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This chapter examines the ethics and business diplomacy of legal tax avoidance by multinational enterprises (MNEs).

The methodology assembles the relevant literature and examines alternative interpretations of corporate tax strategy. Key topics include business ethics and responsibility, business sustainability, economic patriotism and corporate inversions, tax havens, and possible solutions.

The debate concerns whether legal tax avoidance is unethical and/or poor business diplomacy. There are three possible strategies for MNEs. One strategy is intentional tax avoidance. Another strategy is business–government negotiation concerning tax liability. Another strategy is business diplomacy aimed at maximizing the social legitimacy of the firm across multiple national tax jurisdictions.

The chapter assesses four possible solutions for corporate tax avoidance. One solution is voluntary tax payments beyond legal obligations whether out of a sense of ethics or a strategy of business diplomacy. A second solution is international tax cooperation and tax harmonization in ways that minimize opportunities for tax avoidance. A third solution is increased stakeholder pressure emphasizing business diplomacy and tax cooperation and harmonization. The fourth solution is negotiated tax liabilities between each business and each jurisdiction.

The chapter provides an original systematic survey of the key aspects of corporate international tax avoidance in an approach in which business ethics and business diplomacy are better integrated. The value of the chapter is that it provides information and assembles relevant literature concerning corporate international tax avoidance, and addresses possible solutions for this problem.

Multinational corporations (MNCs) are experiencing a number of major challenges in the international business arena. Can business diplomacy help them to deal with these challenges effectively? In this introductory chapter we conceptualize and identify the relationship between MNCs’ international business diplomatic activities and firm performance.

We conducted a literature review and interviews with five large MNCs that are operating in distinctive industries. Business diplomatic activities have been classified into three particular areas to support the analysis, namely: (1) MNC–Non-Governmental Organization (NGO) relations, (2) MNC–Host Government relations, and (3) MNC–Local Community relations.

The main findings suggest that international business diplomacy has a direct positive effect on firm performance with regard to so-called soft or nonfinancial indicators. These indicators include knowledge sharing, reputation, company image, and marketing possibilities. The effect can in turn lead to a better financial performance and market stance in the long run.

The results of this study are important for the future awareness and execution of business diplomacy in large MNCs.

The purpose of this paper in this context is to examine the impact of asset liquidity on real estate equity returns, after taking well-documented systematic risk factors into account. Due to their unique characteristics, real estate equities constitute an inherently low degree of underlying asset liquidity.

Following the Fama-French time-series regression approach, the authors extend the conventional asset pricing model by a real estate-specific asset liquidity factor (ALF), using a sample of 244 real estate equities.

The results, based on monthly data for the period 1999-2012, reveal that asset liquidity is a relevant pricing factor which contributes to explaining return variations in real estate equity markets. Accordingly, investors expect a risk premium from listed real estate companies with a low degree of asset liquidity, which is especially the case for companies facing financial constraints and during economic downturns. Furthermore, an investment strategy exploiting differences in the underlying asset liquidity yields considerable average excess returns of upto 8.04 per cent p.a.

Considering the findings presented in this paper, asset liquidity should receive special attention from investors, as well as from the management boards of listed real estate companies. While investors who ignore the magnitude of asset liquidity may systematically misprice real estate equities, management can influence the firm’s cost of capital by adjusting the underlying asset liquidity.

This is the first study to examine the role of an ALF in a real estate asset pricing framework.

The risk-return relationship of real estate equities is of particular interest for investors, practitioners and researchers. The purpose of this paper is to examine, in an asset pricing framework, whether the systematic risk factors play a significantly different role in explaining the returns of listed real estate companies, compared to general equities.

Running the difference test of the Fama-French three-factor and the liquidity-augmented asset pricing model, the authors analyze the effect of the systematic risk factors related to market, size, BE/ME and liquidity in a time-series setting over the period July 1992 to June 2012. By applying the propensity score matching (PSM) algorithm, the authors bypass the “curse of dimensionality” of traditional matching techniques and identify a comparable control sample of general equities, in terms of the relevant firm characteristics of size, BE/ME and liquidity.

