Environmental,Sustainable Behaviors and Innovation of Firms During the Financial Crisis

In this paper, we analyze the relation between sustainable and environmental behaviors and performance and innovation. Altogether, 1032 observations are divided into specific groups according to the Carbon Disclosure Project (CDP) Global 500 report and the Dow Jones Sustainability Index (DJSI) for 2008 and 2009. Based on legitimation theory and stakeholder theory, we regard the voluntary activities of firms as having long‐run effective characteristics that can be applied to industry in general. The environmental behavior of firms is represented by CDP activity, while the DJSI represents their sustainable activities. Based on the assumption that corporate environmentalism is a bilateral agreement between policymakers and firms, we answer four specific research questions. (i) What is the relation between voluntary activities and performance of firms? (ii) Do firms' voluntary activities in environmental and sustainable implementations induce innovation? (iii) How does the nature of innovation depend on voluntary type of the firms? (iv) What is the link between firm characteristics and innovation according to voluntary types? From the presented empirical analysis, we find positive relations between corporate environmentalism and innovative activities. We then classify environmental and sustainable issues and propose an empirical model of the links between environmental and sustainable behaviors and innovation activities. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

Investment committees and corporate cash holdings

We investigate the association between the voluntary formation of a board investment committee (IC) and corporate cash holdings for a large sample of Gulf Cooperation Council (GCC) firms over the 2005–2013 period. We provide evidence that the existence of a specialized IC increases corporate cash holdings. We also find that several IC characteristics, i.e., member experience, independence, number of meetings, and committee size, are associated with an increase in firms’ cash holdings. Furthermore, the local and foreign institutional ownership of GCC firms moderates the IC-cash holdings relationship. These results remain robust to alternative specifications of cash holdings and endogeneity tests. We contribute to the literature on firms’ incentives to hold cash and to the literature on governance in emerging market contexts.     

The impact of corporate governance on state-owned and non-state-owned firms efficiency in China

The purpose of this paper is to expand the literature on the corporate governance of transition economies by analyzing the relationship between corporate governance and productive efficiency in China's publicly listed manufacturing industry firms. We use the principal component analysis and the hybrid meta-frontier DEA model, separating inputs into radial inputs that change proportionally and non-radial inputs that change non-proportionally to measure the technical efficiency and technology gap ratios of publicly listed Chinese firms in different manufacturing industries during 2010–2013. The input variables are the net value of fixed assets, staff number, and the characteristics of the corporate governance system, while the output variables are gross revenue and total profit. The empirical result shows that inefficiency due to corporate governance is the main reason for lower efficiency in most manufacturing firms. For the technology gap ratio (TGR), the metal and mineral and the machinery, equipment and instrument are the two highest efficient sectors, whereas the paper and allied products sub-industry has the lowest efficiency during 2010–2013. In addition, the ratio of state-owned firms whose inefficiency is mainly caused by corporate governance to total state-owned firms is greater than that of non-state-owned firms in each year. The TGR analysis shows that the efficiency performance of non-state-owned firms is greater than state-owned firms.     

Are Related‐Party Sales Value‐Adding or Value‐Destroying? Evidence from China

Prior literature provides mixed and relatively little evidence on the economic consequences of related‐party transactions. We examine a hitherto underexplored issue of whether transactions among firms within the same business group increase or reduce firm value. Using a large sample of Chinese listed firms, we find that related‐party sales increase firm value. However, this value enhancement disappears for firms with (i) large percentage of parent directors, (ii) high government ownership, or (iii) tax avoidance incentives that often couple with management's rent extraction activities. Although we find that intragroup sales improve firm value in general, we also find that corporate insiders use intragroup sales to deprive value from minority shareholders. Overall, our findings highlight the interplay between ownership structure and tax avoidance incentives in determining the economic consequences of related‐party transactions.     

Mixed ownership of industrial firms in Japan: debt financing,banks and vertical keiretsu groups

In the 1980s, Japanese bank-driven corporate governance practices were often said to be part of the explanation for Japan’s economic success. However, these practices became suspected causes of Japan’s continuing recession following the burst of the financial bubble in 1990. Since then Japanese banks have suffered from increasing numbers of non-performing loans. Consequently, banks have become less able to act as the benefactors for Japanese firms. In response to the reduced supply of bank loans, Japanese firms have been exploring issuing corporate bonds and other types of public debt as alternative methods of debt financing. The objective of this paper is to examine empirically how Japanese manufacturers have responded to the deteriorating financial conditions of Japanese banks from a corporate finance perspective. In particular, we are interested in knowing whether Japanese banks’ involvement in corporate governance has declined with the increase in public debt issuances. Our empirical results seem to suggest that Japanese banks play a significant role in their client firms’ issuances of public debt and hence continue to play a significant role in corporate governance.     

