Pub Date : 2023-09-26DOI: 10.1108/ijmf-08-2022-0355
Nam Hoang Le, Zhe Li, Megan Ramsey
Purpose The purpose of this study is to examine the relationships between chief executive officers (CEOs) with military service and firm dividend and cash holding decisions. Design/methodology/approach The authors use a sample of Standard and Poor's (S&P) 1500 firms in the USA over a sample period from 1999 to 2017 and a panel data approach, as well as instrumental variable (IV)analysis. The models control for firm characteristics as well as industry and year-fixed effects. Findings The results show CEOs with military service are associated with higher total payout and less cash. Higher dividends appear to drive the total payout result. When cash holdings are split into pure cash and short-term investments, the reduction in cash holdings is driven by a reduction in pure cash. The findings are more pronounced for powerful CEOs and CEOs with low labor mobility. Military CEOs are also associated with less risk, measured by stock return volatility and return on assets (ROA) volatility. Originality/value Overall, the results are consistent with military CEOs implementing conservative policies that reduce firm risk, curtailing the demand for precautionary cash and reducing the necessity to forego dividend payouts.
{"title":"Military CEOs and firm dividends and cash holdings","authors":"Nam Hoang Le, Zhe Li, Megan Ramsey","doi":"10.1108/ijmf-08-2022-0355","DOIUrl":"https://doi.org/10.1108/ijmf-08-2022-0355","url":null,"abstract":"Purpose The purpose of this study is to examine the relationships between chief executive officers (CEOs) with military service and firm dividend and cash holding decisions. Design/methodology/approach The authors use a sample of Standard and Poor's (S&P) 1500 firms in the USA over a sample period from 1999 to 2017 and a panel data approach, as well as instrumental variable (IV)analysis. The models control for firm characteristics as well as industry and year-fixed effects. Findings The results show CEOs with military service are associated with higher total payout and less cash. Higher dividends appear to drive the total payout result. When cash holdings are split into pure cash and short-term investments, the reduction in cash holdings is driven by a reduction in pure cash. The findings are more pronounced for powerful CEOs and CEOs with low labor mobility. Military CEOs are also associated with less risk, measured by stock return volatility and return on assets (ROA) volatility. Originality/value Overall, the results are consistent with military CEOs implementing conservative policies that reduce firm risk, curtailing the demand for precautionary cash and reducing the necessity to forego dividend payouts.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134885445","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}
Pub Date : 2023-09-15DOI: 10.1108/ijmf-02-2023-0094
Jan Voon, Yiu Chung Ma
Purpose This paper contributes to the literature as follows. First, it examines if option and stock compensations raise creditor's risk, and which one is more important than the other. Second, it explores if CEO's compensation interacts with CEO overconfidence to raise creditor's risk. Third, it investigates how banks use different loan terms to alleviate their credit risk. Design/methodology/approach This study used advanced regression analysis and use of generalized methods of moment methodology. Findings The results show that option compensation is more important than stock compensation in raising credit risk; option compensation interacts with CEO overconfidence, giving rise to a much higher credit risk; and covenant usage is more important than other loan contract terms in mitigating credit risk given that covenant use could not be substituted away by using other loan contract terms such as increasing interest rate, reducing principal or shortening loan duration. This paper has practical implications for credit markets. Research limitations/implications The main implication is that hand-collect data are available up to 2010. Practical implications It informs creditors the potential sources of loan risk emanating from option rather than stock incentives; it informs creditors that option incentive interacts with CEO overconfidence rendering the credit risk bigger than expected, and it informs creditors the importance of using covenants vis-à-vis other loan contract terms for mitigating compensation and overconfidence risk. Social implications Banks are alerted to the risk due to the interaction between overconfidence and compensations, implying that overconfident managers remunerated with options compensations are more risky than overconfident managers who are not remunerated as such. Originality/value This paper is original: (1) The authors show that option compensation is more risky than stock compensation from viewpoint of creditors. This has not been assessed. (2) Interaction between managerial compensation and managerial overconfidence has not been assessed before. (3) Use of different loan contract terms to alleviate risk from overconfident managers (who are prone to over investment but who are innovative according to the literature) has not been evaluated.
