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Agency problems are more severe for multinational corporations (MNCs) and multinational enterprises compared to their domestic counterparts. As companies develop diversified operations, their managers face more challenges. An incentive compensation structure has been designed to align the benefits of managers with those of shareholders. Additionally, corporate social responsibility (CSR) has become increasingly crucial for companies. MNCs must gain the trust of more investors to improve their corporate reputation and financial performance. CSR enables MNCs with a high sense of social responsibility to expand their investor base, reduce perceived risks, and decrease information asymmetry. Our empirical findings reveal that Taiwanese MNCs can enhance their performance by implementing cash-based compensation and pursuing CSR activities.

This paper explores dividend announcements based on information hypothesis. We explore in particular whether or not information signaling theory existed in Taiwan. We also explore the free cash flow hypothesis. In order to eliminate affecting factors, we target companies with irregular dividends as research samples, just like those with specially designated dividends (SDD). We examine whether or not those proceeds may be deemed as future earnings prospection. In this paper we study mainly dividend announcements made during stockholder’s meetings of the companies listed in the Taiwan Stock Exchange (TSE) or R.O.C. Over-the-Counter Securities Exchange (ROSE). We apply event study as means of analyzing abnormal returns of the companies. In addition we use the GARCH model with traditional ordinary least square to estimate the market model. The results indicate that SDDs are considered positive signals by the national exchange, TSE. In addition, we also show that the first-time SDD does transmit a positive signal to the market regarding the firm’s future cash flow, and that the SDD of no payment in the previous three years is negative. Furthermore, we prove that low Q firms have greater market reaction than high Q firms in announcement period. The free cash flow hypothesis and firm size effects could not be verified in Taiwan.

Purpose – Study the role of sovereign wealth funds (SWFs) as an example of foreign and politically connected large shareholders, and their impact on firm value.

Methodology/approach – Use a sample of SWF large U.S. investments where SWFs intend to actively engage with management to analyze not only whether but also why SWF investments outperform the market in both the short- and long term from the perspective of internationalization, political connections, and corporate governance.

Findings – Foreign and politically connected large investors, like SWFs, improve firm value through the provision of SWF domestic market access and government-related contracts. In the short run, the market welcomes SWF investments in expectation of potential monitoring and internationalization benefits. In the long run, the target firms’ degree of internationalization and Tobin's q increase substantially after SWF investments. The increase in q is directly related to the number of government-related contracts granted by SWF countries.

Social implications – SWF investment benefits appear to outweigh the costs for firm value and shareholders. The results point to the benefits of large and foreign investors for shareholders.

Originality/value of paper – This is the first work to provide evidence on how foreign government-related shareholders can affect firm value.

Whether institutional investors monitor corporations and improve firm value is a key question for corporate governance and investment management. I find little empirical support for the hypothesis that institutions undertake monitoring that increases firm quality and valuation. Granger causation tests show that while quality firms do attract institutional investment, institutions do not monitor and firm value subsequently declines. Instead, institutional incentives are critical; some institutions with strong incentives to monitor do, indeed, monitor. Institutions with concentrated portfolios successfully monitor while institutions with a larger percentage stake do not. Pensions and endowments are better monitors than insurers, banks and mutual funds.

This paper investigates CEO turnover and the usefulness of relative performance evaluation (RPE) as a management incentive in an emerging economy lacking market-based competition.

In a sample of China’s listed state-owned enterprises (SOEs) from the period 2001 to 2005, we manually collect the data where a CEO has gone after being removed by reading the annual reports of the firms and searching the major news and business publications, and run OLS regressions to examine how various incentives provided by different CEO turnovers such as promotion, demotion, and rotation affect the firm performance.

We find that 41% of departing CEOs in SOEs is being promoted. The promotion is positively associated with preceding firm performance relative to peers in the same region and this association is more significant than that between the promotion and firm’s specific performance. Furthermore, the promotion outperforms other incentive schemes such as CEO demotions by 5–8% in terms of subsequent Tobin’s q in three years. These consequences persist in undeveloped regions where there are fewer firms listed on the stock market, a lower stock market capitalization, or a higher regional Herfindahl–Hirschman Index ( HHI ).