Strategic stakeholder management,environmental corporate social responsibility engagement,and financial performance of stigmatized firms derived from Chinese special environmental policy

We draw upon the stigma literature and strategic stakeholder management model to develop a framework capable of explaining the link between environmental corporate social responsibility (ECSR) engagement and financial performance of stigmatized firms, taking stakeholder‐oriented governance and density of local stigmatized firms into consideration. Using a uniquely compiled dataset of Chinese firms specifically monitored by the Ministry of Environmental Protection of China, we conducted propensity score matching analysis to estimate the impact of stigma on corporate financial performance and corporate environmental responsibility. The result shows that the financial performance of stigmatized firms is negatively affected by the stigma label, spurring them to engage in more ECSR than their peers to improve their legitimacy. Though ECSR engagement of stigmatized firms is found to be negatively associated with their financial performance in current study. Our results also confirm that (a) the financial performance of stigmatized firms is positively affected by two proxies for corporate stakeholder‐oriented governance (i.e., institutional ownership and corporate transparency) and negatively affected by the density of local stigmatized firms; (b) corporate stakeholder‐oriented governance compensates for the negative effect of ECSR engagement; (c) high intensity of local stigmatized firms provides focal firms with an opportunity to improve their financial performance through ECSR engagement; and (d) the positive effects of corporate stakeholder‐oriented governance are diminished by the density of local stigmatized firms.     

Board internationalization and corporate social responsibility

This study examines the association between board internationalization and firms’ corporate social responsibility (CSR) performance in China during 2009–2019. Using a large dataset of director nationalities and CSR scores, we find that foreign directors promote CSR performance as evidenced by higher CSR scores. We further document that this relationship is more pronounced among government-controlled firms, firms with better corporate governance, and firms operating under stricter institutional environments. These findings remain valid after sequential robustness checks. Overall, our findings imply that foreign directors motivate the board of directors and their firms to actively pursue and practice social responsibility. Our study enriches the literature on the outcomes of board internationalization and determinants of CSR and provides the internationalization of corporate governance mechanisms a reasonable basis.     

Corporate sustainability strategies in institutional adversity: Antecedent,outcome, and contingency effects

This study examines (i) how top-level managerial institutional ties drive corporate sustainability strategies of emerging market firms operating under conditions of institutional adversity; (ii) the impact of corporate sustainability strategies on market performance; and (iii) the moderating role of financial resource slack on the relationships between corporate sustainability strategies and market performance. The study builds from institutional development logic and the structure–conduct–performance paradigm. Primary data are collected from 300 firms operating in a major sub-Saharan African market. Findings show that top-level managerial institutional linkages with regulatory national governmental officials, local community leaders, and top managers at other firms drive corporate proactive and responsive sustainability strategies, which in turn influence market performance. In addition, the findings reveal that financial resource slack strengthens the path between corporate proactive sustainability strategies and market performance, but not the path between corporate responsive sustainability strategies and market performance. Theoretical and practical implications are discussed.     

Performance Implications of IJV Boards: A Contingency Perspective

This study draws from the corporate governance literature to investigate the implications of board involvement for international joint ventures (IJVs). We extend recent corporate governance research on the value of board involvement by investigating unique sources of complexity related to the nature of the IJV. We argue and find that board involvement can enhance the performance of IJVs, particularly for collaborations that are complex in nature due to their broad functional scope as well the level of market overlap between IJV parents. We complement recent research on joint venture control that has focused on the antecedents and types of control, as well as studies on formal (e.g. contractual safeguards and monitoring) and informal governance mechanisms (e.g. trust) by providing empirical evidence that IJV board involvement is valuable when directors undertake their control and coordination responsibilities. We advance corporate governance research by providing evidence that joint ventures possess several unique characteristics that shape the value of board involvement, thereby showing that applications of corporate governance theory to joint ventures are useful, but should be made with care.     

Institutional investors,corporate governance and the performance of the corporate sector

Proportions of equity held by institutional investors—pension funds, insurance companies and mutual funds—are rising across all OECD countries. Meanwhile institutions are becoming more influential in corporate governance, even in bank-dominated countries, inter alia due to international investment, pension reform and EMU. We provide two forms of evidence on the effects of institutional corporate governance on corporate performance. First we offer a literature survey on micro evidence, the outcome of which is mixed, but on balance suggesting a positive effect on equity returns. We contend that these micro studies face a difficulty that they cannot capture effects of governance initiatives whose effects go wider than “target firms”. Accordingly, we present results for the reduced form empirical relationship between institutional share holding and corporate sector performance at an economy-wide level. These are consistent with significant effects which differ between “Anglo-Saxon” and “relationship banking” countries. For example, institutions appear to accompany lower investment and higher dividends in the former.     

