Journal of Corporate Finance最新文献

This paper examines the role of governmental venture capital firms (GVCs) in supporting industries endorsed by the government. Specifically, we find that GVCs are more likely to invest in industries targeted by the industrial policy compared to non-GVCs. Further analyses on investment behavior suggest that GVCs make larger investments, invest in earlier rounds, and have longer holding periods in government-endorsed industries compared with non-GVCs. In terms of investment outcome, although GVCs have poorer financial performance while supporting targeted industries, they do play a positive role in promoting corporate innovation. Taken together, this paper provides novel empirical evidence on the important role of GVCs in facilitating the implementation of industrial policies.

Joining the debate on the banking sector's impact on the real economy, this study examines the impact of banks' market power on local businesses' financial reporting quality. Based on the market power hypothesis and the information-based hypothesis, we propose four ways the banking market could affect the financial reporting quality. The proposed mechanisms suggest that borrowers and bank lenders face increased market power by implementing different earnings management and monitoring practices. Our documentary evidence suggests that since the banking market deregulation, restrictions on inter- and intra-state banking and branching have been removed, with banks gaining more power and the market becoming more consolidated. Using a large sample of U.S. listed firms from 1995 to 2019, we find a favourable impact of bank market power on corporate financial reporting quality, primarily driven by heightened monitoring by banks with greater market power, supporting the monitoring-stringent conjecture. In addition, this positive relationship is more pronounced among firms heavily reliant on local banks. Our results are robust to a rich set of tests, such as using alternative measurements for financial reporting quality and bank market power, including macroeconomic factors, and considering drastic changes in the bank market structure. We also address the endogeneity concerns and test the robustness of our key findings in a loan syndication setting. Our research suggests that facing increased bank market concentration and power, firms must pay additional attention to their financial reporting, which is widely used to access external finance.

This paper investigates how acquirers' board gender structures respond to the target country's gender-equal culture following cross-border M&A deals. Using a sample of Chinese public firms that conducted cross-border M&As from 2008 to 2019, we find that acquirers tend to adjust the proportion of female directors to better align with the target country's gender-equal culture. We address the potential selection concerns by adopting the Heckman two-step method and show the results are robust. Further analyses show that acquirers are more likely to adjust their board gender structures when the deal size and the target size are larger, and when the communication and legitimacy barriers are greater, suggesting the adjustment is a strategic move. Moreover, we find evidence of synergy gains following board adjustments in terms of enhanced firm performance and increased innovations.

This paper documents the positive impact of partisan conflict on corporate credit spreads for politically connected companies and industries. The effect is both economically meaningful and statistically significant, stands under an extensive set of control variables, and is stronger for speculative-grade bonds. Several approaches are adopted to resolve endogeneity issues and further establish causality. Partisan conflict affects corporate credit spreads through a discount rate channel, increases investors’ risk aversion, and leads to higher borrowing costs and widening credit spreads. Affected companies respond by reducing debt issuance and postponing investments until the conflict subsides.

Overlap in business aspects serves as a proxy for firm relatedness. Employing an unsupervised topic modelling methodology from machine learning, we characterize the attention allocations of earnings conference call participants (corporate executives, financial analysts, and investors) over the topics discussed. We construct a novel topic similarity measure that captures incremental, difficult-to-observe, and time-varying firm relatedness. However, valuable information from topic peers is not incorporated into stock price in a timely fashion. A long-short strategy based on the returns of topic peers yields a monthly alpha of approximately 69 basis points. Furthermore, return predictability stems primarily from similar business models, customer management, and influential macroeconomic situations. Return predictability is more pronounced among focal firms with higher information complexities and arbitrage costs. Overall, this study provides a novel approach to automatically summarise firms' business aspects in focus and highlights the asset pricing implications of investors' underreactions to non-obvious and dynamic firm relatedness hidden in earnings conference calls.

Reexamining CEO personality traits from a real options theory perspective, we suggest that the firm's strategic flexibility can be worsened by CEO conscientiousness and neuroticism. We use a measure of strategic flexibility as the firm's ability to take advantage of heightened volatility, which then results in superior stock returns. Our results suggest that strategic adaptability is impeded by rigid planning, resistance to change (conscientiousness) and lack of emotional stability (neuroticism). For firms that experience a decrease in volatility, the opposite holds. In line with trait activation theory, our results imply that the effect of specific CEO personality traits on firm dynamics and performance is contingent and context-specific. Our findings are economically significant and have important implications concerning CEO selection and management.

We investigate whether CEOs around the world are held accountable for stakeholder-related corporate misbehavior. The likelihood of CEO turnover increases significantly when the media coverage of the ESG incidents reaches extreme levels. CEO turnovers occur even in the cases where an incident does not lead to a stock price decline. In such cases, the board likely has a non-pecuniary motive for the turnover. This suggests that such non-pecuniary reputational concerns are an important determinant of CEO turnover decisions around the world, especially when the firm is facing intense public pressure due to stakeholder-related corporate misbehavior. This effect is more pronounced when firms are headquartered in stakeholder-oriented countries like many European countries.

This paper investigates whether network effects on investment exist and whether firms strategically herd their connected firms. To construct firm networks, we utilize board-interlock networks where two firms share at least one common board member and estimate network effects on firms’ investment decisions. Our identification strategy is built on adopting characteristics of the peers of peers as legitimate instrumental variables. Empirical findings confirm significant network effects on firms’ investment and show that firms strategically follow their connected firms with high-quality information.

This study develops a two-sided matching structural model to examine whether government venture capitals (GVCs) crowd out private venture capitals (PVCs) by comparing the pre-money economic valuation of observed and counterfactual investments. The structural model also allows us to study the impacts of GVCs on the post-investment performance of the funded companies. Using China's VC market data between 2000 and 2020, we find that GVC-funded companies are those neglected by PVCs, and the potential economic performance of GVC-funded companies is inferior to that of PVC-funded ones. It means that the data do not support the crowding out conjecture. Moreover, the evidence suggests that the potential innovativeness of GVC-funded companies is higher than that of PVC-funded companies, indicating that GVCs bridge the equity gap left by PVCs in innovative companies. Regarding the impacts on companies' post-investment performance, GVCs are not significantly different from PVCs in improving companies' economic performance, and they are better than PVCs in improving companies' innovative performance. We also explore the impacts of different types of GVCs, the impacts of the co-investment between GVCs and PVCs, and the impacts of GVCs on companies in different stages of development.

We explore the impact of overlapping institutional ownership (OIO) within supply chains on the earnings management practices of supplier firms. Utilizing a dataset of U.S. publicly traded supplier firms from 1988 to 2016, we discover that suppliers with institutional ownership overlapping with their major customers exhibit reduced levels of discretionary accruals. This finding implies that such overlap discourages suppliers from engaging in upward earnings management through the manipulation of discretionary accruals. We also find that OIO curtails accrual-based earnings management by enhancing the relationship between supply chain partners and bolstering external monitoring. Additionally, we find that OIO also mitigates the extent of real earnings management undertaken by the supplier firm. These findings remain robust after addressing potential endogeneity concerns. Our results underscore the significant role of OIO within supply chains in curbing both accrual-based and real earnings management by supplier firms.