The findings imply that promotion based on RPE provides an important incentive by creating competitions.

Many organizations around the world currently are facing board diversity issues and challenges. Hence, this empirical paper investigates the relationship between board diversity and firm’s financial performance. We use a sample of 35 companies from five countries in Southeast Europe (Macedonia, Croatia, Serbia, Bosnia and Herzegovina, and Greece) for the period between 2008 and 2012 to find that, on average, companies with well-educated board members are more profitable and overvalued on the market. When running the regression again to test the levels of heterogeneity, we also find that the companies with more women on board tend to be overvalued on the market, while those with more foreigners on board are subject of undervaluation. The paper mostly contributes to the literature on corporate governance and board diversity. First, we postulate the impact of each of the board diversity variables on the financial performance and then show the extent of this impact and its economic interpretation. Our findings have important practitioners’ implications for corporate regulators and policy-makers since the demonstrated positive impact of the well-educated board members on firm’s financial performance gives a new impetus in building a corporate strategy that will intend to engage more people holding PhD on board.

We find a significant curvilinear relation between Japanese firm value and the percentage of equity held by foreign investors. Firm value rises until foreign ownership reaches approximately 40%, and then it begins to decline. It appears that large foreign institutional investors invest in well-performing firms and serve as effective monitors. Our results remain robust even after controlling for other corporate governance variables, such as equity ownership by main banks and board membership by foreign investors. It seems that most of the increase in firm value and the performance improvement are due to rising levels of equity ownership in non-keiretsu (independent) firms by foreign investors. We also show that an increase in foreign ownership is correlated with a rise in R&D expenditures, suggesting that foreign institutional investors contribute to the long-term viability and competitiveness of Japanese firms.

The authors study the relation between a firm’s combinative capability and value creation in the context of technological scope expansion. On a sample of Compustat firms that applied for US patents between 1980 and 2001, the authors find that firm value, measured using Tobin’s q, decreases with increases in technological scope (measured as the number of unique patent classes). However, when firms expand by combining different classes into a single patent, the authors find that this negative effect is significantly diminished. These findings indicate that increasing technological scope likely creates value only when the firm is able to integrate the components into a single technology; simply maintaining different technological components within the firm boundary without integration appears to subject the firm to a discount.

With the increasing understanding of stakeholders on sustainability aspects for the business, companies are nowadays paying more attention to environmental and social issues. This study aims to examine the relationship between Environmental, Social, Governance (ESG) Index and firms’ value. Moreover, this study also examines how the controversy score influences the company’s value. The authors employ a dataset of 1.356 companies from 22 countries in Asia which representing the Asian market from 2014 to 2018. This study shows that ESG index score and controversy score are statistically significant, affecting the firms’ value, measured by Tobin’s Q. From the individual tests, the findings of this study indicate that ESG-environmental, ESG-social, and ESG-governance, individually affect the firms’ value. This study suggests that providing disclosure on ESG aspects is essential, not only to increase company value but also to show the company resilience and sustainability. On the other hand, ESG controversy score surprisingly indicates a positive relationship with the company value. The result implies that controversies provide a positive signal to the investor because controversies could provide a signal to the public of companies’ willingness to have transparency and accountability.

This chapter focuses on testing optimal capital structure theory: The role of intervening variable debt to equity ratio (DER) on the influence of the financial performance, Ownership Structure of Independent Board of Commissioners (IBCO), Audit Committee (ACO), and Institutional Ownership on Firm Value. The research design was explanatory research using path analysis. Using purposive sampling, 61 manufacturing companies, observation period from 2014 to 2018 with 286 N samples. The research novelty empirically can prove the role of intervening variable DER on the effect of return on assets (ROA) on firm value and shows the market response to the ROA is fully reflected by DER, indicating the existence of an optimal capital structure. The role of DER on the effect of ROE and IBCO on firm value is a partial mediation with the inverse direction. This phenomenon shows that the mechanism of forming a balance between the responses of investors and creditors relates to debt financing.