{"title":"Compensations, overconfidence and use of loan terms","authors":"Jan Voon, Yiu Chung Ma","doi":"10.1108/ijmf-02-2023-0094","DOIUrl":"https://doi.org/10.1108/ijmf-02-2023-0094","url":null,"abstract":"Purpose This paper contributes to the literature as follows. First, it examines if option and stock compensations raise creditor's risk, and which one is more important than the other. Second, it explores if CEO's compensation interacts with CEO overconfidence to raise creditor's risk. Third, it investigates how banks use different loan terms to alleviate their credit risk. Design/methodology/approach This study used advanced regression analysis and use of generalized methods of moment methodology. Findings The results show that option compensation is more important than stock compensation in raising credit risk; option compensation interacts with CEO overconfidence, giving rise to a much higher credit risk; and covenant usage is more important than other loan contract terms in mitigating credit risk given that covenant use could not be substituted away by using other loan contract terms such as increasing interest rate, reducing principal or shortening loan duration. This paper has practical implications for credit markets. Research limitations/implications The main implication is that hand-collect data are available up to 2010. Practical implications It informs creditors the potential sources of loan risk emanating from option rather than stock incentives; it informs creditors that option incentive interacts with CEO overconfidence rendering the credit risk bigger than expected, and it informs creditors the importance of using covenants vis-à-vis other loan contract terms for mitigating compensation and overconfidence risk. Social implications Banks are alerted to the risk due to the interaction between overconfidence and compensations, implying that overconfident managers remunerated with options compensations are more risky than overconfident managers who are not remunerated as such. Originality/value This paper is original: (1) The authors show that option compensation is more risky than stock compensation from viewpoint of creditors. This has not been assessed. (2) Interaction between managerial compensation and managerial overconfidence has not been assessed before. (3) Use of different loan contract terms to alleviate risk from overconfident managers (who are prone to over investment but who are innovative according to the literature) has not been evaluated.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":"111 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135355137","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}
Pub Date : 2023-09-05DOI: 10.1108/ijmf-06-2023-0299
Hoàng-Long Phan, Ralf Zurbruegg
PurposeThis paper examines how a firm's hierarchical complexity, which is determined by the way it organizes its subsidiaries across the hierarchical levels, can impact its stock price crash risk.Design/methodology/approachThe authors employ a measure of hierarchical complexity that captures the depth and breadth of how subsidiaries are organized within a firm. This measure is calculated using information about firms' subsidiaries extracted from the Bureau van Dijk (BvD) database that allows the authors to construct each firm's hierarchical structure. The data sample includes 2,461 USA firms for the period from 2012 to 2017 (11,006 firm-year observations). Univariate tests and panel regression are used for the main analysis. Two-stage-least-squares (2SLS) instrumental variable regression and various other tests are employed for robustness check.FindingsThe results show a positive relationship between hierarchical complexity and stock price crash risk. This relationship is amplified in firms with a greater number of subsidiaries that are hierarchically distanced from the parent company as well as in firms with a greater number of foreign subsidiaries in countries with weaker rule of law.Originality/valueThis paper is the first to investigate the impact hierarchical complexity has on crash risk. The results highlight the role that a firm's organizational structure can have on asset pricing behavior.
