Environmental behaviour in Chicago automotive repair micro‐enterprises (MEPs)

This study analyzes the relationship between internal and external factors that influence environmental behaviour in traditional service micro‐enterprises, focusing on Chicago motor vehicle repair (MVR) firms five years after the Clean Break amnesty program and subsequent inspections of MVR firms. The survey explored the influence of firm and manager characteristics, government intervention, and market and social pressures and opportunities on environmental awareness and action. Environmental action was significantly higher in older firms (more experienced owners) and in auto‐refinishing firms practicing spray painting. While awareness levels were mixed for dealerships and franchises (contracted to larger organizations), environmental action was good for six out of the seven firms, which may reflect expectations for higher professional rather than environmental standards. However, environmental awareness and behaviour levels were mixed for trade association members. Owners obtain most environmental information from suppliers and government agencies, but confuse government responsibilities and attribute greater authority to non‐environmental agencies. Finally, micro‐enterprises avoid voluntary environmental compliance programs and prefer targeted enforcement and insurance requirements that promote a level playing field. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.     

The Value Relevance of Environmental Audits: Evidence from Japan

Environmental audits are implemented internally in order to monitor compliance with environmental laws, regulations and related accounting rules, and to develop recommendations for ways in which to improve environmental accounting processes and performance. In addition, external third‐party assurance on environmental information is used to verify whether firms’ disclosures on environmental information are in compliance with environmental accounting rules and regulations. We examine whether firms’ environmental audits positively affect their market values and whether third‐party assurance strengthens positive effects, using value relevance theory as a theoretical foundation. Our main tests are based on 266 Japanese manufacturing firms’ published environmental reports for the period 2010–2013. We find that the average market value of firms that implement environmental audits is 9 percent greater than those that do not. Further, we find that environmental audits positively affect firm value, largely through interaction with third‐party assurance. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment     

Turning corporate environmental ethics into firm performance: The role of green marketing programs

In this study, we develop a better understanding of the mechanisms by which corporate environmental ethics influences performance through the adoption of substantive actions. The empirical results of a moderated mediating analysis show that firms with higher environmental ethics are more likely to implement green marketing programs, consisting of the green production, pricing, distribution, and promotion programs and then improve firm performance. It is also observed that closure mechanism negatively moderates the mediation effect of green marketing programs because it leads to low trust and unwillingness to internal cooperation. These findings indicate that the value of corporate environmental ethics could not be determined in a vacuum, both strategy and people do matter when pursuing environmentally driven performance.     

The effect of operational slack,diversification, and vertical relatedness on the stock market reaction to supply chain disruptions

This paper empirically examines whether operational slack, business diversification, geographic diversification, and vertical relatedness influence the stock market reaction to supply chain disruptions. The results are based on a sample of 307 supply chain disruptions announced by publicly traded firms during 1987–1998. Our analysis shows that firms with more slack in their supply chain experience less negative stock market reaction. The extent of business diversification has no significant effect on the stock market reaction. Firms that are more geographically diversified experience a more negative stock market reaction. We find that firms with a high degree of vertical relatedness experience a less negative stock market reaction. These results have important implications on how firms design and operate their supply chains to mitigate the negative effect of supply chain disruptions.     

The product‐market performance benefits of environmental policy: Why customer awareness and firm innovativeness matter

Researchers have widely studied the nexus between corporate environmental (“green”) policy and its green performance and firm financial performance, but with mixed findings. A potential explanation for these mixed findings is the focus of extant studies on the direct and immediate impact of environmental performance on financial performance to the exclusion of firm‐specific boundary conditions. Furthermore, all prior research study the effect of environmental performance on either stock market‐based performance measures (i.e., stock return) or accounting‐based performance measures (i.e., return on assets). A missing third dimension of firm performance, product–market‐based performance (i.e., market share), has so far remained unexplored despite representing a crucial objective when innovating. Using Newsweek's annual green ranking as a novel measure of environmental performance for a panel of U.S. firms from 2010 to 2015, this paper attempts to fill these voids in the literature. The results show a positive relationship between firms' environmental performance and market share as a measure of product–market‐based performance. The findings further demonstrate that this relationship is positively moderated by the level of customer awareness and innovativeness of the firm: The higher the level of awareness of a firm's environmental credentials and innovativeness, the stronger the effects of environmental performance on market share. Our results are robust against endogeneity concerns and alternative measures of firm financial and environmental performance.     

