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Open Access
Article
Publication date: 27 January 2023

Alex Almici

This paper aims to verify whether the integration of sustainability in executive compensation positively affects firms’ non-financial performance and whether corporate governance…

3297

Abstract

Purpose

This paper aims to verify whether the integration of sustainability in executive compensation positively affects firms’ non-financial performance and whether corporate governance characteristics enhance the relationship between sustainability compensation and firms’ non-financial performance and to expand the domain of the impact of sustainability on non-financial performance.

Design/methodology/approach

This analysis is based on a sample of companies listed on the Milan Italian Stock Exchange from the Financial Times Milan Stock Exchange Index over the 2016–2020 period. Regression analysis was used by using data retrieved from the Refinitiv Eikon database and the sample firms’ remuneration reports.

Findings

The findings of this paper show that embedding sustainability in executive compensation positively affects firms’ non-financial performance. The results of this paper also reveal that specific corporate governance features can improve the impact of sustainability on non-financial performance.

Research limitations/implications

This analysis is limited to Italian firms included in the Financial Times Milan Stock Exchange Index; however, the findings are highly significant.

Practical implications

The findings provide regulators with useful insights for considering the integration of sustainability goals into executive remuneration. Another implication is that policymakers should require – at least – listed firms to fulfil specific corporate governance structural requirements. Finally, the findings can provide investors and financial analysts with a greater awareness of the role played by executive remuneration in the long-term value-creation process.

Originality/value

This paper contributes to addressing the relationship among sustainability, remuneration and non-financial disclosure, drawing on the stakeholder–agency theoretical framework and focusing on Italian firms. This issue has received limited attention with controversial results in the literature.

Details

Meditari Accountancy Research, vol. 31 no. 7
Type: Research Article
ISSN: 2049-372X

Keywords

Article
Publication date: 26 October 2018

Giovanni Landi and Mauro Sciarelli

This paper fits in a research field dealing with the impact of Corporate Ethics Assessment on Financial Performance. The authors argue how environmental, social and governance…

13073

Abstract

Purpose

This paper fits in a research field dealing with the impact of Corporate Ethics Assessment on Financial Performance. The authors argue how environmental, social and governance (ESG) paradigm, meant to measure corporate social performance by rating issuance, can impact on abnormal returns of Italian firms listed on Financial Times Stock Exchange Milano Indice di Borsa (FTSE MIB) Index, developing a panel data analysis which runs from 2007 to 2015.

Design/methodology/approach

This study aims at exploring whether socially responsible investors outperform an excess market return on Italian Stock Exchange because of their investment behavior, testing statistically the relationship between the yearly ESG assessment issued by Standard Ethics Agency on FTSE MIB’s companies and their abnormal returns. To verify the impact of an ESG Rating on a company’s abnormal return, the authors developed a panel data analysis through a Fixed Effects Model. They measured abnormal returns via Fama–French approach, running a yearly Jensen’s Performance Index for each company under investigation.

Findings

The empirical results denote in Italy both a growing interest to corporate social responsibility (CSR) and sustainability by managers over the past decade, as well as an improving quality in ESG assessments because of a reliable corporate disclosure. Thus, despite investors have been applying ESG criteria in their stock – picking operations, the authors found a not positive and statistically significant impact in terms of market premium, when they have been undertaking a socially responsible investment (SRI).

Practical implications

The findings described above show that ethics is not yet a reliable fundraising tool for Italian-listed companies, despite SRIs having a positive growth rate over past decade. Investors seem to be not pricing CSR on Stock Exchange Market; therefore, listed companies cannot be rewarded with a premium price because of their highly stakeholder oriented behavior.

Originality/value

This paper explores, for the first time in Italy, when market extra-returns (if any) are related to corporate social performance and how managers leverage ethics to build capital added value.

