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Open Access
Article
Publication date: 29 March 2024

Runze Ling, Ailing Pan and Lei Xu

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

China Accounting and Finance Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1029-807X

Keywords

Article
Publication date: 16 February 2024

Sujie Hu, Yuting Qian and Sumin Hu

The purpose of this study is to explore the economic impact of financial restatements by major customers on the audit opinion of their suppliers, showing that non-financial…

Abstract

Purpose

The purpose of this study is to explore the economic impact of financial restatements by major customers on the audit opinion of their suppliers, showing that non-financial information disclosure potentially helps auditors make better assessments.

Design/methodology/approach

Using a sample of China’s listed firms from 2007 to 2021, the authors aim to find the relationship between customers’ financial restatements and their suppliers’ audit opinions. Heckman selection model, placebo tests and other robustness checks are used as well.

Findings

The findings reveal that customers’ financial restatements have a significant effect on the likelihood of suppliers receiving modified audit opinions. This relationship is pronounced when suppliers face a higher level of financial constraints, exhibit poorer accounting conservatism or receive more negative media coverage. Additionally, this effect occurs through increased business risk and information risk, which heightens auditors’ perceived audit risk. Moreover, the study highlights the influence of switching costs, auditor expertise and restatement severity on this relationship.

Practical implications

Risks originating from customers can spread along the supply chain, emphasizing the necessity for auditors to give heightened attention to both the audited firms and their customer information. Moreover, regulators should carefully consider the important impact of customer information disclosures to maximize the protection of the interests of external information users.

Originality/value

This study not only confirms the crucial role of customer information disclosures in annual reports for stakeholders and auditors but also contributes to the existing literature on customer–supplier relationships.

Details

Managerial Auditing Journal, vol. 39 no. 3
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 22 June 2023

Vishnu K. Ramesh and A. Athira

This study examines the association between geopolitical risk (GPR) and corporate tax, which is a major source of revenue for the government and a significant explicit cost for…

Abstract

Purpose

This study examines the association between geopolitical risk (GPR) and corporate tax, which is a major source of revenue for the government and a significant explicit cost for firms. The authors use a comprehensive measure of GPR to study its effects on corporate taxes by using an international sample.

Design/methodology/approach

The authors adopt the geopolitical measure constructed by Caldara and Iacoviello (2022) as a proxy for GPR and cash-effective tax rate benchmarked with statutory tax rate to measure corporate tax avoidance. The authors employ panel regression with fixed effects (FEs) to investigate the impact of GPR on corporate tax avoidance. The authors also conduct a battery of robustness tests to ensure the strength of the study’s results.

Findings

This study’s empirical results indicate that sample firms increase their tax avoidance amid increasing GPR. Further analyses show that financial constraints incentivize firms to avoid taxes during rising geopolitical tensions. The authors also provide evidence on the role of firm-level and country-level governance in weakening the association between GPR and tax avoidance.

Practical implications

Policymakers and governments may strengthen the enforcement rule to limit aggressive tax practices of corporates during GPR to balance fiscal deficit. In addition, this study sheds light on the debate among administrators and politicians over the efficacy of current tax laws and governance structures in the presence of heightened GPR.

Originality/value

The authors extend the literature on GPR by analyzing its effect on corporate tax avoidance. Unlike existing single-country studies, the authors use a cross-country setup to investigate the impact of GPR on tax avoidance, making this study’s results more generalizable as the authors control for a host of country, industry, and time factors. Apart from political uncertainty, terrorism, and climatic issues, the authors document GPR as a strong macroeconomic driver of corporate tax avoidance. The authors make a new contribution to the literature on the moderating role of governance and institutional factors on the association between tax avoidance and GPR in an international context. The authors also contribute to the literature on macroeconomic determinants of tax avoidance.

