International Journal of Managerial FinanceTable of Contents for International Journal of Managerial Finance. List of articles from the current issue, including Just Accepted (EarlyCite)https://www.emerald.com/insight/publication/issn/1743-9132/vol/20/iss/2?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestInternational Journal of Managerial FinanceEmerald Publishing LimitedInternational Journal of Managerial FinanceInternational Journal of Managerial Financehttps://www.emerald.com/insight/proxy/containerImg?link=/resource/publication/journal/7623f022d414447ffbad13e364379a0b/urn:emeraldgroup.com:asset:id:binary:ijmf.cover.jpghttps://www.emerald.com/insight/publication/issn/1743-9132/vol/20/iss/2?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestDividend policy and firm liquidity under the tax imputation system in Australiahttps://www.emerald.com/insight/content/doi/10.1108/IJMF-01-2023-0018/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe primary goal of this paper is to investigate the relationship between stock market liquidity and firm dividend policy within a market implementing the tax imputation system. The main aim is to understand how the tax imputation system influences the relationship between firm dividend policy and stock market liquidity within a cross-sectional framework. This paper investigates the relationship between stock market liquidity and the dividend payout policy under the full tax imputation system in the Australian market. This study uses the Generalized Least Squares regressions with firm- and year-fixed effects. In contrast to the negative relationship between the liquidity of common shares and the firms' dividends documented in countries with the double tax system, the study reveals that in Australia, the dividend payout ratios are positively associated with liquidity after controlling for various explanatory variables with both the contemporaneous and lagged time periods. Such a finding is robust to the use of alternative liquidity proxies and to the sub-period tests and remains during the COVID-19 pandemic period. The insights derived from this study have significant implications for various stakeholders within the economy. The findings provide regulators with valuable insights to conduct a more holistic assessment of how the tax system impacts the economy, especially concerning the dividend choices of firms. Within the context of a full tax imputation system, investors can make investment decisions without factoring in the taxation impact. Simultaneously, firms can be relieved of concerns about losing investors who prioritize liquidity, particularly when a high dividend payout might not align optimally with their financial strategy. This study contributes to the literature by extending the literature on the tax clientele effects on dividend policy, providing evidence that the tax imputation system can moderate the impact of liquidity on dividend policy. This study examines the impact of the dividend tax imputation system on the substitution effect between dividends and liquidity.Dividend policy and firm liquidity under the tax imputation system in Australia
Min Bai, Yafeng Qin, Feng Bai
International Journal of Managerial Finance, Vol. 20, No. 2, pp.281-303

The primary goal of this paper is to investigate the relationship between stock market liquidity and firm dividend policy within a market implementing the tax imputation system. The main aim is to understand how the tax imputation system influences the relationship between firm dividend policy and stock market liquidity within a cross-sectional framework.

This paper investigates the relationship between stock market liquidity and the dividend payout policy under the full tax imputation system in the Australian market. This study uses the Generalized Least Squares regressions with firm- and year-fixed effects.

In contrast to the negative relationship between the liquidity of common shares and the firms' dividends documented in countries with the double tax system, the study reveals that in Australia, the dividend payout ratios are positively associated with liquidity after controlling for various explanatory variables with both the contemporaneous and lagged time periods. Such a finding is robust to the use of alternative liquidity proxies and to the sub-period tests and remains during the COVID-19 pandemic period.

The insights derived from this study have significant implications for various stakeholders within the economy. The findings provide regulators with valuable insights to conduct a more holistic assessment of how the tax system impacts the economy, especially concerning the dividend choices of firms. Within the context of a full tax imputation system, investors can make investment decisions without factoring in the taxation impact. Simultaneously, firms can be relieved of concerns about losing investors who prioritize liquidity, particularly when a high dividend payout might not align optimally with their financial strategy.

This study contributes to the literature by extending the literature on the tax clientele effects on dividend policy, providing evidence that the tax imputation system can moderate the impact of liquidity on dividend policy. This study examines the impact of the dividend tax imputation system on the substitution effect between dividends and liquidity.

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Dividend policy and firm liquidity under the tax imputation system in Australia10.1108/IJMF-01-2023-0018International Journal of Managerial Finance2023-09-28© 2023 Emerald Publishing LimitedMin BaiYafeng QinFeng BaiInternational Journal of Managerial Finance2022023-09-2810.1108/IJMF-01-2023-0018https://www.emerald.com/insight/content/doi/10.1108/IJMF-01-2023-0018/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Is corporate digital transformation a tax haven?https://www.emerald.com/insight/content/doi/10.1108/IJMF-11-2022-0505/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestCorporate digital transformation (CDT) has challenged traditional tax administration systems. This study examines the impact of CDT on tax avoidance behavior and tests whether tax authorities can identify this behavior. Using data on listed companies on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2020, this study applies the Heckman two-stage and cross-section models. The results show that the higher the degree of CDT, the more aggressive the tax avoidance behavior. The CDT's impact on corporate tax avoidance is more significant under strong government tax efforts. This study expands research on the economic consequences of CDT and the factors influencing corporate tax avoidance behavior. Moreover, it has important implications for governments to monitor tax avoidance behavior under the CDT, improve digital tax systems, and pay more attention to the tax administration of digital assets.Is corporate digital transformation a tax haven?
Wanyi Chen, Fanli Meng
International Journal of Managerial Finance, Vol. 20, No. 2, pp.304-333

Corporate digital transformation (CDT) has challenged traditional tax administration systems. This study examines the impact of CDT on tax avoidance behavior and tests whether tax authorities can identify this behavior.

Using data on listed companies on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2020, this study applies the Heckman two-stage and cross-section models.

The results show that the higher the degree of CDT, the more aggressive the tax avoidance behavior. The CDT's impact on corporate tax avoidance is more significant under strong government tax efforts.

This study expands research on the economic consequences of CDT and the factors influencing corporate tax avoidance behavior. Moreover, it has important implications for governments to monitor tax avoidance behavior under the CDT, improve digital tax systems, and pay more attention to the tax administration of digital assets.

