Equity issuance activity rose sharply across the corporate sector during the COVID-19 crisis. We use this period of unprecedented uncertainty to study the effects of financial distress on seasoned equity offering returns. We find that firms increased their reliance on placements during this period of economic turmoil, with, on average, significantly larger issues, steeper discounts, and a greater focus on debt repayment. We show firms at greater risk of financial distress during the pandemic benefit significantly from signalling debt repayment as a priority, with stronger announcement date returns.
Category Archives: Original Article
Online voting and minority shareholder dissent: Evidence from China
Abstract
Using proposal-level data in China, we document that online voting significantly increases minority shareholders’ participation in voting, and online voting is related to more dissenting votes. The association between online voting and minority shareholders’ participation and dissent is stronger in underperforming firms, indicating that minority shareholders tend to participate and dissent to express dissatisfaction. The association is stronger for shareholders with stronger voting power. Finally, we find that when minority shareholders’ dissent fails to veto a proposal, dissenting minority shareholders are less likely to participate and vote again the following year. Our results suggest that mechanisms designed to facilitate minority shareholder voting lead to greater and more informed participation in the corporate governance process.
Managing the “Downside” of Downsizing: Firms’ Impression Offsetting around Downsizing Announcements
Abstract
Past studies indicate that investors perceive workforce downsizing negatively, as evidenced by negative short-term stock returns around downsizing announcements. Impression management theory suggests that downsizing firms thus attempt to offset investors’ negative impressions by issuing positive news around downsizing announcements, and that firms’ impression offsetting can attenuate investors’ negative response. In this study, we test these theoretical predictions but also unpack why and how impression offsetting positively biases investor perceptions. Prior work theorized that impression offsetting is effective because it dilutes investors’ attention and compels them to average positive and negative news items in their minds but did not clarify whether both causal mechanisms are operative, and which one is more powerful. We posit that impression offsetting influences investor response primarily by forcing them to mentally average positive and negative news. Further, our study provides a more nuanced understanding of investors’ mental averaging process. While prior work assumed that all types of positive news are received equally by investors, we argue that positive financial news offsets investors’ negative impressions more effectively than positive operational or social news. The empirical analysis of nearly 1500 downsizing announcements by the largest, public US firms between 2001 and 2020 mainly supports our theoretical reasoning.
Stakeholder Existential Authenticity and Corporate Social Responsibility
Abstract
Corporate social responsibility (CSR) research has been slow to address the impacts of CSR on stakeholders, especially in terms of the mechanisms explaining how CSR translates into positive stakeholder outcomes. We introduce a new mechanism into this literature – stakeholder existential authenticity (SEA) – that helps explain how stakeholder participation in CSR can enhance stakeholder wellbeing through the experience of being authentic. We develop an original conceptualization of SEA and integrate this into a model explaining the relationships between CSR participation, SEA, eudaimonic happiness, and subjective wellbeing, as well as the moderating effects of individual stakeholder attributes and CSR activity design. We explain our contributions to the literature on society-centric CSR, authenticity in CSR, CSR implementation, and authenticity in management more broadly, before suggesting directions for future research and outlining the practical implications of our study.
How Do Innovation Ecosystems Emerge? The Case of Nanotechnology in Israel
Abstract
Research on innovation ecosystems has identified their evolution phases but neglected their emergence, which we know little about. We offer inductive theory to explain the emergence of the nanotechnology ecosystem in Israel. Our theory suggests that ineffective bureaucracy, resource constraints, and the conflicting agendas of the government and universities create organizational bottlenecks that impede the ecosystem's emergence. Only once these actors establish related dedicated units that are immune to these deficiencies and transition to simultaneous competition and cooperation does the innovation ecosystem begin to emerge. We further reveal how enabling and governing mechanisms legitimize the innovation ecosystem, facilitate its emergence, and direct its evolution trajectory. Hence, we extend research that has centered on subsequent phases of evolution and explain how actors interact to facilitate the emergence of the ecosystem following technological discovery. Our study contributes to strategy research on interfirm coopetition by applying this concept to government and university actors, and by alluding to its multiple facets: identity, direction, administration, and resources. We also complement innovation research on the post-formation dynamics of ecosystems by providing insights into the missing link between technological discovery and the creation of an innovation ecosystem that brings together stakeholders to commercialize that technology.