Details

International Journal of Managerial Finance, vol. 20 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

Book part
Publication date: 4 April 2024

Yong H. Kim, Bochen Li, Miyoun Paek and Tong Yu

We study the potential effects of pension underfunding on corporate investment, financial constraints and improved employee bonding using 10 Pacific-Basin countries (including the…

Abstract

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.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-83753-865-2

Keywords

Open Access
Article
Publication date: 6 October 2023

Ijaz Ur Rehman, Faisal Shahzad, Muhammad Abdullah Hanif, Ameena Arshad and Bruno S. Sergi

This study aims to empirically examine the influence of financial constraints on firm carbon emissions. In addition to the role of financial constraints in firm-level carbon…

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Abstract

Purpose

This study aims to empirically examine the influence of financial constraints on firm carbon emissions. In addition to the role of financial constraints in firm-level carbon emissions, this study also examines this influence in the presence of governance, environmental orientation and firm-level attributes.

Design/methodology/approach

Using pooled ordinary least square, this study examines the impact of financial constraints on firm-level carbon emissions using a panel of 1,536 US firm-year observations from 2008 to 2019. This study also used two-step generalized method of moment–based dynamic panel data and two-stage least square approaches to address potential endogeneity. The results are robust to endogeneity and collinearity issues.

Findings

The results suggest that financial constraints enhance the carbon emissions of the firms. The economic significance of financial constraints on carbon emissions is more pronounced for the firms that do not report environment-related expenditure investment and those that are highly leveraged. The authors further document that firms with a nondiverse gender board signify a statistically significant impact of financial constraints on carbon emissions. These results are also economically significant, as one standard deviation increase in financial constraints is associated with a 3.340% increase in carbon emissions at the firm level.

Research limitations/implications

Some implicit and explicit factors like corporate emissions policy and culture may condition the relationship of financial constraints with carbon emissions. Therefore, it would be worthwhile to consider these factors for future research. In addition, it is beneficial to identify the thresholds and/or quantiles at which financial constraints may significantly make a difference in enhancing carbon emissions.

Practical implications

The findings offer policy implications for investment in stakeholder engagement for capital acquisitions, thereby effectively enforcing environmental innovation and leading to a reduction in carbon emissions.

Originality/value

This study integrated governance and environment-oriented variables in the model to empirically examine the role of financial constraints on the carbon emissions of the firms in the USA over and above what has already been documented in the earlier literature.

Details

Social Responsibility Journal, vol. 20 no. 4
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 4 July 2023

Neeraj Jain and Smita Kashiramka

This study aims to investigate the effects of peers on corporate payout policies in one of the largest emerging markets – India. It also examines the motives for mimicking payout…

Abstract

Purpose

This study aims to investigate the effects of peers on corporate payout policies in one of the largest emerging markets – India. It also examines the motives for mimicking payout decisions.

Design/methodology/approach

The sample is composed of 3,024 non-financial and non-government firms listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for the period 1995 to 2020. To encounter the endogeneity problem, the instrumental variable technique based on peer firms' idiosyncratic risk is used to estimate the effects of peers on firms' payout policy. To define peer reference groups, the authors use the basic industry classification of the firms.

Findings

The results indicate a significant positive impact of peers on firms' dividend policies in India. A firm with all dividend-paying peers is more likely to declare dividends than the one with no dividend-paying peers. Further, peer effects are found to be more pronounced amongst larger and older firms, thus supporting the rivalry theory of mimicking.

Originality/value

To the best of the authors' knowledge, the present study is the first of its kind that attempts to understand peer effects on payout decisions in an emerging market India, that offers a unique institutional setting. Moreover, the authors extend the existing literature by investigating the peer effects on a firm's payout policies considering various firm-level characteristics, such as growth opportunity, cash holding, financial constraint and profitability, which previous studies have not taken into consideration. These results provide additional insights into the heterogeneity and motives behind peer effects.

