encourage stakeholders to actively participate in promoting a sustainable industry.

CEO greed and corporate tax avoidance

PurposeResearch on the organizational ramifications of chief executive officer (CEO) greed remains scarce. This study intends to fill this gap by examining the impact of CEO greed on an important yet risky corporate strategy, corporate tax avoidance (CTA). Drawing on upper echelons theory, the authors argue that greedier CEOs tend to engage in more CTA. The relationship is weaker when CEOs experienced economic recessions in their early career and stronger when CEOs are endowed with equity ownership of their respective firms.Design/methodology/approachThe authors test the hypotheses with data from US public firms from 1997 to 2008 and employ the ordinary least square regression analysis to analyze the hypothesized relationships. The authors also test the robustness of the results by performing the two-stage least square regression and propensity score matching analyses.FindingsThe findings lend broad support to all the hypotheses. The authors find that greedier CEOs tend to engage in more CTA by paying lower corporate taxes. The impact of greed on CTA is attenuated when CEOs are recession CEOs and is exacerbated when CEOs own large numbers of firm shares.Originality/valueThis paper contributes to the upper echelons research by investigating a novel executive personal characteristic, greed, and its negative impact on an important organizational outcome. This paper also contributes to the growing tax research that recognizes the important role executives play in shaping corporate tax strategies.

Stock liquidity, cash flow sensitivity and the value of cash

Using a sample of U.S. public firms from 1990 to 2017, we find that firms with higher stock liquidity are associated with lower cash flow sensitivity of cash. An analysis of the market value of cash shows that each additional dollar of cash and investment in non-cash assets is worth significantly more in firms with high stock liquidity than in firms with low stock liquidity. Further analysis indicates that firms with high stock liquidity enjoy higher investment efficiency and invest more in capital expenditure and R&D. The reduction in cash flow sensitivity through improved stock liquidity is more pronounced when firms demonstrate lower financial constraint, information asymmetry and risk, and stronger corporate governance (i.e., fewer agency problems). Overall, these results suggest that stock liquidity reduces information asymmetry and the agency costs of free cash flow, thus contributing to value enhancing investments which improves company valuation.

Board Members’ Outside Directorships and the Demand for Audit Quality: Large Sample Evidence From Private Firms

Board members with multiple directorships develop reputational capital as decision experts. Prior studies based on public firms suggest that such directors would use higher quality auditors to improve the quality of financial reporting and, thereby, protect their reputational capital. This study is the first large-scale study that investigates whether multiple directorships influence auditor choice in the setting of private firms. The result indicates a significant positive association between the proportion of board members with outside directorships and audit quality. Furthermore, it shows that the propensity to hire a higher quality auditor is significantly influenced by directors’ network. Finally, the results indicate that the incentives to invest in higher quality auditors are largely influenced by the size of the companies in which board members have their outside directorships.

CEO prior uncertainty and pay–performance sensitivity

AbstractA CEO's pay–performance sensitivity (PPS) is higher in the first year of their tenure than in the following years. I explain this finding with reference to chief executive officer (CEO) prior uncertainty: Because of information asymmetry and/or uncertainty about the quality of the match between a CEO and a firm, first‐year compensation is often arranged to depend largely on performance. Consistent with this explanation, CEOs with higher prior uncertainty exhibit higher first‐year PPS. Also, PPS is higher for outsider CEOs than insider CEOs. Among outsider CEOs, first‐year PPS is lower for former executives of large public firms. An insider CEO's service time in a firm before becoming the CEO reduces first‐year PPS.

Do trade credit and bank credit complement or substitute each other in public and private firms?

In this study, we analyse the complementary and substitution effect between trade credit (TC) and short-term bank credit (BC) for public and private firms in the UK. Using a sample of 254,352 firm-year observations over the period 2008–2021, we find TC and BC are substitutes for public firms that have easy access to cheap external finance. In contrast, TC and BC are complements for private firms that have limited access to alternative financing resources, such as financial markets. Importantly, our results show that public firms are faster in adjusting towards the optimum level of their TC and BC than private firms in an attempt to determine the appropriate mix between these two types of financing. Our study introduces new evidence on the efficient management of TC and BC for public and private firms.

Digital transformation along the supply chain

In the last two decades, digital transformation has been critical for firms' survival and development. Thus, it is important to understand what factors might help facilitate firms' digital transformation. We investigate this problem in the supply chain context by examining whether and how a supplier's major customers influence its digital transformation. Using a sample of Chinese public firms from 2007 to 2020, we document that major customers' level of digital transformation is positively associated with their supplier's level of digital transformation, and the effect is more pronounced when customers are of greater importance to suppliers. The finding holds to a battery of robustness tests. Cross-sectional tests reveal that the impact of customers' digital transformation on suppliers' digital transformation is stronger for suppliers with technology-experienced executives, more high-skilled labor, fewer financial constraints, and narrower digital gap. Moreover, suppliers headquartered in regions with more digital infrastructure also show a more pronounced effect. Further analyses show that the underlying channels through which customers impact their supplier's digital transformation are knowledge transfer and market competition. Finally, we show that suppliers' digital transformation helps increase innovation outcomes. Overall, our paper extends prior literature on the real effects of customer-supplier relationships on suppliers' digital investment decisions.

