CEO hometown identity and firm green innovation

Drawn on the upper echelons theory, this study investigates how chief executive officer (CEO) hometown identity drives firm green innovation. We propose that CEO hometown identity has a positive impact on a firm's green innovation performance. Furthermore, we explore the moderating role of managerial discretion determined by organizational and environmental factors (i.e., institutional ownership and market complexity). We propose that institutional ownership negatively moderates the positive relationship between CEO hometown identity and green innovation, but market complexity plays a positive moderating role. Using Chinese publicly listed firms from 2002 to 2016 in heavily polluting industries, our findings support these hypotheses. Our research contributes to the upper echelons theory and corporate social responsibility literature and has substantial practical implications.     

Donating Money to Get Money: The Role of Corporate Philanthropy in Stakeholder Reactions to IPOs

This study examines how stakeholders' investment time horizons interact with information about corporate giving in initial public offering (IPO) firms. Specifically, we build a model that explains how corporate philanthropy affects IPO performance. We find that at the IPO‐preparation stage, corporate giving is negatively related to underwriter prestige, venture capital investment, and IPO financing costs. We also find that at the IPO‐issuance stage, negative media coverage of IPOs moderates the U‐shaped relationship between corporate giving and market premiums. At the IPO‐trading stage, we find that corporate giving only positively influences the market premiums for IPO firms that are the subject of negative media reports. Our findings contribute to the signalling theory by showing how various stakeholders interpret the same signals differently, and they have implications for understanding how the relationship between corporate philanthropy and corporate financial performance materializes in the IPO markets.     

Contract ineffectiveness in emerging markets: An institutional theory perspective

The effectiveness of contracts is bounded by the institutional environment in which they are designed and enforced. When firms form supply chain partnerships in emerging markets, they may experience contract ineffectiveness, which is defined as a firm's perceived limits of contracts with respect to safeguarding interests and coordinating activities. Specifically, we identify two institutional factors that may give rise to contract ineffectiveness, information transparency and legal enforceability, as they determine how effectively a firm designs and enforces a contract. In addition, we reveal that contract ineffectiveness prompts a firm to seek social ties, including business ties and political ties, to overcome the institutionally induced limits of contracts. These efforts, however, are moderated by the type of predominant pressure a firm bears. While equity pressure strengthens the relationship between contract ineffectiveness and a firm's pursuit of social ties, efficiency pressure weakens this relationship, because seeking social ties imposes an extra burden of efficiency. Tested by data collected from 187 distributors in China, our study reveals the institutional causes and the consequences of contract ineffectiveness, which is a common problem encountered by firms when forming supply chain partnerships in emerging markets.     

How Does Ambiguity Influence IPO Underpricing? The Role of the Signalling Environment

We explore the relationship between ambiguity, or low information clarity, in the IPO prospectus of newly public firms and their underpricing. Consistent with signalling theory, we find that IPO underpricing is low when the prospectus contains less ambiguous information that creates a more reliable signal conveying the quality of the IPO firm. However, the positive association between ambiguity and IPO underpricing is less pronounced when IPO firms display low strategic conformity with other firms in the industry, operate in industries with high valuation heterogeneity, or are medium‐sized. Using a sample of 398 IPOs between 1998 and 2007, our results support these predictions. This study shows the importance of the signalling environment influencing boundedly rational signal recipients interpreting ambiguous signals.     

Founders' Characteristics,Venture Capital Syndication and Governance in Entrepreneurial IPOs

Using a unique sample of 444 entrepreneurial IPOs in the UK and France this paper examines links between founders' characteristics, venture capital (VC) syndication and the development of effective boards in entrepreneurial firms. It argues that VC-backed IPOs suffer from two sets of agency problems which are related to principal-agent and principal-principal relationships between the founders and members of the VC syndicate. The empirical evidence shows that there is a curvilinear relationship between the intensity of founders' external ties and VC syndication. Founders' retained share ownership is negatively associated with VC syndication. We also find that in syndicated IPOs there is a higher involvement of passive private equity firms and “business angels” investing alongside VC firms, both in terms of their number and equity presence. VC-syndicated IPOs have more independent boards than IPOs with no VC involvement. Board independence is negatively associated with founders' retained equity. These results are consistent with the assumption that board independence is used to mitigate agency costs associated with VC involvement in IPO firms. Our findings also identify significant differences in governance characteristics between the UK and France. While French IPOs have less independent boards, they involve more VC backing in general and syndicated VC funding in particular, than UK IPOs.     