Corporate Governance and Accruals Earnings Management

This study examines the association between corporate governance and accruals earnings management using a corporate governance index consisting of 55 individual corporate governance measures. Prior literature has focused primarily on certain individual corporate governance measures, overlooking the multidimensional character of corporate governance. Based on a sample of firms listed on the Athens, Milan and Madrid Stock Exchanges, we find an inverse relationship between corporate governance and earnings management. Corporate governance provisions seem to constrain the tendency of management to manage earnings leading to higher credibility for financial statements. Additional tests suggest that the negative relationship holds for large and middle capitalization firms but not for the small capitalization sample. In addition, corporate governance provisions limit upwards but not downwards earnings management. This study emphasizes the multilevel character of corporate governance and suggests the usage of comprehensive measures of corporate governance in the academic research. This study also stresses the importance of introducing corporate governance mechanisms in order to ensure the integrity of the financial reporting process. Practitioners are expected to evaluate the corporate governance provisions that each firm has put in place, whereas policy makers are expected to mandate the application of a wide range of corporate governance mechanisms. Copyright © 2011 John Wiley & Sons, Ltd.     

What drives firms' commitment to fighting corruption? Evidence from the UK

The recent leak of the FinCEN files has highlighted the widespread presence of corruption in developing and developed economies, including the UK. Accordingly, this study aims to investigate the factors that drive companies to implement measures for preventing corruption in developed countries using FTSE 350 nonfinancial firms. Specifically, the research examines the influence of corporate social responsibility (CSR) commitments, board structure, and shareholding structure on adopting strategies, policies, and procedures aimed at countering corruption. Drawing upon agency, stakeholder, and legitimacy theories, our empirical evidence supports that CSR commitments and board independence positively influence firms' engagement in anticorruption measures. Conversely, institutional and managerial shareholdings are found to have a negative association with firms' efforts to combat corruption. In addition, the study shows that the effect of board characteristics became more pronounced following the enactment of the UK Bribery Act 2010, indicating risk-averse behavior. Various models, including cross-sectional and two-stage least squares (2SLS), are employed to analyze the data. Our findings have significant implications for understanding the complex relationship between CSR, corporate governance, and the ethical infrastructure of organizations. Ultimately, our results provide valuable insights for policymakers, companies, and other stakeholders in developing effective strategies, policies, and procedures to combat corruption activities.     

基于公司治理视角的我国上市银行风险控制能力实证分析

本文以我国上市的16家银行为研究对象,根据其2013年半年度报告,基于公司治理视角,选取9个具有代表性的指标,利用SPSS19.0软件对我国上市银行风险控制能力进行因子分析。实证结果表明,基于选定的指标和数据,各种机制的重要性按递减顺序为:内部治理中的股东治理机制、外部治理中的资本充足率监管机制和信息披露机制、内部治理中的董事会治理机制。为提高风险控制能力,加强和完善我国上市银行公司治理,应从优化银行股权结构、强化监管机制、重视境外战略投资者、完善治理机制方面作出努力。     

The ‘Company with Committees’: Change or Continuity in Japanese Corporate Governance?

Corporate governance practices are arguably diffusing across the world. This paper examines the adoption of the committee‐based governance system (i.e. audit, nomination, and remuneration) in Japanese firms, a practice common in Anglo‐American capitalism but potentially contestable in Japan. The study finds that firms that are internationally exposed through cross listing are more likely to adopt the committee system. Moreover, more experienced and highly cross‐held firms, with larger proportions of foreign ownership, are more likely to adopt the committee system. On the other hand our study finds partial support for the hypothesis that larger proportions of bank ownership are negatively associated with the adoption of the committee system, suggesting a gradual withdrawal by banks from the traditional monitoring of firms. This paper adds to the longstanding debate on the convergence on or persistent divergence from the Anglo‐American corporate governance system. The study thus provides insights into corporate governance changes in non‐Anglo/American countries that face a struggle between global capital market forces for change and deep‐seated institutional practices of continuity.     

MANAGEMENT CONTROL SYSTEMS IN FAMILY FIRMS: A REVIEW OF THE LITERATURE AND DIRECTIONS FOR THE FUTURE

Family firms play a significant role in the global economy. Although family firm literature has devoted much time and effort to investigating topics concerning corporate governance, leadership, ownership and succession, accounting issues have received relatively scant attention. In this paper, we assemble and critically review extant literature on the choice of management controls. This is an essential topic for firms as management control systems (MCS) are used to make sure subordinates behave in function of the goals of the firm. Family firms, however, have distinct features, such as differences in governance structures and goals, which can have a significant impact on whether and how MCS are used. We conclude this review paper by providing avenues for future research that can advance our understanding of both the determinants and the outcomes of the choice of MCS.     