Article
Publication date: 4 July 2016

Davide Scaltrito

The purpose of this paper is to assess the level of voluntary disclosure in the companies listed on the Italian Stock Exchange. Voluntary disclosure refers to the discretionary…

1413

Abstract

Purpose

The purpose of this paper is to assess the level of voluntary disclosure in the companies listed on the Italian Stock Exchange. Voluntary disclosure refers to the discretionary release of financial and non-financial information which companies are not obliged to disclose by a standard-setting accounting body. In particular, this paper analyses the effect that certain determinants (leverage, firm size, sector auditor, performance and ownership concentration) could have on voluntary information disclosed by Italian listed companies. In order to do this, 203 annual reports of Italian listed companies for the year 2012 were analysed.

Design/methodology/approach

To assess the extent of voluntary disclosure, an index is created and used as a dependent variable in an OLS model to understand the relationship between the above-mentioned determinants. The disclosure score is composed mainly of 38 items per firm (a total of 7,714 items were collected and analysed) regarding firm performance, general information, forward-looking information, human capital, research and development projects, stock market information, segment reporting information and other information. In order to differentiate the information presented in annual reports, a score was assigned to each item on the index (2 points if an item was reported in qualitative and quantitative terms, 1 point if the item was reported in qualitative terms, 0 points if the item was absent). The score is not weighted because all items are equally important for the research purpose. Repeated information is considered only once.

Findings

According to the research findings, human resource information is the voluntary disclosure item reported with the highest frequency, and both firm size and auditors positively affect the total amount of voluntary information disclosed by Italian listed companies. Financial firms provide a lower level of voluntary disclosure than do industrial firms.

Originality/value

The paper contributes in improving knowledge about Italian firms’ voluntary disclosure of firm-specific determinants, analysing a wide number of items provided in 2012 annual reports.

Details

EuroMed Journal of Business, vol. 11 no. 2
Type: Research Article
ISSN: 1450-2194

Keywords

Article
Publication date: 6 July 2015

Giuseppe Ianniello and Giuseppe Galloppo

The purpose of this paper is to examine investor reactions to auditor opinions containing qualifications or an emphasis of matter paragraph related to going concern uncertainty or…

2416

Abstract

Purpose

The purpose of this paper is to examine investor reactions to auditor opinions containing qualifications or an emphasis of matter paragraph related to going concern uncertainty or financial distress. In particular, abnormal returns are analyzed around audit report dates.

Design/methodology/approach

The event study methodology, focusing on a short event window, was used to determine whether there is an immediate market reaction to the audit report announcement, as might be expected assuming efficient stock markets.

Findings

Overall, this analysis shows that the audit reports investigated have information content for investment decisions. In particular, the qualifications expressed in the audit report have a negative effect on stock prices. It is also shown that an unqualified opinion with an emphasis of matter paragraph regarding going concern uncertainty or financial distress has a positive effect on stock prices. These results also elucidate the distinction between different types of opinions in the Italian context.

Research limitations/implications

This paper has attempted to limit the possible concurrent effects on stock prices using a short window event study methodology. However, the possibility that some other event may have occurred during this event window cannot be excluded. Among the policy implications coming from this research, it is argued that the authorities should regulate the public disclosure of audit reports, so that the information becomes available to the audited company and the other stakeholders on the same day, which, in theory, would be the day that the audit process concludes with the signing of the audit report.

Originality/value

The findings of this paper show the relevance of audit reports, distinguishing the different impacts based on the types of audit opinions issued in a specific jurisdiction (qualified and unqualified with an emphasis of matter paragraph).

Details

Managerial Auditing Journal, vol. 30 no. 6/7
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 20 February 2009

Andreas Charitou and Marios Panayides

The purpose of this paper is to critically evaluate the different market‐making systems found in most developed capital markets and to provide guidance to emerging market…

6461

Abstract

Purpose

The purpose of this paper is to critically evaluate the different market‐making systems found in most developed capital markets and to provide guidance to emerging market regulators for a possible implementation of such a system.

Design/methodology/approach

The paper looks closely at the market design of seven developed countries focusing on the obligations and privileges of market makers. Through a case study and empirical evidence the paper identifies advantage and disadvantage of a possible implementation of a similar design to an emerging market.

Findings

The paper identifies three forms of market making applied today: the quote‐driven, the centralized and non‐centralized systems. Four factors are proposed that regulatory authorities in emerging markets should consider when deciding whether, and which of, the three market‐making systems they should implement. These are: current exchange design and the costs of restructuring, international and domestic investors' sentiment towards the exchange, size of the emerging market and the market designs in countries hosting the target foreign capital.

