Deregulation of short selling and corporate cash dividend policy: A quasi-natural experiment from China

This study takes China’s short selling deregulation as a quasi-natural experiment, employs a sample of Chinese A-share listed firms from 2007 to 2017, and tests the impact of a short selling pilot on firms’ cash dividends using a difference-in-differences model (DID). We find that China’s short selling pilot significantly increases the pilot firms’ cash dividends. The mechanism test shows that short selling can improve the pilot firms’ cash dividends by playing a corporate governance role to restrain dual agency costs such as management fees and major shareholders’ tunneling. Furthermore, we identify that short selling restrains the behavior of “large stock dividends” and increases the cash dividends of “large stock dividends” firms. Moreover, the governance effect of short selling is complementary to the external governance environment. The higher the degree of marketization and government quality, the more significant the governance effect of short selling to increase the pilot firms’ cash dividends. This study enriches not only the research related to cash dividends in emerging economies, but also provides new empirical evidence for the evaluation of China’s short selling deregulation and offers valuable lessons to other emerging economies.     

卖空管制放松与上市公司现金股利：促进还是抑制？

基于2006—2020年中国A股上市公司的数据,验证卖空管制放松对上市公司现金股利分配的影响。研究发现,相比于不可卖空的公司,可卖空公司在被列入卖空标的后,其现金股利分配意愿、分配规模与分配平稳性均显著提升。机制检验发现,卖空管制放松对现金股利分配的促进在代理问题严重、投资机会少的公司中更显著,这支持了代理成本机制;同时,在信号传递能力强、信号传递需求大的公司中,卖空管制放松对现金股利分配的促进更显著,这支持了信号传递机制。进一步分析发现,现金股利分配能力不足的公司在应对卖空压力时并未使用“高送转”作为替代。而对于我国资本市场中广泛存在的达标式分配,卖空管制放松能够产生抑制作用,且抑制作用体现在没有再融资需求的公司中。研究表明,卖空管制放松促进了上市公司现金股利分配,卖空机制能够为我国资本市场中的现金股利监管提供市场化路径。     

Economic efficiency of multi-product structure: the evidence from Korean housebuilding firms

The Korean housebuilding industry has been subject to structural changes since the 1980s. One of the key features is that housebuilding firms have become diversified into a range of businesses and as a result display multi-product structure. This paper examines the efficiency of the multi-product structure of Korean housebuilding firms. For the analysis, translog cost functions were estimated using data for 201 building firms for the 3 years 1993–1995. The empirical results indicate that medium-size building firms enjoy increasing returns to scale, whereas large firms experience constant returns to scale. Korean building firms exhibit significant economies of scope in their diversification activities. Large firms have the greatest economies of scope. These results are consistent with cost efficiency for the multi-product structure of Korean housebuilding firms. The estimated optimum scale suggests that many large firms should expand only through diversification.     

Economies of scale in the Mexican automotive sector

Recent growth of the Mexican motor vehicle industry has sparked a great deal of controversy on both sides of the U.S.-Mexico border regarding the potential effects of the North American Free Trade Agreement. One of the key factors affecting the future competitiveness of the Mexican motor vehicle industry relative to U.S. producers is whether the Mexican firms can exploit economies of scale as their output expands. This article investigates that possibility as well as the direct and cross-price elasticities of demand for the inputs by estimating translog cost functions for the Mexican motor vehicle and autoparts industries. The results are consistent with the hypotheses that substantial economies of scale remain to be exploited by the Mexican motor vehicle industry, but that the autoparts industry is operating with diseconomies of scale. However, the lack of investment in new technology and X-inefficiency on the part of the autoparts firms may have been partially responsible for the latter finding.     

The temporal behavior of scale economies within A banking firm

Examining the time path of the scale economies has not received much attention until recently. Moreover, the time path of scale economies for a given firm has not been studied in the banking literature at all. Examining scale economies, either from cross-sectional or panel data, based only on a single estimate ignores the dynamic behavior (both cost- and production-wise) of a banking firm as well as of the banking industry. We study the time-varying scale economies of commercial banking firms. We employ the Kalman-filter approach in estimating the translog cost function. The Kalman filter allows the parameters of the translog cost function and therefore the scale economies to be time dependent and varying. The estimation results indicate significant variation in inter- and within-firm scale economies over time for sample banks.     

