Firm Value Research Articles

When Economic Prowess Is a Liability—Unpredictable Black Swan Events Such as the Financial Crisis and COVID‐19 Pandemic Disrupt Hotel Value Dynamics

ABSTRACTThis study examines the relationship between operating efficiency and firm value in the hotel industry during the most recent economic crises: the 2008–2009 financial crisis and the COVID‐19 pandemic. Both were Black Swan events that were difficult or impossible to predict in advance. Using a sample of 161,031 hotel firms from 1991 to 2023, we employ OLS and GLS regression models and seemingly unrelated regression analyses to perform the quantitative analysis. Our findings reveal that operating efficiency generally positively impacts firm value, but this relationship varies significantly depending on the nature of the crisis. During the financial crisis, the positive impact of efficiency on firm value was amplified, particularly for financially more robust hotels. Conversely, during the COVID‐19 pandemic, the efficiency‐value relationship remained stable, with financially more robust hotels experiencing a more pronounced negative impact. These results highlight the need for context‐specific approaches to hotel financial management and valuation during Black Swan events, contributing to the literature on hospitality crisis management and financial performance.

The Effect of Board Size, Board Independence and CEO Duality on Firm Value with Financial Performance as A Mediating Variable

This study aims to determine the effect of board size, independent commissioners, CEO duality on firm value with company performance as a mediating variable for corporate governance variables. The number of samples used in this study were 44 companies listed on the Indonesia Stock Exchange in 2019 - 2022 in the manufacturing sector. The analysis method used is multiple linear regression using Eviews 10 to process data. Data collection is taken through the Indonesia Stock Exchange website or the company's official website. The results of this study can show the effect of board size, independent commissioners, CEO duality, performance on firm value mediated by company performance.

Impact of OM Content in Earnings Calls on a Firm’s Stock Performance

We investigate whether and to what extent financial markets value and respond to operations management (OM)-related information in quarterly earnings calls directed toward financial market participants. We develop and use a novel construct called “stated OM focus” (SOMF) to mine the incidence of and emphasis on OM information in the quarterly earnings conference calls for a large cross-section of firms (S&P 1500) over a time frame of 15 years. We empirically establish the value-relevance of OM information as well as summarize and capture both explanatory and predictive aspects of the OM function’s contribution to firm value. We show that OM-related information disclosed by firms systematically, significantly, positively, and persistently affects abnormal stock returns after controlling for known covariates and controls (financial metrics, standard OM metrics, firm and time effects, and lexical-structure related) and after accounting for earnings surprise. Furthermore, we find evidence that firms’ stated OM focus bears significant predictive power in the short term. Long-short portfolios, created using a sorting signal derived solely from stated OM-focus information, predict future abnormal returns consistently over one, two and three months forward from the earnings call event. We show that the OM information metric is reliable and bears internal, external, and predictive validity. These findings offer useful implications for firms, financial market participants, and OM function stakeholders. This paper was accepted by Jayashankar Swaminathan, operations management. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.02221 .

Pengaruh Pengungkapan Sustainability Information, Profitabilitas dan Capital Adequacy Ratio terhadap Nilai Perusahaan

In 2022, Indonesia assumed leadership of the G20 Presidency. The subject "Recover Together, Recover Stronger" was selected, emphasizing the significance of coordinating economic and development policies. The primary concerns addressed included climate risk, the transition to a low-carbon economy, and sustainable financing. The Financial Services Authority (OJK) initiated the Indonesian Green Taxonomy as a framework for green economic activities and unveiled the Sustainable Finance Roadmap 2021–2025. This research investigates the impact of sustainability report disclosure, profitability, and the Capital Adequacy Ratio on the value of banking firms listed on the Indonesia Stock Exchange from 2019 to 2022. The study examines the influence of sustainability report disclosure, profitability, and Capital Adequacy Ratio on business value. The study employed a quantitative methodology and utilized secondary data from the annual report. The sample comprises 92 financial institutions, with the examined variables including the Sustainability Disclosure Reporting Index (SDRI), Return on Assets (ROA), Capital Adequacy Ratio (CAR), and price-to-book value (PBV) as an indicator of company value. Data were analyzed with SPSS 25. The findings indicate that sustainability report disclosure and ROA adversely impact business value, however CAR has a beneficial correlation with firm value. This study offers empirical data about the significance of sustainability reporting and financial performance in assessing business value within Indonesia's banking industry. This research highlights the significance of non-financial information in investment decisions and enhances the literature on sustainable finance and corporate governance.