The empirical results indicate that European real estate equity returns load significantly differently on the size, value and liquidity factor, while the influence of the market factor seems to be equivalent. In addition, the authors find an economically and statistically significant underperformance of European real estate equities, after accounting for the diverging role of systematic risk factors. Running the conditional time-series regression, the authors further reveal that these findings are predominately caused by the divergent risk-return behavior of real estate equities in economic downturns.

Due to the diverging role of the systematic risk factors in pricing real estate equities, the authors provide evidence of potential diversification benefits for investors and portfolio managers.

This is the first real estate asset pricing study to dissect the unique risk-return relationship of real estate equities by employing propensity score matching.

Understanding the pricing of real estate equities is a central objective of real estate research. This paper aims to investigate the impact of liquidity on European real estate equity returns, after accounting for well-documented systematic risk factors.

Based on risk factors derived from general equity data, the authors extend the Fama-French time-series regression approach by a liquidity factor, using a pan-European sample of 272 real estate equities.

The empirical results indicate that liquidity is a significant pricing factor in real estate stock returns, even after controlling for market, size and book-to-market factors. In addition, the authors detect that real estate stock returns load predominantly positively on the liquidity risk factor, suggesting that real estate equities tend to behave like illiquid common equities. These findings are underpinned by a series of robustness checks. Running a comparative analysis with alternative factor models, the authors further demonstrate that the liquidity-augmented asset-pricing model is most appropriate for explaining European real estate stock returns.

The inclusion of sentiment and downside risk factors could provide further insights into real estate asset pricing in European capital markets.

This is the first study to examine the role of liquidity as a systematic risk factor in a pan-European setting.

The purpose of this paper is to explore the effect of venture capital (VC) funding as a form of ownership on lobbying strategies of venture-backed companies.

The sample consists of venture-backed IPO companies between 1999 and 2014. The authors collected IPO data from the Thompson Securities Data Company (SDC) database. The authors collected VC data from SDC VentureXpert database and lobbying data from the Center for Responsive Politics database (opensecrets.org).

Consistent with the hypotheses, the authors find that VC-backed companies spend less on lobbying compared to non-VC-backed counterparts. However, this relationship is moderated by companies’ R&D intensity. R&D intensive VC-backed companies choose to spend more on lobbying.

The research indicates that although VC backing has a negative impact on lobbying efforts, R&D intensity creates an incentive for VC-backed companies to spend more on lobbying in order to shape public policy to their benefit. The study consists of VC-backed companies that are public. The authors believe that future research can explore political strategies of VC-backed companies during their pre-IPO stage.

The authors believe that political strategies are powerful yet underutilized resources that VC-backed companies can rely on to shift industries and invest in innovative products that challenge norms and fight the status quo. Lobbying and other forms of political involvement can help them shape public policy.

To the best of the authors’ knowledge, the study makes a unique contribution to the literature by exploring the political strategies of VC-backed companies.

This paper aims at presenting the theoretical concepts of the transdisciplinary case study approach (TCS), which is a research and teaching approach developed and elaborated at the Swiss Federal Institute of Technology (ETH), as a means of transition support.

The paper reveals the historical roots of case studies, transdisciplinarity and sustainable development as teaching and research paradigms. The TCS approach is presented, which has been developed at ETH for supporting transition management of regional, urban, and organizational systems. This approach is entrenched by an ontology that reveals the basic characteristics of ill‐defined transition problems, an epistemology that refers to Probabilistic Functionalism and distinguishes between multi‐layered systemic and normative epistemics, a methodology that includes a set of methods for case representation (including modelling and projection), assessment, and strategy building, and a project management model that refers to more than a dozen TCSs in the field of sustainable development. Problems of validity of TCSs as a research methodology are discussed.

