Category Archives: Original Article

The Impact of Trustworthiness on the Association of Corporate Social Responsibility and Irresponsibility on Legitimacy

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Abstract

Research on corporate social responsibility (CSR) and corporate social irresponsibility (CSIR) has long argued both affect firms' legitimacy, for good or bad. Such research has ignored how ex-ante corporate trustworthiness and associated attributions affect the association of CSR and CSIR on corporate normative legitimacy. Focusing on two unique aspects of corporate normative legitimacy evaluations – affect and misconduct – we argue that ex-ante perceptions of firm trustworthiness moderate the associations among CSR and CSIR and different aspects of normative legitimacy. Utilizing comprehensive panel-data analytical approaches for S&P 500 firms from 2000 to 2015, MSCI-KLD data, mass-media-based measures of firm trustworthiness, including normative affect-based legitimacy, and normative misconduct-related-legitimacy, our proposition is mostly supported, with surprising caveats. A post-hoc analysis shows these associations vary based on public versus investors' affective-legitimacy views. The findings of this study critically challenge extant scholarship and call for a nuanced view of the impact of CSR and CSIR on firm legitimacy.

Passion Amid the Pandemic: Applying a Person‐Centered Approach to Examine Cross‐Domain Multi‐Passion Profiles during a Crisis

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Abstract

We examine whether having cross-domain passion (i.e., harmonious and obsessive passion for work and for non-work activities) during the COVID-19 pandemic can help individuals fare better amid the crisis. Drawing from work-family boundary framework, we develop a provisional theory of cross-domain multi-passion, and in two studies, we use latent profile analysis to uncover five passion profiles – Dispassionate at Work and Play; Dispassionate at Work, Ambidextrous at Play; Harmonious at Work, Ambidextrous at Play; Harmonious at Work and Play; and Moderately Harmonious at Work and Play. In Study 1, we inductively explore these profiles and their relationships with life satisfaction. In Study 2, we replicate the number and content of these profiles, and test whether segmentation-integration preferences and work and non-work constraints predict the probability of individuals belonging to a certain profile. Overall, these profiles reveal how individuals can co-host multiple forms of passion simultaneously, and how doing so relate to their life satisfaction during the pandemic.

Institutional Divide, Political Ties, and Contested Corporate Governance Reform in Taiwan

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Abstract

This study attempts to address the question of under what conditions political ties buffer firms from, or bind firms to, political pressure. We draw attention to the institutional divide between the executive and legislative branches of a presidential democracy. Using the case of Taiwan, a ‘third wave’ democracy with relatively strong state intervention, we argue that the two branches differ in their respective institutional roles, basis of legitimacy, and resources in a context in which the regime is seeking to fulfil its national agenda and please floating voters. We posit that corporate ties to these respective branches exert divergent influence on the adoption of government-initiated but highly contested corporate governance reforms. Ties to the executive branch push firms to reform because they depend on the government for resources, while ties to the legislative branch act as a buffer to reform as legislators court the support of firms in pursuit of electoral gains. Empirical analysis of reforms to enhance board independence from 2002 to 2005 supports our thesis. Our study contributes to research on corporate political strategy and corporate governance reform, revealing how the structural fragmentation of the state can give rise to conflicting roles of political ties to different branches.

Do Investors Perceive the Link Between Equity Method Earnings and Future Earnings? The Role of Supplemental Disclosures

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Equity method investments are commonly a material component of a firm's corporate structure, yet these investments are presented to financial statement users through opaque financial reporting. This study demonstrates that the link between equity method earnings and future earnings is stronger than the link between consolidated earnings and future earnings, consistent with the synergistic and diversification benefits of equity method investments. Next, this study demonstrates a limitation in the opaque reporting of equity method investments by revealing that the market fails to fully incorporate into prices the link between equity method earnings and future earnings. Further, this study contributes to the active debate among practitioners and regulators about the usefulness of supplemental disclosure requirements related to equity method investments. Results indicate that supplemental equity method investment disclosures aid the market in impounding the persistence of equity method earnings into share price.

Conditional Mandates on Management Earnings Forecasts: The Impact on the Cost of Debt

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Exploiting a unique conditional disclosure mandate on management earnings forecasts (MEFs) in China, we examine the differential effects of voluntary and mandatory MEFs on the cost of debt. We find that firms providing voluntary MEFs have lower cost of debt than do mandatory forecasters and nonforecasters. The results of the channel analyses reveal that voluntary forecasters have greater commitment to voluntary MEFs in future periods than do mandatory forecasters and nonforecasters, and the precision, accuracy, and timeliness of MEFs are higher for voluntary forecasters than for mandatory forecasters. Additional analyses show that the differential effects of voluntary and mandatory MEFs on cost of debt are stronger for voluntary forecasters operating in opaque information environments, issuing high-quality and confirming forecasts, controlled by private shareholders, and operating in highly competitive product markets. Overall, our results indicate that, compared with mandatory MEFs, voluntary MEFs are more informative for credit investors, particularly for firms facing greater information risk and operating uncertainty.