Managerial pay and firm performance — Danish evidence

This study examines the determinants of managerial compensation in a sample of Danish firms, and tests hypotheses derived from agency theory in the seldom studied (European) institutional setting of relationship-oriented governance systems. We find pay–performance sensitivity similar to that found in other settings, small differences in sensitivity across management levels, and no evidence in support of the career concern hypothesis.     

Owners’ rule-based decision-making in family firm strategic renewal

We explore the process and consequences of family firm owners applying informal rules to decision-making in the context of later-generation family firms attempting strategic renewal. Based on the case studies of two firms in a Nordic country where the owners serve as non-executive board members, and following institutional action theory, we propose that informal rules – based on historical precedents and cumulative experience – applied to a family firm’s decision-making play many roles. They sustain family traditions over time, transfer experience over generations and depersonalise family members’ use of power. In addition, the rules on governance structure, governance processes and the content of the strategies form a hierarchy and can both facilitate and hinder the renewal.     

Macroeconomic factors and firm’s cross-border merger and acquisitions

This study investigates the impact of macroeconomic variables on the wealth effects of cross-border acquisitions by Malaysian multinational companies. The sample consists of 159 cross-border acquisitions by Malaysian MNCs bidding in 22 countries around the world from 2000 to 2007. The macroeconomic variables examined in this study are foreign economic condition, GNP correlation between countries, and level of economic development of target country. The findings indicate that, foreign economic condition affects the wealth effect negatively, while the level of economic development of target country affects the wealth effect positively. Aside from the macroeconomic variables, we also find that English or non-English language, government’s rules index and the telecommunication infrastructure all play certain roles in the Malaysian cross-border acquisitions. Implied from this study is that, value creation of the Malaysian cross-border acquisitions is a function of the foreign economic condition and the level of economic development of the target foreign country.     

HR and firm performance at companies in Turkey： Correlative analysis

Aim of this study is to discuss matters with HR and finn performance. Therefore, we used HR and firm performance questionnaire from Delaney and Huselid （1996）. HR variables include recruitment, training, compensation and promotion. Firm performance divided into organizational and market performance. Therefore, correlation analysis demonstrates that HR has positive and significant relationship with organizational performance, and HR has positive but weak relationship with market performance. Therefore, we can propose that HR is partly correlated with firm performance for those companies in sample. Therefore, since we didn＇t realize demography of companies in study, it is arguable, findings of this study can be generalized to other companies in Turkey.     

Do LGBT‐supportive corporate policies enhance firm performance?

Prior research provides evidence that lesbian, gay, bisexual, and transgender (LGBT)‐supportive corporate policies are related to important human resource functions, such as enhanced recruitment and retention. In addition, prior research indicates that investors view the adoption of such policies positively. We examine the firm‐performance mechanisms underlying favorable stock‐market reactions based on an integration of perspectives from corporate social responsibility and the business case for diversity. Specifically, we estimate a hierarchical linear model (HLM) to account for the nested nature of our data (firms nested within states) and find that (1) the presence of LGBT‐supportive policies is associated with higher firm value, productivity, and profitability; (2) the firm‐value and profitability benefits associated with LGBT‐supportive policies are larger for companies engaged in research and development (R&D) activities; and (3) the firm‐value and profitability benefits of LGBT‐supportive policies persist in the presence of state antidiscrimination laws. In supplemental analyses, we find that firms implementing (discontinuing) LGBT‐supportive policies experience increases (decreases) in firm value, productivity, and profitability. We are among the first to link LGBT‐supportive policies specifically to financial performance outcomes as well as to develop and test a multilevel model of these relationships. Our results have important implications for theory and research on LGBT issues in organizations, human resource managers, and policymakers.     

Firms and universities—do spillovers enhance firm’s performance?

This paper aims to assess if geographic proximity from universities enhances small firms’ performance, by means of knowledge spillovers. A sample of micro data is used on 390 manufacturing firms and 11 public universities in Portugal. Performance is measured by labour productivity. The estimation was made using OLS as well as Quantile Regression. Results seem to confirm that both domains of knowledge do produce distinct effects, but there is no evidence that a firm’s performance improves with the proximity to a university. Likewise, the quality of universities does not seem to influence the labour productivity of firms.

Are commercial bank lending propensities useful in understanding small firm finance?