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Is corporate digital transformation a tax haven?10.1108/IJMF-11-2022-0505International Journal of Managerial Finance2023-05-24© 2023 Emerald Publishing LimitedWanyi ChenFanli MengInternational Journal of Managerial Finance2022023-05-2410.1108/IJMF-11-2022-0505https://www.emerald.com/insight/content/doi/10.1108/IJMF-11-2022-0505/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Corporate fraud and industry peer effects on IPO underpricinghttps://www.emerald.com/insight/content/doi/10.1108/IJMF-10-2022-0430/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestExisting studies suggest that negative impacts emanating from corporate fraud revelations may diffuse to other firms through lower trust and lower market participation. Extending this literature stream, the authors examine whether corporate fraud revelations are associated with higher costs of raising capital through initial public offerings (IPOs) for industry peers. The authors employ several analysis techniques including univariate analysis, multivariate regressions, propensity score matching methodology, and probit estimation. The sample consists of 3,015 US IPO firms for the 1996–2021 period. By adopting US private securities class action lawsuits as a proxy for the presence of corporate fraud, the authors find that fraud revelations are associated with higher IPO underpricing, higher post-IPO stock return volatility and increased likelihood of withdrawal from the offering for industry peers. The findings are robust to alternative industry definitions and litigation proxies and to the inclusion of a battery of controls, including industry, state and year fixed effects. This study presents private firms with an additional industry litigation factor to consider when assessing the marginal costs of going public.Corporate fraud and industry peer effects on IPO underpricing
Darshana Palkar
International Journal of Managerial Finance, Vol. 20, No. 2, pp.334-357

Existing studies suggest that negative impacts emanating from corporate fraud revelations may diffuse to other firms through lower trust and lower market participation. Extending this literature stream, the authors examine whether corporate fraud revelations are associated with higher costs of raising capital through initial public offerings (IPOs) for industry peers.

The authors employ several analysis techniques including univariate analysis, multivariate regressions, propensity score matching methodology, and probit estimation. The sample consists of 3,015 US IPO firms for the 1996–2021 period.

By adopting US private securities class action lawsuits as a proxy for the presence of corporate fraud, the authors find that fraud revelations are associated with higher IPO underpricing, higher post-IPO stock return volatility and increased likelihood of withdrawal from the offering for industry peers. The findings are robust to alternative industry definitions and litigation proxies and to the inclusion of a battery of controls, including industry, state and year fixed effects.

This study presents private firms with an additional industry litigation factor to consider when assessing the marginal costs of going public.

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Corporate fraud and industry peer effects on IPO underpricing10.1108/IJMF-10-2022-0430International Journal of Managerial Finance2023-05-31© 2023 Emerald Publishing LimitedDarshana PalkarInternational Journal of Managerial Finance2022023-05-3110.1108/IJMF-10-2022-0430https://www.emerald.com/insight/content/doi/10.1108/IJMF-10-2022-0430/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Strategic working capital management in response to a performance shock: evidence from the NO Budget Trading Programhttps://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2022-0143/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis paper examines how manufacturing firms impacted by the nitrogen oxides (NOx) Budget Trading Program (NBP) strategically managed working capital to release funds for increased costs and mitigate the negative impact on firm performance. The study uses a panel data set including 11,302 manufacturing firm-year observations listed on the US exchanges during the period 2000–2008. The authors use Tobin's Q to proxy for firm performance, and cash holding, cash conversion cycle (CCC), days sales outstanding (DSO), days sales inventory (DSI) and days payable outstanding (DPO) for working capital management (WCM). The empirical analysis is conducted using both ordinary least squares (OLS) and propensity score matching (PSM) regressions. The authors find that firms respond to the higher utility costs imposed by the NBP by decreasing CCC, DSO and DSI. This active WCM response partially mitigated the impact of increased compliance costs on performance for firms affected by the NBP. Results are robust in PSM regressions. Climate change is a global issue that has attracted increasing attention in recent years. This study shows how firms can adjust short-term financing strategies to address the costs of compliance with climate change regulation. The paper contributes to the emerging literature on corporate finance and climate policy actions. The authors use the unique experimental setting of the NBP to examine the regulatory impact on corporate financial management. The authors demonstrate how firms used active WCM to mitigate the negative performance impact of regulatory compliance with the NBP, providing novel insight on the implication of compliance with climate change legislation.Strategic working capital management in response to a performance shock: evidence from the NO Budget Trading Program
Paula Hearn Moore, Ben Le, Donna L. Paul
International Journal of Managerial Finance, Vol. 20, No. 2, pp.358-376

This paper examines how manufacturing firms impacted by the nitrogen oxides (NOx) Budget Trading Program (NBP) strategically managed working capital to release funds for increased costs and mitigate the negative impact on firm performance.

The study uses a panel data set including 11,302 manufacturing firm-year observations listed on the US exchanges during the period 2000–2008. The authors use Tobin's Q to proxy for firm performance, and cash holding, cash conversion cycle (CCC), days sales outstanding (DSO), days sales inventory (DSI) and days payable outstanding (DPO) for working capital management (WCM). The empirical analysis is conducted using both ordinary least squares (OLS) and propensity score matching (PSM) regressions.

The authors find that firms respond to the higher utility costs imposed by the NBP by decreasing CCC, DSO and DSI. This active WCM response partially mitigated the impact of increased compliance costs on performance for firms affected by the NBP. Results are robust in PSM regressions.

Climate change is a global issue that has attracted increasing attention in recent years. This study shows how firms can adjust short-term financing strategies to address the costs of compliance with climate change regulation.

The paper contributes to the emerging literature on corporate finance and climate policy actions. The authors use the unique experimental setting of the NBP to examine the regulatory impact on corporate financial management. The authors demonstrate how firms used active WCM to mitigate the negative performance impact of regulatory compliance with the NBP, providing novel insight on the implication of compliance with climate change legislation.

