Managerial risk-reducing incentives and social and exchange capital

This study investigates the impact of managerial risk-reducing incentives on the firm's social and exchange capital. Using CEO inside debt holdings to proxy for the incentives of risk-averse managers, we find that CEOs with more inside debt holdings are likely to invest more in building social capital, which targets broader society and potentially offers anti-risk protection advantages, to shield the value of their inside debt. However, our results further show that managerial risk-reducing incentives have no impact on firms' exchange capital, suggesting the need to recognize the difference between social and exchange capital. These findings corroborate the view that CEOs invest in social capital as a risk management strategy. Furthermore, this paper presents an understanding of the role that institutional investors play in moderating the impact of managerial risk-reducing incentives on social capital. Our results suggest that institutional investors constrain CEOs that have greater inside debt incentives from investing in social capital. However, they are still willing to increase the investment in social capital for risk management purposes when firm risk is high.     

How do firms learn? Evidence from corporate cash holdings during the COVID-19 pandemic

We examine the impact of COVID-19 on US corporate cash holdings. Our findings suggest that greater pandemic exposure is associated with higher corporate cash holdings and that firms learn from prior experiences as they manage their cash policies. More specifically, the level of cash holdings in firms that experienced severe financial constraints during the 2008 credit crisis and firms with prior severe acute respiratory syndrome (SARS) and H1N1 exposure is significantly lower than that of firms with no prior epidemic or financial constraints experience. Overall, our findings support the learning behaviour of cash and contribute to corporate cash holdings literature by providing insights on the extent to which firms learn from prior experiences to manage their liquidity.     

Narcissistic leaders and corporate cash Holdings: Evidence in China

We use a sample of Chinese firms listed on the Stock Exchange of Hong Kong over the period 2007–2018 to examine the relationship between narcissistic leadership and corporate cash holdings. We find that narcissistic leaders seek to attract public attention and promote self-image by overinvestments that reduce cash holdings. We also show that narcissistic leaders have better access to bank loans and lower loan cost, prompting them to hold less cash. The negative effect of narcissistic leaders on cash holdings is more pronounced at private firms than at SOEs. In addition, narcissistic leaders negatively affect the firm value. We contribute to the literature on leader narcissism, cash holdings, and corporate governance in emerging market contexts.     

Bank earnings management and performance reporting of comprehensive income

FASB’s ASU 2011-05 mandated that comprehensive income (CI) and other comprehensive income (OCI) be reported in performance statements (a single income statement or a separate statement of CI) rather than equity statements. Employing a difference-in-differences research design with ASU 2011-05 as the treatment, I find that presenting accounting information in different statements affects bank earnings management, specifically, presenting CI and OCI in performance statements (especially in single-statements with net income) reduces earnings management through selective sales of available-for-sale (AFS) securities in the banking industry. I also find that the influence of ASU 2011-05 is primarily on banks with high equity incentives in the CEO’s compensation package or less CEO job security. Additional analyses suggest that performance reporting of CI and OCI increases the predictive ability of realized gains and losses of AFS securities; however, banks may manage loan loss provision as a substitute strategy when they have to decrease selective sales of AFS securities.     

Corporate social responsibility and litigation risk: Evidence from securities class action lawsuits

This study examines whether corporate social responsibility (CSR) is associated with the likelihood and outcomes of securities class action lawsuits. We find a lower likelihood of securities litigation for firms with higher CSR. This effect is larger for companies with lower levels of financial distress, companies with larger proportions of institutional investors, and for internal CSR. Additionally, CSR has a mitigating effect on negative market assessments around the filing dates of securities litigation. The results suggest that higher CSR firms are less likely to engage in financial misconduct, and investors are less likely to penalise them for such occurrences.     

Treasury Safety,Liquidity, and Money Premium Dynamics: Evidence from Debt Limit Impasses

Treasury securities enjoy a “money premium” because they are ultra-safe and liquid. However, during debt limit impasses, the safety and liquidity of Treasury securities temporarily deteriorate, eroding the money premium. Using past impasses, we find the money premium eroded by roughly six basis points across all Treasury securities and up to 50 basis points for the shortest maturities at the greatest risk of a delayed principal payment. Safety and liquidity each accounted for about half of the erosion. The deterioration of safety and liquidity also appears to interact, consistent with theories of default-driven liquidity risk and the information sensitivity of debt.     

When stock price crash risk meets fundamentals

We investigate the relationship between fundamental strength and stock price crash risk by analyzing a large sample of Chinese firms. We mainly find that firms with stronger (weaker) total fundamental strength, higher (lower) profitability and higher (lower) operating efficiency have lower (higher) stock price crash risk. Moreover, this negative relationship is more pronounced for firms with a great number of short-term institutional investors and opaque firms. Additional test illustrates that internal control could ameliorate this negative relationship. All these findings are robust to alternative measurements of crash risk and endogeneity correction.     

Corporate codes of ethics and cash holdings: International evidence

In the presence of agency costs, managers retain cash for their own benefit at the expense of shareholder wealth. Extending prior literature on the role of corporate governance in mitigating the effects of agency conflicts on corporate cash holdings, we study a governance mechanism that has largely been overlooked, namely, corporate codes of ethics. We find a negative association between code of ethics quality and cash holdings, which suggests that managers hold less cash when the firm has a strong code of ethics in place. The effect is greater when agency costs are elevated due to weaker country-level investor protections. We also find that payouts and the marginal value of cash holdings to investors are increasing in code quality. Overall, our results are consistent with codes of ethics helping to limit opportunistic behaviour from managers when determining the firm's level of cash holdings.     

Grabbing hand or financial constraint mitigation effect? A reexamination of the relationship between institutional development and cash holdings

This study reexamines the impact of institutional development on corporate cash holdings. Our findings confirm that institutional development has a negative effect on corporate cash holdings, which may be partially explained by the financial constraint mitigation effect of institutional development. Our empirical evidence also shows that the corruption index, used as a proxy for the grabbing hand effect, does not mediate the negative effect of institutional development on corporate cash holdings. Furthermore, the impact of institutional development on corporate cash holdings is not significant for large firms and state-owned enterprises. These results are robust to different measures of cash holdings.     

供应商关系与企业现金持有——来自中国制造业上市公司的经验证据

供应链竞争环境下，供应商—客户关系是把“双刃剑”，企业可以通过积极的理财政策加以应对。本文基于买方的视角，理论分析与实证考察了供应商关系对企业现金持有政策的影响及其具体作用机理。研究发现，随着供应商关系紧密程度的增加，企业将持有较多的现金，且主要基于关系承诺动机，而非预防动机。相比市场地位较高企业和政府控股企业，供应商关系更能激发市场地位较低企业和非政府控股企业的关系承诺动机进而使其持有更多的现金。