Looking Attractive until You Sell: Earnings Management,Lockup Expiration,and Venture Capitalists

Earnings management occurs when managerial discretion allows managers to influence reported earnings and thus mislead some investors about the underlying economic performance and quality of the firm. This study considers how potential investors may guard against earnings management by observing negative stock price reaction at the lockup expiration period of initial public offering (IPO) firms as a negative signal. Findings from a sample of 160 newly public firms show that earnings management behaviour is stronger in IPO firms backed by venture capitalists (VCs). Moreover, VC reputation negatively moderates this relationship such that IPO firms backed by reputable VCs are less likely to manage earnings, suggesting that reputable VCs serve an auditing function following an IPO. Overall, we provide insights into signalling theory by examining negative signals arising from the behaviour of multiple agents in an IPO firm.     

Does going public in the U.S. facilitate corporate innovation of foreign firms?

We examine how going public in the U.S. IPO market influences corporate innovation. Using 185 foreign and 2948 U.S. domestic firms going public in the U.S. over the 1980–2006 period, we find that while exhibiting similar innovativeness in the pre-IPO period, non-U.S. firms tend to generate more innovation than U.S. domestic firms after going public. The findings are robust to adopting subsample tests, various measures of changes in innovation around the year of the IPO, and accounting for truncation problems and potential endogeneity concerns. Further tests show that changes in innovation around the year of the IPO tend to be less prominent for non-U.S. firms that domiciled in countries with more developed equity market and higher level of economic freedom. Our study provides insights into the real effect of going public in the U.S. IPO market on innovative activities.     

The adoption of chief diversity officers among S&P 500 firms: Institutional,resource dependence,and upper echelons accounts

The importance of workforce diversity has become a salient management concern given that demographic minorities comprise key sources of the workforce and consumers. As a result, some firms created chief diversity officer (CDO) positions to manage workforce diversity. This study takes a multitheoretic approach, drawing upon institutional, resource dependence, and upper echelons theories to explain firms' adoptions of this key position. Using Cox event history analyses based on a sample of S&P 500 firms, we find that, from an institutional theory perspective, firms are more likely to adopt CDOs when they are headquartered in legalized gay marriage states and the accumulative number of industry CDO adoptions is high. From a resource dependence perspective, we find that firm innovation intensity, diversification levels, transient institutional ownership, and industry female and African American employment bases can predict firms' adoptions of CDO positions. From an upper echelons explanation, we find that female top management team representation is positively associated with firms' adoptions of CDO positions.     

Narrow‐Framing and Risk Preferences in Family and Non‐Family Firms

Building upon prospect theory’s concept of narrow‐framing, we explore family firms’ risk preferences across multiple decisions in corporate entrepreneurship. We argue that family firms’ decisions are less likely to be narrowly framed (more likely to be made as a group rather than in isolation) compared to non‐family firms. Examining the interaction between two risky decisions (internationalization and R&D investment) in two samples of publicly traded firms in the USA and China confirms our hypotheses. Family firms appear more likely than non‐family firms to diversify risk when making multiple decisions concerning corporate entrepreneurship. However, given inferior performance, risk taking across multiple decisions in family firms is positively related.     

Following in Partners’ Footsteps: An Uncertainty‐Reduction Perspective on Firms’ Choice of New Markets

In this paper, we develop a new perspective on what determines firms’ choice of new markets for entry. First, drawing on the open‐system theoretical tradition and literature on inter‐organizational networks, we advance and empirically test the proposition that firms tend to enter new markets to which they are connected by partnership ties. We then show that this network influence is filtered through the structure of firms’ network connections to new markets and firms’ experience. Specifically, we find that multiplicity of connections to new markets, as well as the extensiveness of firms’ experience and its relevance to new markets weaken the effect of network ties on firms’ choice of new markets. The results of this study indicate that firms’ choice of new markets for entry is a nuanced process that is affected by the interplay of firms’ collaborative ties, the structure of their network, and firms’ internal capabilities. We test our hypotheses in the empirical context of the U.S. venture capital (VC) industry using panel data over a 23‐year period and find broad support for them.     