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Strategic working capital management in response to a performance shock: evidence from the NO Budget Trading Program10.1108/IJMF-03-2022-0143International Journal of Managerial Finance2023-06-09© 2023 Emerald Publishing LimitedPaula Hearn MooreBen LeDonna L. PaulInternational Journal of Managerial Finance2022023-06-0910.1108/IJMF-03-2022-0143https://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2022-0143/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Identifying the risk culture of banks using machine learninghttps://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2022-0422/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestAlthough risk culture is a key determinant for an effective risk management, identifying the risk culture of a firm can be challenging due to the abstract concept of culture. This paper proposes a novel approach that uses unsupervised machine learning techniques to identify significant features needed to assess and differentiate between different forms of risk culture. To convert the unstructured text in our sample of banks' 10K reports into structured data, a two-dimensional dictionary for text mining is built to capture risk culture characteristics and the bank's attitude towards the risk culture characteristics. A principal component analysis (PCA) reduction technique is applied to extract the significant features that define risk culture, before using a K-means unsupervised learning to cluster the reports into distinct risk culture groups. The PCA identifies uncertainty, litigious and constraining sentiments among risk culture features to be significant in defining the risk culture of banks. Cluster analysis on the PCA factors proposes three distinct risk culture clusters: good, fair and poor. Consistent with regulatory expectations, a good or fair risk culture in banks is characterized by high profitability ratios, bank stability, lower default risk and good governance. The relationship between culture and risk management can be difficult to study given that it is hard to measure culture from traditional data sources that are messy and diverse. This study offers a better understanding of risk culture using an unsupervised machine learning approach.Identifying the risk culture of banks using machine learning
Abena Owusu, Aparna Gupta
International Journal of Managerial Finance, Vol. 20, No. 2, pp.377-405

Although risk culture is a key determinant for an effective risk management, identifying the risk culture of a firm can be challenging due to the abstract concept of culture. This paper proposes a novel approach that uses unsupervised machine learning techniques to identify significant features needed to assess and differentiate between different forms of risk culture.

To convert the unstructured text in our sample of banks' 10K reports into structured data, a two-dimensional dictionary for text mining is built to capture risk culture characteristics and the bank's attitude towards the risk culture characteristics. A principal component analysis (PCA) reduction technique is applied to extract the significant features that define risk culture, before using a K-means unsupervised learning to cluster the reports into distinct risk culture groups.

The PCA identifies uncertainty, litigious and constraining sentiments among risk culture features to be significant in defining the risk culture of banks. Cluster analysis on the PCA factors proposes three distinct risk culture clusters: good, fair and poor. Consistent with regulatory expectations, a good or fair risk culture in banks is characterized by high profitability ratios, bank stability, lower default risk and good governance.

The relationship between culture and risk management can be difficult to study given that it is hard to measure culture from traditional data sources that are messy and diverse. This study offers a better understanding of risk culture using an unsupervised machine learning approach.

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Identifying the risk culture of banks using machine learning10.1108/IJMF-09-2022-0422International Journal of Managerial Finance2023-06-15© 2023 Emerald Publishing LimitedAbena OwusuAparna GuptaInternational Journal of Managerial Finance2022023-06-1510.1108/IJMF-09-2022-0422https://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2022-0422/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Geopolitical risk and corporate tax behavior: international evidencehttps://www.emerald.com/insight/content/doi/10.1108/IJMF-10-2022-0428/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study examines the association between geopolitical risk (GPR) and corporate tax, which is a major source of revenue for the government and a significant explicit cost for firms. The authors use a comprehensive measure of GPR to study its effects on corporate taxes by using an international sample. The authors adopt the geopolitical measure constructed by Caldara and Iacoviello (2022) as a proxy for GPR and cash-effective tax rate benchmarked with statutory tax rate to measure corporate tax avoidance. The authors employ panel regression with fixed effects (FEs) to investigate the impact of GPR on corporate tax avoidance. The authors also conduct a battery of robustness tests to ensure the strength of the study’s results. This study’s empirical results indicate that sample firms increase their tax avoidance amid increasing GPR. Further analyses show that financial constraints incentivize firms to avoid taxes during rising geopolitical tensions. The authors also provide evidence on the role of firm-level and country-level governance in weakening the association between GPR and tax avoidance. Policymakers and governments may strengthen the enforcement rule to limit aggressive tax practices of corporates during GPR to balance fiscal deficit. In addition, this study sheds light on the debate among administrators and politicians over the efficacy of current tax laws and governance structures in the presence of heightened GPR. The authors extend the literature on GPR by analyzing its effect on corporate tax avoidance. Unlike existing single-country studies, the authors use a cross-country setup to investigate the impact of GPR on tax avoidance, making this study’s results more generalizable as the authors control for a host of country, industry, and time factors. Apart from political uncertainty, terrorism, and climatic issues, the authors document GPR as a strong macroeconomic driver of corporate tax avoidance. The authors make a new contribution to the literature on the moderating role of governance and institutional factors on the association between tax avoidance and GPR in an international context. The authors also contribute to the literature on macroeconomic determinants of tax avoidance.Geopolitical risk and corporate tax behavior: international evidence
Vishnu K. Ramesh, A. Athira
International Journal of Managerial Finance, Vol. 20, No. 2, pp.406-429

This study examines the association between geopolitical risk (GPR) and corporate tax, which is a major source of revenue for the government and a significant explicit cost for firms. The authors use a comprehensive measure of GPR to study its effects on corporate taxes by using an international sample.

The authors adopt the geopolitical measure constructed by Caldara and Iacoviello (2022) as a proxy for GPR and cash-effective tax rate benchmarked with statutory tax rate to measure corporate tax avoidance. The authors employ panel regression with fixed effects (FEs) to investigate the impact of GPR on corporate tax avoidance. The authors also conduct a battery of robustness tests to ensure the strength of the study’s results.

This study’s empirical results indicate that sample firms increase their tax avoidance amid increasing GPR. Further analyses show that financial constraints incentivize firms to avoid taxes during rising geopolitical tensions. The authors also provide evidence on the role of firm-level and country-level governance in weakening the association between GPR and tax avoidance.

Policymakers and governments may strengthen the enforcement rule to limit aggressive tax practices of corporates during GPR to balance fiscal deficit. In addition, this study sheds light on the debate among administrators and politicians over the efficacy of current tax laws and governance structures in the presence of heightened GPR.