本文考察了公司的层次复杂性如何影响其股价崩盘风险，这是由它在层次层次上组织子公司的方式决定的。设计/方法/方法作者采用了一种层次复杂性的度量方法，该方法捕捉了子公司在公司内部组织的深度和广度。这一措施是使用从Bureau van Dijk (BvD)数据库中提取的公司子公司信息来计算的，该数据库允许作者构建每个公司的层次结构。数据样本包括2012年至2017年期间的2,461家美国公司(11,006家公司年度观察)。主要分析采用单变量检验和面板回归。采用两阶段最小二乘(2SLS)工具变量回归和各种其他检验进行稳健性检验。结果表明，层次复杂性与股价崩盘风险之间存在正相关关系。这种关系在拥有更多子公司的公司中被放大，这些子公司在等级上与母公司保持距离，以及在法治较弱的国家拥有更多外国子公司的公司中被放大。原创性/价值本文首次研究了层次复杂性对碰撞风险的影响。研究结果强调了企业组织结构对资产定价行为的影响。
{"title":"Can a firm's hierarchical complexity affect its stock price behavior? Evidence from stock price crash risk","authors":"Hoàng-Long Phan, Ralf Zurbruegg","doi":"10.1108/ijmf-06-2023-0299","DOIUrl":"https://doi.org/10.1108/ijmf-06-2023-0299","url":null,"abstract":"PurposeThis paper examines how a firm's hierarchical complexity, which is determined by the way it organizes its subsidiaries across the hierarchical levels, can impact its stock price crash risk.Design/methodology/approachThe authors employ a measure of hierarchical complexity that captures the depth and breadth of how subsidiaries are organized within a firm. This measure is calculated using information about firms' subsidiaries extracted from the Bureau van Dijk (BvD) database that allows the authors to construct each firm's hierarchical structure. The data sample includes 2,461 USA firms for the period from 2012 to 2017 (11,006 firm-year observations). Univariate tests and panel regression are used for the main analysis. Two-stage-least-squares (2SLS) instrumental variable regression and various other tests are employed for robustness check.FindingsThe results show a positive relationship between hierarchical complexity and stock price crash risk. This relationship is amplified in firms with a greater number of subsidiaries that are hierarchically distanced from the parent company as well as in firms with a greater number of foreign subsidiaries in countries with weaker rule of law.Originality/valueThis paper is the first to investigate the impact hierarchical complexity has on crash risk. The results highlight the role that a firm's organizational structure can have on asset pricing behavior.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48853358","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}
Pub Date : 2023-09-04DOI: 10.1108/ijmf-01-2023-0030
Cong Wang, Yifan Lu
PurposeThis study aims to provide empirical evidence on the relationship between formal institutions and stock price crash risk from a global perspective.Design/methodology/approachThis paper uses data of 35,468 firms from 205 developing and developed countries over the years 1987–2019 and address the endogeneity issue by employing the Mundlak random effects estimator.FindingsThe authors find a significant negative impact of institution quality on stock price crash risk (i.e. better institutions reduce crash risk), after controlling for common determinants of crash risk such as leverage, return on asset, firm size, investment, etc. as well as macro factors such as GDP growth. This effect is robust to different measures of crash risk and sub-indicators of institutions quality. In addition, the authors also find this effect to be universally present in economies characterized by different levels of income.Originality/valueTo the best of the authors' knowledge, there's no known study that explores the potential causal relationship between institution quality and stock price crash risk. Therefore, the research topic in this study is original and can contribute significantly to the existing literature.
{"title":"Institution quality and stock price crash risk: a global perspective","authors":"Cong Wang, Yifan Lu","doi":"10.1108/ijmf-01-2023-0030","DOIUrl":"https://doi.org/10.1108/ijmf-01-2023-0030","url":null,"abstract":"PurposeThis study aims to provide empirical evidence on the relationship between formal institutions and stock price crash risk from a global perspective.Design/methodology/approachThis paper uses data of 35,468 firms from 205 developing and developed countries over the years 1987–2019 and address the endogeneity issue by employing the Mundlak random effects estimator.FindingsThe authors find a significant negative impact of institution quality on stock price crash risk (i.e. better institutions reduce crash risk), after controlling for common determinants of crash risk such as leverage, return on asset, firm size, investment, etc. as well as macro factors such as GDP growth. This effect is robust to different measures of crash risk and sub-indicators of institutions quality. In addition, the authors also find this effect to be universally present in economies characterized by different levels of income.Originality/valueTo the best of the authors' knowledge, there's no known study that explores the potential causal relationship between institution quality and stock price crash risk. Therefore, the research topic in this study is original and can contribute significantly to the existing literature.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43035125","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}
Pub Date : 2023-08-30DOI: 10.1108/ijmf-12-2022-0551
G. M. Wali Ullah, Isma Khan, M. Abdullah