Research limitations/implications

The paper looks at the implementation of a market‐making system in an emerging market. Further research may investigate other ways of how emerging markets authorities can restructure their markets into more efficient, compatible and trustworthy financial venues in order to attract both domestic and foreign investors.

Originality/value

The area of emerging markets' microstructure design and market quality is still relatively under‐studied. We provide evidence of the challenges and benefits of the implementation of a market‐making system in those markets.

Details

International Journal of Managerial Finance, vol. 5 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 7 June 2021

Ikhlaas Gurrib

This paper aims to investigate the implementation of the short selling ban policy imposed by the Italian stock exchange on health-care stock prices, as a tool to mitigate COVID-19…

Abstract

Purpose

This paper aims to investigate the implementation of the short selling ban policy imposed by the Italian stock exchange on health-care stock prices, as a tool to mitigate COVID-19 price effects. Important contributions are in terms of assessing the effect of the temporary short selling ban on restricted health-care stocks; the effect of COVID-19 cases and crude oil price volatility onto health-care stocks; and whether COVID-19 resulted in a change in the risk and average stock price of health-care stocks.

Design/methodology/approach

The methodology involves impulse responses to capture the shock of the short selling ban onto health-care stocks, and Markov switching regimes to capture the effect of COVID-19 onto the risk and prices in the health-care industry. Daily data from 9 November 2018 till 23 December 2020 is used.

Findings

Findings suggest there were significant changes in average prices in health-care technology and health-care services stocks before, during and after the short selling ban. Shocks to the number of COVID-19 cases and crude oil price volatility impacted health-care stocks but lasted only for a few days. While daily changes in the number of COVID-19 cases impacted some health-care stocks in the presence of a two-state Markov regime, insignificant coefficients and relatively low duration suggest that the short selling policy did not significantly change the average price and risk in health-care stocks to explain a two-state regime in the health-care industry.

Research limitations/implications

Insignificant coefficients in a two-state Markov regime reinforce that short-selling policies have a short-lasting effect onto health-care equity prices. The findings are limited by the duration of the short selling policy, the pandemic event and the health-care industry.

Originality/value

This is the first study to look at the impact of early COVID-19 and short selling ban policy on health-care stocks.

Details

Studies in Economics and Finance, vol. 38 no. 5
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 26 July 2011

Maria Assunta Baldini, Giovanni Liberatore and Tommaso Ridi

This paper aims to investigate the potential relationship between the stock market announcement of a brand's buy and sell agreement, and the stock price trend.

1367

Abstract

Purpose

This paper aims to investigate the potential relationship between the stock market announcement of a brand's buy and sell agreement, and the stock price trend.

Design/methodology/approach

The research question was approached using a GARCH‐based statistical analysis on a sample of companies listed on the Mibtel (Italian stock exchange) that have a brand among their assets and have undertaken a purchase/sale from 2006 to 2008.

Findings

Although the brand is believed to be an important value driver, the mere occurrence of a purchase/sale operation for this asset only occasionally leads to a reaction in the market; at any rate, the stock's volatility quite rarely depends solely on such an occurrence.

Research limitations/implications

The statistical relevance of the analysis is limited by the observational data that it was possible to analyse. In particular, to give a positive conclusion about the influence of the brand's buy and sell agreements on a stock's return, it is necessary to have a time series of a greater number of firms. A larger availability of data might, in the future, allow a more detailed analysis and the opportunity to investigate the possible impacts of the event with relation to the business's characteristics – something that could not be carried out in this study because of the aforementioned problems.

Practical implications

Researchers and practitioners are now aware that the market does not always look upon the operations of a brand's buy and sell agreement as value‐relevant.

Originality/value

The originality of the present work lies in the fact that, to the best of one's knowledge, no other surveys were carried out on the chosen sample (i.e. the companies listed on the Italian stock market); that only a few international contributions posed the same research question; and most importantly, that the statistical methodology used can very well provide more reliable results than regression analysis, which is normally applied to such data.