IPO performance and the size effect: Evidence for the US and Canada

This study provides new evidence on the interaction between firm size and IPO underpricing in the US and Canadian markets. We find a size effect on IPO underpricing in both Canada and the US, which is larger for Canadian firms. Canadian small firms show more underpricing than US small firms (19.32% vs. 13.87%). Large Canadian firms also exhibit more underpricing than their US counterparts over the sample period (12.83% vs. 10.09%). A size effect on performance is not apparent for holding periods beyond six months from the IPO in both countries, consistent with seasoning effects that reduce information asymmetries across firms over longer investment horizons.     

Why do firms cross-list? International evidence from the US market

Using a modified international asset-pricing model we find strong evidence that publicly quoted firms cross-list when exhibiting strong performance in their domestic market and wish to take advantage of this situation. After cross-listing, this advantage disappears. Our sample consists of daily data for 1165 firms from 47 countries that have cross-listed on the US equity markets over the period 1976–2007. Within the context of this model we provide tests of the validity of the main hypotheses of capital market segmentation and investor protection, which provide explanations for equity cross-listing and investigate whether the nature of the market (regulated or unregulated) and the accompanying legal framework (common or civil law) can account for the impact of cross-listing on returns. Supporting the segmentation hypothesis, we report a decrease in local market risk after cross-listing. However, we find that the magnitude of such a decrease is diminishing over time as international markets become more integrated. On the other hand, we do not find any change in the global market risk after cross-listing, except for firms that cross-listed between 2001 and 2007, where their exposure to international market risk decreases. Furthermore, we find no evidence to support the investor protection hypothesis.     

Payout initiation by IPO firms: The choice between dividends and share repurchases

This study evaluates the economics of the choice of form of payout initiation mechanism adopted by IPO firms. Our results suggest that IPO firms demonstrate a preference for repurchases over dividends as the specific form of payout initiation mechanism. We however, find that while the market views post-IPO payout initiations favorably, it is indifferent to the specific form of payout mechanism adopted. Further, we find that dividends and repurchases represent distinct payout mechanisms adopted by IPO firms with fundamentally different characteristics and motivation to initiate payouts during the post-IPO phase. Our results suggest that while dividend initiations are primarily driven by life cycle and catering theory considerations, signaling theory provides the more likely explanation for payout initiations through share repurchases.     

Mispricing in the odd lots market in Brazil

We study the case of mispricing in the odd lots equity market in Brazil. Contrary to expectation, odd lot investors are paying higher prices than round lot investors. The pricing difference between markets is affected by market returns, volatility and spreads. Our main hypothesis is that; once the assets traded in the odd lot market are more illiquid than their counterparts, the mispricing is driven by liquidity factors. Additionally, we show that the mispricing yields an arbitrage opportunity that is not being traded away in the Brazilian market. Therefore, we propose regulators to review the market design for odd lots in Brazil. We argue that reducing the minimal trading unit in the round lots market would benefit investors.     

United States oil and gas stock returns with multi-factor pricing models: 2008–2018

International oil demand is met by large government-owned producers, with remaining production divided between publicly traded Majors and Independents. This study compares publicly traded oil producer equity returns traded on the NYSE for the Majors and Independent US oil producers. Individual producer returns were related to equity and oil returns. Equity market risk is lower for large Majors and higher for smaller Independent rivals. Oil producers’ risk premiums associated with oil are smaller for large Majors and larger for smaller Independents. Natural gas returns generally do not affect producer returns. Major returns are inversely while smaller Independent returns are positively related to the size effect. Major oil producer returns are positively related to the value effect and negatively related to momentum.     

