Weak Financial Performance Research Articles

Sustainable development goals and corporate financial performance: Examining the influence of stakeholder engagement

AbstractThis study investigates the relationship between sustainable development goals (SDG) and corporate financial performance (CFP) in the motor vehicle manufacturing sector. Using a comprehensive dataset from CSRHUB database, covering 380 companies from 2016 to 2022, we analyze how SDG‐related disclosures—across depth, breadth, and concentration—impact financial metrics such as return on assets (ROA), return on equity (ROE), return on invested capital (ROIC), and Tobin's Q. The study employs the system generalized method of moments (System GMM) to mitigate endogeneity concerns, ensuring robust results. Our findings reveal that while SDG initiatives positively influence CFP, the role of stakeholder engagement is pivotal. Firms with comprehensive SDG strategies and high stakeholder engagement experience superior financial outcomes. However, an overly narrow focus on specific SDG themes, even with strong stakeholder interactions, correlates with weaker financial performance. This research contributes to the ongoing discourse on corporate sustainability by highlighting the moderating effect of stakeholder engagement in SDG disclosures. The findings offer practical implications for both policymakers and business leaders, suggesting a balanced approach to SDG reporting to maximize financial performance.

Effects of ownership on the relationship between bank capital and financial performance: evidence from Bangladesh

The financial performance of banks relies heavily on properly utilizing their capital. However, bank ownership can have varying effects on the relationship between financial performance and capital. This study delves into this relationship by examining the impact of ownership on financial performance and bank capital. The study analyzes data from 44 commercial banks in Bangladesh and uses a two-step system generalized method of moments to address heteroscedasticity and autocorrelation issues. Unlike previous studies, this study confirms the significant effect of ownership on the relationship between bank financial performance and bank capital. The study's main findings are: (1) an inverted U-shaped relationship exists between bank capital and financial performance, implying that increasing capital can improve and reduce financial performance. (2) Private and Islamic commercial banks perform better than state-owned and conventional banks. (3) private-owned and Islamic commercial banks with higher capital are more likely to achieve higher profitability and financial success, while state-owned and conventional commercial banks with higher capital show lower profitability and weaker financial performance. Overall, this study offers significant practical implications for academics, researchers, and regulators interested in leveraging these findings.

Assessing the suitability of under-represented tree species for multifunctional forest management—an example using economic return and biodiversity indicators

Abstract A shifting focus in forest management from timber production to resilience and multifunctionality in the face of changing disturbance regimes might entail altering the species composition of forests. Although the conifers Douglas fir (Pseudotsuga menziesii) and silver fir (Abies alba) currently comprise only a small proportion of Central European forests, the prospect of widespread planting of these species as a climate adaptation measure is currently widely debated by forest managers. To inform this debate, objective assessments of the multifunctional value of these species are required. Here, we introduce Pareto frontiers to objectively assess the value of tree species under competing objectives and considering an uncertain future. Using these frontiers, we explore trade-offs between financial performance and biodiversity aspects of German tree species portfolios with and without these currently rare conifers. We compare several potential biodiversity indicators (related to herbivores, saproxylic beetles, and deadwood decomposition rates) that can be derived from standard forest inventory data. Our results indicate that optimizing the biodiversity indicators generates gradual decreases in financial performance at first, but after an inflection point soil rent declines sharply. Portfolios excluding Douglas fir and silver fir achieved comparable biodiversity levels, but much weaker financial performance, than portfolios that included these conifers. Our novel approach of generating Pareto frontiers that integrate uncertainty can offer useful insights into ecosystem services trade-offs in contexts where risk is unequally distributed across management alternatives.

BORSA İSTANBUL’DA ENERJİ ŞİRKETLERİNİN NAKİT AKIM ORANLARINA DAYALI FİNANSAL PERFORMANS ANALİZİ

The purpose of this paper is to evaluate the financial performance of the sixteen energy companies listed in Borsa Istanbul in terms of cash sufficiency and cash efficiency and benchmark them in 2020 and 2021; during the COVID-19 period by using multi-criteria decision making methods. This paper utilizes the Method Based on the Removal Effects of Criteria (MEREC) technique to determine the objective weights of cash ratios. Energy companies’ ranking is estimated using the Grey Relational Analysis (GRA) approach. In the case of the financial performance evaluation problem, 7 performance attributes and 16 alternative layouts were considered. The results show that most of the energy companies have weak financial performance in 2020 and then improve their financial performance in 2021.

