Search results

The purpose of this paper is to test if building reputation capital through environmental, social and governance (ESG) investing can mitigate the negative effect of economic policy uncertainty (EPU) on firms’ valuation.

This study uses an unbalanced panel of 591 financial firms between 2005 and 2021 from Canada, France, Germany, Italy, Japan, the United Kingdom (UK) and the USA. Ordinary least square method is used in the empirical tests. To alleviate a potential endogeneity problem, robustness tests are performed using the two-stage least square approach with instrumental variables.

The results of this paper show that sustainable reporting can offset the negative effect of EPU on the valuation of financial firms. Consistent with the stakeholder-based reputation-building hypothesis, sustainability performance may have an insurance-like impact on firms’ valuation during periods of high uncertainty.

According to the findings, during high policy uncertainty periods, investors accept to pay a premium for the stocks of the firms which built social capital through environmental and social investments. Accordingly, it is suggested that regulatory bodies and governments motivate firms to increase their stakeholder orientation to attain higher reputation capital.

Managers can mitigate the negative impact of policy uncertainty on the value of their firms via building social capital, which will increase financial market stability in return, and portfolio investors may use such firms for portfolio optimization decisions.

To the best of the authors’ knowledge, this paper is one of the first to examine the mitigating role of ESG investing on EPU and firm valuation relationships for financial firms. Thus, this study provides new insights related to the impact of ESG performance on valuation during uncertain times.

This paper illuminates the distinction between individual and organizational actors in business-to-business markets as well as the coexistence of formal and informal mechanisms of coordination in multinational corporations. The main questions addressed include the following. (1) What factors influence the occurrence of personal contacts of foreign subsidiary managers in industrial multinational corporations? (2) How such personal contacts enable coordination in industrial markets and within multinational firms? The theoretical context of the paper is based on: (1) the interaction approach to industrial markets, (2) the network approach to industrial markets, and (3) the process approach to multinational management. The unit of analysis is the foreign subsidiary manager as the focal actor of a contact network. The paper is empirically focused on Portuguese sales subsidiaries of Finnish multinational corporations, which are managed by either a parent country national (Finnish), a host country national (Portuguese) or a third country national. The paper suggests eight scenarios of individual dependence and uncertainty, which are determined by individual, organizational, and/or market factors. Such scenarios are, in turn, thought to require personal contacts with specific functions. The paper suggests eight interpersonal roles of foreign subsidiary managers, by which the functions of their personal contacts enable inter-firm coordination in industrial markets. In addition, the paper suggests eight propositions on how the functions of their personal contacts enable centralization, formalization, socialization and horizontal communication in multinational corporations.

The purpose of this paper is to compare the effects on performance of two types of misfits (overfit vs underfit) as well as two types of fits (high-high fit vs low-low fit) between environmental uncertainty and supply chain flexibility.

The two asymmetry hypotheses have been tested with survey data from 212 Chinese manufacturing firms.

The results in general provided empirical evidences for the asymmetric effects in the fits and misfits between environmental uncertainty and supply chain flexibility. For the same degree of misfit, underfit deteriorates performance more than overfit. In addition, high supply chain flexibility fitting high environmental uncertainty (i.e. high-high fit) results in a higher performance than low supply chain flexibility fitting low environmental uncertainty (i.e. low-low fit).

It suggests that managers should strive to avoid the underfit of supply chain flexibility rather than the overfit, if the perfect fit is impossible to achieve. In addition, as it is beneficial to realize the fit of supply chain flexibility to high levels of environmental uncertainty, managers should probably embrace the highly uncertain environment and enhance the supply chain flexibility of their organizations to meet the increasing uncertainty of environment.

Fit and misfit are the core concepts to understand the relationships among environmental uncertainty, supply chain flexibility strategy, and performance. While the existing literature highlights the differential performance consequences of fit vs misfit between environmental uncertainty and supply chain flexibility strategy, the effects on performance are assumed to be the same for the two types of misfits, and two types of fits. The authors challenge these symmetry assumptions by arguing that overfit has a less negative effect on performance than underfit, and high-high fit has a stronger positive effect than low-low fit. The authors found empirical evidence in a large sample of Chinese manufacturing firms.

The purpose of this study is to examine the role of board networks in promoting stock liquidity when there is high economic policy uncertainty using a sample of Brazilian firms from 2002 to 2015.

