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1 – 10 of 919Marta Sánchez-Sancho, Jennifer Martínez-Ferrero and Javier Perote-Peña
This paper aims to investigate the potential influence of managers on sustainability assurance. When the quality of sustainability reporting is questionable because of subsequent…
Abstract
Purpose
This paper aims to investigate the potential influence of managers on sustainability assurance. When the quality of sustainability reporting is questionable because of subsequent restatements, the authors explore whether assurance is used to enhance its credibility as a legitimization tool or as an impression management strategy. Additionally, the authors analyze how capital markets react to this potential managerial capture and, particularly, whether investors penalize this practice through the cost of capital.
Design/methodology/approach
Using an international sample from 2012 to 2016 and panel data regressions, this study relies on DICTION’s master variables of optimism and certainty to examine the impact of managers on assurance and the market’s reaction to these practices.
Findings
The study shows that some managers might use assurance as a legitimization tool rather than as a means of reinforcing the credibility of sustainability reporting. In such cases, the results reveal that investors penalize (reward) managerial influence (no influence) on assurance.
Practical implications
The new findings help companies understand that they will not improve their financing terms if investors perceive that managers have influenced assurance. Moreover, these findings emphasize the need for standardization to clarify assurance criteria and prevent managerial influence.
Social implications
Managerial influence on assurance raises doubts about its value in terms of reducing information asymmetry and especially improving investors’ decision-making.
Originality/value
The present study represents the first evidence of the potential use of assurance for non-informative purposes. The authors provide clear evidence of how investors penalize managerial influence on assurance, in contrast to the mainstream literature, which shows that this practice always improves investors’ decision-making and is rewarded.
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John Rice, Nigel Martin, Muhammad Mustafa Raziq, Mumtaz Ali Memon and Peter Fieger
Growth optimism, which describes the expected future growth of a firm, is an important but underexplored construct in strategy. This paper aims to assess the planning antecedents…
Abstract
Purpose
Growth optimism, which describes the expected future growth of a firm, is an important but underexplored construct in strategy. This paper aims to assess the planning antecedents of such growth optimism by using a large Australian sample of small enterprises.
Design/methodology/approach
The authors use a secondary data set, gathered among Australian small to medium enterprises (SMEs), by the Australian Bureau of Statistics (ABS). The analysis adopts a regression approach including a mediated and a non-mediated path to explore the direct and indirect effects of strategic planning and budgetary planning and management on expected future revenues.
Findings
This paper assesses the implications of concurrent strategic planning and financial management dynamic capabilities on anticipated future revenue growth, an important predisposition dynamic capability. The authors note that this configuration of actions and predisposition aligns closely with the necessary requirements for growth. The findings suggest that firms that use strategic planning and robust budget planning and monitoring processes exhibit higher optimism about future sales growth and firms that effectively configure these planning activities with market development tend to exhibit higher growth and more growth optimism.
Research limitations/implications
In terms of theoretical contributions, the paper strongly supports the formality view in the formal/informal debates associated with effectuation strategies. The authors suggest that appropriate strategic and budgetary planning and control systems act as a counterbalance to organisational confusion and managerial capriciousness, leading to improved confidence among managers and their employees regarding future resource commitments and plans.
Practical implications
The findings of the paper are potentially important for both managers and policy makers. For managers seeking to grow their future sales, planning is shown to be an important antecedent activity. The presence of financial and strategic planning may predispose firms to make important investment decisions that drive future growth. Also, a better understanding of the firm’s current and future strategic and financial position may be evidence of effective firm management, a situation that, in turn, drives growth.
Social implications
In terms of social and policy implications, the data gathered for the survey by the ABS forms a valuable collection of information in relation to business practices. Australian firms are required by law to regularly report budget plans and outcomes. The research suggests that this data can inform policy initiatives, particularly in relation to programmes that may assist small and young firms to undertake prospective strategic and budgetary planning.
Originality/value
To the best of the authors’ knowledge, this is the first paper to investigate the particular configuration of strategic and financial planning and anticipated sales growth in the SME context.
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Zhihao Qin, Menglin Cui, Jiaqi Yan and Jie Niu
This paper aims to examine whether managerial sentiment, extracted from annual reports, is associated with corporate risk-taking in the context of Chinese companies. This study…
Abstract
Purpose
This paper aims to examine whether managerial sentiment, extracted from annual reports, is associated with corporate risk-taking in the context of Chinese companies. This study expands the vein of literature on overconfidence theory.