We consider recent criticism by Berger et al. (J Bank Finance 31:11–33, 2007) of the use of commercial bank lending propensities (e.g., small business loans/total assets) as research tools. We use 2SLS cross sectional regressions with bank fixed effects to examine the relationship between small business lending and bank size. Our results indicate that the propensity to lend to small businesses declines as bank size increases, and the growth in small business lending does not keep pace with the growth in bank size. An increase in bank asset size from $1 billion to $100 billion reduces the ratio of small business loans to total loans and leases by 28 percentage points. Contrary to Berger and Black (2007) we find that most small business loans are made by small banks. For 1993 to 2006 as a whole, small banks (those under $1 billion) accounted for only 14.1% of total deposits and 9.7% of total banking assets, but they accounted for 28.4% of small business loans outstanding. This is consistent with the pattern shown by lending propensities. We conclude that these propensities remain very useful tools in research on small firm finance.     

Do credit squeezes influence firm survival? An empirical investigation of China

This paper analyses the effect of a “credit squeeze” policy that was set by the Chinese government in 2007, increasing the strictness for firm-level bank loans. We adopt the difference-in-difference (DID) model to compare the survival rate change before and after the policy was implemented. We further explore the mechanism behind how the “credit squeeze” policy reduced the probability of firms surviving the market from perspectives such as financial constraints and ownership structures. The “credit squeeze” policy significantly increased firms’ operating costs and lowered firms’ productivity. In addition, we find that the zombie firm phenomenon existing in state-owned enterprises has a large impact on our estimation. Our results provide practical policy implications regarding the compromise between systematic debt risk and firm survival.     

Returns to firm-provided training: evidence from French worker–firm matched data

Using worker–firm matched data, we study the incidence and the effects of firm-provided training in France. When we use the same kinds of data and models as the existing ones, the estimated impact of training on wages is as high in France as in other countries. When we build on the uniqueness of our French data and control for the selectivity of firms' training practices, the estimated impact of training falls close to zero. The wage differentials observed across trained and untrained workers reflect that individuals who are the most likely to be placed in training programs are also those with the highest unmeasured abilities.     

Does the information content of payout initiations and omissions influence firm risks?

We study the influence on firm risks of NASDAQ and NYSE firm payout initiations and omissions. These payout events can be interpreted as managerial signals of firm financial life-cycle maturation resulting in concomitant changes in firm risks. We remove confounding payout types and we match on the propensity to initiate or omit informed by determinants of payout known to investors in advance. For payout event and matched firms, we apply the difference-in-differences method to estimate the effect of the information content of actual initiations and omissions on firm risks. We find consistent significant declines in total, aggregate systematic, and idiosyncratic firm risks after cash dividend initiations and increases after dividend omissions, but only incidentally after share repurchase initiations and omissions.     

Business start-ups by the unemployed — an econometric analysis based on firm data

Active labour market policies to promote firm foundation from unemployment were improved considerably in Germany in August 1994, a fact which led to a sharp increase in the number of start-ups by the unemployed. The study compares firm survival and employment growth of start-ups by unemployed and others, based on firm data from 15 regions in East and West Germany. Self-selection effects are taken into account by using simultaneous models of start-up promotion and firm development. While firm survival is negatively affected by foundation from unemployment in East Germany (−6%), an influence on employment growth is not evident.     

Independent directors and family firm performance: does one size fit all?

How will the presence of independent directors affect family business performance? This question is still theoretically debated and empirically inconclusive. Because family businesses are a group of heterogeneous companies with different levels of family involvement in the business, the purpose of this paper is to empirically explore how the combination of different family business governance structures jointly shape the effect of independent directors on family business performance in an understudied Collectivist cultural setting. Using Qualitative Comparative Analysis (QCA) on a sample of 74 Lebanese family firms this study finds that, depending on the family firm governance structure, the presence of independent directors on the board can lead to either positive or negative firm performance. Theoretical and practical implications are discussed.     

Should everybody be in services? The effect of servitization on manufacturing firm performance

The servitization of the manufacturing sector refers to the evolution of manufacturers' capabilities to offer services as complements to or substitutes for the goods that they produce. A vast literature has described these strategies and has shown that this phenomenon is widespread and growing in most developed economies. However, very little systematic evidence of the extent or consequences of servitization based on a comprehensive data set of firms exists. In this paper, we provide such evidence using exhaustive data for French manufacturing firms between 1997 and 2007. We find that the vast majority of French manufacturers sell services in addition to producing goods. The shift toward services is growing steadily but at a slow pace. We also estimate the impact of servitization on firm performance. Controlling for various sources of endogeneity bias, our most conservative results show that firms that start selling services increase their profitability by 0.4%, their employment by 2.1%, and their total sales by 0.6%. For small businesses, we also find a positive impact on the production of goods. We also uncover strong heterogeneity across manufacturing industries.     

Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors

The main objective of this study is to investigate the impact of corporate research and development (R&D) activities on firm performance, measured by labour productivity. To this end, the stochastic frontier technique is used on a unique unbalanced longitudinal dataset comprising top European R&D investors over the period 2000–2005. In this framework, this study quantifies technical inefficiency of individual firms. From a policy perspective, the results of this study suggest that if the aim is to leverage firms’ productivity, the emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. On the other hand, corporate R&D in the low-tech sector is found to have a minor effect in explaining productivity. Instead, encouraging investment in fixed assets appears important for the productivity of low-tech industries. Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an ‘erga omnes’ approach across all sectors appears inappropriate. However, with regard to technical efficiency, R&D intensity is found to be a pivotal factor in explaining firm efficiency and this turns out to be true for all industries.     

Commitment to total quality management: Is there a relationship with firm performance?

Much has been written about Total Quality Management (TQM) but, to date, there has been relatively little empirical investigation. Therefore, this work addresses the overarching question of whether or not TQM measurably improves firm performance. For a sample of sixty firms, that have demonstrated a commitment to TQM for a period of at least five years, we find that the strategy is associated with superior stock-market performance (on a market- and risk-adjusted basis) and improved profit margins.     

The optimal capital structure of the firm with stable Lévy assets returns

This article builds a new structural default model under the assumption that a firm’s assets return follows a dynamics displaying jumps of both signs. In essence, we expand the work of Hilberink and Rogers (itself an extension of the Leland and Toft framework), which deals only with negative jumps. In contrast, we make use of stable Lévy processes, and we compute the values of the firm, debt and equity under this assumption. Theoretical credit spreads can also be obtained in our framework. They prove to be consistent with the empirical credit spreads observed in financial markets.      

The expatriate’s family as a stakeholder of the firm: a responsibility viewpoint

In this paper we argue for the recognition of the expatriate’s family as a stakeholder of the firm during the expatriation. We demonstrate why the expatriate’s family can be regarded as a stakeholder of the parent company and what kind of a stakeholder the family is. Additionally, we argue that the parent company needs to develop and apply a holistic well-being orientation to show stakeholder responsibility in the international assignment (IA) arena. We apply the theory of stakeholder salience to the IA relationship because it provides a theoretical framework for integrating the family into the expatriation process. Yet this theory does not necessarily provide a framework for assessing the social functioning of expatriates and their family members. Since expatriation often leads to a radical shift in family roles and living circumstances, family members (or indeed the expatriates themselves) cannot replicate all elements of their previous lives in the host country. Therefore, we use the capabilities approach to complete the theoretical framework, as this approach provides an evaluative mechanism which highlights how a socially responsible relationship between the company and the family can be advanced to foster well-being and quality of life for the family members as well as the expatriate, even if their functioning abroad differs from their functioning in their own country.     

Corporate governance mechanisms and firm valuation in Malaysian listed firms： A panel data analysis

Corporate governance mechanisms emerge to tackle agency problems in ensuring that shareholders＇ funds are not expropriated or wasted on unprofitable activities. The issue arises as to whether these improvements have been effective in reducing agency costs, and therefore enhancing firm value. The objectives of this paper is to examine the effects of governance mechanisms of dividend, types of ownership structure, and board governance on firm value. This paper utilises a panel data analysis of 403 firms listed on the Bursa Malaysia over a four-year period from years 2002 to 2005. A hierarchical regression analysis is used to test the hypotheses and the data is analysed using the generalized least square （GLS） estimation technique. Overall, the results highlight the importance of moderating role played by board governance variables with types of ownership structure to influence firm value. However, the benefits of better corporate governance through enhanced board governance are not the same across all firms since their incentives vary with respect to dividend and different types of ownership structure mechanisms.     

When should a firm set its selling price to cope with gray market trade?

This study investigates the problem of timing for firms that must cope with gray market in setting its prices by applying an observable delay game. We consider a case in which a multinational firm sells a product in two countries, and a parallel importer buys the product in one country and resells it in the other country. We show that the multinational firm never sets its price at the same time when the parallel importer sets in equilibrium, and that the multinational firm's optimal timing depends on the degree of variation in consumer preferences for product quality.