This paper examines how the cultural heritage of chief executive officers (CEOs) in US firms affects research and development (R&D) investment. Utilizing economically significant and unexpected R&D‐increasing events, we examine how six dimensions of CEO cultural heritage—individualism, power distance, masculinity, uncertainty avoidance, long‐term orientation, and indulgence—influence it. We find that CEOs with a high–power distance heritage are more likely to increase R&D. We confirm that this effect of CEO power distance is robust to other cultural effects, the model specification, and endogeneity issues. We conjecture that CEOs with a high–power distance heritage are more likely to increase R&D expenditures because they use their power to pursue personal objectives. Consistent with our hypothesis, we find that R&D increases made by CEOs with a high–power distance culture generate significantly lower benefits in the future, reflecting the inefficiency of these R&D investment decisions.
{"title":"CEO cultural heritage and R&D expenditures","authors":"YuSung Ha, Jangkoo Kang, K. Kwon","doi":"10.1002/ijfe.2970","DOIUrl":"https://doi.org/10.1002/ijfe.2970","url":null,"abstract":"This paper examines how the cultural heritage of chief executive officers (CEOs) in US firms affects research and development (R&D) investment. Utilizing economically significant and unexpected R&D‐increasing events, we examine how six dimensions of CEO cultural heritage—individualism, power distance, masculinity, uncertainty avoidance, long‐term orientation, and indulgence—influence it. We find that CEOs with a high–power distance heritage are more likely to increase R&D. We confirm that this effect of CEO power distance is robust to other cultural effects, the model specification, and endogeneity issues. We conjecture that CEOs with a high–power distance heritage are more likely to increase R&D expenditures because they use their power to pursue personal objectives. Consistent with our hypothesis, we find that R&D increases made by CEOs with a high–power distance culture generate significantly lower benefits in the future, reflecting the inefficiency of these R&D investment decisions.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"16 5","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140377506","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The connection between the defence spending and real growth remains a forefront subject of theoretical and empirical research. Nigeria, like many other developing nations, continues to devote numerous fiscal resources to military spending in ensuring peaceful coexistence and to attain sustainable economic growth after her independence in 1960. Because the interdependence between them has policy implications, this paper studies whether there exists asymmetric causality between them. The dataset, from World Bank database, includes long‐range historical series for military expenditure/GDP ratio and growth rate of GDP, covering 1960–2021. In exploring the empirical relations, the paper shows evidence for the symmetric Granger causality, from Toda–Yamamoto (1995) and asymmetric causality, from Hatemi‐J (2012). The standard (symmetric) identifies unidirectional causality evidence, from defence spending to the GDP per capital growth, with no retained potential feedback from real growth to defence spending. The Hatemi‐J (asymmetric) causality maintains evidence that positive shocks in the defence spending may cause a positive shock in the GDP per capital, supposing that increase perturbations to defence spending would be productive and growth‐enhancing. This causal impact is not evident for positive growth shocks. The findings support the need for policymakers to consider sustained growth targets when redesigning the military budget.