PurposeThis study aims to investigate how a firm's management team's capacity to efficiently use its resources affects the firm's exposure to climate change. Specifically, the authors investigate the intriguing question – does managerial ability affect a firm's climate change exposure?Design/methodology/approachThe authors use an unbalanced panel dataset of 4,230 US based firms listed on Compustat from 2002–2019 and test the hypothesis by panel regression analysis. To mitigate endogeneity concerns, difference-in-differences and instrumental variable approaches are used.FindingsThe baseline analysis shows a negative, statistically significant impact of managerial ability on climate change exposure. The findings hold after controlling for endogeneity using two-stage least squares regression and difference-in-differences tests. The authors find the negative effect is stronger for managers engaged in socially responsible activities, and after climate change issues receiving greater public awareness following the 2006 release of the Stern Review and the 2016 signing of the Paris Accord.Research limitations/implicationsMotivated by the resource-based theory and the natural resource-based view of the firm model, the empirical results support the view that greater managerial ability protects the firm against environmental challenges through efficient use of firm resources. Compared with traditional climate change measures that are plagued by disclosure issues, the use of the Sautner, Van Lent, Vilkov and Zhang's machine learning based dataset utilizing earning conference calls provides stronger, robust findings that will be useful to management and investors in environmental performance assessments.Originality/valueMotivated by the resource-based theory and the natural resource-based view of the firm model, the empirical results support the view that greater managerial ability protects the firm against environmental challenges through efficient use of firm resources. Compared with traditional climate change measures that are plagued by disclosure issues, the use of the machine learning based dataset utilizing earning conference calls provides stronger, robust findings that will be useful to management and investors in environmental performance assessments.
{"title":"Managerial ability and climate change exposure","authors":"G. M. Wali Ullah, Isma Khan, M. Abdullah","doi":"10.1108/ijmf-12-2022-0551","DOIUrl":"https://doi.org/10.1108/ijmf-12-2022-0551","url":null,"abstract":"PurposeThis study aims to investigate how a firm's management team's capacity to efficiently use its resources affects the firm's exposure to climate change. Specifically, the authors investigate the intriguing question – does managerial ability affect a firm's climate change exposure?Design/methodology/approachThe authors use an unbalanced panel dataset of 4,230 US based firms listed on Compustat from 2002–2019 and test the hypothesis by panel regression analysis. To mitigate endogeneity concerns, difference-in-differences and instrumental variable approaches are used.FindingsThe baseline analysis shows a negative, statistically significant impact of managerial ability on climate change exposure. The findings hold after controlling for endogeneity using two-stage least squares regression and difference-in-differences tests. The authors find the negative effect is stronger for managers engaged in socially responsible activities, and after climate change issues receiving greater public awareness following the 2006 release of the Stern Review and the 2016 signing of the Paris Accord.Research limitations/implicationsMotivated by the resource-based theory and the natural resource-based view of the firm model, the empirical results support the view that greater managerial ability protects the firm against environmental challenges through efficient use of firm resources. Compared with traditional climate change measures that are plagued by disclosure issues, the use of the Sautner, Van Lent, Vilkov and Zhang's machine learning based dataset utilizing earning conference calls provides stronger, robust findings that will be useful to management and investors in environmental performance assessments.Originality/valueMotivated by the resource-based theory and the natural resource-based view of the firm model, the empirical results support the view that greater managerial ability protects the firm against environmental challenges through efficient use of firm resources. Compared with traditional climate change measures that are plagued by disclosure issues, the use of the machine learning based dataset utilizing earning conference calls provides stronger, robust findings that will be useful to management and investors in environmental performance assessments.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48460854","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}
Pub Date : 2023-08-25DOI: 10.1108/ijmf-06-2022-0254
Primrose Gurira
PurposeThe purpose of this study is to explore the impact of cost transparency introduced by the Remittance Prices Worldwide (RPW) online transaction cost comparison tool on remittance inflows of remittance recipient countries in emerging economies.Design/methodology/approachPanel fixed-effect model was employed to test the hypothesis focussing on the period five years before and five years after the adoption of the RPW tool. Macroeconomic determinants of international remittances were also included in the model, and the study focused on 115 emerging economies.FindingsThe econometric results reveal that financial development, gross domestic product (GDP) and inflation encourage remittance inflows, whereas interest rate and age dependency ratio discourage remittances. Political stability and migrant stock seem not to influence remittances flowing into emerging markets.Originality/valueEmpirical evidence corroborates the hypothesis that an increase in cost transparency boosts remittance flows. The findings suggest cost transparency is another lever for policymakers to target in boosting remittance flows.
