International Journal of Managerial Finance最新文献

Purpose

This study examines the value implications of oil price uncertainty for investors in diversified firms using a sample of 922 USA firms from 2001 to 2019.

Design/methodology/approach

Our study employs a panel dataset to examine the value implications of oil price uncertainty for diversified firm investors. We consider several alternative specifications to account for unobserved factors and measurement errors that could potentially bias our results. In particular, we use alternative measures of the excess value of diversified firms and oil price uncertainty, additional control variables, fixed-effects models, the Oster test, impact threshold for confounding variable (ITCV) analysis, two-stage least square instrumental variable (2SLS-IV) analysis and the system-GMM model.

Findings

We find that the excess value of diversified firms, relative to a benchmark portfolio of single-segment firms, increases with high oil price uncertainty. The impact of oil price uncertainty is asymmetric, as corporate diversification is value-increasing for diversified firm investors only when the volatility is due to positive oil price changes and amidst supply-driven oil price shocks. The excess value increases irrespective of diversified firms’ financial constraints and oil usage. Diversified firms become conservative in their internal capital allocations with high oil price uncertainty. Such conservatism is value-increasing for diversified firm investors, as it supports higher performance in response to oil price uncertainty.

Originality/value

Our study has three important implications: first, they are relevant to investors in understanding the portfolio value implications of oil price uncertainty. Second, they are helpful for firm managers while comprehending the value-relevant implications of internal capital allocations. Finally, our findings are policy relevant in the context of the future of diversified firms in developed markets.

Purpose

Employees play a vital role in the success of a corporation. While boards of directors are created to protect shareholders’ interests, it is unclear if these directors also ensure employee welfare. In this vein, our paper examines the relationship between board leadership structure and employee well-being.

Design/methodology/approach

The authors employ several analysis techniques, including univariate analysis, ordinary least squares (OLS) regressions, two-stage least squares (2SLS) regressions, propensity score matching methodology, the Heckman Selection model and difference-in-differences analysis. The sample comprises USA public firms for the period 1998–2018.

Findings

Our findings indicate that having an independent chairperson can significantly benefit the welfare of employees, especially for firms with overly powerful chief executive officers (CEOs) and during times of financial distress.

Originality/value

Independent leadership structure is one of the crucial board characteristics that have not been examined to explain employee welfare at firms. We find that an independent chairperson can mitigate the negative effect of overly powerful CEOs on employee benefits. Importantly, independent chairpersons are beneficial for employees in difficult times and when CEOs are busy with daily activities.

Purpose

This paper aims to investigate the relationship between uncertainty and corporate cash holdings with the moderating role of political connections.

Design/methodology/approach

We employ fixed effects estimation on a panel dataset of 669 Vietnamese listed firms over the 2010–2020 period, with one- and two-way standard error clustering. We conduct various robustness tests, including two-stage least squares/instrumental variable and generalized method of moments regressions, alternative cash holding measure, and additional controls for macroeconomic conditions and ownership types.

Findings

The effect of uncertainty on cash holdings is weakened for firms with political connections relative to those without the connections. Although general firms depend on cash flows to adjust their cash holding behavior when uncertainty increases, our findings suggest that politically connected firms do not rely on internal cash flows to accumulate cash when confronted high uncertainty.

Practical implications

Our findings on the role of political connections in moderating the relationship between cash holding and economic policy uncertainty have practical implications for policymaking. Since political connections serve as a buffer for a firm’s liquidity, firms may want to seek those connections, which can, in turn, lead to increasing informal costs and unfair business environment.

Originality/value

This is the first study investigating the role of political connections to the nexus of cash, cash flow and uncertainty, providing novel evidence regarding the less dependence on internal cash flows to save cash by politically connected firms. Second, the paper enriches the literature on the motives of cash holdings by proposing a modified agency view in the context of weak investor protection. Therefore, our findings strengthen the explanation for the positive effect of uncertainty on firms’ cash holdings in emerging markets.

Purpose

This study provides new insights into the relationship between the heterogeneity of institutional investors (IIs) and corporate tax avoidance (CTA). It also investigates whether family ownership moderates this relationship.

Design/methodology/approach

Based on a sample of 200 French-listed firms from 2008 to 2017, we use the generalized method of moment (GMM) estimator proposed by Arellano and Bover (1995) and developed by Blundell and Bond (1998) to address endogeneity and omitted variable concerns.

Findings

The results show that passive IIs are associated with an increase in the level of tax avoidance. However, active ones significantly decrease the levels of tax avoidance practices. Moreover, we show that institutional activism is not sufficient to control managerial actions, particularly in the context of controlled family businesses. The results suggest that families may expropriate the rights of minority shareholders through a controlling coalition with passive IIs.

Research limitations/implications

This study has several practical implications. First, the results are useful for policymakers who should constrain passive IIs to provide only one service (asset management). Second, this study may sensitize family owners to the need to cooperate with active IIs that are effective in monitoring the firm. In particular, families should be willing to sacrifice some of their socioemotional wealth to promote a balanced ownership structure, which is important for responsible and effective corporate governance.

Originality/value

This paper extends previous research by investigating the heterogeneity of IIs in terms of horizon, ownership and control. In addition, this paper sheds a new light on how family firms behave regarding tax avoidance practices in the presence of active and passive IIs.

