Institutional investors' corporate site visits and corporate investment efficiency

This study examines the association between institutional investors' corporate site visits (CSVs) and the visited firms' investment efficiency. Using unique CSVs' data from China, this study provides empirical evidence that institutional investors' CSVs lessen the visited firms' corporate investment inefficiency, including both over- and underinvestment. The negative relationship between CSVs and investment inefficiency is less pronounced for firms with higher quality financial reporting and better corporate governance. In addition, CSVs show a decrease in corporate overinvestment by monitoring the risk-taking activities of younger CEOs and expansionary firms, and supervising the use of excess free cash flows. Meanwhile, CSVs could mitigate underinvestment by reducing managerial shirking from entrenched CEOs, such as dual or longer-tenured CEOs. The possible economic mechanism behind this association is that CSVs increase institutional shareholding percentages. All the main findings are robust to a battery of endogeneity and robustness tests.     

What Makes a Business Ethicist? A Reflection on the Transition from Applied Philosophy to Critical Thinking

Using a sample of 21,030 US firm-year observations that represents more than 3000 individual firms over the 1998–2012 period, we investigate the relationship between Corporate Social Responsibility (CSR) and investment efficiency. We provide strong and robust evidence that high CSR involvement decreases investment inefficiency and consequently increases investment efficiency. This result is consistent with our expectations that high CSR firms enjoy low information asymmetry and high stakeholder solidarity (stakeholder theory). Moreover, our findings suggest that CSR components that are directly related to firms’ primary stakeholders (e.g. employee relations, product characteristics, environment, and diversity) are more relevant in reducing investment inefficiency compared with those related to secondary stakeholders (e.g. human rights and community involvement). Finally, additional results show that the effect of CSR on investment efficiency is more pronounced during the subprime crisis. Taken together, our results highlight the important role that CSR plays in shaping firms’ investment behaviour and efficiency.     

公共投资与经济增长的相关分析--中国数据的计量检验

本文在现有文献研究的基础上,依据中国改革开放20多年的实际数据,运用内生增长理论构建计量经济模型,对公共物质资本投资、公共人力资本投资及R&D投资与经济增长的相关性进行了协整检验和格兰杰因果关系检验,结果发现:三种公共投资具有不同程度的正向经济增长效应,并且其促进经济增长的路径也不相同.公共物质资本投资主要是通过资本积累效应拉动经济增长,而公共人力资本投资及研发投资则是通过提高全要素生产率及外部性效应促进经济增长.并且,在不同的发展阶段上,三种公共投资与经济增长的因果关系及驱动机制又有所不同.针对实证结果得出结论及政策建议,进而为优化我国公共投资政策提供决策依据.     

CEO given names and corporate green investment

Drawing on the psychology of names, this study examines whether a CEO having a given name that has a moral meaning (a moral name) affects corporate investment decisions on environmental protection. We find that a CEO having a moral name plays a significant role in increasing a firm's green investment. Further analysis shows that this positive relationship is more pronounced for state-owned firms. When CEOs' economic incentives are increased, the positive effect of CEOs' moral names on green investment is reduced. Overall, our findings suggest that given names with moral meanings have implications for the moral behavior of executives.     

Diversification and financialization of non-financial corporations: Evidence from China

This paper examines whether and how business diversification affects financialization in non-financial corporations. Using data from the Chinese market, we find that business diversification strategy will significantly increase non-financial corporations' investment in financial assets. Furthermore, exacerbated agency problems, increased investment inefficiency and high operational risk are found to be the consequences of business diversification, which induce companies to hold high-risk financial assets. The impact of business diversification on financial investment is stronger in small-cap firms, SOEs, and firms with weak monitoring mechanisms. Finally, the diversification effect on corporate financialization is more significant where regional economic development and regulatory environment is weak.     