Corporate governance, Sarbanes-Oxley, and small-cap firm performance

The recent debate on the onerous costs of compliance with the Sarbanes-Oxley Act has primarily focused on small firms. I study the effects of SOX compliance on such firms by comparing the performance of Canadian small-cap firms that are subject to SOX provisions with those that are not, while: (a) taking into account firms’ internal and external governance mechanisms, including the market for corporate control, and (b) accounting for the simultaneous interactions between alternative governance mechanisms and firm performance. Firms subject to Sarbanes-Oxley experienced an incremental increase in market valuation ranging between 15.7% and 34% depending on the measure of board independence used in the estimation. Some sub-optimal deployment of the endogenous governance mechanisms is observed, while the market for corporate control serves as a positive disciplining factor.     

CORPORATE GOVERNANCE AND INNOVATION: A SURVEY

Abstract The traditional economics of innovation, inspired by Schumpeter and more recent advances on his work, seem unable to explain why firms with similar external conditions may show greatly different performance in innovation. Contrastingly, the literature on corporate governance provides some useful insights for understanding corporate innovation activity, to the extent that such literature examines the economic effects of different modes of coordination between firm members. The process through which individuals integrate their human and physical resources within the firm is central to the dynamics of corporate innovation. This paper provides the first survey of the literature on this issue. We start by discussing how various theoretical approaches to the analysis of the firm deal with technological innovation. We then describe three main channels – corporate ownership, corporate finance and labour – through which a system of corporate governance shapes a firm's innovation activity. Finally, we examine the relationship between country‐level institutional settings, national patterns of corporate governance and the aggregate innovation activity of corporations. We conclude by suggesting that future research should focus more deeply on the interrelation between the various dimensions of corporate governance and on their joint effect on firm innovation.     

The Foreign Exchange Exposure Management Practices of Finnish Industrial Firms

This study employs questionnaire survey and financial accounting data to extend earlier empirical work on the foreign exchange (FX) exposure management practices of Finnish industrial firms. The paper concentrates on: (i) the form that FX corporate hedging policy takes; (ii) the control of FX procedures and trading; and, (iii) our respondents' perceptions about their ability to predict FX rate changes for hedging decisions. Our results indicate that the extent to which firms hedge FX exposure depends on the type of exposure and the form that FX hedging policy takes. Also, a significant number of the firms pursue FX hedging strategies on the expectation of attaining trading profits and this strategy appears to be accommodated within their FX policies. This feature is not explicitly demonstrated in previous studies. Finnish firms hedge a much higher proportion of both transaction and translation exposures compared to economic exposure. We partly attribute this emphasis to the requirements of the Finnish Accounting Act, which came into effect in 1993. The organisational, historical and financial settings of the firms also have significant impacts on exposure management practices. The overall implication of those results is that firms respond to changes in the financial, economic and regulatory environments in which they operate.     

The New Political Role of Business in a Globalized World: A Review of a New Perspective on CSR and its Implications for the Firm,Governance, and Democracy

Scholars in management and economics widely share the assumption that business firms focus on profits only, while it is the task of the state system to provide public goods. In this view business firms are conceived of as economic actors, and governments and their state agencies are considered the only political actors. We suggest that, under the conditions of globalization, the strict division of labour between private business and nation‐state governance does not hold any more. Many business firms have started to assume social and political responsibilities that go beyond legal requirements and fill the regulatory vacuum in global governance. Our review of the literature shows that there are a growing number of publications from various disciplines that propose a politicized concept of corporate social responsibility. We consider the implications of this new perspective for theorizing about the business firm, governance, and democracy.     

Effects of enterprise technology on supply chain collaboration: analysis of China-linked supply chain

Supply chain collaboration has received increasing attention from scholars and practitioners in recent years. However, our understanding of how enterprise information technology facilitates supply chain collaboration is still very limited, especially with regard to Chinese enterprise ownerships such as state-owned firms, joint-venture firms and local village-owned firms. This paper extends the theory established in enterprise information technology (IT) and supply chain collaboration literature and relates it with coordination in China-linked supply chain. Drawing upon an empirical study from 177 Chinese companies, we provide three major findings: (i) uncovered the importance of leveraging enterprise IT through supply chain collaboration; (ii) identified the relationship between enterprise ownership and enterprise technology use and supply chain collaboration in China-linked supply chain and (iii) illustrated effects of supply chain collaborative activities on operational and market performance.