The authors extend the literature on GPR by analyzing its effect on corporate tax avoidance. Unlike existing single-country studies, the authors use a cross-country setup to investigate the impact of GPR on tax avoidance, making this study’s results more generalizable as the authors control for a host of country, industry, and time factors. Apart from political uncertainty, terrorism, and climatic issues, the authors document GPR as a strong macroeconomic driver of corporate tax avoidance. The authors make a new contribution to the literature on the moderating role of governance and institutional factors on the association between tax avoidance and GPR in an international context. The authors also contribute to the literature on macroeconomic determinants of tax avoidance.

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Geopolitical risk and corporate tax behavior: international evidence10.1108/IJMF-10-2022-0428International Journal of Managerial Finance2023-06-22© 2023 Emerald Publishing LimitedVishnu K. RameshA. AthiraInternational Journal of Managerial Finance2022023-06-2210.1108/IJMF-10-2022-0428https://www.emerald.com/insight/content/doi/10.1108/IJMF-10-2022-0428/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Do emerging market corporates mimic the payout policy of peers?https://www.emerald.com/insight/content/doi/10.1108/IJMF-08-2022-0356/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study aims to investigate the effects of peers on corporate payout policies in one of the largest emerging markets – India. It also examines the motives for mimicking payout decisions. The sample is composed of 3,024 non-financial and non-government firms listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for the period 1995 to 2020. To encounter the endogeneity problem, the instrumental variable technique based on peer firms' idiosyncratic risk is used to estimate the effects of peers on firms' payout policy. To define peer reference groups, the authors use the basic industry classification of the firms. The results indicate a significant positive impact of peers on firms' dividend policies in India. A firm with all dividend-paying peers is more likely to declare dividends than the one with no dividend-paying peers. Further, peer effects are found to be more pronounced amongst larger and older firms, thus supporting the rivalry theory of mimicking. To the best of the authors' knowledge, the present study is the first of its kind that attempts to understand peer effects on payout decisions in an emerging market India, that offers a unique institutional setting. Moreover, the authors extend the existing literature by investigating the peer effects on a firm's payout policies considering various firm-level characteristics, such as growth opportunity, cash holding, financial constraint and profitability, which previous studies have not taken into consideration. These results provide additional insights into the heterogeneity and motives behind peer effects.Do emerging market corporates mimic the payout policy of peers?
Neeraj Jain, Smita Kashiramka
International Journal of Managerial Finance, Vol. 20, No. 2, pp.430-456

This study aims to investigate the effects of peers on corporate payout policies in one of the largest emerging markets – India. It also examines the motives for mimicking payout decisions.

The sample is composed of 3,024 non-financial and non-government firms listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for the period 1995 to 2020. To encounter the endogeneity problem, the instrumental variable technique based on peer firms' idiosyncratic risk is used to estimate the effects of peers on firms' payout policy. To define peer reference groups, the authors use the basic industry classification of the firms.

The results indicate a significant positive impact of peers on firms' dividend policies in India. A firm with all dividend-paying peers is more likely to declare dividends than the one with no dividend-paying peers. Further, peer effects are found to be more pronounced amongst larger and older firms, thus supporting the rivalry theory of mimicking.

To the best of the authors' knowledge, the present study is the first of its kind that attempts to understand peer effects on payout decisions in an emerging market India, that offers a unique institutional setting. Moreover, the authors extend the existing literature by investigating the peer effects on a firm's payout policies considering various firm-level characteristics, such as growth opportunity, cash holding, financial constraint and profitability, which previous studies have not taken into consideration. These results provide additional insights into the heterogeneity and motives behind peer effects.

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Do emerging market corporates mimic the payout policy of peers?10.1108/IJMF-08-2022-0356International Journal of Managerial Finance2023-07-04© 2023 Emerald Publishing LimitedNeeraj JainSmita KashiramkaInternational Journal of Managerial Finance2022023-07-0410.1108/IJMF-08-2022-0356https://www.emerald.com/insight/content/doi/10.1108/IJMF-08-2022-0356/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Does the S&P index effect differ between large and small company stocks?https://www.emerald.com/insight/content/doi/10.1108/IJMF-11-2022-0506/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe purpose of this study is to compare market reactions to the change in the demand by index funds between large and small company stocks by examining the transition of the S&P 500, S&P 400 MidCap and S&P 600 SmallCap indexes from market capitalization to free-float weighting. This unique information-free event allows not only avoiding confounding information signaling and investor awareness effects but also comparing the effect of the decrease in demand on stocks of different sizes. This study uses the event study methodology to calculate abnormal returns and trading volume around the full-float adjustment day. It also tests for significant changes in institutional ownership and liquidity. Multivariate regressions are used to examine the relation of liquidity changes and price elasticity of demand to the cumulative abnormal returns around the full-float adjustment day. This study finds significant decreases in stock price accompanied with significant increases in trading volume on the full-float adjustment day, and significant gains in quasi-indexer institutional ownership and liquidity. The main finding is that cumulative abnormal returns around the event period are related to changes in the number of quasi-indexer and transient institutional shareholders, not to changes in liquidity or price elasticity of demand. This study provides the first comprehensive comparison analysis of stock market reactions to the decline in demand between large and small company stocks. As an important implication for future studies of the index effect, changes in institutional ownership should be considered in the analysis.Does the S&P index effect differ between large and small company stocks?
Ernest N. Biktimirov, Yuanbin Xu
International Journal of Managerial Finance, Vol. 20, No. 2, pp.457-478

The purpose of this study is to compare market reactions to the change in the demand by index funds between large and small company stocks by examining the transition of the S&P 500, S&P 400 MidCap and S&P 600 SmallCap indexes from market capitalization to free-float weighting. This unique information-free event allows not only avoiding confounding information signaling and investor awareness effects but also comparing the effect of the decrease in demand on stocks of different sizes.

This study uses the event study methodology to calculate abnormal returns and trading volume around the full-float adjustment day. It also tests for significant changes in institutional ownership and liquidity. Multivariate regressions are used to examine the relation of liquidity changes and price elasticity of demand to the cumulative abnormal returns around the full-float adjustment day.