Value creation in privately held family businesses: The moderating role of socioemotional wealth

This article examines value creation (VC) in the context of privately held family businesses using a value-based management approach. Namely, this paper assesses the influence of five value drivers (operating profit margin, sales growth, income tax rate, investment rate, and leverage) on the VC of family firms, considering the moderating effect of socioemotional wealth (SEW). Evidence from a sample of 188 Spanish family firms indicates a positive moderating effect of SEW on the relationship between operating profit margin, sales growth, and investment rate, and VC, leading to increases in the value of firms. The results emphasize that the importance of SEW and its variations imply heterogeneous strategic behaviours among family firms, and that economic and emotional goals might be compatible.     

Business Strategy and Labor Investment Efficiency*

This paper examines the relation between business strategy and labor investment efficiency. Since business strategy affects both the agency problem and firm‐level uncertainty, as well as the overall shape of corporate behavior, we would expect the efficiency of labor investment to vary with the particular business strategy a firm pursues. Using a large sample of US data, we find that firms having a prospector‐type business strategy are associated with inefficient labor investment, while those having a defender‐type business strategy are associated with efficient labor investment. We provide evidence that uncertainty, rather than the agency problem, causes prospector‐type firms to exhibit inefficient labor investment. Finally, we document that inefficient labor investment by prospectors leads to relatively low profitability in subsequent periods. These findings are robust when subjected to a series of sensitivity tests.     

Does the green loan policy boost greener production? – Evidence from Chinese firms

The trade-off between stable economic growth and environmental protection has been widely discussed in China, with the rest of the world paying closer attention to the emerging norms of this discourse. Government intervention and policy guidance are believed necessary in spurring firms to adopt more sustainable production approaches. This paper investigates the impact of the Green Loan Guide policy on pollution and firm performance. More specifically, we explore the impacts of the People's Bank of China's Green Loan Guide policy on Chinese firms using information from Chinese manufacturing firms for the period 2010–2017 derived from public databases and individual firms. We apply a difference-in-differences method to analyze the effect of the policies on pollution reduction and to avoid endogeneity problems. Our empirical findings indicate that the green loan policy significantly increases investments that curb pollution and encourages firms to reduce emissions, introduce new energy sources, and demonstrate greater environmental responsibility. We further show that investment in pollution control crowds out investment in fixed and intangible assets due to the financial constraint mechanism, and that it decreases sales growth, return on assets, and return on sales.     

A Note on Agency Conflicts and the Small Firm Investment Decision*

This paper explains how agency conflicts—and potential agency conflicts—can influence the investment decisions of small firms, and provides evidence of these effects using data from a recent survey of small firm investment practices. The survey asks business owners to identify their most important investment concern—overinvestment or underinvestment. We find that underinvestment concerns are more prevalent in growing firms, and those with concentrated ownership and control structures. Overinvestment concerns increase as firms adopt less‐concentrated ownership and control structures. These results suggest that the management challenges facing small firms shift as the degree of separation between ownership and control becomes greater.     

Automotive foreign direct investment in the United States: Economic and market consequences of globalization

This article examines the substantial growth of foreign direct investment into the United States by international (i.e., non-domestic) automotive firms over the past quarter century. Global macro-environmental factors influencing this investment are examined, as are the resulting impacts on numerous stakeholders including global automotive firms, consumers, and regional and state economies. The findings illustrate effective adaptive strategies that both automotive firms and economic development stakeholders follow in an increasingly global environment, resulting in significant economic, market, and quality-of-life benefits. The stakeholder perspective affords a more comprehensive view of globalization, forwarding a position counter to the protectionist viewpoint often espoused in business and popular culture.     

Wage bargaining and multinational firms

We set up a general equilibrium model with heterogeneous firms to study the interaction between wage bargaining and foreign direct investment. Thereby, we highlight the incentives of firms to invest abroad in order to improve their bargaining position vis-á-vis local unions and we show how changes in the bargaining power of unions affect the share of multinational firms in an open economy. In addition, taking into account this relationship between wage bargaining and foreign direct investment, our analysis provides novel insights on how labor income and the unemployment rate adjust to economic integration and how changes in the bargaining power of unions affect these two labor market variables.     