The Value and Profits of Firms

Abstract The real growth of the stock market value of firms has increased from close to 0% on average per year between 1958 and 1980, to 5.2% between 1980 and today. This change coincides with the rise of market power and profits, starting in 1980. This paper proposes to decompose the value of firms based on profits (earnings) rather than dividends. Because firms on average pay out only half of profits in dividends, dividends poorly measure firm performance. I decompose the sources of the rise of the value of all publicly traded firms into: 1. The subjective and risk-free discount factor; 2. Expected future profits; and 3. Shareholder equity (retained earnings). I find that 20% of the rise is due to the discount factor, and 80% is due to profits (half of which is retained earnings). I build a general equilibrium model of the economy where firms have market power; I perform counterfactuals and evaluate the welfare implications. The objective is to study the impact of competition policy. If market power today dropped to the level of 1980, average stock market values would be 40% lower. If market power had never increased in 1980, the average stock values would be 80% lower.

The Role of Company Size Moderating the Effect of Capital Structure and Profitability to Firm Value in Consumer Non-Cyclicals Businesses on the Indonesian Stock Exchange

Aims: Study this is about the firm value, aiming to test company size to moderate the influence of capital structure and profitability on the firm value in consumer non-cyclical business listed on the Indonesia Stock Exchange (IDX). Study Design: The design of this research study is correlational. Place and Duration of Study: Consumer non-cyclical business on the Indonesia Stock Exchange (IDX) issuers in 2018-2022. Methodology: This study's population was 122 non-cyclical consumer companies listed on the Indonesia Stock Exchange from 2018 to 2022. From the population, a sample of 56 was selected based on the purposive sampling method with 5 years of observation (2018-2022), so the number of samples was 280. However, there were 18 outlier data, so the final sample was 262. Data were collected using documentary methods and analyzed using a quasi-moderation model, which was processed with SPSS 24. Results: The study's results indicate that company size can moderate the effect of capital structure and profitability on company value. This means that capital structure and profitability on a larger company scale can strengthen the increase in company value. However, partially or individually, company size, capital structure, and profitability do not affect company value. Conclusion: The top-based results of the contribution study support the signalling theory and prove that empirical improvement in the size of a company can moderately influence the capital structure and profitability on increased firm value.

Generating Value by Working With User Communities: An Analysis of Financial Market Returns to Corporate Open Source Code Contributions

ABSTRACTUsers are an important source of innovation. Scholars suggest that established firms can gain product‐related insights by working with user communities and studies documenting various ways of working with users, as well as managers' interest in doing so. However, the link between working with user communities for product development purposes and its value for firms is not established. Coupling the use of event study methodology and regression analysis, I examine stock market reactions to corporate announcements stating that the firm is contributing software code to the community. I find that when firms state that generating insights from users regarding new and improved features and functionality is a motivation for contributing code, the market's reaction to the announcement is greater than for announcements that do not state this goal. Additional analysis provides evidence supporting the hypothesis that firms can and do benefit by working with user communities and achieve increased R&D efficiency, which leads to greater firm value.

Does Local Government Debt Affect Corporate Innovation Quality? Evidence from China

This study investigates the impact of local government debt levels on the behavior of individual firms, which is crucial for understanding the systemic risks associated with local government debt and fostering economic vitality. Using data from publicly listed companies on the Shanghai and Shenzhen stock exchanges between 2013 and 2022, this study empirically examines the effect of local government debt on corporate innovation quality. The findings demonstrate that local government debt expansion has a significant negative impact on corporate innovation quality. The negative impact remains robust across endogeneity tests and multiple robustness checks. Channel analysis indicates that as local government debt increases, innovation subsidies and procurement funding led toward firms’ decline, while both tax and non-tax revenue demands indicated firm increases. This resource reallocation contributes to the observed decline in corporate innovation quality. Further heterogeneity analysis reveals that regions with lower levels of government intervention and fiscal pressure exhibit a smaller negative effect of local government debt on innovation quality. Finally, examining the economic outcomes reveals that the decline in innovation quality, resulting from current local debt expansion, significantly reduces total factor productivity and firm value in the subsequent year, posing challenges for sustainable corporate development.