The study employs the ordinary least squares estimation method with standard errors clustered at the firm level for preliminary analysis, besides the study employs the two-step GMM dynamic estimation method to deal with potential endogeneity issues.

First, the findings show that economic policy uncertainty disproportionately contributes to stock illiquidity and the impact is mainly prominent for high risky companies, small firms and firms in competitive industries. Second, the author provides evidence that board networks promote stock liquidity more via the information channel when economic policy uncertainty is very high.

Given the adverse effects of economic policy uncertainty on stock liquidity, governments need to swiftly communicate and implement policies that affect the capital market to avoid the drying up of liquidity, which is exacerbated by communication or implementation lags. Also, there is a need for the regulators to continuously encourage the inclusion of independent directors in boards, which helps to increase board monitoring capacity and the firms' ability to respond to changes in the external environment.

Unlike other studies that focus on the adverse effects of economic policy uncertainty on firm outcomes, the novel contribution is that the author uncovers the role of board networks in mitigating the negative effects of economic policy uncertainty on stock liquidity.

This article aims to examine the link between uncertainty and analysts' reaction to earnings announcements for a sample of European firms during the period 1997-2007. In the same way as Daniel et al., the authors posit that overconfidence leads to an overreaction to private information followed by an underreaction when the information becomes public.

In this study, the authors test analysts' overconfidence through the overreaction preceding a public announcement followed by an underreaction after the announcement. If overconfidence occurs, over- and underreactions should be, respectively, observed before and after the public announcement. If uncertainty boosts overconfidence, the authors predict that these two combined misreactions should be stronger when uncertainty is higher. Uncertainty is defined according to technology intensity, and separate two types of firms: high-tech or low-tech. The authors use a sample of European firms during the period 1997-2007.

The results support the overconfidence hypothesis. The authors jointly observe the two phenomena of under- and overreaction. Overreaction occurs when the information has not yet been made public and disappears just after public release. The results also show that both effects are more important for the high-tech subsample. For robustness, the authors sort the sample using analyst forecast dispersion as a proxy for uncertainty and obtain similar results. The authors also document that the high-tech stocks crash in 2000-2001 moderated the overconfidence of analysts, which then strongly declined during the post-crash period.

This study offers interesting insights in two ways. First, in the area of financial markets, it provides a test of a major over- and underreaction model and implements it to analysts' reactions through their revisions (versus investors' reactions through stock returns). Second, in a broader way, it deals with the link between uncertainty and biases. The results are consistent with the experimental evidence and extend it to a cross-sectional analysis that reinforces it as pointed out by Kumar.

Past research has shown that culture has significant effects on people's evaluation of and responses to risk. Despite this important role, the supply chain risk literature has been silent on this matter. The purpose of this paper is to examine the impact of cultural value orientations on managerial perception of and responses to a supply disruption risk.

The authors conduct a scenario-based experiment to investigate the effect of cultural value orientations – i.e. individualism-collectivism and uncertainty avoidance – on individuals' perception of risk and supplier switching intention in the face of a supply disruption.

The findings highlight the negative effect of individualism-collectivism on disruption risk perception and switching intention in high uncertain circumstances. However, these relationships are non-significant in relatively less uncertain situations. Moreover, the findings show that the impact of uncertainty avoidance on risk perception and supplier switching is positive and significant in both low and high uncertain circumstances.

Extant research has traditionally assumed that when confronted with disruption risks, managers make decisions using an economic utility model, to best serve the long-term objectives of the firm. This paper draws from advances of behavioural research to show that cultural value orientations influence such decisions through a mediating mechanism of subjective risk perception.

The purpose of this paper is to examine the extent to which cultural differences and slogan meaning type affect the role of comprehension in attitude toward the ad (A_ad) and attitude toward the brand (A_brand) formation.

In an online experiment, a total of 256 adult participants from the USA (ranged in age from 19 to 26 years old) and 184 participants from France (ranged in age from 18 to 28) were randomly assigned to one of the two conditions (slogan: single meaning vs polysemous) in a between-subjects experimental design. After getting exposed to the ad, participants responded to questions related to their A_ad, A_brand, comprehension, uncertainty avoidance and demographics.

Results from this research demonstrate the moderating effect of uncertainty avoidance and slogan type (single meaning vs polysemous) on the relationship between comprehension and A_ad. The authors show that for polysemous (and not single meaning) slogans, comprehension results in more favorable A_ad for low uncertainty avoidance individuals than for high uncertainty avoidance individuals. In addition, the authors demonstrate the mediating effect of A_ad in the relationship between comprehension and A_brand.

