Narrow Results

We test whether an effective board affects firm value (FV) in Pakistan and whether stock liquidity (LIQ) mediates this relationship. To test this conjecture, we introduce an effective board index (EBI) using board size, board independence, board diversity and CEO duality. By employing the fixed effect model, we find that an effective board reduces agency costs and thus increases FV. An effective board may signal investors positively regarding reduced information asymmetry, thereby increasing stock LIQ. Furthermore, stock LIQ partially mediates the relationship between the effective board and FV. However, only Amihud illiquidity mediates this relationship, which suggests the stock liquidity’s estimation matters.

This paper investigates the link between stock market liquidity and firm value in an important emerging market, Vietnam. Specially, we examine this relationship using a sample of firms listed on the Ho Chi Minh City stock exchange for the period 2006–2014. We show that there is a negative relation between liquidity and firm value. This outcome is contrary to previous results for many developed countries. Further, we demonstrate that this result may be explained by differences in leverage effects and pricing-based theories, where stock liquidity influences firm performance via an illiquidity premium or mispricing.

There is a high level of residual government ownership after privatization processes of state-owned firms in many transitional economies. Accordingly, the role of residual government ownership in firms in these economies draws strong attention from researchers resulting in a huge volume of papers in the literature. This naturally motivates us to examine whether state ownership affects the firm value in Vietnam, a successful transitional economy. More specifically, this paper aims to provide further insights into the impact of residual government ownership on the value of privatized firms listed on the Ho Chi Minh City stock exchange covering the period from 2009 to 2014. Using panel data techniques of fixed effects estimator, our empirical results indicate that residual government ownership has a negative effect on value of Vietnamese firms. This finding provides important implications for different stakeholders in transitional countries.

This paper presents evidence on cash holdings for Japanese firms listed on the Tokyo Stock Exchange, focusing on the impact of corporate governance factors in cash holdings and the implication of cash holdings to firm value. We find that insider ownership and bank relations of firms play a significant role in determining cash holdings. Our results indicate that foreign stockholders select profitable firms to invest, and these firms have higher levels of cash. We document evidence that cash holdings lead to agency problems and impact firm value negatively, and governance characteristics affect the negative relation between cash holdings and firm value.

This is the first study, to the best of our knowledge, to use value- and equal-weighted portfolios of U.S. retail firms to examine the stock market reaction to strategic and nonliquidating store closure announcements. Using event study methodology for a sample of 174 hand-collected store closure announcements during the period 1980–2017, we find a negative and significant stock price reaction on the announcement date. Given the highly competitive nature of the retail industry, we further investigate the market reaction for the closest competitors using a matched sample of 157 competing firms. We report a positive, albeit less significant stock price reaction for competing retail firms on the announcement date. Finally, a cross-sectional analysis shows that the stock price reaction to store closure announcements is positively associated with firm size.

We examine the value implications of Jensen’s free cash flow hypothesis for a sample of Australian listed companies. Consistent with the US evidence in Masulis, R, C Wang and F Xie (2009). Agency problems at dual-class companies. Journal of Finance, 64(4), 1697–1727, we find that the marginal value of corporate capital expenditures in Australian listed companies is inversely related to the magnitude of agency conflicts arising out of the use of free cash flows. Our results suggest that firms where managers have a greater ability to extract private benefits and are therefore more likely to maximize their own private benefits rather than shareholder wealth will suffer from a lower perceived valuation of their capital investments. Our findings are robust to alternative proxies for relative cash flows and growth opportunities and also hold over multiple sub-periods and industry groupings.

This paper examines the effect of corporate tax avoidance on firm value using a sample of Vietnamese nonfinancial listed firms for the period 2007 to 2018. Using fixed effect, ordinary least square and system generalized method of moment estimation, the results show a positive and statistically significant relationship between corporate tax avoidance and firm value. Our result demonstrates the bright side of corporate tax avoidance at the firm level. Further analysis shows that the positive effect of corporate tax avoidance on firm value can be intensified by the effectiveness of the board of directors in monitoring management.

This study examined the degree to which the educational level of directors affects corporate governance and firm value in firms. From the results, it has been found that the educational levels of directors are negatively related to corporate governance performance. On the other hand, firms with higher-educated directors have lower block shareholders’ holdings, which implies that the ownership right is not concentrated and block shareholders cannot effectively monitor the operation of the firm to avoid agency problems. Furthermore, a firm with higher educational levels of directors and stronger governance mechanisms is more significant to raise the firm value.

This study aims to identify the role of contextual variables, especially the interest rate, in affecting the relationship between a firm’s capital structure and firm value. This study investigates the capital structure of Pakistani-listed firms in light of rising interest rates, declining “Domestic credit to the private sector” and emerging Islamic banking in the country. The study uses GMM (Two-Step) to examine the linear, and dynamic Panel threshold model to examine the quadratic relationship between leverage firm value and how other contextual variables affect this relationship. The study found that there is a negative relationship between leverage and firm value in the presence of the majority of contextual variables. Except for tax, depreciation, and free cash flow, leverage shows a negative relationship with firm value in presence of all other contextual variables. Further results show that there is a quadratic relationship present between leverage and firm value. Also, the interest rate and inflation has a negative effect on firm value in long term, while in short term this relationship is positive. The study supports the pecking order & Trade-off theory but does not support the agency theory. The study is using new methodologies, just as the panel threshold model which is never used before for Pakistani industries. The panel threshold model is using some variables for the first time in research. Previously only size and debt were used in panel threshold models, this time we used debt, firm value, profitability, tax, and tangibility, which will be a significant contribution to the literature.