The Determinants of the Location of Foreign Direct Investment by Japanese Small and Medium-sized Enterprises

Japanese manufacturing small and medium enterprises (SMEs) have actively undertaken Foreign Direct Investment (FDI) in Asia since the mid-1980s. FDI contributes to economic growth of the FDI recipient countries, as it brings in not only financial resources for investment but also technologies and managerial know-how, which are important factors for promoting economic growth. Recognizing these benefits of receiving FDI, policy makers in developing countries have formulated various strategies to attract FDI. This paper examines the factors in the host countries that would attract FDI by Japanese SMEs. Our results show the importance of both supply-side and demand-side factors in the recipient countries for attracting FDI by Japanese SMEs. Supply-side factors include abundance of low-wage labor, availability of well-developed infrastructure, and good governance of the host government, while an important demand-side factor is the presence of sizable local market. In addition, Japanese SMEs regard industrial agglomeration, which has a element of both supply and demand factors, as an important factors making FDI decision. Supply-side factors are found to be important for attracting Japanese FDI in developing countries, while demand-factors play a role in attracting Japanese FDI in developed countries. A comparison of the results for SMEs to those for large firms reveals that SMEs are more sensitive to the conditions in the host countries in making their FDI decision. In particular, SMEs regard the availability of low-wage labor, well-developed infrastructure, and industrial agglomeration as important elements much more than large firms. High sensitivity of SMEs to local economic conditions in their decision on FDI location may be explained by their limited availability of financial and human resources and high dependence on overseas production in their business. In light of these findings, we conclude that countries interested in hosting FDI have to provide a very attractive business environment.     

Do Leveraged Firms Underinvest in Corporate Social Responsibility? Evidence from Health and Safety Programs in U.S. Firms

The explosion of health-related costs in U.S. firms over more than a decade is a huge concern for managers. The initiation of Health and Safety (H&;S) programs at the firm level is an adequate Corporate Social Responsibility (CSR) initiative to contain this evolution. However, in spite of their documented efficiency, firms underinvest in those programs. This appears as a puzzle for health economists. In this paper, we uncover a strong negative relation of financial leverage to the implementation of H&;S programs. The negative impact of debt on investment and CSR activities is generally interpreted as an efficient disciplinary effect of debt on managers. H&;S are particularly well suited to revisit this evidence, given their strong profitability and homogeneity across firms. Very interestingly, the negative effect is stronger for firms with high free cash flows, for which debt is used to prevent overinvestment. This strongly suggests that debt, while disciplining managers, also discourages investments which are valuable both for firms and society.     

Government subsidies and corporate investment efficiency: Evidence from China

This study examines how state subsidies to firms affect corporate investment efficiency. Using archival data from a sample of Chinese listed firms over the 2007–2015 period, we find that government subsidies have a negative effect on firms' investment efficiency, and this negative effect is more pronounced for firms that are less financially constrained. Further analyses suggest that government subsidies are positively associated with firms' over-investment, although they alleviate under-investment. Our findings are robust to a series of tests to alleviate concerns about potential endogeneity and self-selection bias.     

Investment Committee,Corporate Cash Holdings and Corporate Life Cycle

We investigate the association between voluntary formation of board investment committee (IC) and corporate cash holdings of nonfinancial firms over the corporate life cycle stages for a large sample of Gulf Cooperation Council firms during 2005–2016. We find that IC increases corporate cash holdings in growth and maturity stages of firm, compared to introduction, shake‐out, and decline stages. These results have important implications for investors, policy makers, and regulators. Our findings are robust to various econometrics specifications.     