{"title":"The impact of international money transfer cost transparency on remittance flows to emerging economies","authors":"Primrose Gurira","doi":"10.1108/ijmf-06-2022-0254","DOIUrl":"https://doi.org/10.1108/ijmf-06-2022-0254","url":null,"abstract":"PurposeThe purpose of this study is to explore the impact of cost transparency introduced by the Remittance Prices Worldwide (RPW) online transaction cost comparison tool on remittance inflows of remittance recipient countries in emerging economies.Design/methodology/approachPanel fixed-effect model was employed to test the hypothesis focussing on the period five years before and five years after the adoption of the RPW tool. Macroeconomic determinants of international remittances were also included in the model, and the study focused on 115 emerging economies.FindingsThe econometric results reveal that financial development, gross domestic product (GDP) and inflation encourage remittance inflows, whereas interest rate and age dependency ratio discourage remittances. Political stability and migrant stock seem not to influence remittances flowing into emerging markets.Originality/valueEmpirical evidence corroborates the hypothesis that an increase in cost transparency boosts remittance flows. The findings suggest cost transparency is another lever for policymakers to target in boosting remittance flows.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-08-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45710955","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}
Pub Date : 2023-08-14DOI: 10.1108/ijmf-02-2023-0092
Christiana Osei Bonsu, Chelsea Liu, Alfred Yawson
PurposeThe role of chief executive officer (CEO) personal characteristics in shaping corporate policies has attracted increasing academic attention in the past two decades. In this review, the authors synthesize extant research on CEO attributes by reviewing 232 articles published in 29 journals from the accounting, finance and management literature. This review provides an overview of existing findings, highlights current trends and interdisciplinary differences in research approaches and identifies potential avenues for future research.Design/methodology/approachTo review the literature on CEO attributes, the authors manually collected peer-reviewed articles in accounting, finance and management journals from 2000 to 2021. The authors conducted in-depth analysis of each paper and manually recorded the theories, data sources, country of study, study period, measures of CEO attributes and dependent variables. This procedure helped the authors group the selected articles into themes and sub-themes. The authors compared the findings in various disciplines and provided direction for future research.FindingsThe authors highlight the role of CEO personal attributes in influencing corporate decision-making and firm outcomes. The authors categorize studies of CEO traits into three main research themes: (1) demographic attributes and experience (including age, gender, culture, experience, education); (2) CEO interactions with others (social and political networks) and (3) underlying attributes (including personality, values and ideology). The evidence shows that CEO characteristics significantly affect a wide range of specific corporate policies that serve as mechanisms through which individual CEOs determine firm success and performance.Practical implicationsCEO selection is one of the most crucial decisions made by corporations. The study findings provide valuable insights to corporate executives, boards, investors and practitioners into how CEOs’ personal characteristics can impact future firm decisions and outcomes that can, in turn, inform the high-stake process of CEO recruitment and selection. The study findings have significant practical implications for corporations, such as contributing to executive training programs, to assist executives and directors attain a greater level of self-awareness.Originality/valueBuilding on the theoretical foundation of upper echelons theory, the authors offer an integrated theoretical framework to consolidate existing empirical research on the impacts of CEO personal attributes on firm outcomes across accounting and finance (A&F) and management literature. The study findings provide a roadmap for scholars to bridge the interdisciplinary divide between A&F and management research. The authors advocate a more holistic and multifaceted approach to examining CEOs, each of whom embodies a myriad of personal characteristics that comprise their unique identity. The study findings encourage future researchers to expand t
