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1 – 10 of over 2000Rosamaria C. Moura‐Leite, Robert C. Padgett and Jose I. Galan
This study aims to revisit the relative importance of industry and firm level effects on corporate social responsibility (CSR), with the objective of clarifying their diverse…
Abstract
Purpose
This study aims to revisit the relative importance of industry and firm level effects on corporate social responsibility (CSR), with the objective of clarifying their diverse effects on CSR.
Design/methodology/approach
The authors suggest that CSR is a shared strategic asset based on insights from the industrial organization and institutional schools, taking into account that there are determinants of CSR that may be operating inside the corporation according to the resource‐based view. They employ a variance components method and a sample compiled of 495 US firms from 19 industries using five‐year periods.
Findings
The study indicates that firms retain considerable self‐determinism regarding their CSR trajectories, but the latter also represent a shared strategic asset. Thus, these results combined imply that CSR needs to be examined on both levels simultaneously.
Practical implications
The results of this study can provide non‐governmental organizations and governmental and regulatory institutions with an indicator that explains the performance variation levels of each dimension of CSR, and can help improve tools designed to promote it. Furthermore, the authors' research provides managers with evidence of CSR variability among CSR dimensions that could help in strategic decision‐making. In addition this research can provide assistance and give perspective regarding selection criteria for investment portfolios in responsible investment funds.
Originality/value
The industry effect is an important factor to consider in CSR intensity. The variation in firm and industry effects on CSR strategies has not been extensively studied; hence, explaining the sources of performance differences regarding industry and firm factors is a key theoretical and empirical issue in the field of management.
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This paper aims to analyze the association between goodwill defined as difference between market and book value of equity and reports of nonrecurring items, namely, special items…
Abstract
Purpose
This paper aims to analyze the association between goodwill defined as difference between market and book value of equity and reports of nonrecurring items, namely, special items, discontinued operations and extraordinary items to suggest information related to restructuring activities measured by these items can link the valuation and incentive roles of accounting. Economic intuition suggests that successful managerial efforts should increase firm value. Yet, the link between the valuation and stewardship roles of earnings has been difficult to verify.
Design/methodology/approach
The author first estimates whether nonrecurring items have an incremental ability to explain goodwill, measured as the difference between market and book value of equity, at the industry level and then estimates whether firm-specific accounting bias is associated with the industry-level signals sent by nonrecurring items. The author then analyzes whether these items are associated with the use of chief executive officer (CEO) market-based compensation.
Findings
The author’ results show that information contained in special items increases firm-specific goodwill, indicating that it sends signals to investors about future growth opportunities, while that of discontinued operations reduces goodwill, suggesting that it provides signals about the adjustments of book value. She does not find any significant informational role for extraordinary items. She also finds that the signals sent by special items are negatively associated with the use of CEO market-based compensation, while those relayed by discontinued operations are positively associated with the use of market-based pay.
Research limitations/implications
Contrary to prior studies, the results show special items and discontinued operations are both value and incentive relevant. There are two caveats to this analysis. First, owing to the frequent changes in the definition of discontinued operations, the analysis is conducted using data between 1992 and 2003. Second, some might argue that industry-level incremental R2 might not be appropriate for a compensation analysis. However, entities often use industry norms as a benchmark to set CEO compensation. Thus, it is reasonable to think that industry-level signals matter for executive pay.
Originality/value
The author’s findings suggest that compensation committees in firms across industries consider the information contained in special items and discontinued operations, and selectively alter the level of incentives to encourage managerial efforts.
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Rakesh B. Sambharya, Farok J. Contractor and Abdul A. Rasheed
The purpose of this paper is to identify some of the major issues relating to the conceptualization and operationalization of industry globalization.
Abstract
Purpose
The purpose of this paper is to identify some of the major issues relating to the conceptualization and operationalization of industry globalization.