组织间权威对交易分配和投资积极性的影响

企业投资决策是事前行为,而交易分配事后才能明确,当企业无法控制交易分配时,其投资积极性会受影响。论文从独立决策、卖方控制和买方控制三方面分析了组织间权威在交易分配中的作用,认为在独立决策时,企业因事后交易的不确定性而存在投资不足;而在卖方控制或买方控制的情况下,拥有权威的一方存在投资过剩,不拥有权威的一方则投资积极性不足。因此,当一方的投资对于社会总收益创造更为重要时,应由其拥有权威。     

管理者过度自信与企业投资行为异化——来自我国证券市场的证据

Based on data of A-shares listed companies in China, this paper studies the relationship between managerial overconfidence and firms’ overinvestment behaviors. We first define a manager as an overconfident one if his or her compan’s announced earnings forecast is higher than its actual earnings at least once in 2002–2004. After controlling such factors as growing opportunity, size, etc., we find that overconfident managers tend to over-invest and their overinvestment behaviors have higher sensitivity to cash flow generated by financing activities. In other word, when their firms obtain an abundant cash flow from financing activities, overconfident managers will over-invest, or vise versa. Contrary to other relevant studies, we find that the sensitivity between over-investment and free cash flow has little to do with managerial overconfidence. Robustness testing is conducted to verify the reliability of our conclusions. We also use “whether top managers increase their holdings of company shares within the observation period” as a substitute variable for managerial overconfidence and run the tests again, and the results are consistent with the above. Finally, findings of this paper indicate that it is necessary for firms to establish a scientific and rigorous investment managing mechanism. Translated and revised from Nankai Guanli Pinglun 南开管理评论 (Nankai Business Review), 2008, (2): 77–83     

企业投融资互动机制下的信贷违约风险——基于中国上市公司的实证研究

本文以中国上市公司为样本,实证分析了在负债融资与投资决策相互作用的机制下企业信贷违约风险的变化规律.实证结果表明,整体上投资支出会促进信贷违约风险,负债融资会对其产生抑制;在负债融资导致的过度投资情形下,企业投资对信贷违约风险的促进作用将更明显,而过度投资会抑制企业最优负债融资水平,从而带来更低的最优信贷违约风险;短期负债融资会促进企业信贷违约风险的增加.文章为信贷违约风险控制探寻了一种从企业微观财务决策角度进行分析的全新视角.     

The Impact of Financing Constraints and Agency Costs on Corporate R&D Investment: Evidence from China

This study investigates the association between financing constraints/agency problem (agency costs) and corporate R&D investment in China by using the two‐tier stochastic frontier model initially developed by Kumbhakar and Parmeter (2009) in light of the Euler equation analysis framework. The results show that there is a significantly negative association between financing constraints and firms' R&D investments and a significantly positive relationship between agency costs and R&D investments. Thus, financing constraints lead to R&D underinvestment, while agency costs cause R&D overinvestment by the sample firms. However, government subsidies have a positive moderating effect on the relationships. The impact of financing constraints and agency costs on R&D investment varies slightly by firms in different geographical regions, industries, business ownerships, and years.     

地方经济增长目标对外商直接投资的影响与机制研究

经济增长目标管理是中国宏观经济的重要现象,外商直接投资的注入为经济增长提供了重要的源泉。文章基于中国各地级市政府工作报告公布的年度经济增长目标,形成284个地级市2001~2016年面板数据,检验经济增长目标对吸引外资的影响。研究发现,经济增长目标的提高显著增大了实际利用外资数量,该发现是稳健的,在进行了变换度量变量、回归样本和考虑内生性的稳健性检验之后,结论依然成立。究其机制,在既定的经济增长目标的激励下,地方政府扩大土地出让面积,增大人均财政支出,以此吸引外商直接投资。文章还发现,地方经济增长目标的提高将导致外商直接投资显著增加的效应,仅在欠发达的中西部地区成立,在2012年之前出现。文章的发现为进一步优化政府目标管理实现经济高质量发展提供了有益的参考。