Firms as Realizations of Entrepreneurial Visions

abstract    In the debate on why firms exist, the question of who chooses between firms and markets and on what basis is rarely addressed. This paper argues that the choice is a core element of the entrepreneurial pursuit of visions or conceptions of business opportunities. To successfully organize resources into the envisioned businesses – be it via firms or markets – resource owners must be coordinated on the entrepreneur's conception of the business and be motivated to perform properly. To solve the dual problem, the organizational form of the firm offers the entrepreneur unique advantages not feasible under the organizational form of markets.     

What drives financial performance-resource efficiency or resource slack?: Evidence from U.S. Based Manufacturing Firms from 1991 to 2006

Extant research in operations management has revealed divergent insights into the value potential of resource efficiency. While one view relates efficiency with good operations management and asserts that slack resources are a form of waste that should be minimized, the other view suggests that limited resource slack can impose heavy costs on firms by making them brittle. In this research, the authors build on these views to investigate the relationship of inventory, production, and marketing resource efficiency of firms with three metrics of financial performance (i.e., Stock-Returns, Tobin's Q, and Returns-on-Assets). The authors evaluate the theoretical framework using secondary information on all U.S. based publicly-owned manufacturing firms across the 16-year time period of 1991-2006. Analysis utilizing a mixed-model approach reveals that a focus on resource efficiency is positively associated with firm financial performance. However, findings also support the arguments favoring slack, indicating that the financial gains from resource efficiency exhibit diminishing returns.     

Say-on-Pay Votes: The Role of the Media

Abstract

We investigate the association between the media coverage of firms’ CEO pay packages and subsequent shareholder voting on say-on-pay resolutions, and find that negative media coverage is able to predict shareholder discontent over say on pay. When we divide media coverage into coverage in the financial and business press versus coverage in the general press, we find that shareholder voting on say-on-pay resolutions is mainly associated with the articles from the financial and business press. This suggests that the media cannot be considered a homogeneous information source that is equally able to predict shareholders’ voting behaviors. As such, our findings have important implications for studies on the role of the media in corporate governance.     

Modeling hard and soft facts for SMEs: Some international evidence

This paper asks how well the use of quantitative and qualitative variables can improve the assessment of companies' creditworthiness and how this result can be influenced by the economic and financial peculiarities of countries. We harden qualitative variable measures to model soft information aimed at scoring microfirms, small, and medium‐sized firms. The structural survey covers Germany, Italy, and the UK in a sample of about 17 thousand companies observed during the financial crisis. Soft facts are determined within the balanced scorecard framework in order to find out the impact of customers, business processes, learning and growth, and financial perspectives. Our findings show that credit models integrating soft variables optimize the risk estimation, but estimates are country‐specific and should be tailored to the characteristics of each economic system.     

Legal Form and Earnings Properties

We investigate whether the financial accounting choices made by German private firms depend on legal form. Legal form determines dividend rights, liability status and the owners' obligations to run the business and, thus, influences agency problems of debt and equity. Consequently, we find that earnings properties depend on legal form. We expect, and find, that corporations exhibit higher levels of income smoothing and conservatism than partnerships and one-person businesses. Corporations are also more likely to disclose small profits. However, generally, there are no significant differences in earnings properties between one-person businesses and partnerships. The results are robust to different econometric specifications including endogeneity concerns (e.g. propensity score matching). Earnings properties of private firms seem to be driven to a considerable extent by agency problems of debt.     

Determinants of performance of independent financial advisors

This paper examines the performance of independent financial advisors (IFAs) in terms of their involvement in innovation activities, participation in business networks and open innovation as a strategy to cope with difficult market conditions caused by the recent economic downturn. Performance is assessed on the basis of average sales growth for years 2010–2012. The results of the study suggest that IFAs’ involvement in innovation activities, participation in networks and open innovation enhances business performance. The managerial implications are that IFAs may be able to achieve higher sales growth by participating in networks and engaging in innovation activities. The originality of this paper is that it provides an empirical assessment of possible strategies to support sales growth in small financial service sector firms facing volatile market conditions.     

Internal organization and enterprise performance: Some UK evidence

The research reported in this paper is based upon the theoretical work of O. E. Williamson (1970, 1975) concerning the impact of internal organizational form upon business behaviour and enterprise financial performance. A sample of 144 large UK firms are classified according to the organizational classification scheme developed by Williamson and Bhargava (1972). An empirical investigation is then undertaken which lests for the impact of organisational form upon financial performance. The results are broadly consistent with both theoretical predictions and the findings of other researchers in so far as the pure M-form (multidivisional) structure is found to be associated with superior profitability. However, the evidence also suggests that the frequency of occurrence of pure M-form firms as a subset of all multidivisions may be rather lower than previously thought, and the closeness of the multidivisional/pure M-form link is questioned.     