{"title":"Defence spending and real growth in an asymmetric environment: Accessing evidence from a developing economy","authors":"A. Gbadebo, F. Bekun, J. Akande, A. O. Adekunle","doi":"10.1002/ijfe.2966","DOIUrl":"https://doi.org/10.1002/ijfe.2966","url":null,"abstract":"The connection between the defence spending and real growth remains a forefront subject of theoretical and empirical research. Nigeria, like many other developing nations, continues to devote numerous fiscal resources to military spending in ensuring peaceful coexistence and to attain sustainable economic growth after her independence in 1960. Because the interdependence between them has policy implications, this paper studies whether there exists asymmetric causality between them. The dataset, from World Bank database, includes long‐range historical series for military expenditure/GDP ratio and growth rate of GDP, covering 1960–2021. In exploring the empirical relations, the paper shows evidence for the symmetric Granger causality, from Toda–Yamamoto (1995) and asymmetric causality, from Hatemi‐J (2012). The standard (symmetric) identifies unidirectional causality evidence, from defence spending to the GDP per capital growth, with no retained potential feedback from real growth to defence spending. The Hatemi‐J (asymmetric) causality maintains evidence that positive shocks in the defence spending may cause a positive shock in the GDP per capital, supposing that increase perturbations to defence spending would be productive and growth‐enhancing. This causal impact is not evident for positive growth shocks. The findings support the need for policymakers to consider sustained growth targets when redesigning the military budget.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"11 3","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140374300","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we study the return and volatility connectedness between cryptocurrencies and DeFi Tokens, considering the impact of different uncertainty indices on their connectivity. Initially, we estimate a TVP‐VAR model to obtain the total connectedness between the two markets. We find that returns on the cryptocurrencies transmit significantly larger shocks and, thus, are responsible for most variations in the majority of DeFis' returns. Then, to analyse the impact of uncertainty on total return and volatility connectedness, we use four factors, namely, Economic Policy Uncertainty (EPU), The Chicago Board Options Exchange Volatility Index (VIX), Infectious Disease Equity Market Volatility Tracker (ID‐EMV) and Geopolitical Risks (GPR). We find that except for geopolitical risks, all three measures have a positive impact on return and volatility connectedness, while GPR exerts a negative impact. Finally, we provide implications for researchers, market participants and policymakers.
{"title":"What drives the return and volatility spillover between DeFis and cryptocurrencies?","authors":"A. Assaf, Ender Demir, Oguz Ersan","doi":"10.1002/ijfe.2969","DOIUrl":"https://doi.org/10.1002/ijfe.2969","url":null,"abstract":"In this paper, we study the return and volatility connectedness between cryptocurrencies and DeFi Tokens, considering the impact of different uncertainty indices on their connectivity. Initially, we estimate a TVP‐VAR model to obtain the total connectedness between the two markets. We find that returns on the cryptocurrencies transmit significantly larger shocks and, thus, are responsible for most variations in the majority of DeFis' returns. Then, to analyse the impact of uncertainty on total return and volatility connectedness, we use four factors, namely, Economic Policy Uncertainty (EPU), The Chicago Board Options Exchange Volatility Index (VIX), Infectious Disease Equity Market Volatility Tracker (ID‐EMV) and Geopolitical Risks (GPR). We find that except for geopolitical risks, all three measures have a positive impact on return and volatility connectedness, while GPR exerts a negative impact. Finally, we provide implications for researchers, market participants and policymakers.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"27 4","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140378460","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the effect of government‐initiated enterprise environmental credit ratings on firms' bank loans. While prior research indicates that companies with superior environmental performance tend to secure more bank loans, it is crucial to acknowledge that these performance metrics predominantly rely on voluntary corporate social responsibility or environmental, social, and governance disclosures made by the firms themselves or evaluated by third‐party agencies. Consequently, the evaluation results could be biased due to incomplete information disclosure, methodologies, or systems, raising concerns among scholars about potential “greenwashing” or symbolic environmental actions. In contrast, we employ a dataset comprising 27,388 observations from 2009 to 2021, applying propensity score matching and a time‐varying difference‐in‐difference model to better discern the relationship between firms' environmental credit ratings and their ability to obtain bank loans. Our findings highlight that firms participating in environmental credit evaluation can secure more bank loans compared to non‐participating firms. This effect is especially pronounced in regions with advanced green finance development. Further analysis shows that non‐state‐owned enterprises with excellent or good environmental credit ratings receive more loans, thus mitigating ownership bias in loan distribution. Overall, our results demonstrate that mandatory government environmental credit ratings mitigate information asymmetry by enabling lenders to better understand firms' environmental information.