Earnings Management Vehicles for Korean Firms

We investigated the vehicles that Korean firms use when the firms manage earnings. We partitioned our sample into low, mid and high accrual sub‐samples based on discretionary accruals. Low accrual firms are defined as income‐decreasing firms whereas the high accrual firms are considered income increasing firms in this study. We decomposed accounting earnings into cash from operations and various components of accruals in a systematic way. Next we examined the types of accruals individual firms use when the respective firms increase reported earnings. The empirical results of the study indicate that there are clear discrepancies in the earnings management vehicles firm use when the firms manage earnings depending on the directions of earnings management. More specifically, income‐increasing firms frequently employ non‐cash revenues including asset‐disposal gains. Income‐decreasing firms employ non‐cash expenses including bad‐debt expenses and asset‐disposal losses. Firms also tend to use current accruals but to a limited extent as current accruals entail cash flow implications in the following years.     

Camouflaged Indicators of Earnings Management†

Abstract

We argue that, in response to increased scrutiny and greater attention to accruals versus sales, firms become more likely to engage in accrual conversion (AC) cash management aimed at aligning cash and accruals with earnings and sales (e.g. by factoring of receivables). In doing so, they reduce the statistical power of standard indicators of accrual-based earnings management – in effect, camouflaging their earnings management activity. This proposition is of interest because many influential papers on earnings management have utilized accrual-based indicators to reach their conclusions. Our results indicate that firms indeed became more likely to engage in AC cash management after the passage of the Sarbanes-Oxley Act (SOX), and that this tendency was particularly pronounced among firms with strong incentives (or enhanced ability) to perform and hide earnings management. In particular, our findings suggest that the post-SOX decrease in standard measurements of accrual-based earnings management, identified in prior research, is partially attributable to firms’ increased engagement in AC cash management activity.     

基于数据包络方法的2010年会计师事务所经营效率分析

本文运用数据包络分析方法中基于输入的CCR模型和BCC模型,对2010年会计师事务所的主要投入产出数据进行效率分析,从整体上分析目前我国会计师事务所的运营效率。通过研究发现,一部分会计师事务所已经达到规模效益,但是还有很多会计师事务所在技术和规模上都没有达到理想的水平,在经营效率上还需要很大的改进。     

Environmental sustainability engagement of firms: The roles of social capital,resources, and managerial entrepreneurial orientation of small and medium enterprises in Vietnam

How firms in transition economies demonstrate their strategic engagement in sustainable environmental management given their limited resources and capabilities is less understood in the literature. This study explores how small and medium enterprises (SMEs) in Vietnam, an exemplar of a country in transition from a closed and socialist economy to an open and liberal market, draw on their external social capital to access critical resources that are leveraged by the entrepreneurial orientation or capabilities of the firms' top management towards engagement in business-wide environmentally sustainable practices. Drawing on a database of more than 2000 firms from a large-scale survey of firms in Vietnam, this study tests the relationships between two facets of social capital, environmental management resources and environmental sustainability engagement. This study further contends that managerial entrepreneurial orientation moderates by enhancing the strategic utilisation of resources to enable firms in Vietnam to engage in environmental sustainability. The results offer novel theoretical insights and timely managerial or practical implications as well as promising directions for future research on the resources, strategies and capabilities of firms in transition economies.     

Production subcontracting and location

Using data from a panel of Spanish manufacturing firms, I examine factors that explain firms' production subcontracting decisions and test whether there is any evidence that production subcontracting is facilitated in areas typically associated with higher agglomeration economies. The results show that location matters. Firms in industry agglomerations are more likely to subcontract production activities. While in general, larger and older firms as well as high wage firms show a greater probability for production subcontracting, industry agglomeration particularly facilitates subcontracting for smaller and lower wage firms and it allows firms to respond to a greater degree to expansive demand conditions by taking advantage of subcontracting.     

