Search results

The fast-changing, highly competitive and technology-driven business environment forces established firms to continually search for new business opportunities and innovative ideas. In reaction, corporations such as Google, Microsoft, Cisco and Bertelsmann have launched new corporate venture capital (CVC) units or have intensified existing CVC activities. This chapter examines the structure, patterns and investment focus of telecommunication, IT, consumer electronics and media & entertainment firms’ CVC investments by conducting a data-mining project based on the Thomson Reuters Private Equity database. The data-mining project reveals the increasing importance of CVC activities as a strategic development tool to address the requirements of the increasing costs, speed and complexity of a technology-driven industry since the bursting of the Internet bubble. Therefore, following chapter is one of the first CVC studies to describe and compare CVC investments of the last CVC wave across industry sectors.

The purpose of this study is to evaluate the impact of environmental uncertainty on corporate social responsibility (CSR), and involves corporate financial investment as mediating factor into this relationship to identify whether Chinese enterprises pursue fame or profit under rising environmental uncertainty.

Data of listed companies in China from 2010 to 2019 are employed. Fixed effect and mediating effect models were used to explore the relationship between environmental uncertainty, corporate financial investment, and CSR. The heterogeneity influence and moderating effect are discussed by using the method of grouping test and adding interactive items.

The study finds that rising environmental uncertainty has a negative impact on CSR. It stimulates managements' short-sighted motivation, so that enterprises prioritize financial investment that can solve short-term goals, rather than CSR performance. This inhibitory effect is caused by holding illiquid financial assets with the motivation of “speculative profit seeking.” The negative effect is greater in the samples of state-owned enterprises, nonfamily enterprises and enterprises with low risk-taking.

It provides a decision-making direction for implementation of CSR governance and the construction of CSR system, particularly in emerging market economies.

CSR is widely known in developed countries for its formation, development and role, but its effectiveness and behavioral motivation are less mentioned in emerging markets. In the future, the research in this area needs to be further advanced.

The study makes significant contributions to the mechanisms behind the link between environmental uncertainty and CSR by taking corporate financial investment as an intermediary factor into the analysis, especially in the unique market context of China.

The purpose of this paper is to examine the relationship between capital expenditures and corporate earnings for 357 manufacturing firms listed on the Taiwan Stock Exchange over the sample period 1992‐2002.

The sample period of 11 years is divided into capital investment period and performance period. The sample firms are first grouped into eight portfolios ranked by capital investment ratio estimated from the investment period. Corporate earnings in the performance period for the eight portfolios are examined to see if any positive association exists. Regressions are then estimated to test the relationship between capital expenditures and corporate earnings.

The results indicate a significantly positive association between capital expenditures and future corporate earnings even after controlling for current corporate earnings.

The results indicate that the unexpected announcements of capital expenditures are good news for investors in the investment practice.

Previous studies on the relationship between capital expenditures and corporate earnings are based mainly on developed countries. Empirical evidence from the manufacturing firms listed on the Taiwan Stock Exchange would provide further insights regarding this important issue.

Board gender diversity is an important component of sound corporate governance. This paper aims to examine the influence that female board directors in listed firms in Korea have on effective investment decisions.

The authors used 4,117 data items related to finance and governance from FnGuide for listed Korean firms between 2014 and 2019. The authors analyzed the data using Heckman’s two-stage regression, controlling the ordinary least square regression and endogeneity, to resolve the problem of selection bias. Gender diversity was measured using the existence/absence of female directors on boards (dummy variable) and the ratio of female directors on boards (BLAUt-1 index and SHANNONt-1 index).

Female board directors influenced the suppression of under-investment for the enhancement of corporate value, but not the suppression of over-investment. Additionally, female directors played a complementary role in under-investment to mitigate corporate risk, but not in intra-industry competition. Kanter’s classification of board types indicated that the skewed board and tilted board have a significant effect on under-investment and play a complementary role in corporate risk.

First, this study is about only Korean firms. Second, this study relies on corporate actual data but does not account for the factors that affect human behavior or how such behaviors can evolve. Third, the authors included as many appropriate variables as possible when setting the research model, but there may be missing correlation variables.