{"title":"Does environmental credit affect bank loans? Evidence from Chinese A‐share listed firms","authors":"Shihao Yin, Zhongguo Lin, Panni Li, Binbin Peng","doi":"10.1002/ijfe.2968","DOIUrl":"https://doi.org/10.1002/ijfe.2968","url":null,"abstract":"We investigate the effect of government‐initiated enterprise environmental credit ratings on firms' bank loans. While prior research indicates that companies with superior environmental performance tend to secure more bank loans, it is crucial to acknowledge that these performance metrics predominantly rely on voluntary corporate social responsibility or environmental, social, and governance disclosures made by the firms themselves or evaluated by third‐party agencies. Consequently, the evaluation results could be biased due to incomplete information disclosure, methodologies, or systems, raising concerns among scholars about potential “greenwashing” or symbolic environmental actions. In contrast, we employ a dataset comprising 27,388 observations from 2009 to 2021, applying propensity score matching and a time‐varying difference‐in‐difference model to better discern the relationship between firms' environmental credit ratings and their ability to obtain bank loans. Our findings highlight that firms participating in environmental credit evaluation can secure more bank loans compared to non‐participating firms. This effect is especially pronounced in regions with advanced green finance development. Further analysis shows that non‐state‐owned enterprises with excellent or good environmental credit ratings receive more loans, thus mitigating ownership bias in loan distribution. Overall, our results demonstrate that mandatory government environmental credit ratings mitigate information asymmetry by enabling lenders to better understand firms' environmental information.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"10 3","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140244419","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines whether gender diversity influences foreign merger and acquisition (M&A) premiums and outcomes in China. Consistent with agency and resource dependence theories, we find that female directors significantly reduce the acquisition premium paid for foreign targets. We show that the market responds positively in the short‐term (measured by cumulative abnormal returns) to the announcement of foreign acquisitions by firms with greater female representation in the boardroom. We further find significant evidence that acquirers' boards comprising more female directors experience value creation and better operating synergies (measured by buy‐and‐hold abnormal returns and changes in return on assets) in the long‐term following engagement in foreign M&A deals. Interestingly, after distinguishing between female independent and executive directors, we find that our previous finding on board gender diversity can be attributable to both the monitoring (independent directors) and supervisory (executive directors) roles played by female directors. We also find evidence accords with the argument of the critical mass of female directors' representation in the boardroom. Our results are robust after controlling for endogeneity issues using instrumental variables (IV), propensity score matching (PSM), Heckman, and firm fixed‐effects methods. Overall, our findings offer additional empirical support for the global concern by regulators for improving corporate governance practices by increasing female quotas in the boardroom.
{"title":"Do women in the boardroom influence foreign acquisitions' premium and outcomes? Evidence from China","authors":"Pei Chu, Mohamed Elsayed, Yousry Ahmed","doi":"10.1002/ijfe.2964","DOIUrl":"https://doi.org/10.1002/ijfe.2964","url":null,"abstract":"This paper examines whether gender diversity influences foreign merger and acquisition (M&A) premiums and outcomes in China. Consistent with agency and resource dependence theories, we find that female directors significantly reduce the acquisition premium paid for foreign targets. We show that the market responds positively in the short‐term (measured by cumulative abnormal returns) to the announcement of foreign acquisitions by firms with greater female representation in the boardroom. We further find significant evidence that acquirers' boards comprising more female directors experience value creation and better operating synergies (measured by buy‐and‐hold abnormal returns and changes in return on assets) in the long‐term following engagement in foreign M&A deals. Interestingly, after distinguishing between female independent and executive directors, we find that our previous finding on board gender diversity can be attributable to both the monitoring (independent directors) and supervisory (executive directors) roles played by female directors. We also find evidence accords with the argument of the critical mass of female directors' representation in the boardroom. Our results are robust after controlling for endogeneity issues using instrumental variables (IV), propensity score matching (PSM), Heckman, and firm fixed‐effects methods. Overall, our findings offer additional empirical support for the global concern by regulators for improving corporate governance practices by increasing female quotas in the boardroom.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"112 3","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140250605","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study empirically investigates the influence of directors' and officers' liability insurance (D&O insurance) on minority shareholders' participation in corporate governance. Using a sample from Chinese A‐share listed companies between 2011 and 2018, we find that D&O insurance can significantly decrease the participation of minority shareholders, and this conclusion remains valid after robustness checks. The mechanism analysis demonstrates that D&O insurance plays a positive role in diminishing minority shareholders' participation through the enhancement of firm performance. Further analyses suggest that the negative association between D&O insurance and minority shareholders' participation is more pronounced in firms with weaker corporate governance practices. These findings provide evidence for the supervisory governance role of D&O insurance, suggesting China should consider encouraging listed companies to purchase D&O insurance for the protection of minority shareholders.