Market liberalization and tax avoidance: Evidence from the Shanghai-Hong Kong Stock Connect Program in China

This study employs two market liberalization programs in China, the Shanghai-Hong Kong Stock Connect (SHSC) program and the Shenzhen-Hong Kong Stock Connect (SZHSC) program, as an exogenous shock to stock market liberalization to explore the impact of market liberalization on tax avoidance. By employing the staggered difference-in-difference regression on Chinese listed firms, we found that market liberalization reduces tax avoidance by approximately 13.1%. This result is robust under parallel trend examination, falsification test, alternative regression methodology, and different measurements for tax avoidance. Additionally, this effect is greater for non-state-owned firms and for firms that have less external monitoring, higher information asymmetry, and stronger financial constraints.     

Deregulation of short selling and corporate cash dividend policy: A quasi-natural experiment from China

This study takes China’s short selling deregulation as a quasi-natural experiment, employs a sample of Chinese A-share listed firms from 2007 to 2017, and tests the impact of a short selling pilot on firms’ cash dividends using a difference-in-differences model (DID). We find that China’s short selling pilot significantly increases the pilot firms’ cash dividends. The mechanism test shows that short selling can improve the pilot firms’ cash dividends by playing a corporate governance role to restrain dual agency costs such as management fees and major shareholders’ tunneling. Furthermore, we identify that short selling restrains the behavior of “large stock dividends” and increases the cash dividends of “large stock dividends” firms. Moreover, the governance effect of short selling is complementary to the external governance environment. The higher the degree of marketization and government quality, the more significant the governance effect of short selling to increase the pilot firms’ cash dividends. This study enriches not only the research related to cash dividends in emerging economies, but also provides new empirical evidence for the evaluation of China’s short selling deregulation and offers valuable lessons to other emerging economies.     

Does it pay to be green? A disaggregated analysis of U.S. firms with green patents

The objective of this paper is to investigate the relationship between environmental performance and financial performance on a sample of 361 U.S. firms over the 2007–2016 period. We contribute to the literature by considering firms active in sustainable innovations by obtaining green patents. We also contribute to the literature by using disaggregated measures of environmental performance collected from the Bloomberg ESG database, including environmental disclosure score, greenhouse gas emissions, waste emissions and water use. Panel data regressions' results show that environmental transparency positively influences current accounting and stock market performance, but negatively influences the return on capital employed. Furthermore, lower pollution emissions tend to improve the current return on assets, while being harmful for the efficiency of long‐term capital employment at the same time. The empirical results also indicate that the Global Financial Crisis (2007–2010) increased the environmental transparency of firms with green patents but negatively impacted their price to earnings ratio. At the same time, lower waste disposal diminishes stock valuation while the opposite is true with water use. Taken together, our results suggest that environmental transparency and greenhouse gas emissions generally appear to be the most important environmental variables influencing financial performance, with increasing importance attributed to them by the market after the global crisis period.     

Performance following ESOP formations by publicly-held corporations

The study assesses the stock performance of publicly-traded firms following ESOP formations. The results show that ESOPs contributing common stock elicit a more favorable market response than ESOPs contributing convertible preferred stock. This result is consistent with the argument that the convertible preferred contribution reduces the regularity of the repurchase of common shares in the market. Also, ESOPs intended to defend against takeovers elicited no market reaction while other ESOPs elicited a favorable market response. This result supports the hypothesis that ESOPs intended to prevent takeovers may eliminate external market discipline. The study also assesses the long-term performance of firms following ESOP formations to determine whether some hypothesized effects of ESOPs are realized. Results of the analysis suggest that firms experienced favorable long-term valuation effects following the creation of new ESOPs. However, the expansion of existing ESOPs was not as favorable. Differences in the effect can be attributed to the loss of external discipline when an expanded ESOP leads to an increase in proportional ownership. *** DIRECT SUPPORT *** A00HA012 00006     

The Stock Market Reaction to the Hiring of Management Consultants: A Signalling Theory Approach

Drawing from signalling theory, this study examines how the stock market reacts to the public announcement of the hiring of management consultants and whether it differentially values clients on the basis of their financial profitability and the brand‐name of the engaged consultant. An event study analysis of 118 client firms that publicly announced the hiring of management consulting firms finds that the stock market, on average, responded positively and significantly to the engagement news. Regression analysis further reveals that the stock market reaction tended to be the highest for client firms that had the highest profitability levels. In addition, the stock market reaction to the hiring announcement was not related to the consultant's brand‐name reputation; clients engaging the most reputable consultants (e.g. McKinsey & Company, Bain, Boston Consulting Group, Booz‐Allen Hamilton) did not realize any different market response than those clients that employed the other consultants. Overall, most client firms that publicly announced the hiring of management consultants experienced a rise in their market value and those that had the highest financial profitability realized the highest increase. Further, the findings imply that there may be boundaries to reputational spillover benefits in partnering relationships.     

