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This study seeks to identify the main determinants of the optimal capital structure by reexamining the interpretation of the conventional set of explanatory variables used as proxies for the costs and benefits of debt in the context of the dynamic tradeoff theory.

The authors isolate the variation in leverage due to different targets from that caused by deviations by aggregating the data across a dimension identifying firms with similar targets – credit rating category.

Contrary to theoretical priors, large and profitable rated firms have lower targets. The authors show that size and profitability proxy for non-financial risk and that, for rated firms, non-financial risk is positively correlated to the optimal leverage. The benefits of a better rating outweigh the costs of foregone tax shields for firms with relatively low non-financial risk. The authors find support for that theory in institutional trading – institutional investors do not punish highly rated firms when credit downgrades occur.

This paper contributes to the capital structure literature by developing a new approach based on data aggregation. This study is the first, to the authors’ knowledge, to find a positive effect of the firm's non-financial risk on target leverage among rated firms. The authors argue that the benefit of a better credit rating is an increasing function of the rating itself. The authors also contribute to the literature on the impact of credit ratings on the capital structure choices of the firm.

The purpose of this paper is to test the validity of dynamic tradeoff theory and argue that the speed of adjustment toward the target capital structure may vary depending primarily on some inherent firm characteristics.

The objective of this article is to study the impact of the corporate governance arrangements on the capital structure behavior taken by listed French firms. The author measures the corporate governance arrangements in three different ways to capture its influences on the capital structure and analyze how it affects a firm's rebalancing behavior in the presence of relevant control variables. Assuming that costs related to deviations from the target leverage are positively correlated with the duration of the deviation, the author finds that firms with a strong governance system adjust at a faster rate because the longer the deviation lasts, the greater the loss in firm value. In addition, firms with more efficient governance structures face lower adjustment costs.

The author measures corporate governance quality in different ways by using several proxies. The results make a major contribution to the literature and show that the quality of the governance system is an important factor in helping the company achieve fatly its target leverage. The authors produces further support for the initial finding by showing that the two extreme leverage deviation groups are dominated by firms with weak governance. The author also shows that the rebalancing speed is faster for firms with strong governance systems.

The paper proposes that a firm characterized by a strong governance system will display a shorter-duration deviation from the target capital structure and a higher adjustment level than a firm with weak governance. In other words, the author argues that the deviation from the target capital structure and the adjustment level are related to the quality of corporate governance. The results indicate that firms with a stronger governance structure are characterized by shorter-term deviations from the target. The author also finds that firms belonging to the two subsamples where leverage deviation is at extremely high or low levels are characterized by a weak governance system. The results corroborate the hypothesis on the speed of adjustment toward the desired target leverage. Furthermore, the author empirically proves that the adjustment level of firms with stronger governance is higher in both extreme leverage situations. This paper extends the existing literature on capital structure adjustment by introducing the effect of corporate governance.

The purpose of this paper is to study the dynamics of capital structure in the context of Indian manufacturing companies in a partial‐adjustment framework during the period 1993‐1994 to 2007‐2008.

This paper specifies a partial‐adjustment model and uses the generalized method of moments technique to determine the variables which affect the target capital structure and to find out the factors affecting the adjustment speed to target capital structure.

Firm‐specific variables like size, tangibility, profitability and market‐to‐book ratio were found to be the most important variables which determine the target capital structure across the book and market leverage and the factors like size of the company, growth opportunity and the distance between the target and observed leverage determine the speed of adjustment to target leverage for the Indian manufacturing companies.

The behavioural variables like managers' confidence and attitude towards raising the external finance have not been incorporated in the model to determine the target capital structure due to the data constraint.

This paper has implications for corporate managers in India, for example, to consider the various adjustment costs while altering the financing decisions of the company with other variables like flexibility of the manager, direct cost of debt and equity.

This paper is first of its kind to study both the determination of target capital structure and the speed of adjustment to target capital structure in the context of Indian companies.

To investigate the impact of tax enforcement on (a) debt aggressiveness (DEA) and (b) dynamic adjustment of capital structure in Chinese listed firms.

The authors estimate the target capital structure by employing the different models. This study uses data of Chinese A-share listed firms from year 1998 to 2015.

The study suggests that the greater the intensity of tax enforcement, the more radical the listed companies' debt policy. The macroeconomic status and nature of property rights have significant moderating effect on the positive relationship between tax enforcement and DEA of listed companies. Further, tax enforcement has a significant impact on the dynamic adjustment of capital structure.

Research conclusions are conducive to tax administration departments to understand the economic consequences of tax enforcement and further promote tax administration efficiency. Additionally, listed companies can rationally adjust their capital structure to strengthen tax enforcement.

This research helps extend the influencing factors of corporate debt decision-making and capital structure dynamic adjustment to the level of tax enforcement and provide new evidence on the effects of tax enforcement on corporate capital structure.