This study finds significant decreases in stock price accompanied with significant increases in trading volume on the full-float adjustment day, and significant gains in quasi-indexer institutional ownership and liquidity. The main finding is that cumulative abnormal returns around the event period are related to changes in the number of quasi-indexer and transient institutional shareholders, not to changes in liquidity or price elasticity of demand.

This study provides the first comprehensive comparison analysis of stock market reactions to the decline in demand between large and small company stocks. As an important implication for future studies of the index effect, changes in institutional ownership should be considered in the analysis.

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Does the S&P index effect differ between large and small company stocks?10.1108/IJMF-11-2022-0506International Journal of Managerial Finance2023-07-18© 2023 Emerald Publishing LimitedErnest N. BiktimirovYuanbin XuInternational Journal of Managerial Finance2022023-07-1810.1108/IJMF-11-2022-0506https://www.emerald.com/insight/content/doi/10.1108/IJMF-11-2022-0506/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Deglobalization and the value of geographic diversification: evidence from Brexithttps://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2022-0564/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis paper aims to explore the value of geographic diversification in the context of deglobalization, drawing evidence from a quasi-natural experiment – the Brexit referendum that took place on 23 June 2016 in the UK. This study applies an event study methodology to estimate the impact of the Brexit vote on a cross-section of firms with varying levels of geographic diversification – undiversified UK firms, UK firms with significant operations in the European Union (EU) and globally diversified UK firms. This study deploys a Heckman two-stage regression approach to address sample selection bias. This study finds that undiversified UK firms experienced negative cumulative abnormal returns (CARs) around the Brexit referendum. The value of UK firms with majority sales within the UK declined by 0.9 percentage points, on average, in the three days centred on the Brexit referendum. In contrast, UK firms that are globally diversified, with the majority of sales within the EU are unaffected, while diversified firms in the rest of the world generated positive CARs of 1.8 percentage points over the same period. These results are robust to firm characteristics, selection bias and alternative measures of CARs and diversification. This study is subject to some limitations that open avenues for future work. There are a few available proxies of diversification and further work on developing other proxies is much needed. Further work may also examine the long-term impact of diversification on UK firms. This study considered Brexit as a quasi-natural experiment, and this study could be applied to other deglobalization events like COVID-19 and can enhance the generalizability of diversification strategy in the deglobalized world. Findings may stimulate future work to explore how another form of diversification – product diversification has affected firm returns around Brexit. Finally, this study has focused on the UK as its base case. It may be interesting to corroborate the findings by exploring the impact of Brexit on European firms, who hitherto Brexit, had some operations in the UK. This work offers some insights for policymakers and regulators around the impact of deglobalization on local firms. Findings suggest that these trends significantly negatively impact the most vulnerable firms (smaller firms with less global reach), while their larger counterparts with significant global reach might be insulated. This finding is important for determining the nature of support needed by different firms in times of deglobalization. The work also offers insights to managers of firms operating in countries where there are real prospects of deglobalization. Specifically, the work highlights the importance of geographic diversification when free movement of goods, services and people is restricted. This study shows that a certain group of globally diversified firms earned significantly higher returns from the prospect of the UK leaving the EU, thereby highlighting the value of geographic diversification in a time of deglobalization.Deglobalization and the value of geographic diversification: evidence from Brexit
Abongeh A. Tunyi, Tanveer Hussain, Geofry Areneke
International Journal of Managerial Finance, Vol. 20, No. 2, pp.479-502

This paper aims to explore the value of geographic diversification in the context of deglobalization, drawing evidence from a quasi-natural experiment – the Brexit referendum that took place on 23 June 2016 in the UK.

This study applies an event study methodology to estimate the impact of the Brexit vote on a cross-section of firms with varying levels of geographic diversification – undiversified UK firms, UK firms with significant operations in the European Union (EU) and globally diversified UK firms. This study deploys a Heckman two-stage regression approach to address sample selection bias.

This study finds that undiversified UK firms experienced negative cumulative abnormal returns (CARs) around the Brexit referendum. The value of UK firms with majority sales within the UK declined by 0.9 percentage points, on average, in the three days centred on the Brexit referendum. In contrast, UK firms that are globally diversified, with the majority of sales within the EU are unaffected, while diversified firms in the rest of the world generated positive CARs of 1.8 percentage points over the same period. These results are robust to firm characteristics, selection bias and alternative measures of CARs and diversification.

This study is subject to some limitations that open avenues for future work. There are a few available proxies of diversification and further work on developing other proxies is much needed. Further work may also examine the long-term impact of diversification on UK firms. This study considered Brexit as a quasi-natural experiment, and this study could be applied to other deglobalization events like COVID-19 and can enhance the generalizability of diversification strategy in the deglobalized world. Findings may stimulate future work to explore how another form of diversification – product diversification has affected firm returns around Brexit. Finally, this study has focused on the UK as its base case. It may be interesting to corroborate the findings by exploring the impact of Brexit on European firms, who hitherto Brexit, had some operations in the UK.

This work offers some insights for policymakers and regulators around the impact of deglobalization on local firms. Findings suggest that these trends significantly negatively impact the most vulnerable firms (smaller firms with less global reach), while their larger counterparts with significant global reach might be insulated. This finding is important for determining the nature of support needed by different firms in times of deglobalization. The work also offers insights to managers of firms operating in countries where there are real prospects of deglobalization. Specifically, the work highlights the importance of geographic diversification when free movement of goods, services and people is restricted.

This study shows that a certain group of globally diversified firms earned significantly higher returns from the prospect of the UK leaving the EU, thereby highlighting the value of geographic diversification in a time of deglobalization.