Modeling the time to an initial public offering: When does the fruit ripen?

This paper uses a duration model to examine credit unions who have converted to mutual savings institutions. We investigate the characteristics that they possess which might influence the probability that they subsequently demutualize and become publicly traded banks. Our key findings are as follows. First, we find evidence of positive duration dependence in the data we examine. Second, we find that the hazard of an IPO issue increases in two waves. The first occurs between 3 1/2 years to 4 years reflecting the increased transition intensity for those who wish to demutualize early. However, the majority of the institutions in our sample do so by approximately 8 years after conversion, and this is where the second spike in the hazard occurs. Finally, upon estimating the model with Cox’s (Biometrika 62:269–276, 1975) semi-parametric partial likelihood approach, we find the probability that a converted institution will issue an IPO is influenced to a large extent by various measures that capture asset quality, in particular through measures that are equity driven. However, contrary to what is found in the literature on bank transformation, we find that the size of an institution does not appear to influence the hazard rate within this industry.     

Employee Shareholders Or Institutional Investors? When Corporate Managers Replace Their Stockholders*

During the past decade, the shares of publicly traded companies moved increasingly into the hands of institutional investors. As large investors pressed companies to restructure, companies were observed in turn to restructure their shareholder base. Drawing on a 1989 survey of 761 US publicly traded companies, firms facing a hostile takeover environment or with large institutional holdings are found to seek greater employee stockholding. Large firms and those that had adopted takeover defences are more likely when threatened with takeovers or short-term pressures to seek more employee and less institutional stockholding. Though managers are employed by owners, investor efforts to discipline their managers can lead the latter to replace the former.     

An upper echelons view of “Good to Great”: Principles for behavioral integration in the top management team

We examined the best‐selling management book Good to Great (GTG) through the lens of upper echelons theory. In doing so, it is demonstrated that the often cited practitioner/academic divide is not necessarily so expansive as frequently perceived. We utilized upper echelons theory and more specifically, the associated metaconstruct of behavioral integration, to identify principles from GTG that are consistent with the theoretically rooted processes of collective action. Through this theoretical lens, three key principles emerged from GTG for building a successful organization: organizationally focused leadership, a disciplined culture, and the right people. Implications for practice are discussed, including the reciprocal relationship among these principles. We conclude by appealing for more constructive dialogue between academics and practitioners of management.     

Firms,shareholders, and financial markets

We study the influence of the financial market on the decisions of firms in the real market. To that end, we present a model in which the shareholders’ portfolio selection of assets and the decisions of the publicly traded firms are integrated through the market process. Financial access alters the objective function of the firms, and the market interaction of shareholders substantially influences firms’ behavior in the real sector. After characterizing the unique equilibrium, we show that the financial sector integrates the preferences of all shareholders into the decisions for production and ownership structure. The participation from investors in the financial market also limits the firms’ ability to manipulate real prices, i.e., there is a loss of market power in the real sector. Note that, while the loss of market power changes expected profits, it is not detrimental to shareholders since the expected return of equity share depends on the variance (and not the mean) of profits. Indeed, any change in expected profits is absorbed by the financial price. We also show that financial access increases production, thereby altering the distribution of profits. In particular, financial access induces firms to take on more risk. Finally, financial access makes the relationship between risk-aversion and risk-taking ambiguous. For example, it is possible that an increase in risk-aversion leads to more risk-taking, i.e., the variance of real profits increases.     

Is Red or Blue More Likely to Narrow the Gap? The Effect of CEO Political Ideology on CEO-Employee Pay Disparity

How does CEO political ideology influence the pay disparity between a CEO and typical firm employees? Drawing on the upper echelons theory, we postulate that politically liberal CEOs are more inclined to address within-firm vertical pay disparity versus conservative or neutral CEOs, because liberals attend more closely to potential inequality issues and are more open to social changes. We furthermore contend that the effect of CEO political ideology varies across certain contextual factors. Results based on a sample of United States public firms support our arguments. Our study contributes to the literature on income inequality by highlighting CEO political ideology as a crucial determinant and investigating the boundary conditions.