Pub Date : 2024-10-09DOI: 10.1016/j.jcorpfin.2024.102678
Hye Seung Lee , Jesus M. Salas , Ke Shen , Ke Yang
We examine whether firms' ESG performance is influenced by bondholder preferences. We argue that insurance companies have unique incentives to monitor bond issuers' ESG performance because insurers face enhanced exposures to ESG shocks in their balance sheets and trading operations. Consistent with this argument, we find that firms with higher bond ownership by insurance companies are associated with higher future ESG ratings. To address potential identification concerns, we test changes in bond issuers' ESG ratings following the initial bond investment by insurance companies. We find that firms' ESG performance improves after insurance companies' initial bond investment. We also find that this improvement in ESG performance is concentrated in firms with greater reliance on bond financing and investment capital from insurance companies. Our study underscores the importance of bond ownership structure in influencing corporate ESG performance.
{"title":"The effect of bond ownership structure on ESG performance","authors":"Hye Seung Lee , Jesus M. Salas , Ke Shen , Ke Yang","doi":"10.1016/j.jcorpfin.2024.102678","DOIUrl":"10.1016/j.jcorpfin.2024.102678","url":null,"abstract":"<div><div>We examine whether firms' ESG performance is influenced by bondholder preferences. We argue that insurance companies have unique incentives to monitor bond issuers' ESG performance because insurers face enhanced exposures to ESG shocks in their balance sheets and trading operations. Consistent with this argument, we find that firms with higher bond ownership by insurance companies are associated with higher future ESG ratings. To address potential identification concerns, we test changes in bond issuers' ESG ratings following the initial bond investment by insurance companies. We find that firms' ESG performance improves after insurance companies' initial bond investment. We also find that this improvement in ESG performance is concentrated in firms with greater reliance on bond financing and investment capital from insurance companies. Our study underscores the importance of bond ownership structure in influencing corporate ESG performance.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102678"},"PeriodicalIF":7.2,"publicationDate":"2024-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142445680","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-04DOI: 10.1016/j.jcorpfin.2024.102679
Yuyuan Chang , Nicolai J. Foss , Shuping Li , Jing Xie
This article examines the role of CEOs' personal incentives in steering their firms' CSR initiatives following their compensation peers, subsequently influencing their career trajectories within their current firms. Specifically, we find that firms exhibit better corporate social responsibility (CSR) performance if their compensation peer (CP) firms demonstrated superior CSR performance in the prior year (i.e., the CP effect). To mitigate the endogeneity concern, we conduct analyses based on the termination (initiation) of CPs' peer relation with the focal firm, a benchmark test, and an instrumental variable analysis. To establish the mechanisms of internal monetary rewards from their firms and enhanced external career tournaments in the labor market, we show the CP effect is stronger if the focal company CEOs have compensation contracts specifying CSR performance targets, face a larger compensation shortfall relative to their CP counterparts, operate in closer geographical proximity to those CP CEOs, or hire more compensation consultants. Furthermore, we find that the probability and quantity of CSR contracts received by focal firms' CEOs increase with CPs' lagged CSR. CEOs receive higher compensation than those in CP firms after they deliver better CSR performance than their CPs. Overall, our paper highlights the role of CEOs' personal incentives in steering their firms' CSR initiatives, subsequently influencing their career trajectories within their current organizations.