企业会选择与竞争对手共享审计师吗?——基于经营范围相似度的分析

在选择最适合自身需求的审计师方面,企业会关注竞争对手的选择,并在享受审计专家服务与保护专有信息外溢之间寻求平衡。以企业的收入排名和经营范围的相似度衡量竞争对手,检验竞争对手间的审计师共享行为。研究发现,当行业内经营范围高度相似的两个企业互为竞争对手时,共享审计师的可能性较低;行业竞争激烈程度会放大竞争对手共享审计师的负向关系;但当外部审计师为审计专家时,会改变同行竞争对手不愿共享审计师的倾向;从经济后果来看,聘用同一会计师事务所的同行企业会有相似的经济决策。从财务层面构建衡量竞争对手的方法,验证竞争对手间的共享审计师问题,发现审计师不仅是财务报表的鉴证者,也是知识与资源丰富的信息中介与来源。     

Business strategy and firm efforts on environmental protection: Evidence from China

Although business strategy plays a fundamental role in firm operations, whether and how business strategy affects firms' environmental protection behaviors remain unclear. On the basis of a typical emerging market, we show that firms following prospector strategies take more environmental protection actions than do those following defender strategies. Our findings are robust to endogeneity checks and alternative measures of business strategy. We further find that prospectors engage in more environmental activities than do defenders when the degree of financial constraint or earning management is high. Our results are particularly pronounced in state‐owned enterprises, heavy‐polluting industries, and firms located in regions with strict environmental regulations. Overall, this study provides clear policy implications for regulators concerned with environmental protection.     

All for one and one for all: Encouraging ecosystem citizenship behaviour to strengthen employer branding

This research investigates how employer branding can be strengthened by taking a business ecosystem approach that encourages and leverages indirect social exchanges, such as the behaviour of paying it forward. This work is founded on extant literature and exploratory interviews with individuals from firms seeking to strengthen their employer brand by interdependently operating in a business ecosystem. A model is developed that proposes how indirect social exchanges can occur in an ecosystem, and what types of outcomes it can lead to for the individuals, firms and the ecosystem as a whole. As far as can be ascertained, this is the first study that combines these perspectives. The work suggests that there is value for firms in taking an ecosystem-focused approach to employer branding. The findings highlight that indirect or generalized social exchanges can provide value for individual firms when they form a group of interdependent collaborators rather than simply being competitors. Further, this work adds to the literature related to employee and partner extra-role behaviour by proposing the perspective of an Ecosystem Citizenship Behaviour. Ecosystem Citizenship Behaviour is an extra-role behaviour that occurs in the business ecosystem and as such can be beneficial for joint employer branding initiatives of participating firms.     

Sustainability reporting quality and post‐audit financial reporting quality: Empirical evidence from the UK

This study examines whether firms that appear to exhibit high sustainability reporting quality are less likely to engage in earnings management activities, thereby delivering financial information that is more transparent and reliable than that delivered by firms that do not produce high‐quality sustainability reports. I also investigate whether the association between sustainability reporting quality and post‐audit financial reporting quality is conditional on audit effort. Analysis of data drawn from FTSE 350 companies covering 2007 to 2018 indicates that firms that produce high‐quality sustainability reports are significantly and negatively associated with earnings management metrics. More importantly, this association is moderated by audit effort, measured by audit fees, suggesting that sustainability reporting quality reflects factors considered by auditors in their audit risk assessment practices. These results remain robust after several sensitivity analyses. I conclude that firms that devote more resources to producing high‐quality sustainability reports are likely to demonstrate an overall commitment to quality that alleviates auditors' concerns about the opportunistic use of sustainability reporting and reduces business risk, thereby reducing the effort auditors expend to verify financial reports.     

我国企业内部控制信息披露存在的问题及对策分析

内部控制信息披露,可以提高企业财务报告的可靠性,为投资者提供财务报告所不能提供的信息,有助于提高管理当局内部控制的管理水平。目前我国企业内部控制信息披露存在的问题,法律、规范的不完善,企业领导者的认识不到位,与商业秘密的保护存在冲突。文章对此进行了分析,并在此基础上提出了相应的对策。     

Templates for financial control? Management and employees under the private equity business model

The term ‘private equity business model’ (PEBM) refers to private equity investors that delist publicly quoted firms, managing them as private equity‐controlled portfolio firms. But how and in what form do these investors diffuse a preferred template for the PEBM in portfolio firms? Is diffusion codified, institutionalised or merely tacit? What is the difference between these forms of diffusion? As a method of financial control, how is diffusion evident for managers and workers? Theoretically, while ‘financialisation’ is a contemporary pressure on the British economy, there is a ‘disconnection’ between competitive pressures for financialisation and the diffusion of practices to manage these pressures in portfolio firms. Forty‐two interviews in eight portfolio firms and five associated private equity firms concludes that potentially transformative and decisive restructuring for managers and workers is more evident than a defined template.     

