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1 – 10 of 88Wenfei Li, Zhenyang Tang and Chufen Chen
Corporate site visits increase labor investment efficiency.
Abstract
Purpose
Corporate site visits increase labor investment efficiency.
Design/methodology/approach
Our empirical model for the baseline analysis follows those of Jung et al. (2014) and Ghaly et al. (2020).
Findings
We show that corporate site visits are associated with significantly higher labor investment efficiency; more specifically, site visits reduce both over-hiring and under-hiring of employees. The effect of site visits on labor investment efficiency is more pronounced for firms with higher labor adjustment costs, greater financial constraints, weaker corporate governance and lower financial reporting quality. We also find that site visits mitigate labor cost stickiness.
Originality/value
First, while the literature has suggested how the presence of institutional investors and analysts may affect labor investment decisions, we focus on institutional investors and analysts’ activities and interactions with firm executives. We provide direct evidence that institutional investors and analysts may use corporate site visits to improve labor investment efficiency. Second, our study adds to a line of recent studies on how corporate site visits reduce information asymmetry and agency conflicts. We show that corporate site visits allow institutional investors and analysts to influence labor investment efficiency. We also provide new evidence that corporate site visits reduce labor cost stickiness.
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This study examines the value implications of oil price uncertainty for investors in diversified firms using a sample of 922 USA firms from 2001 to 2019.
Abstract
Purpose
This study examines the value implications of oil price uncertainty for investors in diversified firms using a sample of 922 USA firms from 2001 to 2019.
Design/methodology/approach
Our study employs a panel dataset to examine the value implications of oil price uncertainty for diversified firm investors. We consider several alternative specifications to account for unobserved factors and measurement errors that could potentially bias our results. In particular, we use alternative measures of the excess value of diversified firms and oil price uncertainty, additional control variables, fixed-effects models, the Oster test, impact threshold for confounding variable (ITCV) analysis, two-stage least square instrumental variable (2SLS-IV) analysis and the system-GMM model.
Findings
We find that the excess value of diversified firms, relative to a benchmark portfolio of single-segment firms, increases with high oil price uncertainty. The impact of oil price uncertainty is asymmetric, as corporate diversification is value-increasing for diversified firm investors only when the volatility is due to positive oil price changes and amidst supply-driven oil price shocks. The excess value increases irrespective of diversified firms’ financial constraints and oil usage. Diversified firms become conservative in their internal capital allocations with high oil price uncertainty. Such conservatism is value-increasing for diversified firm investors, as it supports higher performance in response to oil price uncertainty.
Originality/value
Our study has three important implications: first, they are relevant to investors in understanding the portfolio value implications of oil price uncertainty. Second, they are helpful for firm managers while comprehending the value-relevant implications of internal capital allocations. Finally, our findings are policy relevant in the context of the future of diversified firms in developed markets.
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This article analyzes the moderating role of investment opportunities, business risk and agency costs in shaping the nexus between excess cash and corporate performance.
Abstract
Purpose
This article analyzes the moderating role of investment opportunities, business risk and agency costs in shaping the nexus between excess cash and corporate performance.
Design/methodology/approach
This research uses dynamic regression models (two-step system generalized method of moments) to analyze the data related to 200 Turkish companies listed on Borsa Istanbul (BIST) for the years between 2009 and 2020.
Findings
The findings indicate that when excess cash increases, the financial performance deteriorates only for firms with lower investments compared to firms with more investments. In addition, investment contributes to better financial performance for firms that hold cash surplus, whereas the influence of investment is insignificant for firms that have insufficient cash. Agency costs of equity exacerbate the adverse impact of excess cash on financial performance while agency costs of debt mitigate this effect. Excess cash reduces the financial performance of highly leveraged firms. However, this impact becomes insignificant when debt ratio decreases. The findings also show that investment has more significant role than business risk in building the precautionary motive to hold cash.