{"title":"The impact of CEO attributes on corporate decision-making and outcomes: a review and an agenda for future research","authors":"Christiana Osei Bonsu, Chelsea Liu, Alfred Yawson","doi":"10.1108/ijmf-02-2023-0092","DOIUrl":"https://doi.org/10.1108/ijmf-02-2023-0092","url":null,"abstract":"PurposeThe role of chief executive officer (CEO) personal characteristics in shaping corporate policies has attracted increasing academic attention in the past two decades. In this review, the authors synthesize extant research on CEO attributes by reviewing 232 articles published in 29 journals from the accounting, finance and management literature. This review provides an overview of existing findings, highlights current trends and interdisciplinary differences in research approaches and identifies potential avenues for future research.Design/methodology/approachTo review the literature on CEO attributes, the authors manually collected peer-reviewed articles in accounting, finance and management journals from 2000 to 2021. The authors conducted in-depth analysis of each paper and manually recorded the theories, data sources, country of study, study period, measures of CEO attributes and dependent variables. This procedure helped the authors group the selected articles into themes and sub-themes. The authors compared the findings in various disciplines and provided direction for future research.FindingsThe authors highlight the role of CEO personal attributes in influencing corporate decision-making and firm outcomes. The authors categorize studies of CEO traits into three main research themes: (1) demographic attributes and experience (including age, gender, culture, experience, education); (2) CEO interactions with others (social and political networks) and (3) underlying attributes (including personality, values and ideology). The evidence shows that CEO characteristics significantly affect a wide range of specific corporate policies that serve as mechanisms through which individual CEOs determine firm success and performance.Practical implicationsCEO selection is one of the most crucial decisions made by corporations. The study findings provide valuable insights to corporate executives, boards, investors and practitioners into how CEOs’ personal characteristics can impact future firm decisions and outcomes that can, in turn, inform the high-stake process of CEO recruitment and selection. The study findings have significant practical implications for corporations, such as contributing to executive training programs, to assist executives and directors attain a greater level of self-awareness.Originality/valueBuilding on the theoretical foundation of upper echelons theory, the authors offer an integrated theoretical framework to consolidate existing empirical research on the impacts of CEO personal attributes on firm outcomes across accounting and finance (A&F) and management literature. The study findings provide a roadmap for scholars to bridge the interdisciplinary divide between A&F and management research. The authors advocate a more holistic and multifaceted approach to examining CEOs, each of whom embodies a myriad of personal characteristics that comprise their unique identity. The study findings encourage future researchers to expand t","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-08-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48975345","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}
Pub Date : 2023-08-03DOI: 10.1108/ijmf-12-2022-0564
Tanveer Hussain, Abongeh A. Tunyi, Geofry Areneke
PurposeThis paper aims to explore the value of geographic diversification in the context of deglobalization, drawing evidence from a quasi-natural experiment – the Brexit referendum that took place on 23 June 2016 in the UK.Design/methodology/approachThis study applies an event study methodology to estimate the impact of the Brexit vote on a cross-section of firms with varying levels of geographic diversification – undiversified UK firms, UK firms with significant operations in the European Union (EU) and globally diversified UK firms. This study deploys a Heckman two-stage regression approach to address sample selection bias.FindingsThis study finds that undiversified UK firms experienced negative cumulative abnormal returns (CARs) around the Brexit referendum. The value of UK firms with majority sales within the UK declined by 0.9 percentage points, on average, in the three days centred on the Brexit referendum. In contrast, UK firms that are globally diversified, with the majority of sales within the EU are unaffected, while diversified firms in the rest of the world generated positive CARs of 1.8 percentage points over the same period. These results are robust to firm characteristics, selection bias and alternative measures of CARs and diversification.Research limitations/implicationsThis study is subject to some limitations that open avenues for future work. There are a few available proxies of diversification and further work on developing other proxies is much needed. Further work may also examine the long-term impact of diversification on UK firms. This study considered Brexit as a quasi-natural experiment, and this study could be applied to other deglobalization events like COVID-19 and can enhance the generalizability of diversification strategy in the deglobalized world. Findings may stimulate future work to explore how another form of diversification – product diversification has affected firm returns around Brexit. Finally, this study has focused on the UK as its base case. It may be interesting to corroborate the findings by exploring the impact of Brexit on European firms, who hitherto Brexit, had some operations in the UK.Practical implicationsThis work offers some insights for policymakers and regulators around the impact of deglobalization on local firms. Findings suggest that these trends significantly negatively impact the most vulnerable firms (smaller firms with less global reach), while their larger counterparts with significant global reach might be insulated. This finding is important for determining the nature of support needed by different firms in times of deglobalization. The work also offers insights to managers of firms operating in countries where there are real prospects of deglobalization. Specifically, the work highlights the importance of geographic diversification when free movement of goods, services and people is restricted.Originality/valueThis study shows that a certain group of globally diversified firms