Findings
Globalized industries have four important characteristics: cross-border product flows, cross-border capital flows, dispersal of global value chains and global competition. However, lack of availability of data limits our ability to develop an operationalization that encompasses all these four aspects of globalization.
Practical implications
The authors identify some of the most important factors driving industry globalization as well as the major impediments to globalization.
Originality/value
Although the term “globalization” has attained a nearly “taken for granted” status, its meaning is rather vaguely specified and is often context dependent. This paper delineates the domain of the construct and identifies many of the practical issues in operationalizing the construct.
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Xiaoyue Chen, Bin Li and Andrew C. Worthington
The purpose of this paper is to examine the relationships between the higher moments of returns (realized skewness and kurtosis) and subsequent returns at the industry level, with…
Abstract
Purpose
The purpose of this paper is to examine the relationships between the higher moments of returns (realized skewness and kurtosis) and subsequent returns at the industry level, with a focus on both empirical predictability and practical application via trading strategies.
Design/methodology/approach
Daily returns for 48 US industries over the period 1970–2019 from Kenneth French’s data library are used to calculate the higher moments and to construct short- and medium-term single-sort trading strategies. The analysis adjusts returns for common risk factors (market, size, value, investment, profitability and illiquidity) to confirm whether conventional asset pricing models can capture these relationships.
Findings
Past skewness positively relates to subsequent industry returns and this relationship is unexplained by common risk factors. There is also a time-varying effect in which the predictive role of skewness is much stronger over business cycle expansions than recessions, a result consistent with varying investor optimism. However, there is no significant relationship between kurtosis and subsequent industry returns. The analysis confirms robustness using both value- and equal-weighted returns.
Research limitations/implications
The calculation of realized moments conventionally uses high-frequency intra-day data, regrettably unavailable for industries. In addition, the chosen portfolio-sorting method may omit some information, as it compares only average group returns. Nonetheless, the close relationship between skewness and future returns at the industry level suggests variations in returns unexplained by common risk factors. This enriches knowledge of market anomalies and questions yet again weak-form market efficiency and the validity of conventional asset pricing models. One suggestion is that it is possible to significantly improve the existing multi-factor asset pricing models by including industry skewness as a risk factor.
Practical implications
Given the relationship between skewness and future returns at the industry level, investors may predict subsequent industry returns to select better-performing funds. They may even construct trading strategies based on return distributions that would generate abnormal returns. Further, as the evaluation of individual stocks also contains industry information, and stocks in industries with better performance earn higher returns, risks related to industry return distributions can also shed light on individual stock picking.
Originality/value
While there is abundant evidence of the relationships between higher moments and future returns at the firm level, there is little at the industry level. Further, by testing whether there is time variation in the relationship between industry higher moments and future returns, the paper yields novel evidence concerning the asymmetric effect of stock return predictability over business cycles. Finally, the analysis supplements firm-level results focusing only on the decomposed components of higher moments.
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C. Chet Miller, dt ogilvie and William H. Glick
Organization theorists and strategy researchers have effectively leveraged archival assessments of the environment to better understand organizational actions and performance…
Abstract
Organization theorists and strategy researchers have effectively leveraged archival assessments of the environment to better understand organizational actions and performance. Despite the successes, several issues continue to plague research. Vague constitutive definitions and mismatches between constitutive and operational definitions are among the most pressing of these issues. To further develop the archival tradition, we clarified existing definitions and proposed new definitions where warranted. Our work has implications not only for the selection of concepts and measures in future work but also for interpretations of past research.
The purpose of this paper is to develop a better understanding of how, and how well, stakeholders make decisions about rewarding firms for acts of social responsibility and punish…
Abstract
Purpose
The purpose of this paper is to develop a better understanding of how, and how well, stakeholders make decisions about rewarding firms for acts of social responsibility and punish firms for their lack thereof.
Design/methodology/approach
The author integrates factors at the individual, firm, and industry levels that cause variation in how stakeholders attend to corporate social (ir)responsibility.