Does FinTech penetration drive financial development? Evidence from panel analysis of emerging and developing economies

Recent innovations in digital financial technologies (FinTech) have called into question the role of FinTech in financial development. This study examines FinTech's direct and conditional effects on financial development using data from emerging and developing economies. Three measures of financial development (broad money, Private credit, and bank deposits) and two conditional factors (financial performance and financial inclusion) were investigated vis-à-vis FinTech penetration. This paper demonstrates that FinTech penetration not only drives financial development but also strongly impacts the financial development of countries with weak financial sector performance and low financial inclusion. These findings have several policy implications: (1) countries with weak financial sector performance could leverage FinTech to improve financial development, and (2) appropriate policies on FinTech development can drive digital financial inclusion, financial deepening, and consequently economic growth.

A Comparative Analysis of the Real Sector in Turkey from the Economic and Financial Perspectives with the CRITIC-MAIRCA Method

This study aimed to examine the economic contribution and financial performance of the real sector in Turkey. Using the real sector company accounts published by the Central Bank of the Republic of Turkey (CBRT), seventeen sectors were analysed with the CRITIC-based MAIRCA method. The economic contribution was evaluated with sub-indicators to economic growth, employment, and entrepreneurship; financial performance was evaluated with liquidity, financial structure, turnover and profitability indicators. The findings revealed that manufacturing sector provided the highest contribution to total economy and in all sub-indicators. While the sectors with the lowest contribution in the sub-indicators differed, it was determined that the sub-sector with the lowest total contribution was real estate activities sector. In terms of total financial performance and liquidity, financial structure, and profitability sub-indicators, human health and social work activities, and according to turnover ratios energy supply sector have the highest performance. The study revealed that the sectors with an increased contribution to the economy and those with high financial performance differentiate. Lastly, it has been seen that sectors with high economic contribution exhibit weak financial performance. The findings were checked by sensitivity analysis and proposed method produces consistent results against weight changes and the model is reliable.

The Effect of COVID-Related EU State Aid on the Level Playing Field for Airlines

State aid for airlines around the world has been a common practice during the COVID-19 pandemic, as the air transport was one of the sectors most heavily affected. This study analyzes 27 cases of state aid to EU airlines between 1 March 2020 and 30 September 2021 with a total amount of €31 billion. The information was obtained from the area of competition of the European Commission (EC), which is the entity responsible for final approval. Results indicate that the largest EU economies (Germany and France), as well as some Northern European countries, are supporting national airlines more extensively. Airlines with a weaker financial performance before the pandemic were more likely to receive state aid. Government involvement in the airline industry during the recent health crisis will have an important influence on the level playing field (LPF) for airlines. It is still unclear how this will evolve in the future, but it seems that some airlines now resemble the public flag companies of the past.

Social Capital, Intellectual Capital, and Audit Fee: Conflicting Evidence from Iran

In the current study, we investigate the impacts of social capital (SC) and intellectual capital (IC) on audit fees among the companies listed on the Tehran Stock Exchange (TSE). Since the criteria for the norms and the networks are extremely correlated, we used a principal component analysis (PCA) to construct an index of social capital for each province between 2011 and 2016. The Pulic model is also used as a proxy for measuring value added intellectual capital (VAIC). The ordinary least squares (OLS) regression is employed in this study to test our research hypotheses as well. According to the research literature, on the one hand, investors and lenders can be more confident in the financial reporting honesty of the firms headquartered in areas with high social capital; on the other hand, auditors judge the trustworthiness of their clients based on where the firm is headquartered. Inconsistent with the prior studies, our findings show that companies headquartered in provinces with high social capital pay higher audit fees. Given that Iranian firms are under heavy financial pressure due to economic sanctions, those companies located in areas with higher social capital likely have abused the high level of trust that auditors and other groups in the market have in them and participated in earnings manipulation to mask their weak financial performance. Among the various components of IC, we found strong evidence that employed capital efficiency (ECE) and audit costs correlated positively. In short, this paper sheds light on the fact that severe financial pressures on managers may sometimes lead them to take advantage of the dark side of social capital and intellectual capital when preparing financial reports.