Details

Journal of Intellectual Capital, vol. 12 no. 3
Type: Research Article
ISSN: 1469-1930

Keywords

Book part
Publication date: 31 December 2013

Nicola Moscariello and Barbara Masiello

Purpose – This study investigates the relationship between the ownership structure and the corporate social responsibility (CSR) policies of the Italian listed banks. In…

Abstract

Purpose – This study investigates the relationship between the ownership structure and the corporate social responsibility (CSR) policies of the Italian listed banks. In particular, it focuses on the impact that institutional investors characterized by a philanthropic orientation (banking foundations) exert on the socially oriented management of the Italian financial institutions.

Methodology – This chapter adopts a case study approach. It examines the CSR of the bank Monte dei Paschi di Siena and the role that its controlling shareholder (Fondazione MPS) plays in promoting the social strategy implemented by the Italian bank.

Findings – The Monte dei Paschi di Siena CSR strategy appears to be strongly influenced by the activity of its institutional investor. The skills, knowledge, and the cultural proneness toward social issues of the Fondazione MPS are successfully transferred to the bank and shape its social strategy.

Research limitations – This chapter suffers of the limitations generally associated to the case study research methodology. In particular, the findings of this study can be extended to other cases only after a detailed examination of market wide, institutional and corporate governance differences.

Social implications – The positive relationship between nonprofit institutional investors and the CSR strategy effectiveness unveils corporate governance mechanisms useful to increase the overall value creation process of the organizations.

Originality/value of the chapter – This study contributes to the CSR literature by analyzing if and how the philanthropic nature of the blockholders affect the CSR policies carried out by the entities they control.

Details

Institutional Investors’ Power to Change Corporate Behavior: International Perspectives
Type: Book
ISBN: 978-1-78190-771-9

Keywords

Content available
Book part
Publication date: 26 November 2016

Abstract

Details

The Theory and Practice of Directors’ Remuneration
Type: Book
ISBN: 978-1-78560-683-0

Article
Publication date: 12 October 2015

Francesca Culasso, Elisa Giacosa, Laura Broccardo and Luca Maria Manzi

The purpose of this study is to underscore the impact of the family variable on performance. The authors were interested in understanding whether the differences between Family…

Abstract

Purpose

The purpose of this study is to underscore the impact of the family variable on performance. The authors were interested in understanding whether the differences between Family Firms (FFs) and Non-Family Firms (NFFs), on the one hand, and between large FFs and medium-sized FFs, on the other, were reflected in the performance achieved.

Design/methodology/approach

In this paper a sample of 80 industrial companies listed on the Italian Stock Market (FTSE MIB and STAR indexes) were considered, and mixed criteria to distinguish FFs and NFFs (Smyrnios-Romano et al., 1998) were used. The empirical method allowed the development of some research hypotheses by exploiting the Pearson correlation.

Findings

There are two main categories of FFs, which correspond to two different strategic and organizational categories, namely, the FFs listed on the large capitalized companies index (FTSE MIB) and the FFs listed on the medium-capitalized companies index (STAR). Each kind of FFs (large FFs and medium-sized FFs) has a specific effect on profitability and financial performance. Specifically, if a company is medium sized, family presence is a relevant variable in achieving better profitability and financial performance than NFFs of the same size; on the other hand, if the company expands to become a large one, the family presence is an irrelevant variable in terms of both profitability and financial leverage (debt ratio).

Research limitations/implications

Limitations of the study concern the definition of the sample, as this paper focused on the industrial sector and the method adopted, as it could be integrated with some econometrical models. The implications of this paper are relevant for families and regulatory bodies because it helps them better understand the effects of governance and company size both on short- and long-term performance. Moreover, the findings of the study can influence the decision-making process of investors to identify the long-term outperformers listed on the Italian Stock Exchange.

Originality/value

This study contributes to the literature on FFs by defining two different categories of FFs, namely, large and medium-sized. It seems that larger companies record a weaker family influence on short-term profitability.

Details

International Journal of Organizational Analysis, vol. 23 no. 4
Type: Research Article
ISSN: 1934-8835

Keywords

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