Journal of Business Finance & Accounting最新文献

We examine implications from the expansion of private equity (PE) firms into the collateralized loan obligation (CLO) (i.e., leveraged lending) business. Due to similarities in the investment universes of CLO managers and PE firms, asset managers running both of them frequently hold debt and equity claims of the same company. Our results indicate lower credit costs for these companies through the mitigation of shareholder–creditor agency conflicts. The lower funding costs imply increased equity returns for the sponsoring PE firms. In addition, our findings suggest that PE-affiliated CLO managers benefit from informed trading in the secondary leveraged loan market.

We investigate whether generalist chief executive officers (CEOs), that is, CEOs who gain transferable skills across firms and industries, have less incentive to hoard bad news. To address endogeneity concerns stemming from firm–CEO matching, we deploy a difference-in-differences method utilizing exogenous CEO turnovers, propensity score matching and entropy balancing matching methods, and Oster's coefficient stability test. Supporting our conjecture, we find a negative relation between CEOs’ general ability index (GAI) and future stock price crash risk. The effect of CEOs’ GAI on crash risk is stronger when labor demand is stronger and when firms have more agency conflicts. Our analysis further suggests that generalist CEOs attenuate crash risk by increasing conditional accounting conservatism and reducing real earnings management. Taken together, our findings highlight the role of CEOs’ general human capital in increasing their tolerance for failure and mitigating the agency problem.

We study the effect of tax cuts on the pay dispersion between firms’ executives and rank-and-file employees. Using the 2009 value-added tax (VAT) reform in China as a quasi-experimental setting, we find that tax cuts are associated with increased vertical pay dispersion, which is an unintentional consequence. We also find that managerial power intensifies the effect of tax cuts on vertical pay dispersion, consistent with the view that the increase in pay dispersion is due to managerial rent extraction. Furthermore, our results are not driven by executives’ higher pay-for-performance sensitivity than rank-and-file employees. In addition, we find that the VAT reform significantly increases pay dispersion driven by noneconomic factors but has no significant impact on dispersion driven by economic factors. Overall, our results support the rent-extraction channel for the effect of tax cuts on income inequality.

This study examines the effect of the US–China trade tensions on the corporate social responsibility (CSR) performance of the Chinese suppliers most affected by the 2018 US tariff surges. Using a difference-in-differences approach, we find that Chinese suppliers with direct US corporate customers experience a significant decline in CSR performance, compared with their peers without direct US corporate customers. We also show that the adverse effect of tariff surges on Chinese suppliers’ CSR performance is concentrated among those with a strong cost leadership strategy. However, the CSR performance of Chinese suppliers that have direct US corporate customers with high CSR awareness is not affected by the tariff surges. Further analyses reveal that the negative effects of the trade tensions on CSR performance are felt most strongly by the employees of Chinese suppliers. Taken together, despite the challenges posed by the deglobalization wave to the diffusion of CSR across global supply chains, the increasing demand for CSR involvement from US corporate customers can exert significant pressure on Chinese suppliers’ CSR performance.

This paper re-examines corporate dividend payout policy by focusing on how investors evaluate dividend cuts. Our focus is to understand why despite the documented on average negative market response, many dividend-cutting firms experience a positive market response. We juxtapose a well-established literature on corporate payout policies with the literature on the role of prior information in investor evaluation of newly arrived information and document that the market responds positively to dividend cuts when firms have positive investment opportunity sets. Our results support the primary thesis that not all dividend cuts are bad news—it depends. We validate this result by documenting that firms cutting dividends in the presence of investment opportunities do make significant investments such as capital expenditures and merger and acquisition activities in future years. Furthermore, we also find that future operating profitability is higher for dividend-cutting firms with relatively higher investment opportunities. We also document that among dividend-cutting firms, there is a statistically significant difference in the buy-and-hold returns for up to 2 years, between firms with high versus low investment opportunities. This provides support for the economic significance of our results. These results provide new evidence on how investors interpret corporate payout policies to distinguish among dividend cuts.

We examine the effect of media coverage of corporate environmental activities on corporate green innovation. Using a large sample of corporate news coverage over the period 2001–2019, we find a positive relationship between green media coverage and the green innovation of a corporation but a negative one between nongreen media coverage and green innovation. These results are robust to a battery of sensitivity tests, including the instrumental approach and propensity score matching method. We examine and verify two well-documented general channels through which the media influences corporate behaviors, namely, the financial constraint mitigation and external governance. More importantly, we examine channels specifically related to green media coverage and find that green media coverage strengthens the effect of pressure imposed by the government and the public for green innovation. Taken together, our results suggest that the media plays a distinctive role in green innovation through its particular attention to the environment.

We examine whether and to what extent the personal communication of corporate information by individual managers is affected by their personal preferences for impression management. Using earnings conference calls as a setting in which to observe individual managers’ personal communication and controlling for firm-specific and manager-specific factors, we document that the communication style of managers who sell corporate stock shortly after the call is significantly more optimistic than that of the nonselling manager who participates in the same call. The effect is more pronounced in the less scripted and more flexible question and answer section and is more likely to emerge from Chief Financial Officer (CFO) than from Chief Executive Officer (CEO) communications. Taken together, our findings suggest that differences in individual communication styles are not only affected by personality and career backgrounds of individual managers but rather can also emerge from managers’ conscious or unconscious preferences for impression management.

Using energy firm data and the 1997 introduction of weather derivatives as a natural experiment, we document an average 21-basis-point interest reduction in bank loans after borrowers hedge with weather derivatives. This saving increases among borrowers with higher risk or less complex financial reports, and during more uncertain market conditions or when investors pay more attention to climate risks. Our results are robust to endogeneity-corrected methods. Hedging firms are more willing to pledge collateral, accept stricter covenants and exhibit lower risks and a lower likelihood of covenant violations within 1 year following loan origination. We also find hedging firms have lower bond yields and a lower bank debt ratio, indicating that the benefits from hedging with weather derivatives extend to the public debt market. Overall, our findings demonstrate important financial implications of hedging using weather derivatives.

This paper examines the effect of environmental policy stringency (EPS) on audit pricing. By exploiting the exogenous variation in environmental policies across 26 countries, we find that firms in countries with more stringent environmental policies incur lower audit fees. The inverse association is more pronounced in common law countries, in countries with a higher level of public enforcement of regulations and in countries with more investor protection. The lower audit fees are also more prominent for firms that are followed by more analysts and firms that have a greater institutional ownership. Furthermore, we find that firms in countries with strong regulations are better and more innovative at managing environmental risk, which implies that better environmental performance of the firms following stronger regulations could lower business risks and thus decrease audit fees. Overall, our findings suggest that compliant firms benefit from EPS.

We document that firms in competitive industries experience significantly more deterioration in financial reporting quality after a reduction in analyst coverage due to brokerage closures or mergers, as compared to firms in noncompetitive industries. Most of the effects are mainly driven by firms with smaller initial analyst coverage, lower institutional ownership and greater financial constraints. Importantly, we further show that after brokerage exits, managerial slack increases more for firms in noncompetitive than competitive industries. Consistent with the notion that agency manifestation can take different forms, we provide evidence that competition may curtail some agency issues, such as managerial slack, while also exacerbating other agency issues, such as financial misreporting.