Research limitations/implications
The findings of this article are limited to the Turkish market. Future research is still needed in other emerging markets to compare the results and reveal more about the effect of excess cash on firm performance, and how other factors can change this effect.
Practical implications
The findings verify the increased significance of excess cash in the presence of investment opportunities and difficulties in accessing external funds. Nevertheless, the role of the equity related agency problem in reducing the benefits of cash surplus confirms the necessity of policies that support corporate governance, especially in emerging markets.
Originality/value
This article, according to the knowledge of author, is the first to examine the role of agency costs associated with debt and equity, and the compound effect of investment opportunities and business risk on the nexus between excess internal funds and corporate financial performance in emerging markets.
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The purpose of this paper is to investigate the relationship between tax avoidance and earnings persistence in the light of a developing economy, with the main focus on China.
Abstract
Purpose
The purpose of this paper is to investigate the relationship between tax avoidance and earnings persistence in the light of a developing economy, with the main focus on China.
Design/methodology/approach
In the analysis, the author conducts a survey on the tax avoidance situation of Chinese listed companies from 2012 to 2020. Then, a multivariate regression analysis is performed in order to analyse the relationship between corporate tax avoidance and earnings persistence.
Findings
The findings of the present study show that tax avoidance has a significant positive effect on earnings persistence. However, when the degree of tax avoidance is high, the “risk effect” of tax avoidance exceeds the “value effect”, and tax avoidance will reduce the persistence of earnings. This conclusion is even more prominent when the company is non-state-owned. Further research shows the increase of institutional investors’ shareholding ratio can improve “value effect” of tax avoidance, lessen “risk effect” of tax avoidance, and positively affect the relationship between tax avoidance and earnings persistence.
Practical implications
This study provides evidence for investors to understand the dual effect of tax avoidance on earnings persistence. The results may have implications for regulatory bodies. They can provide a better understanding of the corporate governance role of institutional investors in curbing opportunistic tax avoidance.
Originality/value
This study enriches the research on tax avoidance effects by analysing the impact of tax avoidance on earnings persistence. This study also compensates for the shortcomings of analysing earnings persistence mainly from the perspective of tax differences in the past, and promotes the study of the corporate governance effects of institutional investors under different levels of tax avoidance.
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Engy ElHawary and Rasha Elbolok
This examine the impact of environmental, social and governance (ESG) performance on financial reporting quality (FRQ) before and during COVID-19 in the Egyptian market.
Abstract
Purpose
This examine the impact of environmental, social and governance (ESG) performance on financial reporting quality (FRQ) before and during COVID-19 in the Egyptian market.
Design/methodology/approach
This study uses quarterly data from 2017 to 2021 to draw conclusions, with a sample consisting of 486 firm-year observations for 27 Egyptian companies listed on the Standard and Poor’s/Egyptian Stock Exchange ESG index. This study uses both firms’ ESG scores and the Beneish Model, an earnings detection model, as proxies for FRQ. COVID-19 effects on ESG performance and FRQ were examined by using Pearson’s correlation coefficient and two-stage least squares.
Findings
COVID-19 has a significant impact on the link between ESG and FRQ. This implies that corporations with high ESG performance are less likely to manipulate earnings (having a low M-score) and thus provide high FRQ during the COVID-19 pandemic. Moreover, there is a significant positive relationship between firm size, leverage and M-Score, indicating that large firms typically present a high FRQ.
Research limitations/implications
The sample size and data availability are the main research limitations. Additionally, this study only considers the effects of firms’ ESG performance on FRQ during the COVID-19 pandemic. Thus, future research should consider other factors associated with investors’ corporate social responsibility (CSR).
Practical implications
This research has practical implications for market regulators seeking to establish a legislative framework and enhance guidance to mandate managers to provide ESG data and CSR reports appropriate for Egypt and other developing economies in times of crisis.
Social implications
Promoting the adoption of ESG practices in business, particularly during crises, has the potential to effectively provide high-quality and reliable financial reporting required for investment.