High-involvement information sharing practices: an international perspective

The type of information shared within organizations is a key aspect of strategic human resources management. In this exploratory study, we expand our understanding of high-performance work systems (HPWSs) by examining the information sharing practices of firms operating in different countries to assess the extent that high-involvement-oriented information sharing in organizations is influenced by home-country economic structures and national cultural factors. We assess firm-level data from a 12-country sample to evaluate the use of formal information sharing practices for non-managerial employees. The results of our analysis support the contention that information sharing practices varies by country, and that cultural similarities based on geographical region exist within the three information content areas of business strategy, financial performance, and organization of work. Specifically, we found significant variance in information sharing practices of firms based in different countries but homogeneity of practices among geographical neighbors. There is a modest positive relationship between sharing business strategy information and perceived firm performance that is significantly stronger in North America compared to other regions. These results have important implications for the ongoing theoretical development of mechanisms underlying the use of HPWS practices in an international context.     

邮政金融发展社区金融服务模式的探讨

社区金融服务多样,形式灵活,贴近客户。近来,我国的民营银行、城商行、四大国有行都在该领域开展业务,这一变化显然对定位于零售业务的邮储银行产生了影响,文中在对我国目前社区服务归纳总结的基础上,探讨了邮储银行展开社区金融服务应注意的问题和模式选择。     

Multinationals' Offshore Operations,Tax Avoidance,and Firm‐Specific Information Flows: International Evidence

Using a large sample of multinational enterprises (MNEs) over the period 1999–2009, this study investigates whether and how offshore operations via offshore financial centers (OFCs) impact the extent to which firm‐specific information is incorporated into stock price, relative to common information. Our analyses show that, irrespective of whether a firm is a Type I offshore firm (directly having headquarters registered in OFCs) or a Type II offshore firm (indirectly setting up subsidiaries in OFCs), the amount of firm‐specific information flowing into stock price is lower for offshore firms than for non‐offshore firms. We also find that as offshore firms become more aggressive in their tax avoidance strategies, their stock prices impound a lower amount of firm‐specific information relative to common information. Finally, we find that a strong offshore proclivity also deters firm‐specific information flows, thereby driving up stock price synchronicity. Our results suggest that the opaque and complex nature of business and financial transactions in OFCs, coupled with their institutional characteristics, that is, weak and flexible legal enforcement, zero or extremely low taxation, and low litigation risk, provide offshore firms with not only stronger incentives but also the opportunities and means to adopt opaque disclosure policies and aggressive earnings management.     

Accounting contagion: The case of Enron

The Enron scandal offers the opportunity to assess the degree to which misleading accounting can affect connected firms and industry rivals. While the market was inept at detecting the inaccuracy of Enron’s financial statements, it swiftly punished many connected firms once Enron's faulty accounting was publicized. A cross-sectional analysis documents that the market punished connected firms that had greater exposure to Enron’s business, whose financial statements were viewed as more complex, and that had greater financial leverage. Most of the negative news indicating concern with Enron’s accounting corresponded with a significant decline in the stock prices of firms in the energy and natural gas (ENG) industry, regardless of an explicit connection to Enron. Furthermore, rival firms with direct exposure to Enron and more aggressive earnings-reporting methods also experienced more detrimental effects.     

The Coupling of Ownership and Control and the Allocation of Financial Resources: Evidence from Hong Kong

Theoretical and empirical research regarding the impact of corporate ownership on the behaviour and performance of firms have typically focused on consequences stemming from the separation of ownership and control. While large scale business enterprise characterized by such a separation is dominant in the US, Japan and the UK, firms in which ownership and control is coupled in the hands of individuals and their families are apparent in many other large developed economies and are dominant in most emerging markets. This paper examines consequences regarding the generation and allocation of financial resources stemming from the coupling of ownership and control among Hong Kong based firms. In doing so, we join insights from the economics literature regarding the incentive and risk bearing consequences of coupled ownership and control with the extant management, sociology and history literatures regarding Chinese family business groups and develop and six hypotheses pertaining to patterns in the allocation of financial resources. Results indicate that coupled ownership and control is positively related with dividend payout levels and financial liquidity while it is negatively related to investments in capital expenditures. Consistent with these results, we also find that coupled ownership and control is positively related to short-term (accounting) profitability.     

Accounting for Heterogeneity in Network Formation Behaviour: An Application to Vietnamese SMEs

Network formation is often characterized by homophily, i.e. the tendency of agents to connect with others who have similar attributes. However, while most agents are homophilous, others could be heterophilous; they aim to create ties with dissimilar agents. This study provides empirical evidence supporting this hypothesis by applying a random coefficient approach to data on the information-sharing networks of small- and medium-sized Vietnamese enterprises. In particular, we find that firms tend to form heterophilous links with respect to business type and gender ratio. One possible reason for the heterophily is that firms can obtain useful and performance-improving information from such dissimilar partners.     

FAMILY FIRM PERFORMANCE OVER THE BUSINESS CYCLE: A META-ANALYSIS

The financial performance of family firms has been widely studied in the literature. Combining the results of 155 primary studies from 35 countries with data about business cycles, we investigate how family firm performance changes over the business cycle. Using meta-analytic estimation methods, we find that family firms outperform nonfamily firms in developed markets, irrespective of economic circumstances. This outperformance, although statistically significant, is very small and practically negligible. With regard to the business cycle, we find evidence for a procyclical effect in which the relative performance of family firms is lower in economically difficult times. Our study extends the literature on how family firm performance depends on macroeconomic factors.