Quality-improving licensing of an outside innovator in a mixed Cournot duopoly

This paper proposes a mixed Cournot duopoly model with private and partially public firms to study an outside innovator's optimal licensing strategy. The innovator decides how and to whom it licenses its quality-improving innovation. We uncover three main findings. First, constrained to exclusive contracts, fixed-fee licensing to the public firm is always optimal. Second, constrained to non-exclusive contracts, fixed-fee licensing outperforms royalty licensing when the innovation size and the private share of the public firm are sufficiently large. Finally, if the innovator can freely decide on contracting exclusivity, fixed-fee licensing to the public firm emerges as the optimal choice. This result holds even when exclusive auction and two-part tariffs are available. We further examine social welfare effects, determining that a conflict regarding contracting exclusivity may arise between the innovator and the state.

Different strokes for different folks: The moderating effect of top managers’ political ideologies on the efficacy of top management team vertical pay disparities

A debate surrounds the utility of tournament theory prescription for the pay arrangements of top executives, based on competing perspectives on the relationship between vertical pay disparities and important firm outcomes. In this study, we attempt to reconcile the competing perspectives by offering a contingency view of the utility of tournament theory prescriptions. We integrate insights from the person-pay interaction theory with research on political ideology to show how top executive’s individual and top management team’s team-level political ideology shapes the relationship between vertical pay disparities and top executive departure and firm performance. Using data on US public firms, we find that liberal-leaning top executives are more likely to exit the firm at higher levels than at lower levels of vertical pay disparity, whereas conservative-leaning top executives are more likely to exit the firm at lower levels than at higher levels of vertical pay disparity. Furthermore, liberal-leaning top management teams perform better at lower levels than at higher levels of vertical pay disparity, whereas conservative-leaning top management teams perform better at higher levels than at lower levels of vertical pay disparity. We discuss the implications of these findings for the literature on executive compensation, corporate governance, and executive values.

No reason to leave: The effects of CEO diversity-valuing behavior on psychological safety and turnover for female executives.

An extensive body of research has shed light on the structural challenges and stereotypic barriers that lead female leaders to exit their organizations. However, we know little about the factors that mitigate these exits. In this study, we advance the literature by examining how the chief executive officers (CEO's) diversity-valuing behavior relates to female executives' likelihood of turnover. We integrate insights from the literature on gender inclusive leadership, turnover, and psychological safety to propose psychological safety as a key underlying mechanism for this outcome. We test and find support for our theory and hypotheses using a unique data set that combines primary survey data and archival data on turnover for a sample of 365 male and female executives from large U.S. public firms. Our findings show that CEO diversity-valuing behavior is associated with psychological safety for female executives and that psychological safety, in turn, mediates the effect on female executive turnover. We do not find these effects in men. Our study contributes to the literature on gender diversity and female leadership by shifting the conversation from discussing barriers constraining women's longevity to how CEOs enable female executives' retention through diversity-valuing behaviors. (PsycInfo Database Record (c) 2022 APA, all rights reserved).

Disclosure Regulation, Intangible Capital and the Disappearance of Public Firms

Since the mid-1990s, the number of listed firms in the U.S. has halved, and their public disclosure has become opaquer. To explain these trends, we develop a general equilibrium model where the choices of going public or private and the transparency of voluntary disclosure are characterized analytically. In the equilibrium, the stock market with directed search and the private equity market with random search co-exist. According to the estimation, stricter disclosure regulation and increased intangible capital share are the key drivers of the observed patterns. Lastly, we characterize a policymaker’s trade-off between welfare and productivity and analyze the optimal policy.

Insider Horizon and Disclosure Policies

ABSTRACT We investigate the relationship between insider horizon and disclosure policy. First, we develop and analyze a rational expectations model assuming insiders are able to commit to a disclosure policy. Insiders with a short horizon prefer more disclosure and are willing to bear costs of disclosure to reduce information asymmetries among capital market participants. We then empirically test our predictions in the setting of newly public firms and firms where the CEO is approaching retirement. We find that firms with insiders that have a shorter horizon disclose more and experience lower information asymmetry. Our study contributes to the understanding of firms’ disclosure choices by suggesting that the horizon of insiders shapes a firm’s disclosure policy. JEL Classifications: G14; G32; D83.

How the second largest shareholder affects cash dividends? An empirical study in China

PurposeIn public firms, the largest shareholder can make decisions on cash dividends in favor of its own interests at the expense of other investors. While the second largest shareholder can actively participate in corporate governance and protect the interests of investors, its impact has not been fully understood. This research investigates how shareholding ratio and ownership type of the second largest shareholder moderate the relationship between controlling shareholder's shareholding ratio and cash dividends.Design/methodology/approachThe authors conducted econometrics analysis based on a panel data of China's A-share listed companies from 2007 to 2017.FindingsThe authors find that the controlling shareholder's shareholding ratio has a significant negative impact on cash dividends. However, this influence is conditional on the shareholding ratio of the second largest shareholder. The negative impact is weakened when the second largest shareholder holds a large proportion of shares or when the shareholding gap between the second largest and the controlling shareholder is small.Originality/valueThis research extends the existing literature by highlighting the nuanced moderating effect of the second largest shareholder on the relationship between the controlling shareholder and cash dividends, thus making a unique contribution to the understanding of corporate governances in the emerging financial market in China.