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The purpose of this paper is to investigate the relationship between CEOs' inside debt holdings (pension benefits and deferred compensation) and the operating leverage of the firms they manage, with the aim to examine whether CEO incentives play a role in corporate risk-taking.

The authors investigate the relation between CEO inside debt holdings (CIDH) (pension benefits and deferred compensation) and the operating leverage (DOL) of the firms they manage. Using a sample of 11,145 US firm-year observations over the period 2006–2017, the authors find a strong negative association between CIDH and DOL. Additional analyses reveal that the relationship between CIDH and DOL is more pronounced in firms with heightened agency issues, powerful CEOs and for CEOs with stronger professional networks. The results are robust to various sensitivity and endogeneity tests.

The authors find strong evidence confirming the expected negative association between CEO inside debt and DOL suggesting that firms with higher inside debt tend to maintain lower levels of operating leverage. These findings continue to hold with the alternative measure for the inside debt and operating leverage, and across a range of tests designed to rule out the possibility that the primary findings are in any way driven by potential endogeneity. In addition, the findings demonstrate that the presence of manager-shareholder agency conflicts can strengthen the inside debt–DOL relationship suggesting the strong role of inside debt in reducing firm risk.

Findings in this paper have implications for design of compensation structures so that corporate boards can establish incentives as a tool for risk management. A limitation of this study is that it is focused on one market, i.e. US listed companies, so the findings may not be applicable on a global scale.

To the best of the authors’ knowledge, this is the first study that links firm-level management of operating leverage through design of CEO inside debt incentives (two obvious choices for risk-reduction at the CEOs’ disposal include reducing financial risk through reduction of firm leverage and reducing operating risk through reduction of operating leverage). While use of firm leverage as an instrument of choice has been explored in the past, use of operating leverage to achieve risk reduction when CEO possess high inside holding, has received very little attention.

This article analyzes the moderating role of investment opportunities, business risk and agency costs in shaping the nexus between excess cash and corporate performance.

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.

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.

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.

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.

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.

The paper examines contingent liabilities' effect on the firm's dividend decisions.

Fixed-effects regression and logit model results estimate the influence of contingent liabilities on firms' dividend decisions using a sample of 2,288 firm-year observations of S&P 500 firms from 2012 until 2022. Robustness checks and results from the 2SLS model further support the authors’ findings.

The results show that contingent liabilities negatively affect dividend payment decisions. This analysis further demonstrates that the stated effect of contingent liabilities on dividend decisions is more substantial for firms with financing deficits and those with above-industry-average corporate governance scores.

There needs to be more systematic conceptual reason for measuring uncertainty for firms and its influence on dividend decisions. Future research should use other measures of firm uncertainty to examine the relation of the firm's uncertainty with dividend decisions.

The authors suggest that contingent liabilities create uncertainty for future cash flows, influence a firm's agency costs and provide credible signals on a firm's prospects to the market. The findings support existing literature that measurable firm-specific variables significantly influence a firm's dividend decisions. The results are robust for an alternative explanation.

By investigating the impact of the influence of contingent liabilities on dividends, the authors extend research on dividend decisions and attempt to provide insights into a firm's dividend decisions by incorporating an off-the-balance sheet item (contingent liabilities) as a significant predictor for dividend decisions.

We study the potential effects of pension underfunding on corporate investment, financial constraints and improved employee bonding using 10 Pacific-Basin countries (including the United States, Australia, and eight Asian countries) at heterogeneous economic development stages and different regulatory environments. We document that corporate pensions are significantly underfunded in most countries of our sample in the period of 2001–2017, when interest rates were ultralow in most countries. In addition, firms from countries with stronger employee protection and more generous retirement benefits tend to show higher levels of underfunding in their defined benefit (DB) pension plans. To the extent of pension underfunding imposing constraints on corporate investment, we find that firms in these countries can face more constraints on investment when their pension is underfunded.

This study compares the motives of holding cash between developed (Australian) and developing (Malaysian) financial markets.

For the period 2006–2020, the t-test, fixed-effect and generalised method of moment (GMM) model have been applied to a sample of 1878 (1,165 Australian and 713 Malaysian) firms.