Details

International Journal of Managerial Finance, vol. 20 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 7 December 2022

Galym Tokazhanov, Serik Tokbolat, Aidana Tleuken and Ferhat Karaca

The current COVID-19 pandemic is influencing our life in every aspect, including working and living environments. Millions of people were forced to isolate themselves in their…

Abstract

Purpose

The current COVID-19 pandemic is influencing our life in every aspect, including working and living environments. Millions of people were forced to isolate themselves in their homes, which has posed significant pressure on buildings and shown us that our dwellings are not designed for such purposes. This is partly due to the fact that homes are designed and built for occasional use rather than isolated and long-term occupation. The legislative system of a country plays an important role in defining and shaping the conditions of people living there. Hence, the aim of the study is to evaluate the readiness of Kazakhstani and the EU construction-related legislation for pandemics.

Design/methodology/approach

Previously developed pandemic-resilient indicators were used for the evaluation of construction legislation. Both legislative systems were reviewed, and the quality of responses was evaluated by assigning response scores.

Findings

The results based on response scores indicate that the environmental resource consumption sub-category was better covered by EU legislation. At the same time, the buildings’ health, safety and comfort are better taken into account in Kazakhstani legislation. Seven pandemic-resilient indicators were not responded to by any legislative system indicating a gap between current legislation and requirements for new living conditions.

Originality/value

No study has analyzed how COVID-19 can transform construction legislation. The study reveals the limitation of current construction legislation in Kazakhstan (KZ) and the EU, indicating the need for transformation to meet the requirements of the pandemic era.

Details

Engineering, Construction and Architectural Management, vol. 31 no. 4
Type: Research Article
ISSN: 0969-9988

Keywords

Open Access
Article
Publication date: 2 May 2023

Rejaul Karim, Md. Abdullah Al Mamun and Abu Sadeque Md. Kamruzzaman

The purpose of the present study is to determine how the cash conversion cycle (CCC) affects the financial performance of manufacturing companies in Bangladesh.

4278

Abstract

Purpose

The purpose of the present study is to determine how the cash conversion cycle (CCC) affects the financial performance of manufacturing companies in Bangladesh.

Design/methodology/approach

The authors have collected data of 61 Dhaka Stock Exchange (DSE)-listed firms from the 10 distinct manufacturing industries of Bangladesh for 18 years, from 2003 to 2020. The data have been analyzed through the two-steps system generalized method of moment (GMM) regression model, using profitability indicators return on asset (ROA) and earnings per share (EPS) as dependent variables, while CCC has been used as the independent variable, whereas asset turnover (ATO) and financial leverage (LEV) were used as control variables to assess the relationship between the CCC and financial performance.

Findings

The findings indicated that CCC has a negative connection with profitability – ROA and EPS, with the connection between CCC and EPS being highly significant. This indicates that reducing the inventory conversion time, reducing the period of receivable collection and making payments to creditors with potential delays might help Bangladeshi manufacturing firms boost their profitability. In addition, the firm-specific characteristics, namely ATO and LEV significantly affect the firm's profitability.

Research limitations/implications

The research was based only on secondary sources and information was scarce. This research was conducted to determine the impact of the CCC on the corporate profitability of the manufacturing sector solely. There might be many other working capital variables that are still unexplored through this study.

Practical implications

The current study's findings are consistent with the traditional rule that minimizing the firm's days of the cash cycle may optimize financial performance. The results of this research have added to the existing body of knowledge on the topic of working capital management (WCM). Future research endeavors can be initiated for assessing the impact of the CCC on the firm's profitability in other industrial sectors or to identify other working capital variables that have much impact on corporate profitability.

Originality/value

This study is an original work of the researchers and adds value to the current literature in the domain of WCM and corporate profitability. The present study is the first one that covers firms in all the manufacturing industries in Bangladesh. The corporate managers, creditors, investors and other concerned stakeholders will be benefited from the findings of the present study.

Details

Asian Journal of Economics and Banking, vol. 8 no. 1
Type: Research Article
ISSN: 2615-9821

Keywords

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