The Firm Value (FV) and Financial Performance (FP), which cover the firm’s operational and financial outputs, are considered as a set of partial organizational effectiveness and financial attitude of stakeholders. Hence, sustainability disclosures contribute value driver factors for firms to maximize the stakeholder’s benefits. The adoption and impact of sustainability disclosure in various industries have been shown by numerous existing studies. Astonishingly, some studies lack the adoption of sustainability disclosure in the aviation industry. These impacts on FV and FP in the aviation industry have received little attention and remain largely unexplored, despite an increase in the sustainability disclosure implementation. Hence, this work will focus on the sustainability disclosure’s impact on the aviation industry and explore the relationship between sustainability disclosure with FV and FP. Data have been considered from 44 airlines from the Thomson Reuters Eikon database from 2017 to 2022. A study of the result has been analyzed by utilizing multiple Regression Analysis (RA). The outcome displayed that variables of environmental and Governance Pillar Score (GS) have a positive relationship with the FP and FV in the aviation industry. Also, it revealed that the relationship between sustainability disclosure and FV and FP has been significantly moderated by the size of firms.

In the era of globalisation and with the advent of knowledge economies, organisational innovation has assumed a critical role in enhancing economic performance of firms. Proponents of the Resource Based View of the firm and its more recent extensions such as the Knowledge Based View and Dynamic Capabilities Theory have suggested that generation, diffusion and application of organisational knowledge could be the source of sustained competitive advantage and superior performance of firms. While there is near unanimity in accepting the vital role of innovation in a firm's performance, consensus on what constitutes organisational innovation and how to measure it has proven to be elusive so far. Most previous research in this area has conceptualised innovation through one or more dimensions of a firm's innovative capability using R&D of a firm only. The measurement of the construct has thus reflected this narrow conceptualisation with a single measure of R&D expenditure being the most often used proxy. This study utilises a broader definition of organisational innovation capabilities that includes the generation, dissemination and strength of innovative activity in a firm. The unique features of this study is that it uses multiple indicators of a firm's innovation profile along with lagged measures of market value using fixed effects panel data analysis.

We examine the relation between tax aggressiveness and firm value. Using a tax enforcement change in Taiwan that limits firms’ abilities to pursue aggressive tax strategies, we document that the relation between tax aggressiveness and firm value becomes more negative after the regulatory change. Further analyses reveal that the negative change is more pronounced for firms that are more likely to be targeted by the stricter tax enforcement. In addition, we do not find strong evidence on the impact of corporate governance in moderating the main relation. Our results seem to be consistent with the argument that potential increases in regulatory costs may outweigh the benefit of the stricter tax enforcement in constraining insiders’ income diversion, intensifying the conflict between aggressive tax positions and shareholder wealth in our research setting.

Synopsis

Research problem

According to the World Economic Forum, terrorism is one of the main managerial concerns for companies worldwide. However, there is surprisingly scant research on how terrorist attacks impact managerial decision-making. To fill this gap, we investigate how terrorist attacks influence firms’ socially oriented activities, as measured by their investments in corporate social responsibility (CSR).

Motivation or theoretical reasoning

In light of the crucial role of CSR in financial markets and the growing apprehension regarding terrorism risk, this study explores whether and to what extent firms’ CSR investments contribute to the resilience to terrorism risk. The motivation for our research question is grounded in the idea that terrorist attacks create a unique set of circumstances that prompt firms to reconsider their socially oriented initiatives. We argue that firms impacted by such events tend to recognize the importance of demonstrating commitment to social responsibility in the aftermath of a crisis. Overall, the theoretical underpinnings of this study revolve around the notion that CSR becomes a strategic response for firms affected by terrorism, through which they address various stakeholder concerns, maintain legitimacy, and strategically manage their public image in the aftermath of a crisis.

The test hypotheses

We empirically examine two key research questions in this study. First, we examine the effect of terrorist attacks on the CSR investments of publicly traded firms. Second, we examine whether and how the increase in CSR investments of publicly traded firms after terrorist attacks affects firm value.

Target population

Our study extends the limited research on the impact of terrorism on capital markets, which is an area of great concern to various stakeholders, including shareholders and corporate managers. The findings will also help researchers understand the determinants of CSR and the potential channels through which CSR creates value for shareholders.

Adopted methodology

Using a multivariate regression model and controlling for all other determinants of corporate CSR investment documented by prior studies, we test the effect of terrorist events on firms’ CSR investment. To reduce the concern that a growing awareness of the importance of CSR may explain the changes in firms’ investment in CSR over time, we use a difference-in-differences research design.