The Effect of Media Competition on Analyst Forecast Properties: Cross-Country Evidence

We examine the effect of media competition on analyst forecast properties in an international setting using 113,436 firm-year observations from 32 countries spanning 2000 through 2012. We find that firms in countries with stronger media competition enjoy more accurate, less optimistically biased, and less dispersed analyst forecasts. The effects of media competition on the properties of analyst forecasts are stronger for firms with lower institutional ownership, for firms followed by fewer analysts or by analysts from smaller brokerage houses, and for firms with weaker financial performance. This suggests that media competition plays a more pronounced role in shaping the information environment when information from nonmedia channels is likely to be limited or of lower quality. Finally, we find that analysts in countries with stronger media competition tend to follow more firms, suggesting that stronger media competition reduces analysts’ information acquisition costs, which in turn, improves the properties of their forecasts.

Improving Supply Chain Profit through Reverse Factoring: A New Multi-Suppliers Single-Vendor Joint Economic Lot Size Model

Supply chain finance has been gaining attention in theory and practice. A company’s financial position affects its performance and survivability in dynamic and volatile markets. Those that have weak financial performance are vulnerable when operating in environments that are uncertain and financially unstable. Companies adopt various solutions and techniques to manage, effectively and efficiently, the flow of money to and from its suppliers and buyers. Reverse factoring is an innovative technique in supply chain financing. This paper develops a joint economic lot size model where a vendor coordinates operational and financial decisions with its multiple suppliers through the establishment of a reverse factoring arrangement. The creditworthy vendor systematically informs a financial institution (e.g., bank) of payment obligations to selected suppliers, enabling the latter to borrow against the value of the relevant accounts receivable at low interest (borrowing) rates. The paper also presents a numerical example and a sensitivity analysis to illustrate the behavior of the model and to compare the economic and operational performance of a supply chain with and without a reverse factoring agreement. The results show that the establishment of a reverse factoring agreement within the supply chain improves the economic performance and impacts on the operational decisions.

Foreign retail banner longevity

PurposeThe purpose of this paper is to provide a robust examination of the factors that accelerate/decelerate the divestment timing of retail banners in international markets.Design/methodology/approachThe sample represents 3,235 foreign market banner operations of 132 international retailers across 144 countries using an accelerated failure time (AFT) parametric survival modelling technique.FindingsBanner divestment is accelerated by both weak financial performance and smaller size. Furthermore, there is a synergistic negative detriment to the combination of both factors on divestment. Banner divestment is decelerated by deploying the corporation’s dominant format in the home country. Moreover, inadequately performing dominant banners are allowed more time to turn around their operations than subpar non-dominant banners. Concurrently, when host country markets are growing, poorly performing dominant banners are given more time to improve performance. When home market performance weakens, smaller, poorly performing banner divestment is accelerated.Research limitations/implicationsThe large data set covers more than half of the world so the authors are limited to observing corporate divestments without the benefit of the managerial decision-making process. The authors only have access to divestment data in annual units, which limits the ability to provide precise timing information. Though the authors have a wide variation in country conditions, data on smaller, poorer countries and domestic competitors is limited.Practical implicationsSmall, poorly performing retail chains in foreign markets are divested faster than their counterparts. When retailers internationalize with their dominant chains, management tends to give these banners more time to succeed than non-dominant counterparts. Evidence also suggests that managers hesitate to withdrawal from a foreign market when the dominant banner is involved, regardless of a chain’s stunted growth and subpar performance.Originality/valueThis study provides the first examination of factors driving the divestment times of international retail chains using rigorous empirical survival time methodologies.

Non-GAAP Earnings Disclosures on the Face of the Income Statement by UK Firms: The Effect on Market Liquidity

This study benefits by a special feature of the UK information environment which allows UK firms to disclose non-GAAP earnings on the face of the income statement to examine two interrelated questions. First, we ask whether the decision to disclose non-GAAP earnings on the face of the income statement is related to the firm's financial performance and corporate governance characteristics, and second, we investigate the effect of this disclosure decision on market liquidity. Using a dataset of 1227 hand-collected firm-year observations during the period 2006–2013, we show that better governed firms and firms with weaker financial performance are more likely to disclose non-GAAP earnings. Our evidence also suggests that this disclosure is associated with increased levels of market liquidity and the results hold after controlling for self-selection bias. We conclude that firms' decision to disclose non-GAAP earnings on the face of the income statement is more consistent with the incentive to provide information than to mislead the market.

