Category Archives: RESEARCH ARTICLE

Group budget‐based bonus scheme and group cooperation: The role of social value orientation, goal alignment, and group identity

Posted on 28 August 2023 by nAndson Braga Aguiar, nMamadou Dieng, nReinaldo Guerreiron

Abstract

In a workgroup setting, we use a quasi-experiment to examine whether and why proself rather than prosocial employees benefit more from high group identity to foster group cooperation. We validate the goal-transformation hypothesis that proself rather than prosocial employees benefit more from high group identity. Consistent with the goal-expectation hypothesis, we show that goal alignment explains why proself rather than prosocial employees benefit more from high group identity. The main implication of our results is that, when group identity is high, proself employees reinforce their strategic behaviour to cooperate with the group to obtain higher individual payoffs through greater goal alignment.

CFO facial beauty and bank loan contracting

Posted on 22 August 2023 by nKarel Hrazdil, nJiyuan Li, nGerald Lobo, nRay Zhangn

Abstract

We examine whether the facial attractiveness of borrower firms' chief financial officers (CFOs) influences bank loan contracting terms. Using a machine learning-based algorithm to measure facial attractiveness, we document that firms led by CFOs with greater facial attractiveness receive more favourable loan contracts from their banks. We further show that the relation between CFO facial attractiveness and bank loan contracting terms is significantly influenced by the characteristics of both the borrower and the lender. Collectively, our results suggest that loan contracting is not an entirely rational process, as the ‘beauty premium’ is at least partly driven by taste-based discrimination.

The disciplinary role of unsuccessful takeovers and changes in corporate governance

Posted on 21 August 2023 by nMartin Bugeja, nYaowen Shan, nYanglan Zun

Abstract

This study examines if unsuccessful takeovers trigger the replacement of directors and changes in other governance attributes and result in improvements in target firm performance. Using an Australian sample this study finds that following failed bids, target firms are more likely to remove directors and experience an increase in director ownership, board independence, and block ownership. In contrast, target firm director expertise and prestige decrease following failed bids. We also find that post-bid accounting and stock performance of targets are largely unrelated to changes in governance attributes after the unsuccessful takeover.

Investigating performance implications of intra‐family ownership successions: Equity transfers with versus without debt creation

Posted on 21 August 2023 by nEllen Janssen, nSigrid Vandemaele, nWim Voordeckers, nMark Vancauterenn

Abstract

We relate two routes of intra-family ownership succession (i.e., succession financed with versus without debt) to post-succession financial performance. Investigating a sample of 203 privately-held family businesses, our results show that the succession-induced performance paths of the two subgroups are significantly different. When debt is used to fund the intra-family share transfer, financial performance significantly increases in the post-succession period. This phenomenon is absent when no debt is used to fund succession. We attribute the performance gap to a governance device characterising the debt-financed succession route: debt creation at succession leads to firm-level efficiency gains.

The impact of post‐retirement financial market participation on retirement income sufficiency in Australia

Posted on 18 August 2023 by nXiaobo Xu, nJiali Fang, nMartin Young, nLiping Zoun

Abstract

Using HILDA survey data, we document a strong positive relationship between post-retirement financial market participation and retiree income sufficiency in Australia. We find a 17% improvement in the income replacement ratio and a 3.26 times higher annuitised net wealth for financial market participants compared to non-participants. We further investigate how age, residence area, relationship status, education, health, and employment affect the main finding in all and female retirees. The results highlight the value of financial market participation in facilitating household retirement security and provide further support for the active promotion of household financial market participation, both in Australia and globally.

Pressure from words: The tone of investors in Chinese earnings communication conferences and managerial myopia

Posted on 18 August 2023 by nRunmei Luo, nYong Yen

Abstract

This study examines whether and how the negative tone of investors in earnings communication conferences (ECCs) held by Chinese listed companies influences managerial myopia. We use the bidirectional encoder representations from transformers (BERT) model to construct sentence-level emotional tone and find that the negative tone of investors in ECCs leads to greater myopic behaviour by managers. The positive relationship between the negative tone of investors and managerial myopia is stronger when more investors participate in ECCs, investors ask more questions, and managers respond with longer statements. However, this positive relationship becomes weaker when managers have positions in other companies, managers are more competent, and managers display a more positive tone in ECCs. Additionally, this positive relationship weakens when listed companies that hold ECCs have more institutional investors and strengthens when the media reports these companies more frequently. Our results prove that individual investors can have a voice and influence the decision-making behaviour of managers through ECCs.

A study of cross‐border profit shifting channels: Evidence from Australia

Posted on 17 August 2023 by nAlfred Tran, nWanmeng Xun

Abstract

We investigate two cross-border profit shifting channels used by foreign multinational enterprises (MNEs) in Australia and assess the effectiveness of the related measures adopted by the Australian Parliament to combat base erosion and profit shifting (BEPS). Overall, we find that Australian subsidiaries of foreign MNEs used tax-induced intra-group transfer pricing and, to a lesser extent, interest expense loading to shift profit out of Australia throughout the period from 2007 to 2020. However, we find no evidence indicating that profit shifting out of Australia via the two channels has reduced after the implementation of related BEPS countermeasures in Australia from 2013.

The crowding‐out effects of innovation information disclosure on peers’ innovation: Evidence from innovation‐driven M&As in China

Posted on 16 August 2023 by nZhangfan Cao, nChen Hua, nYan Tong, nXi Wangn

Abstract

This study investigates the impact of rivals' announcements of innovation-driven mergers and acquisitions (M&As) on focal firms' ex-post corporate innovation performance. Exploiting a hand-collected dataset of Chinese listed firms from 2011 to 2018, we find that focal firms file fewer patents after rivals' announcements of innovation-driven M&As. Further analyses show that focal firms become more conservative and hold more cash when rivals intend to obtain innovation resources through M&As. We find that such crowding-out effects are more pronounced for focal firms that are more financially constrained, those facing higher competition, those whose rivals are industry leaders, and those operating in traditional industries.

CEO turnovers and capital structure persistence

Posted on 14 August 2023 by nViktoriya Stanevan

Abstract

Firm fixed effects in panel leverage regressions act as a noisy proxy for managerial effects that drive persistence in leverage. Firms that do not change their chief executive officer (CEO) for prolonged periods of time are more likely to keep debt ratios within a narrow bandwidth and to display persistent differences in their time-series averages for up to 20 years. A CEO turnover is associated with considerable modifications to the financing policy of the firm. Significant capital structure changes take place immediately after a new executive takes office and leverage ratios remain relatively stable for the remaining tenure of the CEO.

CEO narcissism and firm’s cash conversion cycle: The moderating role of CEO’s gender

Posted on 14 August 2023 by nHeba F. Zaher, nGilberto Marquez‐Illescasn

Abstract

This study investigates the effect of CEO narcissism on firm's cash conversion cycle (CCC), and how this influence is moderated by CEO gender. Based on a sample of 354 CEOs in 229 S&P 500 firms, our results indicate that firms led by more narcissistic CEOs tend to have a shorter CCC and this effect is weaker in companies led by a female CEO. Our additional analyses show that the effect of CEO narcissism on the CCC may improve or damage firm performance depending on the firm's CCC level.