Analyses

Using a sample of 53 major terrorist attacks occurring in the U.S. between 1994 and 2015, this study examines the causal effect of terrorist attacks on firms’ CSR activities.

Findings

Our findings indicate that public firms located in close proximity to terrorist attacks (i.e., the impact firms) substantially increase their investment in CSR following those terrorist events, and that the increase in CSR investment is positively associated with firm value. We further observe a strengthened association between increased CSR and firm value when the CSR efforts of the impact firms attract greater media attention. In conclusion, our findings substantiate the hypothesis that firms exposed to higher levels of terrorism risk are more inclined to enhance their CSR investments. This inclination is driven by the dual impact of CSR efforts: not only do they contribute to bolstering stakeholders’ confidence in firms’ future performance, but they are also linked to increased returns in the aftermath of a terrorist attack.

Seeing the firm as a nexus of activities and projects, we propose a characterization of the firm where variations in the market price of risk should induce adjustments in the firm's portfolio of projects. In a setting where managers disagree with respect to what investment maximizes value, changing the portfolio of projects generates coordination costs. We then propose a new role for financial risk management based on the idea that the use of financial derivatives reduces coordination costs by moving the organization's expected cash flows and risks toward a point where coordination in favor of real changes is easier to achieve. We find empirical support for this new rationale for the use of financial derivatives, after controlling for the traditional variables explaining the need for financial risk management.

This paper provides empirical evidence that media coverage of CEOs, a channel of investor recognition, significantly increases firm value, measured by Tobin’s q. The result is robust to alternative econometric methods and checks of causality. Firms with the highest level of CEO media coverage and positive coverage outperform those with the lowest levels by 8% and 7% per year, respectively, in abnormal stock returns. Media coverage also impacts CEO rent extraction through compensation. Subsequent total pay rise is 4.1% above and beyond what CEOs obtain from the increase in firm value that arises due to media coverage.

This study investigates empirically how net-working-capital (NWC) affects firm value, using a sample of the Vietnamese stock market. Our empirical results indicate an optimal NWC level that maximizes firm value. Our research also shows empirical evidence that deviations from actual and estimated NWC levels (above and below optimal level) can reduce firm value. We show that more than 40% of NWC observations in our sample on the right-hand side of the breakpoint reduce firm value. Managers tend to build up excessive working capital to prevent hiking funding costs after the 2008 crisis. Therefore, our findings help managers determine an optimal level of NWC, which enhances firm value. Our findings are consistent with the trade-off theory.

The primary focus of this study is to investigate the impact of advertising expenditure on firm performance. In light of the existing literature, this study considers four proxies of firm performance i.e., Sales (SLS), Return on Assets (ROA), Market-to-Book Ratio (MBR) and Market Capitalization (MC). The sample data for the purpose of estimation consists of 100 listed companies selected randomly from Pakistan Stock Exchange (PSX) during 2005–2018. The results show that advertising spending has a significantly positive impact on firm’s performance. This is also true for lagged value of advertising, where the results show significant positive relationship of lagged advertising on firm performance. This study supports the signaling effect of advertising expenditure on performance of Pakistani firms.

This study examines the relations between leverage and investment and the relations between leverage and firm value during the COVID-19 period using data from Chinese listed companies. We find that the COVID-19 pandemic has strengthened the inhibition of leverage on corporate investment and firm value, while alleviated the constraint of leverage on corporate cash holdings. Furthermore, the pandemic-induced negative relationships are stronger for non-SOEs, firms holding less cash, multinational firms and firms in severe epidemic areas. Overall, our results are consistent with the risk-aversion theory. Higher economic uncertainty increases the firms’ risk aversion and eventually strengthens the negative relations between leverage and investment.

Sensitive data are often handled in business processes. As an important component of industry systems, information system (IS) plays a vital role in business processes. However, data and information may leak in business processes. The damages caused by information security breaches (ISBs) on firms are increasing in recent years. Previous studies have consistently found that the announcements of ISBs are negatively associated with the market values of the announcing firms during the days surrounding the breach announcements. Globalization drives firms in diverse industries to cross-list their stocks. With the benefits of cross-listing, firms are able to perform entrepreneurship and industry integration is improved as well. Because cross-listing improves information environments and provides better investor protection, this paper argues that cross-listing help firms to reduce the negative impacts caused by their announcements of ISBs. From the perspective of ISs engineering, this paper conducts an event study of 120 publicly traded firms and finds that cross-listing does not mitigate the impact of ISB announcements on a firm’s stock prices.

We study the effect of political connection (PC) on company value in an environment where low PC is due to better institutions and not confounded by favorable social/cultural factors. We find that in Singapore, the only country that fits this description, PC in general adds little to the value of a company. However, in industries that are subject to more stringent government regulations, PC appears to be somewhat important. Robustness checks show that alternative PC variables give rise to similar results, and the addition of control variables do not drastically change the findings. Politically connected firms have higher managerial ownership and tend to be smaller than non-PC firms, rendering them more susceptible to poorer governance practices. We show that the presence of politically connected directors somewhat neutralizes such potential negative effects. PC firms are associated with good governance practices such as nonduality in their chairman and chief executive officer positions and fewer executive directors.