The effect of working capital management and capital structure on firm value through profitability as a mediating variable in manufacturing companies during the COVID-19 pandemic

During the COVID-19 pandemic, many companies experienced a decline in performance due to market uncertainty, cash flow limitations, and disruptions to supply chains. Therefore, effective capital management to support company performance became crucial. This study aims to analyze the impact of working capital management (CCC) and capital structure (DER) on firm value (Tobin’s Q) through profitability (ROA) among manufacturing companies listed on the Indonesia Stock Exchange during the Covid-19 pandemic from 2020 to 2022. The sample was selected using purposive sampling, resulting in a total of 118 companies. Data analysis includes descriptive statistics, normality tests, Robust Least Squares regression, coefficient of determination tests, partial tests, path analysis, and Sobel test. The results indicate that the independent variables CCC and DER do not have a direct significant effect on firm value during the Covid-19 pandemic. However, when profitability (ROA) is considered as a mediating variable, both CCC and DER show a negative impact on firm value. Furthermore, the study reveals a differing direct relationship between capital structure (DER) and firm value, where the relationship is positive.

Analisis Faktor Internal Nilai - Nilai Perusahaan Tembakau yang Terdaftar di Bei Periode 2019-2023

This study aims to analyze the impact of Return on Equity (ROE), Return on Assets (ROA), and Earnings Per Share (EPS) on firm value in the tobacco sector companies listed on the Indonesia Stock Exchange (IDX). The results show that a high ROE, as seen in HMSP, reflects efficient equity management and positively contributes to increased firm value, while low ROE in GGRM and ITIC indicates inefficiency. ROA analysis reveals that all four issuers have very high average ROA, indicating efficiency in utilizing assets to generate profits. Regarding EPS, the increase in ITIC and WIIM reflects improved financial performance, whereas the decline in EPS at GGRM and HMSP may reduce investor attractiveness. Overall, the study concludes that ROE, ROA, and EPS are important indicators influencing firm value, although they should be considered along with other external factors for a more comprehensive understanding.

Firm Value Impact of Global Oil and Gas Mergers and Acquisitions: The Role of Environmental Policy Framework

The oil and gas (O&G) industry is under increasing pressure to decarbonize and adopt sustainable practices. While some firms are transitioning toward renewable energy, many continue to expand their traditional O&G operations. This study examines how financial markets perceive the value creation potential of business-as-usual mergers and acquisitions (M&As) by the world’s largest O&G companies from 2000 to 2021. Using an event study methodology, we focus on the role of home-country environmental policy stringency (EPS) in shaping market reactions. Our findings reveal that higher EPS in the acquirer’s home country is associated with a greater perceived loss in shareholder value upon the announcement of traditional O&G M&A deals, suggesting that EPS signals significant operational and financial risks related to hydrocarbon investments. However, when these deals are cross-border, the adverse impact of the acquirer’s home-market EPS diminishes, indicating that expanding beyond domestic markets may help O&G firms mitigate the financial consequences of stricter environmental regulations. JEL Classification: G11, G14, G34, Q40, Q58

ESG rating divergence and firm value: evidence from China

ABSTRACT ESG investing is increasingly influential in today’s markets, but the divergence in ESG ratings across different providers creates significant challenges. This study utilizes ESG rating data from nine different agencies covering Chinese A-share listed companies from 2006 to 2023 to develop a measure of ESG rating divergence and examine its impact on firm value. Based on information asymmetry theory, the results reveal that ESG rating divergence negatively affects firm value through two key mechanisms: information uncertainty and agency costs. Moreover, market supervision emerges as a crucial moderating mechanism, effectively enhancing information transparency and constraining managerial opportunistic behaviour.