Ownership Structure And Conservatism's Impact On Jordanian Bank's Financial Performance

The banking sector has suffered recently from a series of financial crises that have affected the worlds' financial system's stability. It is argued that the weak financial performance of banks could be due, among other factors, to deficiencies within corporate governance systems in banks, and the lack of conservatism (as conservatism is used to minimize the agency problem). This paper aims to examine the effect of the corporate governance mechanism (ownership structure, bank's characteristics) and conservatism level on the Jordanian commercial banks' performance for the period between 2005-2014. Four ownership structure dimensions are employed-ownership concentration, institutional ownership, foreign ownership and government ownership. Bank characteristics are captured by using size, age and debt-to-equity ratio. The paper used return on assets and return on equity to assess the financial performance, and applied the accrual method and book value-to-market value method as proxies for conservatism. The results showed a significant impact for all of the ownership structure dimensions and bank's characteristics, on the bank's performance, except for the institutional ownership and the banks' age, which showed no impact on performance. The explanation of this exception is that the Jordanian banking sector is essentially built upon family business. The foreign ownership and government ownership have a positive relationship with bank performance, as the high level of foreign ownership indicates high quality investments. Additionally, government ownership usually imposes more controls and minimizes the agency problems. On the other hand, the concentrated ownership and the bank's size showed a negative relationship to the banks' performance, as concentrated investors may abuse their authority. The negative relationship to the banks' size is due to the high cost required from these banks to control and monitor their different branches. In addition, the results suggest a negative impact of conservatism on the bank's performance when utilizing the book value method as the balance sheet accounts are understated, and hidden reserves are created. On the other hand, a positive impact of conservatism on the bank's performance is detected when utilizing the accrual method. This is because conservatism's policy will improve firm's performance by minimizing the investment in the negative net present value projects. Thus, two different methods could have different results as every method adopts a different perspective.

Corporate social responsibility, gender, and CEO turnover

PurposeThe purpose of this paper is to explore the research question whether corporate social responsibility (CSR) and gender influence the likelihood of CEO turnover.Design/methodology/approachThe author uses a large sample of firms over a 21-year period from 1992 to 2013 taken from firms cross-listed in the ESG STATS, Execucomp, and Compustat databases. Logistic regression is used to analyze the determinants of both CEO turnover and the gender of the newly hired CEO.FindingsFirms with better social performance have higher rates of CEO turnover, performance notwithstanding. Further, for firms with decreasing financial performance, it is more likely they will replace their CEO if they have strong CSR vs firms with weak CSR records. In addition, as performance deteriorates, male CEOs will have a higher chance of being replaced relative to female CEOs. For female CEOs, other factors besides financial performance are important determinants of the likelihood of a turnover taking place.Research limitations/implicationsThis study finds support for the stakeholder theory of CSR and does not support entrenchment theory. It is the first study to look at CSR, CEO turnover, and gender issues concurrently.Practical implicationsFor practitioners looking for tangible effects of CSR in the workplace, this paper provides evidence that it does matter in terms of CEO turnover. The findings suggest that CSR is acting as a deterrent to bad behavior on the part of executives in the face of weak financial performance in particular.Originality/valueThis study is the first to look at the impact of CSR on CEO turnover. Importantly, the findings suggest that CSR is not something that a firm decides or thinks about in the “right” financial environment but is rather an omnipresent focus embedded within the mission of the firm.

Saying more with less? Disclosure conciseness, completeness and balance in Integrated Reports

The Integrated Reporting Framework of 2013 represents the latest international attempt to connect a firm’s financial and sustainability (i.e., environmental, social and governance) performance in one company report. An Integrated Report (IR) should communicate “concisely” about how a firm’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of sustainable value. At the same time, an IR needs to be “complete and balanced”, i.e., broadly including all material matters, both positive and negative, in a balanced way. Drawing on impression management studies, we examine a selection of performance determinants to gain insights into the factors associated with conciseness, completeness and balance in IR. The results from a sample of IR early adopters show that in the presence of a firm’s weak financial performance, the IR tends to be significantly longer and less readable (i.e., less concise), and more optimistic (i.e., less balanced). We additionally find that firms with worse social performance provide reports that are foggier (i.e., less concise) and with less information on their sustainability performance (i.e., less complete). Our evidence implies that IR early adopters employ quantity and syntactical reading ease manipulation as well as thematic content and verbal tone manipulation as impression management strategies. The results also suggest that such strategies depend not only on the level of firms’ performance but also on the type of performance (financial versus nonfinancial/sustainability). This paper adds to the limited literature on IR in sustainability accounting as well as to the research in mainstream financial accounting that examines disclosure quality using textual analysis.