{"title":"Compensation peer effects of corporate social responsibility","authors":"Yuyuan Chang , Nicolai J. Foss , Shuping Li , Jing Xie","doi":"10.1016/j.jcorpfin.2024.102679","DOIUrl":"10.1016/j.jcorpfin.2024.102679","url":null,"abstract":"<div><div>This article examines the role of CEOs' personal incentives in steering their firms' CSR initiatives following their compensation peers, subsequently influencing their career trajectories within their current firms. Specifically, we find that firms exhibit better corporate social responsibility (CSR) performance if their compensation peer (CP) firms demonstrated superior CSR performance in the prior year (i.e., the CP effect). To mitigate the endogeneity concern, we conduct analyses based on the termination (initiation) of CPs' peer relation with the focal firm, a benchmark test, and an instrumental variable analysis. To establish the mechanisms of internal monetary rewards from their firms and enhanced external career tournaments in the labor market, we show the CP effect is stronger if the focal company CEOs have compensation contracts specifying CSR performance targets, face a larger compensation shortfall relative to their CP counterparts, operate in closer geographical proximity to those CP CEOs, or hire more compensation consultants. Furthermore, we find that the probability and quantity of CSR contracts received by focal firms' CEOs increase with CPs' lagged CSR. CEOs receive higher compensation than those in CP firms after they deliver better CSR performance than their CPs. Overall, our paper highlights the role of CEOs' personal incentives in steering their firms' CSR initiatives, subsequently influencing their career trajectories within their current organizations.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102679"},"PeriodicalIF":7.2,"publicationDate":"2024-10-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142441186","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-10-02DOI: 10.1016/j.jcorpfin.2024.102677
Haowen Tian , Junkai Wang , Sirui Wu
This study explores how vertical common ownership reduces supply chain risk and influences creditors' decisions, focusing on the cost of loans. Findings reveal that creditors view such firms as less likely to default, evidenced by lower loan spreads. This effect is stronger for suppliers with more relationship-specific investments, weaker bargaining power, higher information asymmetry, and long-term common institutional ownership. Results remain robust through quasi-natural experiments from financial institutions' M&As, supplier-customer pair analyses, etc. We also compare vertical common ownership with the horizontal one and demonstrate its incremental contributions. Moreover, the fraction of customer sales and the institutional investors' share ownership likely influence the likelihood of vertical common ownership, with our results consistently holding under Heckman analysis. Overall, the results suggest that vertical common ownership enhances coordination and monitoring, reducing risks and creditor risk premiums. The findings may offer valuable insights into managing supply chain risks and understanding their financial implications.
{"title":"Supply chain vertical common ownership and cost of loans","authors":"Haowen Tian , Junkai Wang , Sirui Wu","doi":"10.1016/j.jcorpfin.2024.102677","DOIUrl":"10.1016/j.jcorpfin.2024.102677","url":null,"abstract":"<div><div>This study explores how vertical common ownership reduces supply chain risk and influences creditors' decisions, focusing on the cost of loans. Findings reveal that creditors view such firms as less likely to default, evidenced by lower loan spreads. This effect is stronger for suppliers with more relationship-specific investments, weaker bargaining power, higher information asymmetry, and long-term common institutional ownership. Results remain robust through quasi-natural experiments from financial institutions' M&As, supplier-customer pair analyses, etc. We also compare vertical common ownership with the horizontal one and demonstrate its incremental contributions. Moreover, the fraction of customer sales and the institutional investors' share ownership likely influence the likelihood of vertical common ownership, with our results consistently holding under Heckman analysis. Overall, the results suggest that vertical common ownership enhances coordination and monitoring, reducing risks and creditor risk premiums. The findings may offer valuable insights into managing supply chain risks and understanding their financial implications.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102677"},"PeriodicalIF":7.2,"publicationDate":"2024-10-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142428546","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-30DOI: 10.1016/j.jcorpfin.2024.102676
Ivan E. Brick , Darius Palia , Yankuo Qiao
The theoretical and empirical literature suggests that CEO might not make risky long-term investments if the CEO believes that the benefit of such investments would not materialize or is not recognized by the market until after the CEO has retired. This paper tests the predictions of the Acharya, Myers, and Rajan (2011) internal governance model to counteract the CEO’s tendency to forego such investments on a sample of voluntary CEO turnovers. We find that the optimal level of sharing of tasks between the CEO and her top-management team, the firm’s internal governance, is dependent on the CEO’s career horizon. Additionally, we find the effect of internal governance only matters for older CEOs. We also find that the closer the internal governance is to the optimal level, the smaller is the underinvestment for an older outgoing CEO. We find that the new incoming CEO divests profitably the assets acquired under good internal governance. Finally, we find that optimal internal governance is found to have positive effects on corporate innovation. Our results are robust to continuous matching by generalized propensity score and controlling for the CEO’s explicit pay-performance sensitivity, succession plan, and pay duration.