{"title":"Deglobalization and the value of geographic diversification: evidence from Brexit","authors":"Tanveer Hussain, Abongeh A. Tunyi, Geofry Areneke","doi":"10.1108/ijmf-12-2022-0564","DOIUrl":"https://doi.org/10.1108/ijmf-12-2022-0564","url":null,"abstract":"PurposeThis paper aims to explore the value of geographic diversification in the context of deglobalization, drawing evidence from a quasi-natural experiment – the Brexit referendum that took place on 23 June 2016 in the UK.Design/methodology/approachThis study applies an event study methodology to estimate the impact of the Brexit vote on a cross-section of firms with varying levels of geographic diversification – undiversified UK firms, UK firms with significant operations in the European Union (EU) and globally diversified UK firms. This study deploys a Heckman two-stage regression approach to address sample selection bias.FindingsThis study finds that undiversified UK firms experienced negative cumulative abnormal returns (CARs) around the Brexit referendum. The value of UK firms with majority sales within the UK declined by 0.9 percentage points, on average, in the three days centred on the Brexit referendum. In contrast, UK firms that are globally diversified, with the majority of sales within the EU are unaffected, while diversified firms in the rest of the world generated positive CARs of 1.8 percentage points over the same period. These results are robust to firm characteristics, selection bias and alternative measures of CARs and diversification.Research limitations/implicationsThis study is subject to some limitations that open avenues for future work. There are a few available proxies of diversification and further work on developing other proxies is much needed. Further work may also examine the long-term impact of diversification on UK firms. This study considered Brexit as a quasi-natural experiment, and this study could be applied to other deglobalization events like COVID-19 and can enhance the generalizability of diversification strategy in the deglobalized world. Findings may stimulate future work to explore how another form of diversification – product diversification has affected firm returns around Brexit. Finally, this study has focused on the UK as its base case. It may be interesting to corroborate the findings by exploring the impact of Brexit on European firms, who hitherto Brexit, had some operations in the UK.Practical implicationsThis work offers some insights for policymakers and regulators around the impact of deglobalization on local firms. Findings suggest that these trends significantly negatively impact the most vulnerable firms (smaller firms with less global reach), while their larger counterparts with significant global reach might be insulated. This finding is important for determining the nature of support needed by different firms in times of deglobalization. The work also offers insights to managers of firms operating in countries where there are real prospects of deglobalization. Specifically, the work highlights the importance of geographic diversification when free movement of goods, services and people is restricted.Originality/valueThis study shows that a certain group of globally diversified firms ","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43147084","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}
Pub Date : 2023-07-18DOI: 10.1108/ijmf-11-2022-0506
Ernest N. Biktimirov, Yuanbin Xu
PurposeThe purpose of this study is to compare market reactions to the change in the demand by index funds between large and small company stocks by examining the transition of the S&P 500, S&P 400 MidCap and S&P 600 SmallCap indexes from market capitalization to free-float weighting. This unique information-free event allows not only avoiding confounding information signaling and investor awareness effects but also comparing the effect of the decrease in demand on stocks of different sizes.Design/methodology/approachThis study uses the event study methodology to calculate abnormal returns and trading volume around the full-float adjustment day. It also tests for significant changes in institutional ownership and liquidity. Multivariate regressions are used to examine the relation of liquidity changes and price elasticity of demand to the cumulative abnormal returns around the full-float adjustment day.FindingsThis study finds significant decreases in stock price accompanied with significant increases in trading volume on the full-float adjustment day, and significant gains in quasi-indexer institutional ownership and liquidity. The main finding is that cumulative abnormal returns around the event period are related to changes in the number of quasi-indexer and transient institutional shareholders, not to changes in liquidity or price elasticity of demand.Originality/valueThis study provides the first comprehensive comparison analysis of stock market reactions to the decline in demand between large and small company stocks. As an important implication for future studies of the index effect, changes in institutional ownership should be considered in the analysis.