The authors’ results have policy implications, as they can be used as a basis to establish policies related to gender diversity in Korea, where there are currently insufficient empirical studies on women’s participation on the boards of directors. Moreover, with the amended FISCMA, which mandates that firms must hire at least one female director, Korean firms need to implement practical employment policies that can benefit firms, by selecting capable female directors rather than engaging in tokenism.

This study empirically examines gender diversity in the boards of Korean firms that have implemented the female quota system for the first time and considers female board directors’ roles in undertaking effective corporate investment decisions. This insight can guide change management and help firms avoid tokenism – a possible corporate response to pressures arising from the debates about feminism in Korea and gender diversity legislation.

The purpose of this paper is to empirically investigate the impact of equity market valuation and government intervention on the research and development (R&D) investments of listed companies in China and their relationship.

Using a manually collected R&D database in the period 2007–2015, this paper constructs a sample of 6,595 firm–year observations and applies the methods of pooled OLS regressions to examine the effects of market valuation and government intervention on corporate R&D expenditures.

This paper finds that market valuation enhances corporate R&D investments, but there is no evidence that government intervention may significantly affect the R&D investments. Government intervention also decreases the sensitivity of corporate R&D investment to stock price, which implies that government intervention weakens the promotion of market mechanism to corporate R&D investment. Furthermore, these effects are stronger in the non-state-owned firms and the non-regulated industries.

This study suggests that the functional borders of markets and government should be reasonably defined and markets play a decisive role in resource allocation to improve corporate innovation and national innovation.

This paper provides a micro view of the relationship between market and government at the stage of transitional economy in China as well as directions for further research on the relationship between stock prices and corporate investments.

This study aims to empirically examine the impact of internal corporate governance mechanisms (ICGM) related to the size of the board, board composition, CEO duality and audit committee independence as a single metric on a firm’s investment decisions.

This study attempts to develop an internal corporate governance quality index comprising 10 items under four main ICGMs – size and independence of the board, CEO duality and audit committee independence – employing panel data analysis to investigate its impact on the investment decisions in 301 nonfinancial firms listed in six emerging capital markets in the Gulf Cooperation Council (GCC) member countries for the years 2015–2020. Data were extracted from sample companies' websites, stock markets, annual reports and Refinitiv database.

This study provides convincing evidence that effective ICGMs minimize inefficient investment and ultimately boost investment efficiency. The findings remain consistent even after considering the potential endogeneity bias.

This study provides empirical evidence on investment efficiency in the GCC region and emphasizes the importance of high-quality ICGMs in reducing inefficient investment. By examining the impact of ICGMs on investment inefficiencies, this study contributes to the corporate governance literature. The GCC region's unique economic and social contexts, with its growing economies, are considered to shed light on this issue.

The purpose of this paper is to investigate the effect of equity market misvaluation on manager behavior. Using a sample of 535 French-listed over 2000–2018, the authors analyze whether corporate investment decision is sensitive to equity market overvaluation.

The study adopts market-to-book (M/B) decomposition developed by Rhodes-Kropf and Viswanathan (2004, RKV) that proxies for market misvaluation at the firm and industry levels. The authors conducted a long-term performance analysis via a portfolio sorting procedure and a Carhart (1997) four-factor pricing model. The authors tested the relationship between equity misvaluation, corporate investment decisions and equity issuance. The authors ran several robustness tests.

The empirical results show that equity market misvaluation affects corporate investment positively as the stock price deviates further away from its fundamental. Based on market timing theory, the authors find that corporate investment occurs in periods of high valuation motivated by equity issuance to benefit from the low cost of capital. This effect is more prominent for financially constrained firms. Consistent with the catering channel, the authors find that the misvaluation-investment nexus is more pronounced in firms with short-horizon investors. By examining the stocks’ long-term performance of misvalued firms, via a sorting portfolio procedure, the authors find that undervalued firms outperform and generate higher abnormal returns (Jensen’s alpha) than overvalued firms, suggesting that mispricing-driven investment appear to be short-lived and lead to lower return in the long term.