理论和实证文献表明，如果首席执行官认为此类投资的收益不会实现，或者直到首席执行官退休后才会被市场认可，那么首席执行官可能不会进行高风险的长期投资。本文以 CEO 自愿离职为样本，检验了 Acharya、Myers 和 Rajan（2011 年）的内部治理模型对抵消 CEO 放弃此类投资倾向的预测。我们发现，首席执行官与其高层管理团队之间分担任务的最佳水平，即公司的内部治理，取决于首席执行官的职业生涯期限。此外，我们发现内部治理的影响只对年长的首席执行官有影响。我们还发现，内部治理越接近最优水平，年长的离任首席执行官的投资不足就越小。我们发现，新上任的首席执行官会将在良好内部治理下获得的资产剥离，从而获利。最后，我们发现最佳内部治理对企业创新有积极影响。通过广义倾向得分进行连续匹配，并控制首席执行官明确的薪酬-绩效敏感性、继任计划和薪酬期限，我们的结果是稳健的。
{"title":"Impact of internal governance on investment policy: Evidence from CEO voluntary turnovers","authors":"Ivan E. Brick , Darius Palia , Yankuo Qiao","doi":"10.1016/j.jcorpfin.2024.102676","DOIUrl":"10.1016/j.jcorpfin.2024.102676","url":null,"abstract":"<div><div>The theoretical and empirical literature suggests that CEO might not make risky long-term investments if the CEO believes that the benefit of such investments would not materialize or is not recognized by the market until after the CEO has retired. This paper tests the predictions of the Acharya, Myers, and Rajan (2011) internal governance model to counteract the CEO’s tendency to forego such investments on a sample of voluntary CEO turnovers. We find that the optimal level of sharing of tasks between the CEO and her top-management team, the firm’s internal governance, is dependent on the CEO’s career horizon. Additionally, we find the effect of internal governance only matters for older CEOs. We also find that the closer the internal governance is to the optimal level, the smaller is the underinvestment for an older outgoing CEO. We find that the new incoming CEO divests profitably the assets acquired under good internal governance. Finally, we find that optimal internal governance is found to have positive effects on corporate innovation. Our results are robust to continuous matching by generalized propensity score and controlling for the CEO’s explicit pay-performance sensitivity, succession plan, and pay duration.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102676"},"PeriodicalIF":7.2,"publicationDate":"2024-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142445679","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-23DOI: 10.1016/j.jcorpfin.2024.102673
Steven E. Kaplan , Eugie Y. Lee
We investigate whether the Tax Cuts and Jobs Act (TCJA) impacts labor investment efficiency. By lowering the top corporate tax rate from 35% to 21%, ceteris paribus, the TCJA provides firms with a cash windfall. Based on difference-in-differences analysis using non-US based firms as a control group, we find that in the post-TCJA years, labor investment inefficiency increased for US based, but not for non-US based, firms. Further, the increase in labor investment inefficiency is concentrated among US firms with high cash holdings, suggesting that these firms face higher agency costs in the post-TCJA period. Additional analysis suggests that in the post-TCJA period, managers of high cash holding firms were seeking a quiet life. We find weak evidence that strong corporate governance mitigated this negative behavior. Overall, our findings show that tax reform can impact labor investment efficiency and should be of interest to investors, boards of directors, tax authorities, and to researchers.