The authors used nationality as a proxy for culture. Future research should include other cultural dimensions in the development of conceptual models and analysis of data. Another limitation is that the authors used a college student sample for this research. A more representative sample should be used in future research to examine cultural differences in interpreting adverting messages. One other limitation concerns the measurement tool the authors used to measure objective versus subjective comprehension in this research. While the theoretical foundations of the two modes of comprehension are clear and robust, improved measurement tools can enhance the validity and reliability of future research. Finally, the authors suggest that future research examine the effect of such variables as figure-ground contrast, figure attractiveness, stimulus repetition, prototypicality, symmetry and semantic or visual priming that may impact the processing of brand slogans.

This study argues that the processing of brand slogans in advertising is impacted by culture. Individuals from different cultures perceive and comprehend brand slogans differently. This study contributes to the research stream that examines the influence of cultural dimensions on the effectiveness of advertising by focusing more precisely on the impact of uncertainty avoidance (one of Hofstede’s cultural dimensions). In the case of single meaning slogans, advertisers might diminish the use of objective comprehension advertising strategies to influence both individuals with high and low uncertainty avoidance. In the case of polysemous slogans, advertisers should consider that consumers with high uncertainty avoidance (vs low uncertainty avoidance) are impacted more by subjective comprehension (vs objective comprehension) when forming A_ad and A_brand.

This research contributes meaningfully to the marketing literature by examining previous work on ad slogan processing through subjective vs objective comprehension and extending the analysis by incorporating culture as an important factor.

This paper aims to discuss financial reporting under economic policy uncertainty.

The paper uses discourse analysis to examine financial reporting under economic policy uncertainty.

The paper identifies the link between economic policy uncertainty and financial reporting, in terms of earnings management and fair value accounting. It argues that high economic policy uncertainty will transmit fewer new information to firms which can motivate managers to influence accounting numbers in the direction of the desired financial reporting outcome.

The relationship between economic policy uncertainty and financial reporting has not been studied. This paper is one of the first papers to relate economic policy uncertainty to financial reporting behavior.

This study aims to examine the contingent fit between business strategies and environmental uncertainty and its effect on corporate tax avoidance.

This study uses a two-stage linear regression method comprising multinomial logistic regression and panel data regression.

This study finds that under highly uncertain conditions, the contingent fit of prospector strategy is higher than the contingent fit of other two strategies, i.e. defender and analyzer strategy. The study fails, however, to demonstrate that under highly uncertain conditions, this study finds that under highly uncertain conditions the contingent fit of a “prospector” strategy is higher than for “defender” and “analyzer” strategies. The study fails, however, to demonstrate that under highly uncertain conditions the contingent fit of a defender strategy is higher than that of an analyzer strategy. The study also finds that the contingent fit between prospector strategy and environmental uncertainty has a positive effect on tax avoidance, and this effect is higher than for the misfit strategies. Moreover, in such environments the fit level of a defender strategy has a negative effect on tax avoidance while environmental uncertainty has a positive effect on tax avoidance.

This study estimated competition uncertainty using the Herfindahl index to measure competitive intensity in an industry. However, only the data from public listed companies was used due to a lack of data availability for non-public companies. Consequently, further study is recommended to include the total number of companies within an industry as a proxy of competitive intensity.

The results implied that managers, not only in Indonesia but also in other countries as well, specifically emerging countries (generally the environmental uncertainty in emerging countries is high) should consider the contingent factors when making business strategy decisions. Managers must be aware of the contingent fit with environmental uncertainty, and therefore, must assess external conditions prudently. Furthermore, the results of this study showed that managers should pay more attention to the effects of their decisions on corporate tax avoidance, while aligning their business strategy decisions with corporate tax planning strategy to obtain an optimal outcome for the company.

The Directorate General of Taxes and Board of Fiscal Policy, as regulators, need to comprehend environmental uncertainty to issue various policies that can ease the burden of the taxpayer to remain in business, particularly during the turbulence environment so that can prevent the companies doing illegal practices and will eventually reduce the number of tax avoidance.

This study developed alternative measure of tax avoidance, which is tax avoidance latent variable score (TAXLVS). The TAXLVS was derived from confirmatory factor analysis of previous existing tax avoidance measurements. This study is also the first that analyzes the effect of business strategy on tax avoidance using contingency approach.