Capital gains lock-in and governance choices

Differences in accrued gains and investors’ tax-sensitivity induce variation in a capital gains lock-in effect across mutual funds even for the same stock at the same time. Exploiting this variation, we show this effect influences funds’ governance decisions: higher capital gains decrease the likelihood a fund exits prior to contentious votes and increase the likelihood a fund votes against management. Consistent with tax motivation, these findings are concentrated among funds with tax-sensitive investors. Further, high aggregate capital gains across funds holding a stock predict a higher likelihood management loses a vote and a lower likelihood a contentious vote is proposed.     

How novel actors achieve a positive reputation: A case of prep schools with elite‐level hockey programs

How are novel organizations able to build a positive reputation while attempting to enter into a system with established organizations? To address this, we examined the field of elite‐level amateur hockey. Private Secondary Schools (PSS) are novel in that they offer a nontraditional pathway for players with respect to fielding elite‐level hockey teams. Findings from interviews with PSS with elite‐level hockey programs revealed that PSS highlight their Selection Processes, Player Development Practices, and the enhanced Player Experience in an effort to build a positive reputation. This study contributes to the literature on reputation by showing that novel organizations can build a reputation through highlighting the unique value they add. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

Building A Sustainable Shelf: The Role of Firm Sustainability Reputation

The reputation of firms for being environmentally friendly and socially responsible is a key purchase driver for sustainable products. However, the commitment of firms to sustainability varies – some firms are founded on strong environmental and social principles; other more traditional firms are built on strong product/brand focus and are not known for sustainability. In response to market trends, many traditional firms are introducing sustainable products to their portfolios. We argue that the firm’s sustainability reputation (FSR) will influence consumer purchase with respect to equally sustainable products from different firms. Two choice studies demonstrate that FSR favors sustainable product choice when the consumer decides between equally sustainable products. However, FSR affects the choice only for sustainable products and not regular products and does so only for consumers that construe sustainability at a high (abstract) level. Retailers should pay attention to the role that FSR plays in consumer response when they select sustainable products to sell.     

Crisis leadership in economic recession: A three-barrier approach to offset external constraints

An economic recession is a type of crisis originated from external factors that may imperil an organization’s survival depending on the intensity and duration of the crisis. In peripheral European countries, such as Portugal, the recent financial crisis had devastating effects on various business activities. As a result, Portugal represents an important case study in examining how some corporate leaders have handled the economic recession successfully. I interviewed 20 corporate managers to capture their perceptions of the leadership traits and behaviors exhibited by their CEOs in guiding their companies through the recession. In economic recessions, negative constraints do not affect the most effective leaders, who instead erect barriers against the high-pressure conditions to create a supportive, positive work environment. In order to achieve maximum effectiveness, leaders must act as blocking agents against the negative social impacts of the economic crisis, including the fragility of trust in organizational life (i.e., a barrier against distrust), uncertainty of the future (i.e., a barrier against uncertainty), and toxic emotions (i.e., a barrier against toxic emotions).     

Media coverage and investment efficiency

We examine the effect of media coverage on firm-level investment efficiency. We find that media coverage reduces under-investment but increases over-investment. The negative effect of media coverage on under-investment is more pronounced in firms affected by greater information asymmetry and poorer corporate governance. The positive effect of media coverage on over-investment is driven by media-induced CEO overconfidence. Additional results show that both investment- and non-investment-related news coverage decrease under-investment, while non-investment-related news coverage is more influential in increasing over-investment. In general, higher news optimism is associated with less under-investment but more over-investment. Moreover, media coverage affects investment efficiency through its information dissemination rather than information creation function. Collectively, our results suggest that firms’ media visibility promotes more over-investment than under-investment.     

Relative-to-rival corporate philanthropy,product market competitiveness,and stakeholders

Unlike most of the literature that examines the relationship between corporate philanthropy and financial performance, this study investigates the mechanisms through which corporate socially responsible behaviors produce financial outcomes. We propose that corporate philanthropy improves corporate competitiveness by eliciting positive responses from stakeholders, who assess a firm’s philanthropic contribution in relation to its rivals to determine what level of support they wish to provide to the firm. We predict that a firm’s philanthropy relative to its rivals has a positive effect on its product market competitiveness, and that this positive effect is moderated by three conditions that influence stakeholder response: stakeholder attention to philanthropy, its perceived legitimacy, and expectations of corporate giving. Our predictions are generally supported by our analyses. Overall, this paper shows that strategic philanthropy has a quantitative dimension, and firms obtain the market competitiveness associated with corporate philanthropy by integrating their rivals’ positions into their decision making.     

Bridging the great divide? Making sense of the human rights-CSR relationship in UK multinational companies

Human rights (HR) and corporate social responsibility (CSR) are both fields of knowledge and research that have been shaped by, and examine, the role of multi-national enterprises in society. Whilst scholars have highlighted the overlapping nature of CSR and HR, our understanding of this relationship within business practice remains vague and under-researched. To explore the interface between CSR and HR, this paper presents empirical data from a qualitative study involving 22 international businesses based in the UK. Through an analysis based on sensemaking, the paper examines how and where CSR and HR overlap, contrast and shape one another, and the role that companies’ international operations has on this relationship. The findings reveal a complex and multi-layered relationship between the two, and concludes that in contrast to management theory, companies have bridged the ‘great divide’ in varying degrees most notably in their implementation strategies.     

The development of the group accounts disclosure system in Japan

The Japanese disclosure system of consolidated statements was introduced in 1977 and extensively revised in 1997. The role of the bureaucracy has been significant in these developments and seems to be part of Japan's closed culture. However, other explanations could also be applied. In particular, although Japanese firms opposed such disclosures on the basis of preparation costs, the Japanese government had to modernize the disclosure system, including consolidation, in order to develop the securities market regardless of an individual company's interests.     

Optimal investment with fixed financing costs

Models with a premium on external finance produce counterfactual predictions about liquidity management. We address this shortcoming by introducing a fixed cost of increasing external finance into an otherwise standard investment/financing problem. This additional financial friction is well-motivated by case studies and our analysis shows that it generates more realistic predictions about liquidity management: firms hold external finance and idle cash simultaneously, and may invest an additional dollar of cash flow in liquidity rather than repaying external funds or investing in productive capital. In addition to better fitting the stylized facts about the time-series and cross-sectional pattern of liquidity holding, these results may help shed light on the fragility of estimates of investment–cash flow sensitivities.     

Capital structure and the control of managerial incentives

We present a theory of capital structure based on the power of shareholders, bondholders and managers to control the incentive conflicts in large corporations. The manager–owner conflict produces a trade-off between inefficiency in the low state and rents in the high state, and the shareholder–bondholder conflict produces under-investment as in Myers [Journal of Financial Economics 19 (1997) 147]. Since managers and bondholders both prefer more efficient actions in the low state, the two conflicts are interdependent. With risk-less levels of debt, there are no shareholder–bondholder agency costs, but managerial control over the incentive-setting process produces excessive rents. With risky debt, shareholders focus more on returns in the high state so that shareholder–bondholder agency costs increase but managerial rents decrease. Efficient levels of debt holder protection facilitate a reduction in manager–owner agency costs that outweighs shareholder–bondholder agency costs, and are decreasing in firm performance. The results are consistent with the separate empirical results relating control to both compensation and leverage, and suggest how future studies can be integrated.