The impact of carbon disclosure on firm value: Examining the role of institutional ownership in the energy sector

The impact of carbon disclosure on firm value: Examining the role of institutional ownership in the energy sector

PROFITABILITAS BERPERAN SEBAGAI MODERATING VARIABEL : PENGARUH STRUKTUR MODAL DAN HARGA SAHAM TERHADAP FIRM VALUE (STUDI EMPIRIS PADA PERUSAHAAN SUB SEKTOR PERBANKAN DI BURSA EFEK INDONESIA TAHUN 2018-2022)

The purpose of this study was to determine the effect of Capital Structure and Stock Prices intensity Firm Value with Profitability as a moderating variabel. This study uses a sample of Banking companies listed on the Indonesia Stock Exchange in 2018-2022. The data used in this study are financial reports and annual reports. The sampling tecnique used was Purposive Sampling. The population used in this study were 47 banking companies with a sample of 27 banking companies selected with a total sample of 135 data. To test the hypothesis carried out with a significance test, namely the F tes, t test and Moderated Regresion Analysis (MRA) test with a significance level of 5%. Data processing used eviews 10. The results of this study indicate that Capital Structure has effect on Firm Value, and Stock Prices have an effect on Firm Value. Mean while, Capital Structure and Stock Price simultaneously affect Firm Value. Research result profitability can as a moderating variable the influence of Capital a Structure on Firm Value, and Profitability as a moderating variable can moderate the influence of Stock Price on Firm Value.

Corporate ownership and firm performance. Evidence from an emerging market

PurposeThis paper aims to examine the relationship between corporate ownership and firm performance, and the mechanisms through which ownership creates the firm value. Vietnam has been chosen as the research site because it is characterized by high ownership concentration, a high level of state ownership, strong incentives for foreign ownership and a weak external governance system.Design/methodology/approachWe use data on the ownership structure of 527 listed firms in Vietnam during the 2010–2021 period. Corporate ownership includes concentrated, state and foreign ownership, while firm performance is measured by ROA and Tobin’s Q. In addition to Pooled OLS, system GMM and the propensity score matching are employed to mitigate the possibility of unreliable and biased results.FindingsWe find that firms with highly concentrated ownership tend to have better performance. Both state ownership and foreign ownership with their unique advantages contribute to enhancing firm performance. Further analyses delve into specific channels through how controlling shareholders, state and foreign owners facilitate firm value creation: the ease of access to capital, the lower cost of capital and the higher sales. Our results are robust to alternative proxies for ownership concentration and different methodological approaches.Originality/valueOur study contributes to the ongoing debate about the ownership–performance relationship by providing novel insights into how corporate ownership influences firm performance.

Market value of R&D, patents, and CEO characteristics

The contribution of knowledge capital to firm value has increased significantly, from 25% in the 1970s to 45% in the 2010s (Belo et al. in Decomposing firm value J Financ Econ 143:619–639, 2022). However, what influences firms’ ability to maximize the effect of knowledge capital on firm value? Drawing on insights from upper echelons, agency, and behavioral agency theories, we show that CEO characteristics are crucial in enabling firms to take advantage of knowledge stock. We empirically demonstrate that short-term CEO compensation structures are detrimental to a firm’s ability to take advantage of its knowledge stock. We further show that CEO power enhances knowledge stock and R&D intensity. Our study provides direct empirical evidence of the importance of CEO compensation structure and corporate governance in understanding firm value in a knowledge economy.

Discovering causal relationships among financial variables associated with firm value using a dynamic Bayesian network

<p>This study investigated the causal relationships among financial variables associated with firm value using a Causal Dynamic Bayesian Network (CDBN), which is an extension of the basic Bayesian network that captures both temporal and contemporaneous causal relationships. The CDBN model was constructed using a panel dataset of listed manufacturing companies in Korea over a 14-year period (2009–2022). By visualizing the interactions between financial factors, the model makes it easy to understand their dynamic and instantaneous relationships, offering valuable insights into corporate finance. Key findings in the model include evidence of autocorrelation in all dynamic variables, a lagged feedback loop between the intangible assets ratio and firm value, the widespread impact of the COVID-19 pandemic on the financial sector, and important causal relationships involving key financial metrics such as the fixed assets ratio, firm value, and return on assets ratio.</p>

Impact of Firm-Level Climate Change Exposure on Firm Value: The Moderating Role of Carbon Transparency

Impact of Firm-Level Climate Change Exposure on Firm Value: The Moderating Role of Carbon Transparency

Exploring the influence of intangible resources on firm value across major Indonesian industrial sectors: An RBV perspective

Exploring the influence of intangible resources on firm value across major Indonesian industrial sectors: An RBV perspective

The Impact of ESG on Firm Value: The Moderating Role of Cash Holdings

The Impact of ESG on Firm Value: The Moderating Role of Cash Holdings