{"title":"Directors' and officers' liability insurance and minority shareholders' participation in corporate governance","authors":"Ruigang Zhang, Runze Yang, Hanwen Huo","doi":"10.1002/ijfe.2961","DOIUrl":"https://doi.org/10.1002/ijfe.2961","url":null,"abstract":"This study empirically investigates the influence of directors' and officers' liability insurance (D&O insurance) on minority shareholders' participation in corporate governance. Using a sample from Chinese A‐share listed companies between 2011 and 2018, we find that D&O insurance can significantly decrease the participation of minority shareholders, and this conclusion remains valid after robustness checks. The mechanism analysis demonstrates that D&O insurance plays a positive role in diminishing minority shareholders' participation through the enhancement of firm performance. Further analyses suggest that the negative association between D&O insurance and minority shareholders' participation is more pronounced in firms with weaker corporate governance practices. These findings provide evidence for the supervisory governance role of D&O insurance, suggesting China should consider encouraging listed companies to purchase D&O insurance for the protection of minority shareholders.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"58 15","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140259006","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Banking is one of the highly regulated industries, where a single set of global standards is likely to play a significant role in eliminating double reporting and reducing information asymmetry. Accordingly, we use data on 98 countries over 9 years to examine whether the use of International Financial Reporting Standard (IFRS) drives bank internationalisation. The results show that the use of IFRS is positively and significantly associated with an increase in foreign investment in the banking sector by easing regulatory compliance. However, in developing countries, the benefit of IFRS increasing foreign investment banks is associated with both easing regulatory compliance and reducing information asymmetry between banks and their clients. Our results are consistent across different sub‐samplings, including EU versus non‐EU, high versus low absence, and divergence between domestic standard and IFRS. These results provide reassurance and clear evidence of how IFRS facilitates the global flow of capital, even in a highly regulated industry such as banks. The results are robust to alternative measurements of variables and endogeneity tests using the Two‐Stage Least Square, Two‐step System Generalised Method of Moments and Propensity Score Matching.
{"title":"The effect of IFRS adoption on bank internationalisation","authors":"V. Tawiah, B. Oyewo","doi":"10.1002/ijfe.2932","DOIUrl":"https://doi.org/10.1002/ijfe.2932","url":null,"abstract":"Banking is one of the highly regulated industries, where a single set of global standards is likely to play a significant role in eliminating double reporting and reducing information asymmetry. Accordingly, we use data on 98 countries over 9 years to examine whether the use of International Financial Reporting Standard (IFRS) drives bank internationalisation. The results show that the use of IFRS is positively and significantly associated with an increase in foreign investment in the banking sector by easing regulatory compliance. However, in developing countries, the benefit of IFRS increasing foreign investment banks is associated with both easing regulatory compliance and reducing information asymmetry between banks and their clients. Our results are consistent across different sub‐samplings, including EU versus non‐EU, high versus low absence, and divergence between domestic standard and IFRS. These results provide reassurance and clear evidence of how IFRS facilitates the global flow of capital, even in a highly regulated industry such as banks. The results are robust to alternative measurements of variables and endogeneity tests using the Two‐Stage Least Square, Two‐step System Generalised Method of Moments and Propensity Score Matching.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"44 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139845402","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The study investigates the role of governance (i.e., ‘voice and accountability,’ political stability/no violence, regulatory quality, government effectiveness, corruption‐control and the rule of law) in the incidence of short‐term debt services on infrastructure development in the perspective of telecommunication infrastructure and access to electricity. The focus of the study is on 52 African countries for the period 2002–2021. The generalised method of moments is employed as estimation strategy and the following findings are established. Debt service has a negative unconditional effect on access to electricity and telecommunication infrastructure. Governance dynamics moderate the negative effect of debt service on infrastructure dynamics. Effective moderation is from regulatory quality and corruption‐control for access to electricity and from government effectiveness, regulatory quality, corruption‐control and rule of law, for telecommunication infrastructure. Policy implications are discussed.