LIFO adoption and dividend payout

Adoption of the LIFO inventory costing method tends to decrease reported earnings but increases cash flows to adopting firms. This study examines the change in dividend payout ratios (cash dividends divided by earnings) accompanying LIFO adoption. The question addressed is whether adopting firms likely paid out incremental cash flows or retained them to the benefit of management. The evidence suggests that managers and directors adjusted payout ratios to partially offset the negative earnings effect of LIFO. The adjustments made were not sufficient in magnitude to achieve a neutral LIFO effect on dividend payout, and the net result was the retention of incremental cash flows generated by LIFO adoption.     

Economies of scale and organization efficiency in banking

Previous studies attempting to assess economies of scale in banking firms have largely relied upon cost functions. The profit-function approach enjoys several important advantages over the cost-function method, consequently that is the approach used in this study. A risk-adjusted profit function estimates economies of scale of unit and branch banks; and the effects of bank holding-company affiliation on the level of bank profits is also examined. The results indicate larger economies of scale for branch banks than for unit banks; and bank holding-company affiliates were found to be more efficient than independent banks.     

High‐performance work systems and workplace performance in small,medium‐sized and large firms

This article draws on the Organisational Growth and Development (OGD) life cycle model to explore the relationship between high‐performance work systems (HPWS) and performance in firms of different size, thereby extending understanding of congruence or ‘best fit’ theory within strategic HRM debates. With reference to management control theory, economies of scale and the availability of specialist managerial skills, the article hypothesises that while an HPWS–performance relationship might exist in small, medium‐sized and large firms, the relationship will be stronger in large firms than in both small and medium‐sized firms, and stronger in medium‐sized firms than in small firms. Analysis of data from the British Workplace Employment Relations Survey demonstrates, however, that there is no association between HPWS and workplace performance in medium‐sized firms, in contrast to the positive relationship between HPWS and performance found in large firms and between HPWS and labour productivity in small firms.     

Wal-Mart and the geography of grocery retailing

This paper empirically examines the impact of entry by Wal-Mart on competition in the supermarket industry. Using a detailed panel dataset spanning 1994–2006, we estimate the impact of Wal-Mart on firm outcomes and market structure, controlling for persistent local trends and systematic differences across markets by exploiting the detailed spatial structure of our store-level census. We find that Wal-Mart’s impact is highly localized, affecting firms only within a tight, two-mile radius of its location. Within this radius, the bulk of the impact falls on declining firms and mostly on the intensive margin. Entry of new firms is essentially unaffected. Moreover, the stores most damaged by Wal-Mart’s entry are the outlets of larger chains. This suggests that Wal-Mart’s expansion into groceries is quite distinct from its earlier experience in the discount industry, where the primary casualties were small chains and sole proprietorships that were forced to exit the market. This contrast sheds light on the role density economies play in shaping both equilibrium market structure and economic geography. In the case of grocery competition, high travel costs and the perishable nature of groceries appear to impart horizontal differentiation between firms. This differentiation in demand appears to reduce impact of scale economies advantages that Wal-Mart exploited to the detriment of far-flung competitors in the discount store industry.     

Debt Maturity and Tax Avoidance

This study proposes and empirically tests the argument that creditors are likely to extend debt with a shorter maturity to tax-avoiding firms so that they can frequently re-evaluate tax-related risk in debt contracting. Using effective tax rates and uncertain tax benefits as a proxy for tax avoidance, I find that tax-avoiding firms have a larger proportion of short-maturity debt compared to other firms. The empirical findings further show that firms with unsustainable tax positions and with subsidiaries in tax-haven countries are more likely to employ short-maturity debt. Collectively, the empirical findings suggest that frequent debt renegotiations increase the exposure of tax-avoiding firms to credit supply shocks, contributing to their higher demand for cash.     