Saying More with Less? Disclosure Conciseness and Completeness in Integrated Reports

The Integrated Reporting (IR) Framework of 2013 represents the latest international attempt to connect in one company report a firm’s financial and sustainability (i.e. environmental, social and governance) performance. An IR should communicate “concisely” about how a firm’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of sustainable value. At the same time, an IR needs to be “complete”, i.e., broadly including all material matters, both positive and negative. Drawing on impression management studies, we examine a selection of performance determinants to gain insights into the factors associated with conciseness and completeness in IR. The results from a sample of IR early adopters show that in the presence of a firm’s weak financial performance, the IR tends to be significantly longer and less readable (i.e., less concise), and more optimistic (i.e., less complete). We additionally find that firms with worse social performance provide reports that are foggier (i.e., less concise) and with less information on their sustainability performance (i.e., are less complete). Our evidence implies that IR early adopters employ quantity and syntactical reading ease manipulation as well as thematic content and verbal tone manipulation as impression management strategies. The results also suggest that such strategies not only depend on the level of firms’ performance, but also on the type of performance (financial versus non-financial/sustainability). This paper adds to the limited literature on IR in sustainability accounting, as well as to research in mainstream financial accounting that examines disclosure quality using textual analysis.

How Do Competition and Capabilities Influence Managerial Performance?

The environment in which an organization operates namely, new entrants, substitute products, abundance of competitors with diverse strategies, lack of differentiation, origins and personalities (Porter, 1979), dictates how the company should plan its internal business processes as well as its learning and growth development to satisfy customers and thus achieve enterprise performance. For this study, we collected data until February 2009 by surveying American and Canadian companies using the Dunn and Bradstreet database. We used OLS regression to test hypothesized relation between the variables. We find that there is a positive relationship between Learning & growth (LG) and Technological dynamism (TD); and LG and Environmental competitiveness (EC); but a weak positive relationship between LG and Internal business process (IBP). These results support our argument that firms that confront external environment need to invest in IBP in order to succeed. We found that LG has a strong positive relationship with EC but not significant relationship with TD. While LG has a strong positive influence on Customer satisfaction (CS), IBP shows a very weak positive relationship but Financial Performance (FP) has a strong positive relationship with EC, IBP, and CS, but a relatively weak positive relationship with TD and LG. This means that a competitive environment with fast moving technology influences firms to invest in internal processes and human resources which in turn creates customer satisfaction thus have better operating results. Before the results could be generalized, more research is warranted.

Rural Hospital Mergers and Acquisitions: Which Hospitals Are Being Acquired and How Are They Performing Afterward?

The number of stand-alone rural hospitals has been shrinking as larger health systems target these hospitals for mergers and acquisitions (M and As). However, little research has focused specifically on rural hospital M and A transactions. Using data from Irving Levin Associates' Healthcare M and A Report and Medicare Cost Reports from 2005 to 2012, we examined two research questions: (1) What were the characteristics of rural hospitals that merged or were acquired, and (2) were there changes in rural hospital financial performance, staffing, or services after an M and A transaction? We used logistic regression to identify factors predictive of merger, and we used multiple regression to examine various hospital measures after an M or A. Study results showed that hospitals with weaker financial performance but lower staffing levels and staffing costs were more likely to merge or be acquired. Statistically weak evidence suggested that operating margins declined after the merger; stronger evidence suggested reductions in salary expense. There was no statistically significant evidence of changes to the number of full-time equivalent (FTE) employees, the service lines that were included in the study, capital expenditures, or the amount of debt financing among the hospitals that merged or were acquired. M and A may not result in a rapid influx of capital, a relief of debt burden, or an improvement in bottom-line profitability. However, M and A may be a viable option for maintaining the hospital and the access to care it provides.