{"title":"Governance, debt service, information technology and access to electricity in Africa","authors":"Simplice A. Asongu, Sara le Roux","doi":"10.1002/ijfe.2946","DOIUrl":"https://doi.org/10.1002/ijfe.2946","url":null,"abstract":"The study investigates the role of governance (i.e., ‘voice and accountability,’ political stability/no violence, regulatory quality, government effectiveness, corruption‐control and the rule of law) in the incidence of short‐term debt services on infrastructure development in the perspective of telecommunication infrastructure and access to electricity. The focus of the study is on 52 African countries for the period 2002–2021. The generalised method of moments is employed as estimation strategy and the following findings are established. Debt service has a negative unconditional effect on access to electricity and telecommunication infrastructure. Governance dynamics moderate the negative effect of debt service on infrastructure dynamics. Effective moderation is from regulatory quality and corruption‐control for access to electricity and from government effectiveness, regulatory quality, corruption‐control and rule of law, for telecommunication infrastructure. Policy implications are discussed.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"24 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139851924","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The view that corporations have a wider focus than just maximising shareholder value has received considerable attention from practitioners, managers, and academics alike. We investigate the Q theory of corporate investment with financial frictions when management maximises stakeholder value instead of shareholder value. Different objective functions are investigated. We characterise the optimal investment and financial policy of the firm. The results show that stakeholder firms invest more than shareholder firms, that is, over invest, and an increase of stakeholder shares increases investment, except when equity issuing firms face severe informational asymmetries or severe cost of external equity. We also discuss different approaches to model investment of stakeholder firms and their implications for empirical analysis.
{"title":"On stakeholder theory and corporate investment under financial frictions","authors":"Dariya Mykhayliv, Klaus G. Zauner","doi":"10.1002/ijfe.2942","DOIUrl":"https://doi.org/10.1002/ijfe.2942","url":null,"abstract":"The view that corporations have a wider focus than just maximising shareholder value has received considerable attention from practitioners, managers, and academics alike. We investigate the Q theory of corporate investment with financial frictions when management maximises stakeholder value instead of shareholder value. Different objective functions are investigated. We characterise the optimal investment and financial policy of the firm. The results show that stakeholder firms invest more than shareholder firms, that is, over invest, and an increase of stakeholder shares increases investment, except when equity issuing firms face severe informational asymmetries or severe cost of external equity. We also discuss different approaches to model investment of stakeholder firms and their implications for empirical analysis.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"125 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139862853","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines the interplay between various cultural characteristics and the legal environment on classification shifting using a global sample that enables variability in underlying cultural characteristics across countries while controlling for heterogeneity. Given that both culture and the legal environment tend to exhibit low variability over time, our international cross‐country analysis with diverse cultural dimensions and legal frameworks enhances the robustness of our empirical findings. Our identification strategy employs several models and shows the significant impact of culture on classification shifting and the interactions between national culture and the legal environment on classification shifting behaviour, though there is variability across countries. We also find that certain traits of culture induce classification shifting. We highlight that strengthening the legal environment becomes crucial in creating an institutional framework that effectively curbs unethical practices induced by certain national culture traits and enhances transparency and accountability in financial reporting.
{"title":"How culture and legal environment affect classification shifting? Global evidence","authors":"Eric O. Boahen, Emmanuel C. Mamatzakis","doi":"10.1002/ijfe.2933","DOIUrl":"https://doi.org/10.1002/ijfe.2933","url":null,"abstract":"This study examines the interplay between various cultural characteristics and the legal environment on classification shifting using a global sample that enables variability in underlying cultural characteristics across countries while controlling for heterogeneity. Given that both culture and the legal environment tend to exhibit low variability over time, our international cross‐country analysis with diverse cultural dimensions and legal frameworks enhances the robustness of our empirical findings. Our identification strategy employs several models and shows the significant impact of culture on classification shifting and the interactions between national culture and the legal environment on classification shifting behaviour, though there is variability across countries. We also find that certain traits of culture induce classification shifting. We highlight that strengthening the legal environment becomes crucial in creating an institutional framework that effectively curbs unethical practices induced by certain national culture traits and enhances transparency and accountability in financial reporting.","PeriodicalId":371613,"journal":{"name":"International Journal of Finance & Economics","volume":"39 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139806608","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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