Corporate decision-makers and governance structures should pay attention to the rationality of the corporate investment decision in the context of equity market misvaluation. Managers who focus on maximizing the stock market value in the short-run at the expense of its long-term performance must give preference to value-creating investment, not driven by an external mechanism such as equity market mispricing. More generally, investors and portfolio managers must take into account the market mispricing process in decision-making. Nonetheless, from the portfolio sorting perspective, decision-makers must act in terms of high governance quality to mitigate suboptimal investment due to stock market mispricing (Jensen, 2005). Finally, equity market overvaluation, leading managers to invest via equity financing in particular, should be a signal to attract investors’ attention to seize the window of opportunity and embark on a short-term portfolio strategy. Such a strategy promises high returns in the short term.

This paper investigates jointly two theoretical channels: equity market timing and catering. The authors propose for the analysis three components of the M/B decomposition to dissociate market misvaluation at the firm and industry level from the fundamental component of market value (growth). This procedure provides a better understanding of the role of firm and industry misvaluation in explaining corporate investments. The authors provide evidence of the equity market misvaluation via a portfolio sorting procedure and a Carhart (1997) four-factor pricing model. The authors examine the effect of misvaluation on both the investment and the financing decisions.

Financial flexibility, investment efficiency and effective corporate governance mechanisms have been issues of concern to stakeholders. Yet, little empirical evidence on the combined moderating effects investment efficiency and corporate governance mechanisms on the nexus between financial flexibility and firm performance. This study aims to address this gap and extend the extant literature by examining the moderating effects of corporate governance and investment efficiency on the nexus between financial flexibility and financial performance.

The empirical study is based on progression analysis using a sample of 13,865 US listed companies selected from BoardEx (WRDS) for the period (2010–2022) with 89,198 firm-year observations.

Findings of this study indicate that financial flexibility improves firm value as well as accounting performance. Furthermore, the results reveal that both investment efficiency and corporate governance moderate the effect of financial flexibility on firm performance. The authors complement and extend the literature on the optimal investment strategies domain by showing that the combined impact of corporate governance mechanisms and investment efficiency strengthens the nexus between financial flexibility and firm performance.

Key limitations of this study due to the characteristics of the sample selection: country-specific context and proxies used by this study.

Findings of this study have managerial and theoretical implications for firms’ boardrooms, institutional and individual investors, regulators, academics and other stakeholders regarding behavioural aspects of investment decision-making.

The authors’ novel contribution to the extant literature is articulated by the conceptual framework underlying this study and by the new evidence regarding exploring the combined effect of corporate governance mechanisms on nexus between financial flexibility and companies’ performance.

The purpose of this paper is to study the relationship between board attributes and national culture on firms’ investment decisions.

The study used data from listed firms from seven Sub-Saharan Africa countries. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by regression analysis, which constitutes the main data analysis.

The multiple regression analysis results indicate a negative relationship between uncertainty avoidance (UAI) and corporate investment decisions. The study also found that there is a negative relationship between the interaction between UAI and the number of independent board members and corporate investment decisions.

This study is one of the few to measure the influence of governance variables and national culture on corporate investment decisions in Sub-Sahara Africa.

This study aims to analyse the effect of corporate governance on investment efficiency and the moderating impact of industry competition on the relationship between corporate governance and investment efficiency.

The research sample includes a total of 36 publicly listed companies assessed by the Indonesian Institute for Corporate Directorship from 2012 to 2018. Testing is performed on full sample and overinvestment and underinvestment subsamples. Additional testing is further carried out using the generalized method of moments to address endogeneity problems and a robustness test is performed to assess the estimated investment efficiency.

Corporate governance can increase investment efficiency and the effectiveness of corporate governance is found to drop when the level of industry competition is higher.

The results of the present study corroborate the suggestion that companies need to implement corporate governance mechanisms. Furthermore, designing a corporate governance mechanism requires the scrutiny of the external environment, including industry competition.

The present study adds the profitability factor in the calculation of investment efficiency levels. This study also considers external factors that can influence the effectiveness of corporate governance in determining investment efficiency.