The Impact of Financial Postion on Risk Asset Ratios: Emirical Study of Banking Sector Listed in Muscat Security Market

IntroductionThe investment process is one of the pillars of growth in the economy of any country so the firms trying to search for investments that operate efficiently and high productivity at the lowest possible risk and so it was necessary to focus on the risks and try to find equilibrium between return and risk in the light of available resources equation. The financial system in the economy of any country consists of financial and economic institutions, fiscal and monetary markets, restrictions and regulations. The important financial institutions in the Sultanate of Oman and engaged in a prominent role is the banking sector. Banks is explain the relationship between money providers and requesters, so start saving deposits and then relends it to others to retain the profit margin and the banks are an important source of growth in the economy of any country. The good financial position reflect a good profitability owned by the bank and the result of a liquidity was employed optimally in safe investments where the bank stay in the market and rival strongly depends on the extent of being aware of the risks surrounding it . So if a strong financial performance has been positively reflected on the hide various risks and thus banks must keep a balance between liquidity and investment ratios for the purposes of profitability and at the same time the banks that you make alignment between current liabilities and assets traded in order to exit a net positive working capital (Naser Ali, 2013).The process of creating a market value or increase shareholder wealth does not come easy way and to achieve this the banks keeps the percentage of reasonable and appropriate risk in its operations as if the financial performance of the bank is in the defect as a result of operations may be adversely reflected on the performance in the long term and thus increase of the potential risks of the company was threatening the capital or funds deposited in the accounts of depositors. Banks currently maintains a variety of ways to measure risk, especially with regard to self-risk assessment system. If find that weak financial performance on the general level of the bank may be due to the presence of risk in operations which requires correction within a specific and clear path (Rompho, 2011). The continuity, success and further improvement of its performance in the market depend on the company's ability to surrounding risk management and its dependence on plans that are consistent with its goals (Al-Tamimi and Al-Mazrooei, 2007). The efficiency of liquidity management exercise a role in the survival of the institutions and gain a competitive advantage Sardakis et al. (2007), also liquidity management in the success of small businesses is the ability of the administration to deal with the risks, especially cash flows and daily commitments factor (Collis and Jarvis, 2000). That risk management of companies as an efficiently lead to the achievement of value for the company and is working to maximize shareholder wealth (Calandro and Lane, 2006).The banking system has an important role in the financial system so that is part of the financial markets and working with each other to provide services where that bank failures extends to the financial and economic system of the state failure (Kumbirai & Webb, 2010). The banking system must keep up with technology constantly so that can compete banks in the market and reduce the risk, especially when the entry of foreign banks into the domestic market, or as noted recently after a period of global financial crisis entry Islamic banks, which had a clearly, the positive effect on performance, which became necessarily adopt the ideas or the Islamic methodology in the granting of credit as a safe way of thinking by many foreign banks. Banks also always tried to think of how to exploit the technology as a way to reduce the risk in terms of the introduction of electronic cards and the internet as a quick service to customers, which achieves satisfactory of customers, which is reflected in the financial performance and thus reflected the risks (DeYoung, 2001). …

Real and Accrual‐Based Earnings Management in the Pre‐ and Post‐IFRS Periods: Evidence from China

AbstractThe purpose of this study is to investigate the prevalence of both accrual‐ and activities‐based earnings management for Chinese A‐share firms surrounding the adoption of substantially IFRS‐convergent accounting standards. Since 2007, all listed A‐share firms in China have been required to comply with a new set of accounting standards that have substantially conformed to IFRS. The new reform also produced a set of new auditing standards and internal control reporting requirements. Based on a sample of 4,050 firm‐year observations from 2002 to 2011, we find that Chinese firms in the post‐IFRS period (2007–2011) are less likely to engage in accrual‐based earnings management. The magnitude of discretionary accruals also declines after IFRS adoption. In response, we see firms turning to real activities manipulation as a substitute for upward earnings management. The reduction in accrual‐based earnings management could stem from higher quality accounting standards associated with IFRS adoption and/or concurrent changes in the governance regimes introduced with the IFRS mandate. A further analysis, however, indicates that the benefits of IFRS adoption in curbing upward accrual‐based earnings manipulation are not evenly distributed across firms. Specifically, the benefit diminishes for firms that are controlled by Chinese central or local governments, are located in less developed regions, and that have weak financial performance and therefore subject to delisting status. We also find that the benefit is less pronounced for manufacturing firms than for their non‐manufacturing counterparts.