Design/methodology/approach
By leveraging textual analysis on Chinese listed companies’ annual reports, the authors construct firm-level managerial sentiment during 2007 and 2021 to examine how managerial sentiment influences corporate risk-taking after control for firm characteristics. Corporate risk-taking is denoted by corporate investment engagements: capital expenditures and net fixed asset investment.
Findings
Results show that incentives for corporate risk-taking are likely to increase with the positive managerial sentiment and decrease with the negative sentiment in companies’ annual reports. Positive managerial sentiment is associated with over-/under-investment and low/high investment efficiency. Further additional tests show that the managerial sentiment effect only holds during low economic uncertain years and samples of private-owned firms. Furthermore, the robust tests indicate that there is no endogenous issue between managerial sentiment and corporate risk-taking.
Research limitations/implications
Annual report textual-based managerial sentiment may not perfectly reflect managers’ lower frequency sentiment (e.g. weekly, monthly and quarterly sentiment). Future studies could attempt to capture managers’ on-time sentiment by using media sources and corporate disclosures.
Practical implications
To the best of the authors’ knowledge, this paper is the first research to provide insights into supervising managers’ corporate decisions by observing their textual information usage in corporate disclosure. Moreover, the approach of measuring managerial sentiment might be a solution to monitoring managerial class.
Originality/value
This paper contributes to the literature on accounting and finance studies, adding another piece of empirical evidence on content analysis by examining a unique language and institutional context (i.e. China). Besides, the paper notes that in line with the English version disclosure, based on Chinese semantic words, managerial sentiment in the Chinese-speaking world has magnitude on corporate decisions. The research provides insights into supervising managers’ corporate decisions by observing their textual information usage in corporate disclosure. Moreover, the approach to measuring managerial sentiment may be a practical solution to monitoring managerial class.
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This paper aims to construct a novel measure of firms’ perceived degree of economic policy uncertainty (EPU) and to examine its impact on imitative innovation.
Abstract
Purpose
This paper aims to construct a novel measure of firms’ perceived degree of economic policy uncertainty (EPU) and to examine its impact on imitative innovation.
Design/methodology/approach
This paper uses text mining methods to extract valid information for management discussion and analysis from the annual reports of Chinese A-share-listed companies from 2009 to 2021.
Findings
The empirical findings demonstrate that firms that perceive higher uncertainty in economic policies promote increased imitative innovation behaviour. In addition, when uncertainty is high, overly optimistic managers can reduce the imitative innovation of the firm to other firms.
Originality/value
The paper uses some of the more recent textual analysis techniques in the field of innovation to measure listed firms' perceptions of external EPU and to examine the impact of uncertainty on imitative innovation. Such research enriches the literature on innovation and fills some gaps.
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Elena Fedorova, Alexandr Nevredinov and Pavel Drogovoz
The purpose of our study is to study the impact of chief executive officer (CEO) optimism and narcissism on the company's capital structure.
Abstract
Purpose
The purpose of our study is to study the impact of chief executive officer (CEO) optimism and narcissism on the company's capital structure.
Design/methodology/approach
(1) The authors opt for regression, machine learning and text analysis to explore the impact of narcissism and optimism on the capital structure. (2) We analyze CEO interviews and employ three methods to evaluate narcissism: the dictionary proposed by Anglin, which enabled us to assess the following components: authority, superiority, vanity and exhibitionism; count of first-person singular and plural pronouns and count of CEO photos displayed. Following this approach, we were able to make a more thorough assessment of corporate narcissism. (3) Latent Dirichlet allocation (LDA) technique helped to find the differences in the corporate rhetoric of narcissistic and non-narcissistic CEOs and to find differences between the topics of interviews and letters provided by narcissistic and non-narcissistic CEOs.
Findings
Our research demonstrates that narcissism has a slight and nonlinear impact on capital structure. However, our findings suggest that there is an impact of pessimism and uncertainty under pandemic conditions when managers predicted doom and completely changed their strategies. We applied various approaches to estimate the gender distribution of CEOs and found that the median values of optimism and narcissism do not depend on sex. Using LDA, we examined the content and key topics of CEO interviews, defined as positive and negative. There are some differences in the topics: narcissistic CEOs are more likely to speak about long-term goals, projects and problems; they often talk about their brand and business processes.