Three major strengths of the TCS approach presented in the paper are: that it is based on three sound paradigms, which focus on different, relevant characteristics of complex, human‐environment systems; i.e. the case study approach, transdisciplinarity and sustainable development, that it is strictly organized according to an elaborated and consistent theoretical framework that includes ontological, epistemological, methodological, and organizational considerations, and that it is itself subject to an ongoing inquiry and adaptation process. All theoretical considerations of the paper are clarified be elaborated examples from the more than 10 years experience with TCS of the authors.

The paper gives a comprehensive overview of the theoretical foundation of TCS that might assist other scientists engaged in case study research and teaching to further develop their approaches. Additionally, relevant topics for further research in the field of TCS are presented which hopefully induce an inspiring discussion among case study researchers.

As far we know, this paper is one of the first that presents a comprehensive and theoretically sound overview of applying transdisciplinary case studies as means of sustainability learning. Thus, it can be seen as a first, crucial step for establishing the new research field of TCS research and a sound research community of complex, transdisciplinary problem solving towards sustainability learning.

In crafting Auditing Standard No.3 (AS3), a primary objective of the PCAOB was to reduce auditors' exposure to litigation by raising the standard of care for audit documentation. We examine whether the increased documentation requirements of AS3 affect legal professionals' perceptions of audit quality and auditor responsibility in the event of an audit failure. Our experiment consists of a 3 × 2 between-participants design with law students serving as proxies for legal professionals. The results of our experiment indicate that when an audit procedure, namely the investigation of inconsistent evidence, is not required to be documented, legal professionals perceive the performance of the work itself but not its documentation to significantly increase audit quality and reduce the auditor's responsibility for an audit failure. When documentation of the procedure is required, as per AS3, legal professionals perceive enhanced audit quality and reduced auditor responsibility only if the performance of the work is documented.

The authors investigate the implications of environmental, social and governance (ESG) practices of firms for the pricing of their credit default swaps (CDS). In doing so, the authors compare European and US firms and consider nonlinear and indirect effects. This complements the previous literature focusing on linear and direct effects using bond yields and credit ratings of US firms.

For this purpose, the authors apply fixed effects regressions on a comprehensive panel data set of US and European firms. Further, nonlinear and indirect effects are investigated utilizing quantile regressions and a path analysis.

The evidence indicates that higher ESG ratings mitigate credit risks of US and European firms from 2007 to 2019. The risk mitigation effect is U-shaped across ESG quantiles, which is consistent with opposing effects of growing stakeholder influence capacity and diminishing marginal returns on ESG investments. The authors further reveal a mediating indirect volatility channel that substantially amplifies the direct effect of ESG on credit risk. A one-standard-deviation improvement in ESG ratings is estimated to reduce CDS spreads of low, medium and high ESG firms by approximately 4%, 8% and 3%, respectively.

This is the first study to examine whether credit markets reflect regional differences between Europe and the US with regard to the ESG-CDS-relationship. In addition, this paper contributes to the existing literature by investigating differences in the response of CDS spreads across ESG quantiles and to study potential indirect channels connecting ESG and CDS spreads using structural credit risk variables.

This research aims to explore the impact of augmented reality (AR), the digital technology that superimposes virtual elements in a real environment, on consumers in the context of experiential marketing. Specifically, this study proposes a research model based on the stimulus-organism-response model, which considers AR media characteristics as external stimuli, consumers’ value perceptions as the organisms, and purchase intentions as the responses. The research model was tested with 248 consumers using structural equation modelling. The results show that informativeness, ease of use, and telepresence have positive effects on consumers’ utilitarian value perception and that telepresence and interactivity have positive effects on hedonic value perception. Overall, this study contributes to the growing body of knowledge on AR and provides actionable insights for managers implementing digital transformation strategies and AR applications in marketing practices.