The literature on defense-welfare tradeoffs has not been characterized by an emphasis on theory development. Indeed, most work has concentrated on using increasingly sophisticated statistical techniques to isolate empirical relationships in spending data on various countries. Unfortunately, however, this empirical enterprise has proven inconclusive, with some studies finding trade-offs and others not. In this paper, we suggest that a greater focus on theory development may help to resolve some of the empirical conflicts in this literature. In particular, we argue that there are at least two substantial bodies of theoretical work available that, while relevant to guns-butter questions, have remained to a large extent unexploited. One conclusion that we draw from this exercise is that the discussion of tradeoffs should probably move away form its current focus on primarily direct exchanges between spending on guns and butter, and instead begin to explore more indirect links which are acting through the economy.

The author argues and explains that the indigenous Eastern epistemological system of Yin-Yang balancing should be taken as a novel system or frame of thinking, which is deeply rooted in the indigenous Eastern culture traditions, but it has significant global implications, especially in the domain of paradox management. The purpose of this paper is twofold: first, to provide a detailed elaboration of the indigenous Eastern epistemological system of Yin-Yang balancing in contrast to the Western logic systems; and second, to provide a roadmap for applying the system of Yin-Yang balancing to complex issues in the area of management, in general, and paradoxical issues, in particular.

This is a conceptual paper with a focus on theory-building.

The author elaborates on the indigenous features of Yin-Yang balancing, in contrast to Aristotle’s formal logic and Hegel’s dialectical logic in the West, to further explore the former’s global implications for the increased attention to research on paradox management. In particular, the author posits that Yin-Yang balancing appears to be better suited for paradox management than the more commonly used logics available in the Western literature. Built upon the Yin-Yang balancing, a practical tool of Duality Map for paradox management is proposed.

The system of Yin-Yang balancing proposed in this paper has the potential to embrace logical systems available in the West into a geocentric (East-meeting-West) meta-system. This paper further shows how to apply Yin-Yang balancing with the tool of Duality Map to the most salient paradoxes in the domain of management, including value-profit balance (triple bottom lines), exploration-exploitation balance (ambidexterity), cooperation-competition balance (co-opetition), globalization-localization balance (glocalization), institution-agency balance (institutional entrepreneurship), simultaneously positive and negative attitudes toward an entity (ambivalence), and etic-emic balance (geocentric) across all domains of management research.

The primary challenge for management researchers is to find a way to achieve a geocentric integration between the West and the East at the fundamental level of philosophy. The hope is that the philosophical traditions in the East will facilitate such integration. In particular, the Eastern philosophy of wisdom has a unique capacity to reframe paradox from a negative problem (i.e. a problem of inconsistency to be resolved by dualism in terms of separating opposite elements) to a positive solution (i.e. a solution of completeness or holism to be achieved by duality in terms of partially separating and partially integrating opposite elements).

The purpose of this paper is to pay more attention to four different research questions at least. One is that this study intends to explore the changes of the risk-return relationship over time, because the institutions and environment have changed a lot and might tend to influence the risk-return regime in the Chinese stock markets. The second question is whether there is any difference for the risk-return relationship between Shanghai and Shenzhen stock markets. The third question is to compare the similarities and dissimilarities of the risk-return tradeoff for different frequency data. The fourth question is to compare the explanation power of different GARCH-M type models which are all widely used in exploring the risk-return tradeoff.

This paper investigates the risk-return tradeoff in the Chinese emerging stock markets with a sample including daily, weekly and monthly market return series. A group of variant specifications of GARCH-M type models are used to test the risk-return tradeoff. Additionally, some diagnostic checks proposed by Engle and Ng (1993) are used in this paper, and this will help to assess the robustness of different models.

The empirical results show that the dynamic risk-return relationship is quite different between Shanghai and Shenzhen stock markets. A positive and statistically significant risk-return relationship is found for the daily returns in Shenzhen Stock Exchange, while the conditional mean of the stock returns is negatively related to the conditional variance in Shanghai Stock Exchange. The risk-return relationship usually becomes much weaker for the lower frequency returns in both markets. A further study with the sub-samples finds a positive and significant risk-return trade-off for both markets in the second stage after July 1, 1999.

This paper extends the existing related researches about the Chinese stock markets in several ways. First, this study uses a longer sample to investigate the relationship between stock returns and volatility. Second, this study estimates the returns and volatility relationship with different frequency sample data together. Third, a group of variant specifications of GARCH-M type models are used to test the risk-return tradeoff. In particular, the author employs the Component GARCH-M model which is relatively new in this line of research. Fourth, this study investigates if there is any structural break affecting the risk-return relationship in the Chinese stock markets over time.