Originality/value
First, we examine the COVID-19 pandemic period and evaluate how CEO optimism and pessimism affect their financial decisions under specific external conditions. The pandemic forced companies to shift the way they worked: either to switch to the remote work model or to interrupt operations; to lose or, on the contrary, attract clients. In addition, during this period, corporate management can have a different outlook on their company’s financial performance and goals. The LDA technique helped to find the differences in the corporate rhetoric of narcissistic and non-narcissistic CEOs. Second, we use three methods to evaluate narcissism. Third, the research is based on a set of advanced methods: machine learning techniques (random forest to reveal a nonlinear impact of CEO optimism and narcissism on capital structure).
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Asis Kumar Sahu, Byomakesh Debata and Saumya Ranjan Dash
This study aims to examine the impact of manager sentiment on the firm performance (FP) of Indian-listed nonfinancial firms. Further, it endeavors to investigate the moderating…
Abstract
Purpose
This study aims to examine the impact of manager sentiment on the firm performance (FP) of Indian-listed nonfinancial firms. Further, it endeavors to investigate the moderating role of economic policy uncertainty (EPU) and environment, social and governance (ESG) transparency in this relationship.
Design/methodology/approach
A noble manager sentiment is introduced using FinBERT, a bidirectional encoder representation from a transformers (BERT)-type large language model. Using this deep learning-based natural language processing approach implemented through a Python-generated algorithm, this study constructs a manager sentiment for each firm and year based on the management discussions and analysis (MD&A) report. This research uses the system GMM to examine how manager sentiment affects FP.
Findings
The empirical results suggest that managers’ optimistic outlook in MD&A corporate disclosure sections tends to present higher performance. This positive association remains consistent after several robustness checks – using propensity score matching and instrumental variable approach to address further endogeneity, using alternative proxies of manager sentiment and FP and conducting subsample analysis based on financial constraints. Furthermore, the authors observe that the relationship is more pronounced for ESG-disclosed firms and during the low EPU.
Practical implications
The results demonstrate that the manager sentiment strongly predicts FP. Thus, this study may provide valuable insight for academics, practitioners, investors, corporates and policymakers.
Originality/value
To the best of the authors’ knowledge, this is the first study to predict FP by using FinBERT-based managerial sentiment, particularly in an emerging market context.
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Dongmin Kong, Shasha Liu and Rui Shen
On the basis of labor economics theories, this study examines how adjustment in human capital accounts for labor cost stickiness.
Abstract
Purpose
On the basis of labor economics theories, this study examines how adjustment in human capital accounts for labor cost stickiness.
Design/methodology/approach
This study makes use of employee education level as a measure of the quality of human capital and relies on data from Chinese public firms to conduct the empirical test. This study focuses on two important components of labor cost changes: one corresponding to the adjustment in the number of employees (capacity adjustment) and another corresponding to the adjustment in the mix of employee education levels (quality adjustment).
Findings
This study reveals that labor cost changes driven by the adjustment of employee education level are sticky. This stickiness cannot be explained by the standard adjustment cost theory. This further shows that firms that actively adjust their employee quality during downturns experience improved future performance. The findings are robust to alternative measures and specifications.
Originality/value
This study provides new evidence for and insights into the cost behavior literature. Previous studies treat input resources in a homogenous way and focus on the effect of capacity adjustment. This study considers the heterogeneity of resources and examines three dimensions of salary cost adjustment: capacity, structure, and unit cost. In line with the economic theory of sticky costs proposed by Banker et al. (2013a), the study’s evidence sheds light on the additional underlying economic mechanisms driving cost stickiness behavior. Specifically, managers asymmetrically adjust both employee structure and average salaries, in addition to employee number. This study also adds to the existing knowledge of the consequences of managers' actions regarding cost behavior.
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Mahdi Salehi and Nazanin Bashirimanesh
Corporate social responsibility (CSR) might be among the primary factors ensuring any organization’s survival, and disclosing its related information is very important. This…
Abstract
Purpose
Corporate social responsibility (CSR) might be among the primary factors ensuring any organization’s survival, and disclosing its related information is very important. This research initially investigates the effect of managers’ behavior characteristics, including overconfidence, myopia and narcissism and corporate political ties on the disclosure of CSR. This study also aims to assess the mediating impact of political connections on the association between managerial personality traits and CSR.
Design/methodology/approach
The research sample included 129 listed companies on the Tehran Stock Exchange from 2013 to 2020. Behavioral managerers charecteristics. A multivariate regression method with combined data (firm-year) was used to test the research hypotheses.