Findings
The author explicates the multi-level cognitive process stakeholders undertake in attending to firm’s actions and identifies limits on their ability to fulfill their central role in conditioning firms to be more socially responsible.
Research limitations/implications
The author outlines areas for future research that can fill gaps in the understanding of how stakeholders notice, make sense of, and respond to corporate social practices.
Social implications
The author argues that, under many conditions, business case or self-regulatory solutions may be inadequate to increase corporate social responsibility (CSR), and instead, formal regulatory solutions may prove necessary.
Originality/value
This paper brings needed structure to the literature on CSR. By delving deeper into the minds of stakeholders and outlining a multi-level cognitive process, it enables scholars to better address the key managerial issue of when, not simply whether, it pays to be good.
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In-Mu Haw, Bingbing Hu, Jay Junghun Lee and Woody Wu
The existing literature has established the importance of industry concentration in explaining firm performance and information environments. However, little is known about…
Abstract
Purpose
The existing literature has established the importance of industry concentration in explaining firm performance and information environments. However, little is known about whether and how industry concentration affects investors’ ability to anticipate future earnings. This paper aims to investigate this query by identifying and testing two channels, product market power and intra-industry information transfer, through which industry concentration affects the informativeness of stock returns about future earnings.
Design/methodology/approach
The paper measures the informativeness of stock returns about future earnings by the future earnings response coefficient (FERC)). This study estimates the FERC using a firm-level sample from 38 economies.
Findings
The authors find that industry concentration significantly enhances investors’ ability to predict future earnings. Further tests show that both product market power and intra-industry information transfer contribute to explaining the positive association between industry concentration and the FERC, with the former playing a more salient role. Finally, the authors show that a country’s effective competition law attenuates the positive impact of industry concentration on the FERC by weakening the economic impact of the two underlying channels.
Originality/value
This study contributes to the growing literature on the price-leading-earnings relation, industry concentration and international corporate governance.
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Alex A.T. Rathke, Amaury José Rezende and Christoph Watrin
This study investigates the impact of different transfer pricing rules on tax-induced profit shifting. Existing studies create different enforcement rankings of countries based on…
Abstract
Purpose
This study investigates the impact of different transfer pricing rules on tax-induced profit shifting. Existing studies create different enforcement rankings of countries based on specific transfer pricing provisions on the assumption that larger penalties and more extensive information requirements imply higher tax enforcement. This assumption carries limitations related to the impact of transfer pricing rules in different countries and to the interaction of different tax rules. Instead, the authors propose a nonordered segregation of groups of countries with different transfer pricing rules, and they empirically investigate the impact of these transfer pricing rules on the profit-shifting behavior of firms.
Design/methodology/approach
The authors apply the hierarchical clustering method to analyze 57 observable quantitative and qualitative characteristics of transfer pricing rules of each country. This approach allows the creation of groups of countries based on a comprehensive set of regulatory characteristics, to investigate evidence of profit shifting for each of these separate groups. Profit-shifting behavior is measured by the variation in the volume of import and export transactions between local firms and related parties located in other countries.
Findings
The results indicate that firms have a higher volume of intrafirm transactions with related parties located in countries with a lower tax rate. This result is consistent with the profit-shifting hypothesis. Moreover, the results show that relevant differences in transfer pricing rules across countries produce different effects on the volume of intrafirm transactions. The authors observe that the existence of domestic transfer pricing rules that override the OECD Transfer Pricing Guidelines may inhibit profit shifting. In addition, the results suggest that the OECD guidelines may facilitate profit shifting. Overall, it is observed that some transfer pricing rules may be more effective than others in curbing profit shifting and that firms are still able to manipulate transfer prices under some tax rules.