Sustainability Strategy and Eco‐Innovation: A Moderation Model

This study develops a moderation model to examine the role of a proactive environmental strategy on eco‐innovation. Drawing upon the perspectives of contingency theory, this study argues that the impacts of sustainability strategy on eco‐innovation depend on market demand, innovation intensity and government subsidy. The sample used to test the hypotheses is obtained from the Community Innovation Survey in Taiwan. A total of 2955 manufacturing firms are included in the final sample. A logit moderating regression is adopted to analyze the models. The results reveal that market demand and government subsidy positively moderate the relationship between environmental strategy and eco‐innovation. Specifically, firms are more likely to adopt a proactive environmental strategy to improve eco‐innovation under high levels of market demand and government subsidy. Furthermore, the results indicate that innovation intensity affects the effect of environmental strategy on eco‐innovation, but the direction of the influence varies with different categories of eco‐innovation. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment     

Doing more and doing better are two different entities: Different patterns of family control and environmental performance

Family firms bear two types of agency costs, including type I and type II agency problems, in corporate environmental practices: (1) Outside executives at family firms hesitate to engage in environmental strategies, which can lead to drops in profits; (2) Controlling families employ opportunistically environmental management to achieve their interests. We argue that a primary cause for the agency problems lies on ineffective internal corporate governance at family firms, which can cause loss of managerial (or power) balance between outside executives and family executives. Our findings show that family firms with ownership and strategic control (FSC), which family executives and outside executives monitor and constrain each other, can achieve the highest environmental performance. Moreover, external controls, including product market competition and provincial environmental regulations, substitute effective internal control of FSC. The environmental performance premium of FSC is more prevalent when the production market competition is lower. Family firms with ownership, operational, and strategic control (FOSC) can achieve higher environmental performance within a province with more stringent environmental regulations.     

The Impact of Corporate Environmental Violation on Shareholders' Wealth: a Perspective Taken from Media Coverage

This study provides empirical evidence of the way in which media coverage of corporate environmental violation events affects shareholders' wealth due to stock market reactions. Data relating to the media coverage of the environmental violations of 173 publically traded companies in China, gathered using web crawler technology, were analyzed through multi‐dimensional variables with the purpose of examining the impact of media coverage on stock market reactions in terms of cumulative abnormal return (CAR) under different event windows based on the methodology of event study. The variables include the intensity of media coverage, media information sources, disclosure mode, media newsworthiness, violation entity, whether the company is punished by the government, whether the company makes a clarification and whether the company is ISO 14001 certified. The results obtained reveal that media coverage affects the market values of the event companies to some extent, and that those companies that attract high levels of media attention generally see greater losses in their shareholders' wealth. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment.     

Do financial penalties for environmental violations facilitate improvements in corporate environmental performance? An empirical investigation

Environmental regulations play an essential role in managing firm behavior and providing a reference point for the minimum standards of corporate environmental performance, yet certain firms fail to ensure their environmental performance meets these standards. This research focuses on public firms that the US government has penalized for violating environmental regulations and investigates whether these firms subsequently improved their environmental performance. Surprisingly, neither the receipt of a penalty for an environmental violation nor the imposition of a greater penalty was associated with improvements in environmental performance. Instead, a penalty for environmental violation predicted further, albeit mild, deterioration in environmental performance. While the existing literature has established that financial penalties deter most firms from committing environmental violations, this research contributes to this literature by revealing that these penalties fail to motivate firms that have violated environmental regulations to improve their environmental performance.     

The effect of the Rana Plaza disaster on shareholder wealth of retailers: Implications for sourcing strategies and supply chain governance

Supply chain and reputational risks are often assumed to motivate firms to source production in developed, high-cost countries rather than developing, low-cost countries. To examine this assumption, we provide evidence from the collapse of the Rana Plaza building on April 24, 2013, which with its 1133 fatalities and 2438 injuries is seen as one of the worst industrial accidents in history. Do markets reactive negatively enough to such events to motivate firms to shift their sourcing strategy? We analyze the stock market reaction to the Rana Plaza disaster in the Bangladeshi ready-made garment industry to address this question. Our analysis is based on a sample of 39 publicly traded global apparel retailers with significant garment sourcing in Bangladesh. Stock market reaction to retailers on the day of the Rana Plaza disaster is negative, but its magnitude and significance dissipate by the following day. We find no evidence of significant stock market reaction during the 11 trading days (approximately two weeks in calendar time) following the disaster. Retailers responded to the disaster by developing two different agreements to improve factory and worker safety in Bangladesh – the Accord on Fire and Building Safety in Bangladesh (AFBSB), and the Alliance for Bangladesh Worker Safety (ABWS). We find no evidence of significant stock market reaction to the announcements of the AFBSB and the ABWS. The insignificant negative economic impact from the Rana Plaza disaster suggests that retailers have little economic incentive to move sourcing out of Bangladesh or other low-cost countries so as to reduce the risk of being involved in such events. We discuss the implications of our results for retailers, non-governmental organizations (NGOs), garment factory owners in Bangladesh, the Bangladeshi government, and academic researchers.     