{"title":"Does tax reform affect labor investment efficiency?","authors":"Steven E. Kaplan , Eugie Y. Lee","doi":"10.1016/j.jcorpfin.2024.102673","DOIUrl":"10.1016/j.jcorpfin.2024.102673","url":null,"abstract":"<div><div>We investigate whether the Tax Cuts and Jobs Act (TCJA) impacts labor investment efficiency. By lowering the top corporate tax rate from 35% to 21%, ceteris paribus, the TCJA provides firms with a cash windfall. Based on difference-in-differences analysis using non-US based firms as a control group, we find that in the post-TCJA years, labor investment inefficiency increased for US based, but not for non-US based, firms. Further, the increase in labor investment inefficiency is concentrated among US firms with high cash holdings, suggesting that these firms face higher agency costs in the post-TCJA period. Additional analysis suggests that in the post-TCJA period, managers of high cash holding firms were seeking a quiet life. We find weak evidence that strong corporate governance mitigated this negative behavior. Overall, our findings show that tax reform can impact labor investment efficiency and should be of interest to investors, boards of directors, tax authorities, and to researchers.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102673"},"PeriodicalIF":7.2,"publicationDate":"2024-09-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142428545","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-23DOI: 10.1016/j.jcorpfin.2024.102675
Po-Hsuan Hsu , Hsiao-Hui Lee , Long Yi
We propose that corporate social responsibility (CSR) investment serves as an intangible investment in stakeholder relationships to guard against external disruptions to firms' operations and tangible assets. Using a difference-in-differences setting and a database of factory locations, we show that manufacturing firms with higher CSR ratings are much less affected by major natural disasters in terms of operating performance. We then propose two mechanisms through which CSR engagement shields manufacturing firms against external disruptions: employee motivation and customer loyalty. Empirical evidence suggests that CSR helps manufacturing firms survive major natural disasters by motivating employees, which leads to higher post-disaster productivity, and keeping customers, which leads to more stable post-disaster sales.
{"title":"Corporate social responsibility and external disruptions","authors":"Po-Hsuan Hsu , Hsiao-Hui Lee , Long Yi","doi":"10.1016/j.jcorpfin.2024.102675","DOIUrl":"10.1016/j.jcorpfin.2024.102675","url":null,"abstract":"<div><div>We propose that corporate social responsibility (CSR) investment serves as an intangible investment in stakeholder relationships to guard against external disruptions to firms' operations and tangible assets. Using a difference-in-differences setting and a database of factory locations, we show that manufacturing firms with higher CSR ratings are much less affected by major natural disasters in terms of operating performance. We then propose two mechanisms through which CSR engagement shields manufacturing firms against external disruptions: employee motivation and customer loyalty. Empirical evidence suggests that CSR helps manufacturing firms survive major natural disasters by motivating employees, which leads to higher post-disaster productivity, and keeping customers, which leads to more stable post-disaster sales.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102675"},"PeriodicalIF":7.2,"publicationDate":"2024-09-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142357548","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-19DOI: 10.1016/j.jcorpfin.2024.102671
Johannes A. Barg , Wolfgang Drobetz , Sadok El Ghoul , Omrane Guedhami , Henning Schröder
This paper shows evidence of a positive relationship between institutional dual holders, who hold both equity and debt in a firm, and voluntary greenhouse gas (GHG) emission disclosure. Considering dual holders as particularly risk-sensitive institutional investors, we document that improvements in voluntary GHG emission disclosure are motivated by climate-conscious and risk-related considerations. The positive effect of institutional dual ownership is more pronounced in firms facing significant environmental risks, where disclosure enables clearer explanations and prevents exaggerated stakeholder reactions. The impact of dual ownership is also stronger in firms with poor information environments, where dual holders exploit their enhanced monitoring capacity through gathering information from both their public equity and private debt holdings. Consistent with our risk-based explanation, voluntary GHG emission disclosure reduces the cost of equity and increases firm valuation in firms with higher dual ownership.