{"title":"Does the S&P index effect differ between large and small company stocks?","authors":"Ernest N. Biktimirov, Yuanbin Xu","doi":"10.1108/ijmf-11-2022-0506","DOIUrl":"https://doi.org/10.1108/ijmf-11-2022-0506","url":null,"abstract":"PurposeThe purpose of this study is to compare market reactions to the change in the demand by index funds between large and small company stocks by examining the transition of the S&P 500, S&P 400 MidCap and S&P 600 SmallCap indexes from market capitalization to free-float weighting. This unique information-free event allows not only avoiding confounding information signaling and investor awareness effects but also comparing the effect of the decrease in demand on stocks of different sizes.Design/methodology/approachThis study uses the event study methodology to calculate abnormal returns and trading volume around the full-float adjustment day. It also tests for significant changes in institutional ownership and liquidity. Multivariate regressions are used to examine the relation of liquidity changes and price elasticity of demand to the cumulative abnormal returns around the full-float adjustment day.FindingsThis study finds significant decreases in stock price accompanied with significant increases in trading volume on the full-float adjustment day, and significant gains in quasi-indexer institutional ownership and liquidity. The main finding is that cumulative abnormal returns around the event period are related to changes in the number of quasi-indexer and transient institutional shareholders, not to changes in liquidity or price elasticity of demand.Originality/valueThis study provides the first comprehensive comparison analysis of stock market reactions to the decline in demand between large and small company stocks. As an important implication for future studies of the index effect, changes in institutional ownership should be considered in the analysis.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44717243","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}
Pub Date : 2023-07-04DOI: 10.1108/ijmf-08-2022-0356
Neeraj Jain, Smita Kashiramka
PurposeThis study aims to investigate the effects of peers on corporate payout policies in one of the largest emerging markets – India. It also examines the motives for mimicking payout decisions.Design/methodology/approachThe sample is composed of 3,024 non-financial and non-government firms listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for the period 1995 to 2020. To encounter the endogeneity problem, the instrumental variable technique based on peer firms' idiosyncratic risk is used to estimate the effects of peers on firms' payout policy. To define peer reference groups, the authors use the basic industry classification of the firms.FindingsThe results indicate a significant positive impact of peers on firms' dividend policies in India. A firm with all dividend-paying peers is more likely to declare dividends than the one with no dividend-paying peers. Further, peer effects are found to be more pronounced amongst larger and older firms, thus supporting the rivalry theory of mimicking.Originality/valueTo the best of the authors' knowledge, the present study is the first of its kind that attempts to understand peer effects on payout decisions in an emerging market India, that offers a unique institutional setting. Moreover, the authors extend the existing literature by investigating the peer effects on a firm's payout policies considering various firm-level characteristics, such as growth opportunity, cash holding, financial constraint and profitability, which previous studies have not taken into consideration. These results provide additional insights into the heterogeneity and motives behind peer effects.
{"title":"Do emerging market corporates mimic the payout policy of peers?","authors":"Neeraj Jain, Smita Kashiramka","doi":"10.1108/ijmf-08-2022-0356","DOIUrl":"https://doi.org/10.1108/ijmf-08-2022-0356","url":null,"abstract":"PurposeThis study aims to investigate the effects of peers on corporate payout policies in one of the largest emerging markets – India. It also examines the motives for mimicking payout decisions.Design/methodology/approachThe sample is composed of 3,024 non-financial and non-government firms listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for the period 1995 to 2020. To encounter the endogeneity problem, the instrumental variable technique based on peer firms' idiosyncratic risk is used to estimate the effects of peers on firms' payout policy. To define peer reference groups, the authors use the basic industry classification of the firms.FindingsThe results indicate a significant positive impact of peers on firms' dividend policies in India. A firm with all dividend-paying peers is more likely to declare dividends than the one with no dividend-paying peers. Further, peer effects are found to be more pronounced amongst larger and older firms, thus supporting the rivalry theory of mimicking.Originality/valueTo the best of the authors' knowledge, the present study is the first of its kind that attempts to understand peer effects on payout decisions in an emerging market India, that offers a unique institutional setting. Moreover, the authors extend the existing literature by investigating the peer effects on a firm's payout policies considering various firm-level characteristics, such as growth opportunity, cash holding, financial constraint and profitability, which previous studies have not taken into consideration. These results provide additional insights into the heterogeneity and motives behind peer effects.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":"1 1","pages":""},"PeriodicalIF":1.7,"publicationDate":"2023-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41317794","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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