Findings
The results show that overconfidence and managerial myopia cause the disclosure of CSR to decrease. Managers’ overconfidence and short-term attitudes lead to a decrease in the level of CSR activities of the companies and their disclosure, respectively, 0.021 and 0.025. However, the existence of narcissism in managers and having political ties by companies may lead to an increase in the disclosure of the CSR, respectively, around 0.089 and 0.02. Further findings also indicate that political connections may motivate narcissistic managers to increase CSR disclosure near 0.037. However, the results document no significant impact of political ties on the relationship between managerial overconfidence and myopia with CSR involvement.
Research limitations/implications
According to the findings, the authors recommend to stockholders that employing narcissistic managers and improving political connections might be two effective strategies to enhance the level of CSR engagement. One of the critical limitations of the current paper might be its generalizability. As Iran is an emerging and fossil fuel seller country, its institutional settings may significantly differ from those of developed and industrial nations. Thus, the readers of these nations must consider such an important issue.
Originality/value
For the first time, to the best of the authors’ knowledge, this research has investigated the moderating effect of political ties on the association between management behavioral characteristics and the level of fulfilling CSR by listed companies.
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Pasquale Massimo Picone, Marco Galvagno and Vincenzo Pisano
There is growing interest in how hubris bias shapes managerial and entrepreneurial judgments and decisions and, in turn, firm strategy and performance. Based on a 44-years dataset…
Abstract
Purpose
There is growing interest in how hubris bias shapes managerial and entrepreneurial judgments and decisions and, in turn, firm strategy and performance. Based on a 44-years dataset of articles reaching the beginning of 2023, the authors offer a synthesis of hubris research published within business journals.
Design/methodology/approach
The authors implement a mixed-method approach offering a content representation of 600 peer-reviewed articles extracted from Scopus. The authors conduct a bibliometric investigation – employing Excel, VOSViewer and Biblioshiny software – and perform a qualitative review.
Findings
The analysis unveils four thematic clusters: hubris bias in financial policies (Cluster 1), hubris bias in restructuring deals (Cluster 2), hubris bias in entrepreneurial contexts (Cluster 3) and hubris bias in strategic decision-making (Cluster 4). Moreover, the authors infer that hubris research in business predominantly developed from three disciplinary perspectives – finance, entrepreneurship and strategic management – and progressed with limited interdisciplinary dialogue.
Practical implications
The authors call practitioners' attention to the impact of the hubris bias in forming financial, entrepreneurial and strategic choices. Managers get conscious of the risks of hubristic choices; hence, they implement organizational practices that move forward with unbiased (or less biased) judgments and decisions.
Originality/value
The authors offer an up-to-date and comprehensive view of hubris research in business. Furthermore, the authors provide an integrative framework and a research agenda.
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Fei Xu, XinZhu Liu, Qian Liu, XiaoYang Zhu and DuanMing Zhou
Considering the greenwashing risk of symbolic environmental management, this study aims to distinguish the motivation for environmental investment growth (EIG) from the corporate…
Abstract
Purpose
Considering the greenwashing risk of symbolic environmental management, this study aims to distinguish the motivation for environmental investment growth (EIG) from the corporate cost stickiness and anti-stickiness perspectives.
Design/methodology/approach
This study analyzes the impact of substantive and symbolic environmental management on cost stickiness. Subsequently, competing hypotheses are proposed. Finally, empirical tests are conducted on Chinese A-share listed companies from 2010 to 2019.
Findings
EIG significantly improves enterprises’ cost stickiness. The cost of high EIG enterprises does not decrease significantly with a decline in income compared to other enterprises, which is consistent with the motivation for substantive environmental management. Enterprises with high asset specificity and optimistic management expectations show more obvious substantive environmental management. Government and public environmental concerns cause more pronounced substantive environmental management.
Practical implications
An evaluation of corporate environmental responsibility should take into account both what the company has disclosed and what it has actually done.
Social implications
Governments and the public should have a comprehensive understanding of corporate environmental management. They need to strengthen their ability to recognize symbolic environmental management and support substantive environmental management.
Originality/value
Fundamental to the evaluation of corporate environmental responsibility, this study distinguishes the motivations for corporate EIG disclosures from the cost stickiness perspective to avoid the risk of greenwashing. Hypotheses on the impact of substantive and symbolic environmental management on cost stickiness are presented. This study verifies the substantive environmental management characteristics of listed Chinese companies.
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