Regulatory pressure, consumer awareness, and the quest for competitive advantage place sustainable products in today’s decision-making spotlight. The purpose of this paper is to explore supply chain dynamics as they relate to sustainable product programs and to empirically develop a framework to align efforts across the supply chain to bring sustainable products to market.

Grounded in systems design, stakeholder theory, and the theory of planned behavior, the authors conduct an inductive empirical study of 28 European and US companies.

The authors make three contributions. First, the authors identify six dimensions of product sustainability, which map to the Greenhouse Gas Protocol’s sustainability scope model. Second, the authors model relational dynamics using systems diagrams to provide a framework that: first, communicates a common understanding of product sustainability; and second, facilitates tradeoff analysis. Third, the authors elaborate behaviors needed to reduce ambiguity and compliance costs.

Managers can use the framework to assess product sustainability and evaluate tradeoffs across product dimensions and supply chain participants. Using this insight, managers can design sustainable product programs that engage supply chain participants.

By identifying dimensions, defining costs, and uncovering tradeoffs, managers can more effectively implement sustainable product programs.

The framework provides a much needed source of clarity to mitigate role ambiguity, reduce compliance costs, and promote collaborative behavior in bringing sustainable products to market.

Many organizations struggle to achieve their desired levels of business process flexibility and support. However, these two capabilities conflict with each other and different tradeoffs have to be made. In this paper, the authors analyze different process conceptualizations and discuss their implications. The authors argue that the conceptualizations people adopt to think (conceptualize) about business processes affect the way they model them, which in turn result in different flexibility-support tradeoffs.

A set of properties is proposed to compare process conceptualizations: dominant concept, contract, and existential and representational properties. Using these properties, several process conceptualizations are analyzed and integrated in a comparison chart, which highlights different flexibility-support tradeoffs. The storytelling method is adopted to support the analytic process.

The authors show how different process conceptualizations result in different flexibility-support tradeoffs. The authors suggest that we need to intervene on a set of properties of process conceptualizations to achieve different flexibility-support tradeoffs.

This research contributes to understanding the relationships between process conceptualizations, process modeling, and the flexibility-support tradeoff. A comparison chart helps organizations analyze their desired levels of flexibility and support using a set of properties.

The extent of covered viewpoints makes this study unique in the process management field. Such effort provides a contribution towards a more multidisciplinary discussion of process models, which integrates different process conceptualizations.

In today’s ever-increasing context of volatile, uncertain, complex and ambiguous market conditions, the shifts of countries’ protectionist policies toward inward Foreign Direct Investment (FDI), and an increased gap between headquarters’ (HQ) and subsidiaries’ perspectives on what makes business sense, it has become apparent that challenges toward foreign expansion are becoming more severe and require a multidimensional dynamic approach. The authors draw from orchestration theory, dynamic capabilities literature and previous literature on dimensions of internationalization [specifically, density, geographic distance and degree of diversity of the multinational corporation (MNC) subsidiary network] to argue that firms must enhance their orchestration capability. In doing so, this study aims to highlight the nuances of orchestrating a three-dimensional (3D) conceptualization of MNCs’ international configurations.

The authors analyzed the patterns of configurations that are adopted by MNCs. This sample was made up of the international configuration of 78 Fortune 500 MNCs consisting of 3,318 foreign subsidiaries. Furthermore, the authors examined the impact of different configurations of the 3Ds on firm performance using ordinary least squares regression analysis.

While the research did indicate that the sample MNCs adopted the sample configurations of the three internationalization dimensions more frequently than others, the authors found that orchestrating MNCs with an international configuration characterized by high density, low geographic distance and low internetwork scope diversity had a positive impact on firm performance.

While international expansion is often motivated by financial performance or market/resource gains, it is also impacted by the firm’s dynamic capability profile. Thus, as MNCs seek to continue to expand globally, they must assess and, if needed, develop their management team’s orchestration capability, which includes effectively determining how the addition or removal of a subsidiary will impact the density, geographic distance and diversity dynamics of the MNC’s international configuration. Finally, the management team needs to be able to devise plans to respond to the potential challenges associated with each of these dimensions.

The contribution of this study includes bringing a dynamic capabilities lens to the extant international business literature examining the multinationality and performance relationship by highlighting the importance of an MNC’s process orchestrating capability that is needed for firms to effectively manage increasingly complex subsidiary networks. It also conceptually explains and empirically supports that some configurations are likely to yield higher returns than others, which can act as a guide for firms as they are seeking to expand in more geographically distant as well as diverse sectors. Furthermore, this study highlights the need for a multidimensional simultaneous approach to the examination of internationalization to performance relationship. Finally, it highlights the tradeoffs that MNCs must address across the orchestration of the three internationalization dimensions using a dynamic capabilities theoretical lens that acknowledges the differences in perspective that exist between HQs and subsidiaries.