{"title":"Institutional dual ownership and voluntary greenhouse gas emission disclosure","authors":"Johannes A. Barg , Wolfgang Drobetz , Sadok El Ghoul , Omrane Guedhami , Henning Schröder","doi":"10.1016/j.jcorpfin.2024.102671","DOIUrl":"10.1016/j.jcorpfin.2024.102671","url":null,"abstract":"<div><div>This paper shows evidence of a positive relationship between institutional dual holders, who hold both equity and debt in a firm, and voluntary greenhouse gas (GHG) emission disclosure. Considering dual holders as particularly risk-sensitive institutional investors, we document that improvements in voluntary GHG emission disclosure are motivated by climate-conscious and risk-related considerations. The positive effect of institutional dual ownership is more pronounced in firms facing significant environmental risks, where disclosure enables clearer explanations and prevents exaggerated stakeholder reactions. The impact of dual ownership is also stronger in firms with poor information environments, where dual holders exploit their enhanced monitoring capacity through gathering information from both their public equity and private debt holdings. Consistent with our risk-based explanation, voluntary GHG emission disclosure reduces the cost of equity and increases firm valuation in firms with higher dual ownership.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102671"},"PeriodicalIF":7.2,"publicationDate":"2024-09-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142536027","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-18DOI: 10.1016/j.jcorpfin.2024.102672
Marcin Borsuk , Nicolas Eugster , Paul-Olivier Klein , Oskar Kowalewski
This study examines the relationship between family firms and carbon emissions using a large cross-country dataset of 6600 non-financial firms over the period 2010–2019. We find that family firms emit less carbon than non-family firms, especially after the Paris Agreement. Several factors contribute to this outcome, including governance structure, the degree of family control, R&D spending, and the issuance of green patents. Our study also shows that despite lower carbon emissions, family firms have lower environmental scores, primarily due to their reduced public commitment to emission reduction. Both environmental scores and carbon emissions increase when non-family CEOs are appointed and when family ownership decreases, indicating that agency conflicts may influence these outcomes.
{"title":"Family firms and carbon emissions","authors":"Marcin Borsuk , Nicolas Eugster , Paul-Olivier Klein , Oskar Kowalewski","doi":"10.1016/j.jcorpfin.2024.102672","DOIUrl":"10.1016/j.jcorpfin.2024.102672","url":null,"abstract":"<div><div>This study examines the relationship between family firms and carbon emissions using a large cross-country dataset of 6600 non-financial firms over the period 2010–2019. We find that family firms emit less carbon than non-family firms, especially after the Paris Agreement. Several factors contribute to this outcome, including governance structure, the degree of family control, R&D spending, and the issuance of green patents. Our study also shows that despite lower carbon emissions, family firms have lower environmental scores, primarily due to their reduced public commitment to emission reduction. Both environmental scores and carbon emissions increase when non-family CEOs are appointed and when family ownership decreases, indicating that agency conflicts may influence these outcomes.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102672"},"PeriodicalIF":7.2,"publicationDate":"2024-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142319578","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-12DOI: 10.1016/j.jcorpfin.2024.102670
José-Miguel Gaspar , Sumingyue Wang , Liang Xu
Over the last decades, firms have been incorporating digital technologies into their operations, a process known as digitalization. Nevertheless, understanding the link between digitalization and firm performance remains challenging. We propose a new firm-level measure of digital intensity based on textual analysis of business descriptions and quarterly earnings calls. To overcome endogeneity, we use two quasi-natural experiments: the COVID-19 pandemic and shocks involving suppliers affected by U.S. natural disasters. Non-technological firms with higher pre-shock digital intensity experience higher abnormal returns, higher profitability, and higher revenue growth during the shocks. The supply chain is one of the areas through which digitalization contributes to significantly mitigate the effects of these shocks, thereby enhancing firm resilience.