The Fire to Inspire: A Multilevel and Multimethod Investigation of How and When CEO Passion for Organizational Development Impacts Employee Creativity
Abstract
In this paper, we conceptualize CEO passion for organizational development (CEO POD) as CEOs’ strong inclination to continuously grow and improve their companies, which they find important and fulfilling. We draw from social information processing theory to articulate how and when CEO POD may trickle down to facilitate frontline employees’ creativity. Our research encompasses three studies employing different methodologies, including a multilevel, multisource, and multiphase survey and two vignette-based experiments. The results consistently support our model, revealing that CEO POD inspires middle managers to exhibit transformational leadership, which subsequently fosters frontline employees’ creativity. Moreover, CEO self-promotion skills augment the indirect effect of CEO POD on employee creativity via middle managers’ transformational leadership. Our findings generate valuable theoretical and practical implications to leverage CEO POD to foster employees’ creativity in the fast-changing business environment.
A Psychological Ownership Perspective on the HR System–LGBT Voice Relationship: The Role of Espousal and Enactment of Inclusion Matters
Abstract
Voice behaviours of invisible sexual minorities, such as lesbian, gay, bisexual, and transgender individuals and others whose sexual orientations and/or gender expressions fall outside of heterosexual/cisgender norms (LGBT), have received scant attention in prior research. Based on the psychological ownership (PO) perspective, this study investigates the relationship between the presence of an LGBT-supportive human resource (HR) system and LGBT employees’ voice. Moreover, grounded in the situational strength and leadership literature, this study examines the boundary conditions of the strength of an LGBT-supportive HR system and leader inclusiveness within this PO mechanism. Data collected from LGBT employees in three waves reveal that PO can mediate the influence of the presence of an LGBT-supportive HR system on LGBT voice. Additionally, the strength of an LGBT-supportive HR system moderates the relationship between its presence and LGBT employees’ PO in the first stage, while leader inclusiveness moderates the PO–voice relationship in the second stage. Overall, the mediating effect of PO is most significant when a strong HR system is aligned with high leader inclusiveness. Theoretical and managerial implications are also discussed.
Multi‐Temporality and the Ghostly: How Communing with Times Past Informs Organizational Futures
Abstract
Despite growing interest in time, history, and memory, we lack an understanding of the multi-temporal reality of organizations – how past, present, and future intersect to inform organizational life. In assuming that legacies are bequeathed from past to present, there has been little theorization on how this works practically. We propose that the lexicon of the ghostly can help. We contribute a theory of ghostly influence from past to future by offering a framework focusing on core moments of organizational existence: foundation, strategic change, and longevity commemoration, and illustrate this using a case study of consumer goods multinational Procter & Gamble (1930–2010). In showing that organizational ghosts, absent members whose presence is consequential to the actions of living members, are active and dialogical, we illuminate a dialectical interaction missing from other non-linear conceptions of temporality. This emphasizes the performative force of a dynamic past that provides an inference to action in the present and future.
Market power and systematic risk
Abstract
We examine the impact of product market competition on firms' systematic risk. Using a measure of total product market similarity, we document a strong negative relationship between market power and market betas. The effect more than triples in the most recent period of low competition. Anticompetitive mergers result in a significant reduction in market betas. Firms facing less competition seem to be partially insulated from systematic discount-rate shocks. Lower equity costs therefore imply that market power is partly self-perpetuating.
Upbeat or Off‐the‐Mark? How Work Rhythms Affect Strategic Change
Abstract
This study examines how organizational members cope with new work rhythms that are brought about by a strategic organizational change. Based on a two-year qualitative case study of a major strategic change in a research unit at a university that encouraged academics to embody an upbeat, energetic work rhythm, we identify four different modes of engaging with rhythms (syncing, tuning, figuring, and settling). We found that individual academics engaged rhythmically in different ways to meet this expected way of working and with discernible consequences for how they participated in the strategic change and ultimately were able to support the change, or not. Based on our study findings, we conceptualize a process model of rhythmic coping that highlights a central but often overlooked part of strategic change with significant implications for the success of a change as well as for the continued health and well-being of employees.