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Deglobalization and the value of geographic diversification: evidence from Brexit10.1108/IJMF-12-2022-0564International Journal of Managerial Finance2023-08-03© 2023 Emerald Publishing LimitedAbongeh A. TunyiTanveer HussainGeofry ArenekeInternational Journal of Managerial Finance2022023-08-0310.1108/IJMF-12-2022-0564https://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2022-0564/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
The impact of CEO attributes on corporate decision-making and outcomes: a review and an agenda for future researchhttps://www.emerald.com/insight/content/doi/10.1108/IJMF-02-2023-0092/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe role of chief executive officer (CEO) personal characteristics in shaping corporate policies has attracted increasing academic attention in the past two decades. In this review, the authors synthesize extant research on CEO attributes by reviewing 232 articles published in 29 journals from the accounting, finance and management literature. This review provides an overview of existing findings, highlights current trends and interdisciplinary differences in research approaches and identifies potential avenues for future research. To review the literature on CEO attributes, the authors manually collected peer-reviewed articles in accounting, finance and management journals from 2000 to 2021. The authors conducted in-depth analysis of each paper and manually recorded the theories, data sources, country of study, study period, measures of CEO attributes and dependent variables. This procedure helped the authors group the selected articles into themes and sub-themes. The authors compared the findings in various disciplines and provided direction for future research. The authors highlight the role of CEO personal attributes in influencing corporate decision-making and firm outcomes. The authors categorize studies of CEO traits into three main research themes: (1) demographic attributes and experience (including age, gender, culture, experience, education); (2) CEO interactions with others (social and political networks) and (3) underlying attributes (including personality, values and ideology). The evidence shows that CEO characteristics significantly affect a wide range of specific corporate policies that serve as mechanisms through which individual CEOs determine firm success and performance. CEO selection is one of the most crucial decisions made by corporations. The study findings provide valuable insights to corporate executives, boards, investors and practitioners into how CEOs’ personal characteristics can impact future firm decisions and outcomes that can, in turn, inform the high-stake process of CEO recruitment and selection. The study findings have significant practical implications for corporations, such as contributing to executive training programs, to assist executives and directors attain a greater level of self-awareness. Building on the theoretical foundation of upper echelons theory, the authors offer an integrated theoretical framework to consolidate existing empirical research on the impacts of CEO personal attributes on firm outcomes across accounting and finance (A&F) and management literature. The study findings provide a roadmap for scholars to bridge the interdisciplinary divide between A&F and management research. The authors advocate a more holistic and multifaceted approach to examining CEOs, each of whom embodies a myriad of personal characteristics that comprise their unique identity. The study findings encourage future researchers to expand the investigation of the boundary conditions that magnify or moderate the impacts of CEO idiosyncrasies.The impact of CEO attributes on corporate decision-making and outcomes: a review and an agenda for future research
Christiana Osei Bonsu, Chelsea Liu, Alfred Yawson
International Journal of Managerial Finance, Vol. 20, No. 2, pp.503-545

The role of chief executive officer (CEO) personal characteristics in shaping corporate policies has attracted increasing academic attention in the past two decades. In this review, the authors synthesize extant research on CEO attributes by reviewing 232 articles published in 29 journals from the accounting, finance and management literature. This review provides an overview of existing findings, highlights current trends and interdisciplinary differences in research approaches and identifies potential avenues for future research.

To review the literature on CEO attributes, the authors manually collected peer-reviewed articles in accounting, finance and management journals from 2000 to 2021. The authors conducted in-depth analysis of each paper and manually recorded the theories, data sources, country of study, study period, measures of CEO attributes and dependent variables. This procedure helped the authors group the selected articles into themes and sub-themes. The authors compared the findings in various disciplines and provided direction for future research.

The authors highlight the role of CEO personal attributes in influencing corporate decision-making and firm outcomes. The authors categorize studies of CEO traits into three main research themes: (1) demographic attributes and experience (including age, gender, culture, experience, education); (2) CEO interactions with others (social and political networks) and (3) underlying attributes (including personality, values and ideology). The evidence shows that CEO characteristics significantly affect a wide range of specific corporate policies that serve as mechanisms through which individual CEOs determine firm success and performance.

CEO selection is one of the most crucial decisions made by corporations. The study findings provide valuable insights to corporate executives, boards, investors and practitioners into how CEOs’ personal characteristics can impact future firm decisions and outcomes that can, in turn, inform the high-stake process of CEO recruitment and selection. The study findings have significant practical implications for corporations, such as contributing to executive training programs, to assist executives and directors attain a greater level of self-awareness.

Building on the theoretical foundation of upper echelons theory, the authors offer an integrated theoretical framework to consolidate existing empirical research on the impacts of CEO personal attributes on firm outcomes across accounting and finance (A&F) and management literature. The study findings provide a roadmap for scholars to bridge the interdisciplinary divide between A&F and management research. The authors advocate a more holistic and multifaceted approach to examining CEOs, each of whom embodies a myriad of personal characteristics that comprise their unique identity. The study findings encourage future researchers to expand the investigation of the boundary conditions that magnify or moderate the impacts of CEO idiosyncrasies.

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The impact of CEO attributes on corporate decision-making and outcomes: a review and an agenda for future research10.1108/IJMF-02-2023-0092International Journal of Managerial Finance2023-08-14© 2023 Emerald Publishing LimitedChristiana Osei BonsuChelsea LiuAlfred YawsonInternational Journal of Managerial Finance2022023-08-1410.1108/IJMF-02-2023-0092https://www.emerald.com/insight/content/doi/10.1108/IJMF-02-2023-0092/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
How does management respond to stock price crashes?https://www.emerald.com/insight/content/doi/10.1108/IJMF-05-2023-0250/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe purpose of this study is to investigate (1) how managers respond to stock price crashes, (2) why they respond and (3) how their responses affect shareholders. This study employs a panel regression with various firm-level controls and firm- and year-fixed effects. The sample is comprised of 101,532 firm-year observations with 11,727 unique firms from 1950 to 2019. Using mutual fund flow redemption pressure as an exogenous variable to stock price crashes, the paper provides further evidence of the causality of documented findings. Management becomes more focused on improving transparency, raising investment efficiency, reducing agency conflicts and regaining the trust of shareholders by investing in social capital and employee welfare. These actions increase firm value. This study also suggests that management undertakes these actions out of concern for their tenure of employment. The catalysts of stock price crashes are well documented, but much less is known about what happens following stock price crashes. This study provides more insights into the understanding of corporate crisis management practices following adverse events.How does management respond to stock price crashes?
Suvra Roy, Ben R. Marshall, Hung T. Nguyen, Nuttawat Visaltanachoti
International Journal of Managerial Finance, Vol. 20, No. 2, pp.546-577

The purpose of this study is to investigate (1) how managers respond to stock price crashes, (2) why they respond and (3) how their responses affect shareholders.