Originality/value
This study aspires to address notable deficiencies in the pertinent literature concerning the relationship between ESG performance and FRQ during COVID-19. To the best of the authors’ knowledge, little is known about how ESG performance changes in response to pandemics in emerging markets. To address this gap, this study examines the effects of COVID-19 on the relationship between ESG performance and FRQ in Egyptian-listed firms from 2017 to 2021.
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Chao Zhang, Zenghao Cao, Zhimin Li, Weidong Zhu and Yong Wu
Since the implementation of the regulatory inquiry system, research on its impact on information disclosure in the capital market has been increasing. This article focuses on a…
Abstract
Purpose
Since the implementation of the regulatory inquiry system, research on its impact on information disclosure in the capital market has been increasing. This article focuses on a specific area of study using Chinese annual report inquiry letters as the basis. From a text mining perspective, we explore whether the textual information contained in these inquiry letters can help predict financial restatement behavior of the inquired companies.
Design/methodology/approach
Python was used to process the data, nonparametric tests were conducted for hypothesis testing and indicator selection, and six machine learning models were employed to predict financial restatements.
Findings
Some text feature indicators in the models that exhibit significant differences are useful for predicting financial restatements, particularly the proportion of formal positive words and stopwords, readability, total word count and certain textual topics. Securities regulatory authorities are increasingly focusing on the accounting and financial aspects of companies' annual reports.
Research limitations/implications
This study explores the textual information in annual report inquiry letters, which can provide insights for other scholars into research methods and content. Besides, it can assist with decision making for participants in the capital market.
Originality/value
We use information technology to study the textual information in annual report inquiry letters and apply it to forecast financial restatements, which enriches the research in the field of regulatory inquiries.
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Rosemond Desir, Patricia A. Ryan and Lumina Albert
The study aims to investigate market reactions associated with the JUST 100 rankings published by JUST Capital, a non-profit organization, as well as differences in financial…
Abstract
Purpose
The study aims to investigate market reactions associated with the JUST 100 rankings published by JUST Capital, a non-profit organization, as well as differences in financial reporting quality and performance between selected firms and their industry peers.
Design/methodology/approach
This study uses a sample of 431 firms selected as the 100 America’s Most Just Companies between 2016 and 2020 by JUST Capital. This study performs both an event study to determine whether the rankings are useful to investors and cross-sectional regression analyses on the characteristics of selected firms compared to their peers.
Findings
This study finds that investors react positively to selected firms around the time of the release of the JUST 100 rankings, suggesting that the rankings are decision-useful. This study also finds that selected firms exhibit higher accounting quality and financial performance than their peers.
Research limitations/implications
Rankings may not be free from bias because of JUST Capital’s ownership of an exchange-traded fund.
Social implications
The findings validate the rankings as well as the methodology used by JUST Capital, as they show market participants value firms that engage in socially responsible actions through their commitment to positively impact five key stakeholder groups: employees, customers, communities, environment and shareholders.
Originality/value
To the best of the authors’ knowledge, this is the first study that shows the importance of the JUST 100 rankings for investment decisions. Considering the growing push for companies to disclose environmental, social and governance (ESG) activities, this study provides evidence to support ESG disclosure regulations.
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Dominique Mazé, Jorge Alcaraz and Ricardo E. Buitrago R.
This paper aims to investigate how emerging market multinational enterprises (EMNEs) are integrating and expanding into other emerging market host countries, focusing on Chinese…
Abstract
Purpose
This paper aims to investigate how emerging market multinational enterprises (EMNEs) are integrating and expanding into other emerging market host countries, focusing on Chinese mining companies in Peru.
Design/methodology/approach
Adopting a qualitative approach, an in-depth analysis of two Chinese state-owned enterprises’ strategies was conducted, building on stakeholder theory and the business ecosystem perspective.
Findings
This study reveals a reliance on high-level political lobbying rather than localized engagement strategies. However, findings point to increasing grassroots resistance among local stakeholders, undermining EMNEs’ bargaining power.