Research limitations/implications
(1) The authors focus on the Brazilian context, which provides a suitable set of profit-shifting incentives for the analysis, since it combines an extreme corporate tax rate, a highly complex tax system, and a unique set of transfer pricing rules. (2) Profit-shifting behavior is captured by the volume of intrafirm transactions. The authors would prefer to observe the transfer price directly; however, this information is not disclosed by firms, for it may represent a limitation to the investigation. Nonetheless, theory shows that the profit-shifting behavior is reflected by the manipulation of both transfer prices and intra-firm outputs.
Practical implications
The authors find that the volume of intrafirm transactions may decrease or increase, depending on the transfer pricing system of the foreign country (including the tax-differential effect). It suggests that some transfer pricing rules are more effective than others in curtailing the profit-shifting behavior and that firms are still able to find vulnerabilities in current rules and take advantage of them in deploying a profit-shifting strategy.
Social implications
Results provide knowledge about how key differences on transfer pricing rules across countries influence the profit-shifting behavior. The results of the study may have valuable application in solving regulatory mismatches, to eliminate blind spots in transfer pricing rules and thus to contribute to the current review of OECD guidelines and to the global tax reset movement.
Originality/value
Recent studies suggest that if tax-avoidance incentives are somewhat weak, it becomes difficult to observe the shifting behavior of firms. The puzzle is to check whether profit shifting is nonexistent under weak incentives or whether this is a matter of methodological limitations. The authors’ analysis is applied to a complex tax background with strong profit-shifting incentives; thus, it allows the authors to obtain robust evidences of the shifting behavior and the effect of different transfer pricing rules.
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Muhammad Aftab and Ijaz Ur Rehman
This paper aims to examine the influence of exchange rate risk on the bilateral trade of two closely connected East Asian open economies – Malaysia and Singapore – at industry…
Abstract
Purpose
This paper aims to examine the influence of exchange rate risk on the bilateral trade of two closely connected East Asian open economies – Malaysia and Singapore – at industry level.
Design/methodology/approach
This study estimates import and export demand models considering 65 import and 65 export industries of Malaysia, with Singapore using monthly data over the period 2000-2014. Generalized Auto Regressive Conditional Heteroskedasticity (GARCH) model is used to measure the exchange rate risk, and autoregressive distributed lag (ARDL) approach to co-integration is used to examine the study empirical models.
Findings
The findings suggest that exchange risk has an impact on a moderate number of industries in the short run; however, this influence endures in very few industries in the long run. It is interesting to note that exchange rate volatility expedites import demand for the large Malaysian import industries like gas and plastic.
Originality/value
No prior study has explored the topic at industry level focusing on the bilateral trade flows between Malaysia and Singapore. This research serves important implications while thinking about exchange rate risk and trade linkage in a case of open economies trade pairs that are highly integrated in presence of a variety of bilateral trade agreements and economic groupings.
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Vahagn Jerbashian and Montserrat Vilalta-Bufí
The authors analyzed the evolution of working from home (WFH) within industries in 12 European countries in the period 2008–2017 and studied its relationship with information and…
Abstract
Purpose
The authors analyzed the evolution of working from home (WFH) within industries in 12 European countries in the period 2008–2017 and studied its relationship with information and communication technologies (ICT).
Design/methodology/approach
The authors used data from the European Union Labour Force Survey (EU-LFS) to document the trends and levels of WFH within industries in 12 European countries. The authors further used the EU-KLEMS database and a difference-in-difference approach to study whether the fall in prices of ICT is associated with a higher share of employees who work from home in industries that depend more on ICT relative to industries that depend less.
Findings
The authors show that WFH has increased almost everywhere and that there is significant heterogeneity across industries. The authors provide evidence that the fall in prices of ICT is associated with a higher share of employees who work from home in industries that depend more on ICT relative to industries that depend less. This result also holds within age, gender and occupation groups. While the authors find no significant differences among gender and occupation groups, the positive association between the fall in ICT prices and WFH increases with age.
Originality/value
This paper has two main contributions: First, it reports that WFH has increased in European countries in the period 2008–2017. Second, it provides new explorations about the relationship between ICT and WFH by using the price variation of ICT.
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