This study employs a panel regression with various firm-level controls and firm- and year-fixed effects. The sample is comprised of 101,532 firm-year observations with 11,727 unique firms from 1950 to 2019. Using mutual fund flow redemption pressure as an exogenous variable to stock price crashes, the paper provides further evidence of the causality of documented findings.

Management becomes more focused on improving transparency, raising investment efficiency, reducing agency conflicts and regaining the trust of shareholders by investing in social capital and employee welfare. These actions increase firm value. This study also suggests that management undertakes these actions out of concern for their tenure of employment.

The catalysts of stock price crashes are well documented, but much less is known about what happens following stock price crashes. This study provides more insights into the understanding of corporate crisis management practices following adverse events.

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How does management respond to stock price crashes?10.1108/IJMF-05-2023-0250International Journal of Managerial Finance2023-10-18© 2023 Emerald Publishing LimitedSuvra RoyBen R. MarshallHung T. NguyenNuttawat VisaltanachotiInternational Journal of Managerial Finance2022023-10-1810.1108/IJMF-05-2023-0250https://www.emerald.com/insight/content/doi/10.1108/IJMF-05-2023-0250/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Institution quality and stock price crash risk: a global perspectivehttps://www.emerald.com/insight/content/doi/10.1108/IJMF-01-2023-0030/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study aims to provide empirical evidence on the relationship between formal institutions and stock price crash risk from a global perspective. This paper uses data of 35,468 firms globally over the years 1987–2019 and address the endogeneity issue by employing the Mundlak random effects estimator. The authors find a significant negative impact of institution quality on stock price crash risk (i.e. better institutions reduce crash risk), after controlling for common determinants of crash risk such as leverage, return on asset, firm size, investment, etc. as well as macro factors such as GDP growth. This effect is robust to different measures of crash risk and sub-indicators of institutions quality. In addition, the authors also find this effect to be universally present in economies characterized by different levels of income. To the best of the authors' knowledge, there's no known study that explores the potential causal relationship between institution quality and stock price crash risk. Therefore, the research topic in this study is original and can contribute significantly to the existing literature.Institution quality and stock price crash risk: a global perspective
Cong Wang, Yifan Lu
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study aims to provide empirical evidence on the relationship between formal institutions and stock price crash risk from a global perspective.

This paper uses data of 35,468 firms globally over the years 1987–2019 and address the endogeneity issue by employing the Mundlak random effects estimator.

The authors find a significant negative impact of institution quality on stock price crash risk (i.e. better institutions reduce crash risk), after controlling for common determinants of crash risk such as leverage, return on asset, firm size, investment, etc. as well as macro factors such as GDP growth. This effect is robust to different measures of crash risk and sub-indicators of institutions quality. In addition, the authors also find this effect to be universally present in economies characterized by different levels of income.

To the best of the authors' knowledge, there's no known study that explores the potential causal relationship between institution quality and stock price crash risk. Therefore, the research topic in this study is original and can contribute significantly to the existing literature.

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Institution quality and stock price crash risk: a global perspective10.1108/IJMF-01-2023-0030International Journal of Managerial Finance2023-09-04© 2023 Emerald Publishing LimitedCong WangYifan LuInternational Journal of Managerial Financeahead-of-printahead-of-print2023-09-0410.1108/IJMF-01-2023-0030https://www.emerald.com/insight/content/doi/10.1108/IJMF-01-2023-0030/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Compensations, overconfidence and use of loan termshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-02-2023-0094/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis paper contributes to the literature as follows. First, it examines if option and stock compensations raise creditor's risk, and which one is more important than the other. Second, it explores if CEO's compensation interacts with CEO overconfidence to raise creditor's risk. Third, it investigates how banks use different loan terms to alleviate their credit risk. This study used advanced regression analysis and use of generalized methods of moment methodology. The results show that option compensation is more important than stock compensation in raising credit risk; option compensation interacts with CEO overconfidence, giving rise to a much higher credit risk; and covenant usage is more important than other loan contract terms in mitigating credit risk given that covenant use could not be substituted away by using other loan contract terms such as increasing interest rate, reducing principal or shortening loan duration. This paper has practical implications for credit markets. The main implication is that hand-collect data are available up to 2010. It informs creditors the potential sources of loan risk emanating from option rather than stock incentives; it informs creditors that option incentive interacts with CEO overconfidence rendering the credit risk bigger than expected, and it informs creditors the importance of using covenants vis-à-vis other loan contract terms for mitigating compensation and overconfidence risk. Banks are alerted to the risk due to the interaction between overconfidence and compensations, implying that overconfident managers remunerated with options compensations are more risky than overconfident managers who are not remunerated as such. This paper is original: (1) The authors show that option compensation is more risky than stock compensation from viewpoint of creditors. This has not been assessed. (2) Interaction between managerial compensation and managerial overconfidence has not been assessed before. (3) Use of different loan contract terms to alleviate risk from overconfident managers (who are prone to over investment but who are innovative according to the literature) has not been evaluated.Compensations, overconfidence and use of loan terms
Jan Voon, Yiu Chung Ma
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This paper contributes to the literature as follows. First, it examines if option and stock compensations raise creditor's risk, and which one is more important than the other. Second, it explores if CEO's compensation interacts with CEO overconfidence to raise creditor's risk. Third, it investigates how banks use different loan terms to alleviate their credit risk.

This study used advanced regression analysis and use of generalized methods of moment methodology.

The results show that option compensation is more important than stock compensation in raising credit risk; option compensation interacts with CEO overconfidence, giving rise to a much higher credit risk; and covenant usage is more important than other loan contract terms in mitigating credit risk given that covenant use could not be substituted away by using other loan contract terms such as increasing interest rate, reducing principal or shortening loan duration. This paper has practical implications for credit markets.