The empirical results reveal that firms in developed financial markets hold higher cash compared to the developing financial markets. The findings confirm that motives to hold cash differ between developed and developing financial markets. The GMM findings further show that cash holdings (CH) in Australia are higher due to higher ratios of cash flow, research and development (R&D) and return on assets (ROA), and lower due to larger dividend payments. In the Malaysian market, however, cash flows and R&D are ineffectual, ROA falls and dividend payments rise CH.

The study helps managers, practitioners and investors understand that firms' distinct economic, institutional, accounting and financial environments are important. To attain the desired outcomes, they must thus comprehend and consider these considerations while developing suitable liquidity strategies.

To the authors' best knowledge, this is the initial research demonstrating how varied cash motives and their ramifications are in developed and developing financial markets. Therefore, this study identifies the importance that CH motives varied among financial markets and that findings from a particular market cannot be generalised to other markets because of the market and financial structural variations.

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.

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.

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.

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.

This study examines the impact of China’s mixed-ownership reform on the innovation of non-state-owned acquirers, with a particular focus on the impact on firms with high financing constraints, low-quality accounting information or less tangible assets.

We use a proprietary dataset of firms listed on the Shanghai and Shenzhen Stock Exchanges to investigate the impact of mixed ownership reform on non-state-owned enterprise (non-SOE) innovation. We employ regression analysis to examine the association between mixed ownership reform and firm innovation.

The study finds that non-state-owned firms can improve innovation by acquiring equity in state-owned enterprises (SOEs) under the reform. Eased financing constraints, lowered financing costs, better access to tax incentives or government subsidies, lowered agency costs, better accounting information quality and more credit loans are underlying the impact. Additionally, cross-ownership connections amongst non-SOE executives and government intervention strengthen the impact, whilst regional marketisation weakens it.

This study adds to the literature on the association between mixed ownership reform and firm innovation by focussing on the conditions under which this impact is stronger. It also sheds light on the policy implications for SOE reforms in emerging economies.

This paper aims to document the impact of shadow banking on non-performing loans (NPLs) of publicly listed banks in an international setting.

This paper uses the data from 27 countries and various estimation strategies to test the arguments presented in this paper. The sample covers the period between 2002 and 2020.

The empirical results suggest that banks headquartered in countries with high shadow banking activity have fewer NPLs than otherwise similar banks headquartered in countries with low shadow banking activity. The findings remain qualitatively the same in different sub-samples and after replacing the main variables with their alternate proxies. The paper also shows that this relationship is sensitive to bank-specific characteristics. Moreover, the paper also indicates that the stringency of banking regulations weakens the relationship between shadow banking and NPLs.

The study’s data limitations prevent a detailed year-by-year analysis of NPLs and shadow banking, restricting insights into their evolving dynamics. In addition, the focus on country-level shadow banking data limits the exploration of how multinational banks’ activities in various jurisdictions impact individual banks’ NPLs.

The paper not only documents the effect of shadow banking on NPLs but also shows that the relationship between shadow banking and NPLs weakens as banking regulations become more stringent.

This study aims to investigate how firms of different sizes respond to competitive pressure from peers.

This study employs machine learning techniques to measure competitive pressure based on management discussion and analysis (MD&A) documents and then utilises the constructed pressure indicator to explore the relationship between competitive pressure and corporate risk-taking behaviours amongst firms of different sizes.

We find that firm sizes are positively associated with their risk-taking behaviours when firms respond to competitive pressure. Large firms are inclined to exhibit a high level of risk-taking behaviours, whereas small firms tend to make conservative decisions. Regional growth potential and institutional ownership moderate the relationships.

Utilising text mining techniques, this study constructs a novel quantitative indicator to measure competitive pressure perceived by focal firms and demonstrates the heterogeneous behaviour of firms of different sizes in response to competitive pressure from peers, advancing research on competitive market pressures.

The effects of board composition on performance have long been discussed in management research using fractionalization measures. In this study, we propose an alternative measurement approach based on board polarization.

Using an exploratory analysis and applying the polarization measure to German Deutscher Aktienindex (DAX)-, Midcap-DAX (MDAX)- and Small Cap-Index (SDAX)-listed companies, this paper applies the polarization index to examine the relationship between board diversity and performance.

The results show that the polarization concept is well suited to measure principal-agent problems between the members of the management and supervisory boards. We reveal that board polarization is negatively associated with firm performance, as measured by return on investment (ROI).

This exploratory study shows that the measurement of board polarization can be linked to performance differences between companies, which offers promising starting points for further research.