Purpose

This study examines how the presence of labor unions affects a firm’s pay disparity between executives and employees and its financial statement comparability.

Design/methodology/approach

It uses firm-level labor union data in Korea and applies regression analyses to a sample of 1,776 firm-year observations from 2004 to 2008.

Findings

The authors find that unionized firms have a smaller pay disparity between executives and employees than non-unionized firms, suggesting that labor unions place pressure on the pay structure. Unionization also lowers financial statement comparability, which helps managers of unionized firms maintain information asymmetry. Further, this negative relationship between unionization and financial statement comparability is stronger in non-chaebol firms, implying that they are more motivated than chaebol firms to reduce their financial statement comparability in response to the presence of labor unions. In addition, the negative relationship between unionization and financial statement comparability is pronounced in profit-making firms, firms with less analyst following, firms with fewer foreign investors and firms in more competitive product markets.

Research limitations/implications

The finding that firms adjust comparability in response to labor unions interests regulators and policymakers, who emphasize the role of comparability in providing usefulness to information users.

Originality/value

The findings add to the existing literature on the effect of labor unions on firms' pay structures and accounting choices.

Purpose

This study investigates the association between debt overhang and carbon emissions (both direct and indirect emissions) using a sample of US publicly listed firms.

Design/methodology/approach

The study applies generalized least squares (GLS) regression analyses to a sample of 2,043 US firm-year observations over a period of 14 years from 2007 to 2020. The methods include contemporaneous effect, lagged effect, alternative measures of carbon emissions and debt overhang, intensive versus non-intensive analysis, channel analysis, firm fixed effects, change analysis, controlling for credit rating analysis, propensity score matching approach, instrumental variable analysis with industry and year fixed effect.

Findings

This study's findings reveal that the debt overhang problem increases carbon emissions. This finding holds when the authors use alternative measures of carbon emissions and debt overhang. The authors find that carbon abatement investment is a channel that is negatively impacted by debt overhang, which in turn increases carbon emissions. This study's results are robust for several endogeneity tests, including firm fixed effects, change analysis, propensity score matching approach and two-stage least squares (2SLS) instrumental variable analysis.

Practical implications

The outcome of this research has policy implications for several stakeholders, including investors, firms, market participants and regulators. This study's findings offer insights for investors and firms, helping them allocate resources effectively and make financing decisions aimed at reducing carbon emissions. Regulators and policymakers can also use the findings to formulate policies that promote alternative sustainable finance practices.

Originality/value

The outcome of this research is likely to help firms develop their understanding of the debt overhang problem and undertake strategies that yield a significant amount of funding to invest in reducing carbon emissions.

Purpose

Throughout the 21st century, US households have experienced unprecedented levels of leverage. This dynamic has been exacerbated by income shortfalls during the COVID-19 crisis. Leveraging and deleveraging decisions affect household consumption. This study investigates the effect of the dynamics of household leverage and consumption on the stock market.

Design/methodology/approach

The authors explore the relation between household leverage and consumption in the context of the consumption capital asset pricing model (CCAPM). The authors test the model's implication that leverage has a negative risk premium by transforming the asset pricing restriction into an unconditional linear factor model and estimate the model using the general method of moments procedure. The authors run time-series regressions to estimate individual stocks' exposures to leverage, and cross-sectional regressions to investigate the leverage risk premium.

Findings

The authors show that shocks to household debt have strong and lasting effects on consumption growth. The authors extend the CCAPM to accommodate this effect and find, using various test assets, a negative risk premium associated with household deleveraging. Looking at individual stocks the authors show that the deleveraging risk premium is not explained by well-known risk factors.

Originality/value

This paper contributes to the literature on the role of leverage in economics and finance by establishing a relation between household leverage and spending decisions. The authors provide novel evidence that households' leveraging and deleveraging decisions can be a fundamental and influential force in determining asset prices. Further, this paper argues that household leverage might explain the small, persistent, and predictable component in consumption growth hypothesised in the long-run risk asset pricing literature.

Purpose

This study examines the effect of stable institutional investors on firms' product quality failures. Furthermore, the authors investigate the channels through which institutional ownership stability enhances product quality management.

Design/methodology/approach

This study uses probit, ordered probit and negative binomial regression frameworks to investigate the research questions. In addition, the authors utilize the three-stage least-squares to address the endogeneity issues.

Findings

Using a sample of product recall incidents from 2012 to 2021, the authors find that firms with more stable institutional ownership have a lower probability, frequency and severity of recall incidents and adopt a proactive product recall strategy. Institutional investors with significant and persistent holdings improve quality management by reducing overinvestment and the use of option-linked and relative performance executive compensations. Furthermore, the influence of stable institutional owners on product quality failures is more pronounced in firms with low managerial ability and specialist CEOs. Lastly, the empirical evidence demonstrates that stable holdings by active investors have a more substantial impact on reducing product recalls than passive and other stable institutional holdings.

Originality/value

This study is the first to examine the impact of institutional ownership stability on firms' product recalls. The authors contribute to the literature on the benefits of stable institutional ownership on firm outcomes and the determinants of product quality failures.