{"title":"Digitalization and the performance of non-technological firms: Evidence from the COVID-19 and natural disaster shocks","authors":"José-Miguel Gaspar , Sumingyue Wang , Liang Xu","doi":"10.1016/j.jcorpfin.2024.102670","DOIUrl":"10.1016/j.jcorpfin.2024.102670","url":null,"abstract":"<div><p>Over the last decades, firms have been incorporating digital technologies into their operations, a process known as digitalization. Nevertheless, understanding the link between digitalization and firm performance remains challenging. We propose a new firm-level measure of digital intensity based on textual analysis of business descriptions and quarterly earnings calls. To overcome endogeneity, we use two quasi-natural experiments: the COVID-19 pandemic and shocks involving suppliers affected by U.S. natural disasters. Non-technological firms with higher pre-shock digital intensity experience higher abnormal returns, higher profitability, and higher revenue growth during the shocks. The supply chain is one of the areas through which digitalization contributes to significantly mitigate the effects of these shocks, thereby enhancing firm resilience.</p></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102670"},"PeriodicalIF":7.2,"publicationDate":"2024-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0929119924001329/pdfft?md5=978a1ccc5e3110ea8ae14609a1cf9d9d&pid=1-s2.0-S0929119924001329-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142238119","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-09-05DOI: 10.1016/j.jcorpfin.2024.102669
Xuedan Tao , Huabing Barbara Wang , Qian Xin , You Xu
We investigate whether and how the public revelation of tax uncertainty affects supply chain relations by utilizing an exogenous shock to tax reporting under FIN 48, which mandates the disclosure of uncertain tax benefits (UTBs). Using a difference-in-differences research design, we find that firms disclosing UTBs experience a significant decrease in sales to major customers after FIN 48 relative to firms without tax uncertainty. Further mechanism analyses suggest a risk perception channel that the disclosure heightens customers' risk perception of the suppliers: the adverse effect is more pronounced for suppliers with higher tax uncertainty or ex ante corporate risk. However, we do not find evidence for a tax morale channel that customers are concerned about sourcing from a “bad corporate citizen.” In cross-sectional analyses, we find a stronger adverse effect when customers and suppliers are less likely to engage in private information sharing or tax coordination, when suppliers disclose higher-quality UTBs, or when customers have lower tax risk tolerance or switching costs. Overall, our findings document an externality of tax disclosure from the perspectives of supply chain partners, suggesting that the disclosure of tax uncertainty provides valuable information to corporate customers and affects a firm's trade relations.
FIN 48 强制要求披露不确定税收优惠（UTBs），我们利用 FIN 48 对税务报告的外生冲击，研究公开披露税收不确定性是否以及如何影响供应链关系。通过差分研究设计，我们发现披露了不确定税收优惠的企业在 FIN 48 后对主要客户的销售额会比没有披露不确定税收优惠的企业显著下降。进一步的机制分析表明，风险感知渠道表明，信息披露提高了客户对供应商的风险感知：对于税收不确定性或事前企业风险较高的供应商，不利影响更为明显。然而，我们并没有发现税收士气渠道的证据，即客户担心从 "不良企业公民 "处采购。在横截面分析中，我们发现当客户和供应商不太可能进行私人信息共享或税务协调时，当供应商披露的UTB质量较高时，或者当客户的税务风险承受能力或转换成本较低时，不利效应会更强。总之，我们的研究结果从供应链合作伙伴的角度记录了税务披露的外部性，表明税务不确定性的披露为企业客户提供了有价值的信息，并影响了企业的贸易关系。
{"title":"Does the mandatory disclosure of suppliers' tax uncertainties affect supply chain relations?","authors":"Xuedan Tao , Huabing Barbara Wang , Qian Xin , You Xu","doi":"10.1016/j.jcorpfin.2024.102669","DOIUrl":"10.1016/j.jcorpfin.2024.102669","url":null,"abstract":"<div><p>We investigate whether and how the public revelation of tax uncertainty affects supply chain relations by utilizing an exogenous shock to tax reporting under FIN 48, which mandates the disclosure of uncertain tax benefits (UTBs). Using a difference-in-differences research design, we find that firms disclosing UTBs experience a significant decrease in sales to major customers after FIN 48 relative to firms without tax uncertainty. Further mechanism analyses suggest a risk perception channel that the disclosure heightens customers' risk perception of the suppliers: the adverse effect is more pronounced for suppliers with higher tax uncertainty or <em>ex ante</em> corporate risk. However, we do not find evidence for a tax morale channel that customers are concerned about sourcing from a “bad corporate citizen.” In cross-sectional analyses, we find a stronger adverse effect when customers and suppliers are less likely to engage in private information sharing or tax coordination, when suppliers disclose higher-quality UTBs, or when customers have lower tax risk tolerance or switching costs. Overall, our findings document an externality of tax disclosure from the perspectives of supply chain partners, suggesting that the disclosure of tax uncertainty provides valuable information to corporate customers and affects a firm's trade relations.</p></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102669"},"PeriodicalIF":7.2,"publicationDate":"2024-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142171870","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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