Originality/value
This paper argues for a paradigm shift toward inclusive, cooperative “translocal governance” approaches as empowered communities gain voice. Key contributions include advancing theoretical understanding of changing stakeholder relationships and power configurations in emerging countries, underscoring the rising significance of microlevel sociocultural embeddedness for MNE success and highlighting practical imperatives for EMNEs to embark on rapid localization strategies in Latin America. By elucidating multilayered integration realities in Peru, this interdisciplinary study yields contextualized insights and enriches perspective on the conditions and pathways for EMNEs to build sustainability in Global South emerging market environments.
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Mouna Ben Rejeb and Nozha Merzki
This study aims to investigate the effect of income and asset diversification on earnings management using discretionary loan loss provisions (LLP) in banks, and the role of risk…
Abstract
Purpose
This study aims to investigate the effect of income and asset diversification on earnings management using discretionary loan loss provisions (LLP) in banks, and the role of risk level in mediating this effect.
Design/methodology/approach
A sample of banks operating in Middle East and North Africa countries was used to test the mediation model of Baron and Kenny (1986) with different measures of diversification and risk.
Findings
The results show that bank income and asset diversification have unique and combined effects on earnings management. The results also support the idea that a risk-mediating effect contributes to explaining this relationship among banks. Specifically, bank diversification strategies positively affect LLP-based earnings management by increasing bank risk. This result is relevant for conventional banks. However, only a direct and positive effect of diversification strategies on LLP-based earnings management can be observed in Islamic banks, and the indirect effect is not supported.
Originality/value
This study extends previous research by examining the unique and combined effects of income and asset diversification strategies on earnings management in the banking sector. Specifically, it provides new evidence that diversification strategies increase LLP-based earnings management, both directly and indirectly, through bank risk.
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Irina Alexandra Georgescu, Simona Vasilica Oprea and Adela Bâra
The COVID-19 pandemic and the onset of the conflict in Ukraine led to a sustained downturn in tourist arrivals (TA) in Russia. This paper aims to explore the influence of…
Abstract
Purpose
The COVID-19 pandemic and the onset of the conflict in Ukraine led to a sustained downturn in tourist arrivals (TA) in Russia. This paper aims to explore the influence of geopolitical risk (GPR) and other indices on TA over 1995–2023.
Design/methodology/approach
We employ a nonlinear autoregressive distributed lag (NARDL) model to analyze the effects, capturing both the positive and negative shocks of these variables on TA.
Findings
Our research demonstrates that the NARDL model is more effective in elucidating the complex dynamics between macroeconomic factors and TA. Both an increase and a decrease in GPR lead to an increase in TA. A 1% negative shock in GPR leads to an increase in TA by 1.68%, whereas a 1% positive shock in GPR also leads to an increase in TA by 0.5%. In other words, despite the increase in GPR, the number of tourists coming to Russia increases by 0.5% for every 1% increase in that risk. Several explanations could account for this phenomenon: (1) risk-tolerant tourists: some tourists might be less sensitive to GPR or they might find the associated risks acceptable; (2) economic incentives: increased risk might lead to a depreciation in the local currency and lower costs, making travel to Russia more affordable for international tourists; (3) niche tourism: some tourists might be attracted to destinations experiencing turmoil, either for the thrill or to gain firsthand experience of the situation; (4) lagged effects: there might be a time lag between the increase in risk and the actual impact on tourist behavior, meaning the effects might be observed differently over a longer period.
Originality/value
Our study, employing the NARDL model and utilizing a dataset spanning from 1995 to 2023, investigates the impact of GPR, gross domestic product (GDP), real effective exchange rate (REER) and economic policy uncertainty (EPU) on TA in Russia. This research is unique because the dataset was compiled by the authors. The results show a complex relationship between GPR and TA, indicating that factors influencing TA can be multifaceted and not always intuitive.
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