The impact of the logistics service standardization on firm value: Evidence from China

In 2014, the Standardization Administration of China launched its first pilot project of the logistics service standardization (LSS). We examine whether the staggered adoption of the LSS creates value for shareholders using a difference-in-difference research design. The findings suggest that firms located in LSS cities have higher firm value in terms of Tobin’s Q and stock returns than those of non-LSS cities. In further analysis, we find that the LSS enhances firm value by improving corporate operational efficiency. However, the LSS increases large firms’ market share at the expense of small firms. Overall, our findings advance the literature of logistics system reform and show that such reform creates value for shareholders.     

Policies for Enhancing Corporate Environmental Management: a Framework and an Applied Example

This paper develops a four‐phase schematic representation dubbed the CEM lifecycle for conceptualizing how corporate environmental management (CEM) programs typically evolve in a given organization and then explicates the forces that influence corporate commitment as a CEM program progresses from inception to later phases of the CEM lifecycle. Examples are then presented on how the Singaporean government encourages enhancement of CEM programs by designing support programs that target the underlying corporate needs inherent to the first three CEM lifecycle phases. The examples provided in this paper of Singaporean CEM support programs illustrate how policy can be strategically designed to improve corporate uptake of CEM programs by enhancing CEM knowledge in the initial phase of the CEM lifecycle, providing technical support in the second lifecycle phase and providing opportunities for public recognition in the third lifecycle phase. The article concludes that replicating the strategic approach to policymaking exemplified in the Singaporean case study can significantly improve the competitiveness of domestic firms through encouraging more efficient use of resources; however, in order to design truly sustainable economies (provide for the needs of future generations), governments must be prepared to more coercively regulate the exploitation of natural endowments. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

The Alternative of Private Regulation: The London Stock Exchange's Alternative Investment Market as a Model

Most people assume that markets require a strong set of government rules and regulations to eliminate problems associated with transparency and fraud. Commonly overlooked is the fact that stock exchanges did, and to a large extent still do, provide a set of private rules and regulations. One modern stock exchange that relies heavily on private rather than government regulation is the London Stock Exchange's Alternative Investment Market (AIM). Founded in 1995, AIM is an exchange regulated market in which private regulators, called Nominated Advisors or Nomads, oversee individual firms and decide whether they can list their shares. This system of private regulation reduces regulatory barriers and has attracted many new firms. But rather than being ‘a race to the bottom’ in which anything goes, the private regulators work to put their stamp of approval only on firms that warrant trading. The market has attracted a lot of investment, and the survival rate of IPOs is in line with that of other more regulated markets.     

Institutional Pressures and Environmental Management Practices: The Moderating Effects of Environmental Commitment and Resource Availability

With the deterioration of the environment and the shortage of natural resources, firms are facing increasing pressures to implement environmental management practices in their daily operation management. Drawing on institutional theory and environmental management literatures, this research tries to explore how institutional pressures motivate firms to implement environmental management practices, and how such effects are moderated by firms' environmental commitment and resource availability. The results of a survey of 188 Chinese firms suggest that regulatory pressures and normative pressures are positively and significantly related to firms' propensity to implement environmental management practices. Moreover, the results indicate that firms' environmental commitment positively moderates the relationships between institutional pressures and environmental management practices, while firms' resource availability plays different roles depending on the types of pressure (regulatory or normative pressures). Implications and suggestions for future research are provided. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Impact of Environmental Performance on Firm Value for Sustainable Investment: Evidence from Large US Firms

This research examines the impact of environmental performance on firm value, applying the event study methodology to Newsweek’s ‘Green Rankings’ announcement of 2012 for large US firms. Specifically, it analyzes the impact of the absolute green score and green rank of firms on their performance in the stock market. We found that investors perceive the announcement as positive news, leading to significant positive standardized cumulative abnormal returns (SCARs). After controlling for industry‐ and firm‐specific effects, we observed that firms with repeated green rankings for enhancing environmental performance showed significantly higher SCARs than those with either reduced or unchanged environmental performance. In addition, the environmental impact score measuring environmental damage from a firm's operational activities was found to be the most influential factor in improving the firm's value. Our findings are beneficial to managers in allocating resources to different types of environmental initiative, and provide valuable insight for sustainable environmental investment. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment