Sustaining the sustainable development: How do firms turn government green subsidies into financial performance through green innovation?

The impact of government green subsidies on firms' green innovation behaviors and sustainable development has been recognized in the existing literature, but the deep relationship remains poorly understood. This study aims to examine the mechanism of how government green subsidies influence firms' financial performance via green innovation and how the mediating effect varies under different contingent conditions. Empirical results based on data of Chinese listed companies between 2006 and 2018 reveal that green subsidies have positive effects on green process and product innovation, but only green product innovation can rise higher financial performance, which further verifies that green subsidies positively influence financial performance through green product innovation rather than green process innovation. In addition, both higher absorptive capacity and higher market turbulence strengthen the indirect effect of green subsidies on firms' financial performance via green product innovation. Our study provides useful implications for enterprises by revealing the influence mechanism of green subsidies on financial performance through green innovation under different leveraging levels of internal and external conditions. It also provides basis for the government to formulate relevant environmental policies.     

The impact of group incentives on performance of small firms: Hausman–Taylor estimates

This paper investigates the impact of group incentives on firms' performance. It shows that group incentive raises firms' performance. This result empirically validates the implication of the theoretical literature that performance‐related pay can potentially improve firms' performance, in the context of a developing country, and indicates the importance of group incentives in small firms. It also shows that partnership firms perform better than private limited companies and labour unions have a negative impact on firms' performance. It employs the Hausman–Taylor random effects estimator in order to isolate the effects of time‐invariant covariates and also to tackle potential endogeneity problem. Copyright © 2010 John Wiley & Sons, Ltd.     

Supply chain fragmentation,input–output tables and spillovers from foreign direct investment

The literature on the impact of multinationals on domestic firms' productivity points to supply chain linkages with multinational firms as the main channel for positive spillover effects. Local and multinational firms' relative positions in the supply chain are typically determined through the use of input–output tables. For a panel of Romanian firms, we show that the level of industry aggregation in these tables and the applied spillover definitions bear an important impact on estimated spillover effects. We find that the total impact of foreign presence – irrespective of the channel – is considerably larger when detailed IO-tables are used. When more aggregated tables are used, one is likely to misclassify a considerable number of supplier–client activity as within-industry competitive activity. Including within-industry supply and use in the measures of supplier–client activity results in a further increase of the spillover effect on local suppliers, whereas the within-industry spillover effect disappears.     

Institutional investors' corporate site visits and aggressive financial reporting

This paper investigates the impact of institutional investors' corporate site visits on financial reporting aggressiveness. While prior research has shed light on the monitoring impact of institutional shareholding on firms' financial reporting practices, institutional investors' preference regarding financial reporting remains unclear. Using a sample of Chinese firms listed on the Shenzhen Stock Exchange from 2012 to 2019, we find that institutional investors' on-site visits significantly increase financial reporting aggressiveness of hosting firms. The on-site visit effect is more salient in firms that are more sensitive to the influence of institutional investors, for example, firms with a less powerful chief executive officer, financially constrained firms, and firms operating in competitive industries. Our study highlights that under a setting of weak minority shareholder protection such as in China, managers are likely to recognize revenue aggressively to please powerful shareholders who paid intensive attention to them.     

CO2 Emissions and Financial Performance of Socially Responsible Firms: An Empirical Survey

A firm's financial performance is closely related to its environmental behavior. This result is valid especially in the case of socially responsible firms. In the present study a data econometric analysis is conducted based on a GARCH model for socially responsible and conventional firms. According to our findings, the performance of socially responsible firms is negatively related to an increase of global CO₂ emissions. The firms' costs for implementing environmental policies and the investors' attitude towards the aforementioned firms may account for our results. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

Carbon disclosure and financial performance: UK environmental policy

The outcome of carbon disclosure, the importance of which has grown remarkably in recent years to become a strategic decision‐making issue for organisations in today's competitive environment, is a subject of lively debate but remains under‐researched in the environmental accounting literature. This study is motivated by this research gap and the growing interest in assessing the financial consequences of corporate involvement in climate change beyond regulatory compliance, as evidenced by firms' voluntary participation in the Carbon Disclosure Project. Using the resource‐based view of the firm as a theoretical framework and linking it to carbon disclosure through Carbon Disclosure Project, we conceptualise and empirically investigate the impact of adopting proactive carbon management policies and communicating them to stakeholders, focusing on the financial performance of the top FTSE350 companies between 2007 and 2015. By developing a comprehensive financial performance index and controlling for several firm characteristics, we find strong evidence that voluntary carbon disclosure is positively associated with firm financial performance. The findings in this paper provide new insights and policy implications for managers, financial stakeholders, and regulators.     

A multi-level examination of quality-focused human resource practices and firm performance: evidence from the US healthcare industry

In today's business world, the role of quality has become ever more significant for organizations to compete in a global marketplace. Based on the quality management theory, this study empirically examines the relationship between quality-focused human resource practices (QHRP) and organizational performance outcomes. Data from 69 healthcare organizations indicate a strong support for this relationship. A Human Resource (HR) system focused on quality management was directly related to multiple dimensions of organizational performance outcomes (i.e., intangible – employee satisfaction and customer satisfaction – and tangible – profit). Specifically, two measures of QHRP, knowledge management and strategic management, were found to be positively related to the financial performance of firms implementing quality management. Process management is found to be negatively related to employee satisfaction. General Human Resources were positively related to both employee and customer satisfaction. Employee focus of the firms is also positively related to employee satisfaction. In addition, employee satisfaction is also related to both customer satisfaction and financial performance while customer satisfaction is found to be positively related to employee satisfaction. The findings indicate a generally strong positive relationship with the organizational performance outcomes. The results of this study are particularly important in showing HR's contribution to the organization's bottom line.     

The role of strategic HR practices in organisational effectiveness: an empirical investigation in the country of Jordan

This study responds to the call of researchers, and is conducted in a non-western context in the country of Jordan. The study contributes to our understanding of human resource (HR) practices' impact on organisational effectiveness. The empirical analysis is based on theoretical prepositions that motivated employees through good HR practices stay longer and contribute positively to the overall financial performance of organisations. Rigorous statistical testing of the data on the population of financial firms shows that careful recruitment and selection, training and internal career opportunities have a positive impact on reducing employee turnover. Training, in particular, is found to have a strong positive impact on financial performance measured by return on assets and return on equity. Furthermore, the findings provide strong support for the direct approach in strategic HR management–performance research that a group of best HR practices will continuously and directly generate superior performance. Despite such compelling arguments, however, we did not find evidence to support the notion that a bundle of HR practices impact better on financial performance than individual HR practices. It is possible that the optimal configuration may not only be contingent on national context, but could be due to the sector and the specific characteristics of the firm.     

Sustaining Competitive Advantage Through Corporate Environmental Performance

This research investigates the relationship between a firm's environmental efforts and the sustainability of its competitive advantage by analyzing the effects of change in firm environmental performance on the persistence of profitability growth. We find that environmental resources allow a firm with superior financial performance to sustain its competitive advantage, and also complement the efforts of a poorly performing firm to hasten recovery from inferior financial performance. Our findings further indicate that firms attain such positive effects through enhanced profit margins resulting from improved environmental performance. Additionally, we observe that a corporate strategy of improving environmental performance demonstrates management's responsibility to maximize the shareholder wealth of a well‐performing firm. The results provide valuable insights to align environmental activities towards developing unique resources for sustaining the competitive advantage. The study provides an empirical support for creating economic value by benefiting the environment. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment     

Environmental reporting by the Fortune Global 250: exploring the influence of nationality and sector

While research on environmental reporting frequently includes large multinational enterprises, the number of surveys that systematically analyses a whole set of such firms, including the non‐reporters, is limited – and mainly focuses on the United States. This article presents the state of environmental reporting by the Fortune Global 250, all large multinationals with a potentially large impact on other firms. Of these 250 firms, 35% has a recent environmental report, with another 32% publishing other types of environmental information. Reporting frequencies between the financial and non‐financial sector differed considerably, at 15 and 44% respectively. Besides an analysis of the number and contents of environmental reports, the importance of sectoral differences and firms' nationality is also considered. A framework is developed that posits the existence of reporting legislation in firms' home countries (some in place/pending, or none) against the direct environmental impact of the sector (large or small). The results of the analysis fit partially in this framework. Only a small number of reporting firms originates from countries with some kind of legislation (particularly The Netherlands), but national societal pressure seems to play a large role (especially in the UK, The Netherlands and Germany). Many operate in sectors with a substantial direct environmental impact (chemicals, pharmaceuticals, oil and motor vehicles and parts); reporting in sectors with more indirect effects is getting off the ground. Copyright © 2001 John Wiley & Sons, Ltd and ERP Environment     

Which Corporate Sustainability Activities are Associated with Greater Financial Payoffs?

While many company managers and academic researchers have argued that businesses that develop a sustainability focus also may improve their financial performance, little information is known about whether firms' different types of sustainability activities are related to varying degrees of financial gain. This paper assesses the economic relationship between two types of sustainability activities – lower‐ and higher‐order – derived from the sustainability value framework of Hart and Milstein (2003). Our analysis reveals that both types of sustainability activities are similarly associated with firms' financial performance in terms of direction and trend. However, the average level of financial benefits related to firms' higher‐order sustainability activities (which develop new products and processes) is greater than the average level of financial benefits related to firms' lower‐order sustainability activities (which modify existing products and processes). These findings offer initial evidence that companies that reach further by developing higher‐order sustainability activities may reap greater financial benefits, while improving the natural environment to a greater degree. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

When patents matter: The impact of competition and patent age on the performance contribution of intellectual property rights protection

The question whether patenting impacts patenting firms' subsequent financial performance is important for technology-oriented companies. However, relevant research has led to contradictory results. We strive to overcome this impasse by introducing innovation competition and patent age as moderators of patents' performance contribution into the discourse. Based on a sample of 975 cases from diverse industries, we find strong support for our arguments. In line with our expectations, the results show that the number of patents granted, the degree of patent competition, and the timeliness of a patent contribute positively to financial performance. Moderation analysis nuances our findings by showing that the impact of patent protection on financial performance is stronger when the patent competition is stronger and the patents are younger.These findings provide insights into the conditions under which patenting leads to higher financial performance. Our findings highlight the importance of innovation competition and patent age for innovation research. The empirical results show firms that patenting pays and that, in order to tap the full potential of patents, they need to focus on emerging competing industries and reduce the time to market. Policy makers learn that patenting is a successful approach to foster innovation at limited social costs.     

Transnational ties and performance of immigrant entrepreneurs: the role of home-country conditions

This study contributes to the recent empirical literature on the performance of transnational immigrants' firms by investigating the effect of transnational ties on the firm's growth. In addition to the effect of the ties, the paper shows that home country's institutional and socio-economic characteristics and country-specific entrepreneurial factors have a crucial role in shaping the ties–performance relationship. The evidence from a sample of immigrant-owned firms in the Italian information and communications technology (ICT) sector in the period 2000–2010 confirmed the relevance of the proposed model and helped in understanding a potential channel of improvements in immigrant firms' performance through transnational ties. Our results show the limited relevance of a direct, or linear, impact of ties on the growth of sales in immigrant-run firms in the ICT sector, but support the crucial moderating role of home-country characteristics on the ties–performance relationship.     

Does it pay to venture abroad? Exporting behavior and the performance of firms in Indian industry

Using contemporary data for a firm-level sample of over 600 Indian firms, this paper investigates the impact that an export-orientation has on the profitability of the firms studied. The results, based on a two-stage least squares method, establish a positive and significant relationship between firms' levels of exports and profitability. For firms from developing and transition economies like India it does pay to venture abroad, and the ability to sell goods overseas has a significant impact on firms' economic performance. © 1998 John Wiley & Sons, Ltd.     

Institutional investors’ ownership stability and their investee firms’ equity mispricing

This study examines the impact of institutional investors' equity ownership stability and their investment horizon to determine the impact on their investee firms' equity mispricing. Mispricing represents the difference between a firm’s market and fundamental values. We treat institutional investors as a heterogenous group, i.e., dedicated, transient, or quasi-indexer as defined by Bushee, 1998, Bushee, 2001 since their categorization determines their trading strategy. Higher institutional ownership, higher stability in institutional investors' equity ownership, and institutional investors classified as long-term are all associated with lower equity mispricing at investee firms.     

The Impact of Debt-Equity Reporting Classifications on the Firm's Decision to Issue Hybrid Securities

Abstract

We test the influence of classification of securities into liabilities and equity on firms' financing choices, using as our setting the change in reporting classification of hybrid securities following SFAS 150. We find that this change affected the decision of firms to issue mandatorily redeemable preferred shares (MRPS). Following the requirement that firms classify the debt-like hybrid security MRPS as a liability, the share of MRPS issuances in firms' new financing declined. Characteristics of firms issuing MRPS also changed. While prior to SFAS 150 firms with higher levels of debt and lower coverage ratios chose to issue MRPS and not debt, after its adoption, the decision to issue MRPS is no longer related to firms' pre-existing debt and coverage levels. Furthermore, our results indicate that before SFAS 150 managers were willing to bear the higher issuance fees of MRPS and chose to issue these debt-like hybrid securities over cheaper debt. The requirement to classify debt-like hybrids as a liability took away the reporting incentives for issuance and made these securities a less popular financing vehicle.     

Firm performance and ownership structure: Dynamic network data envelopment analysis approach

This paper applies dynamic network slacks-based data envelopment analysis to measure financial performance based on the interrelationship among investment, financing, and dividend decisions. The empirical results show that financial performance is determined simultaneously by the efficiency of decisions, and sample firms have good performance in investment stage, but need to improve their financing and dividend policies. The proposal financial performance measure explains the multicriteria of decision-making rather than the single financial ratios. Besides, the research contributes a novel on the significant relationship between firm's ownership structure in the form of managers, government and foreign shareholders, and the firm's financial performance.     

Entry and Technological Performance in New Technology Domains: Technological Opportunities,Technology Competition and Technological Relatedness

Entry and success in new technology domains (NTDs) is essential for firms' long‐term performance. We argue that firms' choices to enter NTDs and their subsequent performance in these domains are not only governed by firm‐level factors but also by environmental characteristics. Entry is encouraged by the richness of opportunities for technology development, while technology competition by incumbent firms discourages entry and render entries that do take place less successful. Firms are expected to be positioned heterogeneously to recognize and capitalize on technological opportunities, depending on the presence of a related technology base. We find qualified support for these conjectures in a longitudinal analysis of entry and technological performance in NTDs by 176 R&D intensive firms. While opportunity rich technology environments attract entries by firms even if these NTDs are distal from firms' existing technologies, firms require related technological expertise in order to exploit technological opportunities post‐entry.     

Private Equity Investments and Disclosure Policy

In the current study, we dynamically analyze unlisted firms' voluntary disclosure decisions around private equity (PE) participation. First, we disentangle the role of disclosure in attracting PE investments. In addition, we examine the extent to which a firm's disclosure policy is affected by the changing corporate setting and intensified corporate governance after having received PE. We find no evidence that firms would employ increased disclosure to signal their quality in the years preceding the PE financing. However, we document a significant switch to increased financial disclosure from the PE investment year onwards, consistent with the hypothesis that PE investor presence positively affects portfolio firms' disclosure decisions. Further, we show that the proportional PE ownership stake is positively related to increased disclosure, but only at very high ownership levels. We explain these results in that both internal and external information demands call for higher public disclosure in PE firms. We conclude that the changing information environment resulting from a PE investment stimulates increased public financial disclosure. Our results contribute to illustrate how an indisputable change in governance resulting from a PE investment affects inter-temporal corporate disclosure decisions in unlisted firms.     

The implications of efficiency differences in sustainable development: An empirical study in the consumer product industry

Firms often invest in sustainable development projects to improve their environmental and societal performance. Given the broad spectrum of these projects and limited resources, managers face challenges in determining where to improve (e.g., improving water consumption and reducing carbon footprint). The study examines the connection between environmental performance and firm performance from a new angle to help managers make informed decisions. The study examines firms in the consumer product industry regarding their efficiency in the operational aspect, the resource-related environmental aspect, and the climate-related environmental aspect. It then employs panel data models to investigate the implications of efficiency differences across these aspects on firms' financial performance and business risk. The results indicate that the effects of these differences are adverse in general. Additionally, the relationship between the operational and environmental efficiency difference and financial performance is in an inverted-U shape. The study contributes to the literature by offering theoretical support and empirical evidence for the balanced portfolio approach in managing multiple environmental concerns. The study findings also provide managerial guidelines for decision-making. To gain a greater benefit, managers should aim to minimize the performance differences across multiple environmental aspects and manage a subtle balance between operational performance and environmental performance.