Costs, Institutional Mobility Barriers, and Market Structure: Advertising Agencies as Multiproduct Firms

What accounts for the diversity and limited concentration that has long characterized the organization of the advertising agency industry? This question is addressed by treating an advertising agency as a multiproduct firm. The firm's product line or service mix is defined in terms of the set of different media categories where an agency places the advertising messages that it creates on behalf of its clients. Evidence is presented indicating that the structure of demand and costs in the advertising agency industry conforms to the conditions that MacDonald and Slivinski showed were required for an industry to sustain an equilibrium with diversified firms. Building on this framework, we formulate a set of three hypotheses relating to the realization of product-specific scale and scope economies. The first two hypotheses posit that given low fixed costs and minimal entry barriers, both media-specific scale and scope economies are available and can be exploited by relatively small-size agencies. The third hypothesis suggests that large agencies may experience diseconomies of scope as a consequence of excessive diversification induced by two pervasive industry institutional phenomena: (1) “bundling” of agency services to match client demand for a mix of media advertising, and (2) “conflict policy,” which prohibits an agency from serving competing accounts and operates as a mobility constraint. Utilizing a multiproduct cost function, we estimate media-specific scale and scope economies for a cross section of 401 U.S. agencies in 1987. The results obtained support the set of three hypotheses outlined above. The paper concludes with a discussion of the implications of these findings for the restructuring currently underway in this industry.     

Cultural and macroeconomic determinants of cash holdings management

This study examines patterns in cash management, particularly cash holdings speed of adjustment (CH‐SOA), across 48 countries. I find that managerial cultural characteristics and country‐level macroeconomic factors influence the persistence of cash reserve levels, deviation from target, and the speed with which firms in different countries adjust their cash holdings. The findings support the idea that agency costs as well as market frictions influence CH‐SOA and other aspects of cash management. The findings are robust to the inclusion of a wide range of firm‐level characteristics, country‐level corporate‐governance variables, and an alternative cultural index.     

Corporate cash holdings and total factor productivity – A global analysis

Studies concerning total factor productivity (TFP) have investigated the effect of TFP on economic growth from a country-level perspective, which is a critical issue in the macroeconomics field. Few studies have examined how corporate financial decisions influence TFP from a firm-level perspective. Specifically, no extant studies have investigated how cash holdings affect firm productivity. This study utilizes data for firms in 65 countries during 1993–2017 to investigate the effect of cash holdings on TFP from a corporate perspective. The findings show that firms with higher cash holdings can enhance TFP. The results hold after considering endogenous problems, financial constraints, financial crises, corporate governance, institutional quality, and financial development as well as various robustness tests. Furthermore, we examine whether firms consistently invest their cash holdings into research and development (R&D) expenditures enhances firm productivity. The evidence indicates that higher cash holdings lead to steady increases in R&D expenditure, which improves firms’ TFP.     

Home market effects with endogenous costs of production

In a standard imperfect competition model, we endogenize the costs of production of firms in the increasing returns sector (IRS) via process R&D. We show that firms in the larger region in terms of demand invest more in R&D (i.e.: they are bigger in size and have lower marginal costs) than firms in the smaller region, since the former exploit larger economies of scale in production to pay for the costs of R&D. As a result, when the return on R&D is high, the larger region does not employ disproportionately more labor nor attracts a disproportionately larger share of firms in the IRS in relation to share of demand it hosts, i.e.: negative home market effects (HMEs) in employment and in the number of firms. When this occurs, only partial agglomeration of the IRS in the larger region is sustainable in equilibrium. Even so, the larger region always runs trade surplus in the IRS, i.e.: HME in trade patterns.     

The status of purchasing and supply management in Finland and Russia

Previous studies have shown that long-term planning, collaborative supplier relationships and supply management capabilities reflect the strategic role and importance of purchasing and supply management (PSM) in firms, regardless of the nature of the business. This study examines how these elements behave in different business environments, such as in Western countries and emerging economies. Finland and Russia were chosen to represent two extremes in terms of international economic competitiveness and the business environment. A survey was conducted in both countries. Regression analyses were run from both samples to examine the effects of long-term planning, collaborative supplier relationships and supply management capabilities on the status of PSM by using data from 100 Finnish firms and 208 Russian firms. The results showed that these elements positively influence the status of PSM in both countries.