The main implication is that hand-collect data are available up to 2010.

It informs creditors the potential sources of loan risk emanating from option rather than stock incentives; it informs creditors that option incentive interacts with CEO overconfidence rendering the credit risk bigger than expected, and it informs creditors the importance of using covenants vis-à-vis other loan contract terms for mitigating compensation and overconfidence risk.

Banks are alerted to the risk due to the interaction between overconfidence and compensations, implying that overconfident managers remunerated with options compensations are more risky than overconfident managers who are not remunerated as such.

This paper is original: (1) The authors show that option compensation is more risky than stock compensation from viewpoint of creditors. This has not been assessed. (2) Interaction between managerial compensation and managerial overconfidence has not been assessed before. (3) Use of different loan contract terms to alleviate risk from overconfident managers (who are prone to over investment but who are innovative according to the literature) has not been evaluated.

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Compensations, overconfidence and use of loan terms10.1108/IJMF-02-2023-0094International Journal of Managerial Finance2023-09-15© 2023 Emerald Publishing LimitedJan VoonYiu Chung MaInternational Journal of Managerial Financeahead-of-printahead-of-print2023-09-1510.1108/IJMF-02-2023-0094https://www.emerald.com/insight/content/doi/10.1108/IJMF-02-2023-0094/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
The US government customer concentration and the firm innovationhttps://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0132/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study examines the impact of the US government customer concentration and product innovation in supplier firms. The US government customer concentration is defined as the proportion of sales made by a supplier firm to the US government as a major customer. To measure product innovation, the author uses two key metrics: the number of patents and the novelty of the patents. The results indicate that a supplier firm’s relationship with the US government, as measured by the tenure of the relationship, has a significant impact on product innovation. Furthermore, the author shows that changes in the composition of the US government, Senate can also affect the level of innovation in supplier firms. This study employs the Compustat’s Segment Customer database and the National Bureau of Economic Research (NBER) Patent Citation database to gather information regarding patents granted by the United States Patent and Trademark Office (USPTO). The author also incorporates data from US Congressional committees from the 96th to 115th Congresses to assess the effect of changes in seniority of US senators on influential committees on the firm’s innovation. For a robustness test, the author utilizes a propensity score matched analysis. The author demonstrates that a firm’s dependence on the US government as a customer channel for an extended period negatively impacts the firm’s innovation efficiency, as measured by the number of patents, citations and novelty of the patents. In addition, the author provides evidence that changes in the seniority of US senators on influential committees have a significant impact on firms located in the same state as the new senior senators. These firms decrease innovative efforts due to the political connections, resulting in lower levels of innovation. These findings are robust after controlling the endogeneity issues. In conclusion, this study contributes to the existing literature by offering insight into the relationship between customer concentration and firm innovation. The findings highlight the importance of considering the relationship between firms and their customer base in determining innovation outcomes. This study demonstrates that a heavy reliance on the US government as a customer channel has a detrimental impact on a firm’s innovation efficiency. Furthermore, the author analyzes the exogenous shock of changes in the seniority of US senators on the relationship between customer dependence and innovation. By utilizing a propensity matched sample, the author addresses endogeneity concerns and provides robust evidence for empirical findings. In conclusion, this study sheds light on the complex relationship between customer dependence and firm innovation, particularly in the context of the US government as a sales channel.The US government customer concentration and the firm innovation
HyunJun Na
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study examines the impact of the US government customer concentration and product innovation in supplier firms. The US government customer concentration is defined as the proportion of sales made by a supplier firm to the US government as a major customer. To measure product innovation, the author uses two key metrics: the number of patents and the novelty of the patents. The results indicate that a supplier firm’s relationship with the US government, as measured by the tenure of the relationship, has a significant impact on product innovation. Furthermore, the author shows that changes in the composition of the US government, Senate can also affect the level of innovation in supplier firms.

This study employs the Compustat’s Segment Customer database and the National Bureau of Economic Research (NBER) Patent Citation database to gather information regarding patents granted by the United States Patent and Trademark Office (USPTO). The author also incorporates data from US Congressional committees from the 96th to 115th Congresses to assess the effect of changes in seniority of US senators on influential committees on the firm’s innovation. For a robustness test, the author utilizes a propensity score matched analysis.

The author demonstrates that a firm’s dependence on the US government as a customer channel for an extended period negatively impacts the firm’s innovation efficiency, as measured by the number of patents, citations and novelty of the patents. In addition, the author provides evidence that changes in the seniority of US senators on influential committees have a significant impact on firms located in the same state as the new senior senators. These firms decrease innovative efforts due to the political connections, resulting in lower levels of innovation. These findings are robust after controlling the endogeneity issues. In conclusion, this study contributes to the existing literature by offering insight into the relationship between customer concentration and firm innovation. The findings highlight the importance of considering the relationship between firms and their customer base in determining innovation outcomes.

This study demonstrates that a heavy reliance on the US government as a customer channel has a detrimental impact on a firm’s innovation efficiency. Furthermore, the author analyzes the exogenous shock of changes in the seniority of US senators on the relationship between customer dependence and innovation. By utilizing a propensity matched sample, the author addresses endogeneity concerns and provides robust evidence for empirical findings. In conclusion, this study sheds light on the complex relationship between customer dependence and firm innovation, particularly in the context of the US government as a sales channel.

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The US government customer concentration and the firm innovation10.1108/IJMF-03-2023-0132International Journal of Managerial Finance2024-01-03© 2023 Emerald Publishing LimitedHyunJun NaInternational Journal of Managerial Financeahead-of-printahead-of-print2024-01-0310.1108/IJMF-03-2023-0132https://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0132/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
International evidence on the monitoring role of foreign institutional investors in corporate investment efficiencyhttps://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0149/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study examines whether and how the legal origin of foreign institutional investors (FIIs) impacts corporate investment efficiency. The study employs a large panel dataset of firms from 32 non-USA countries from 2005 to 2018. Financial and institutional ownership data are obtained from the COMPUSTAT Global and Public Ownership databases in S&P Capital IQ, respectively. The study employed ordinary least squares (OLS) regression with year and firm fixed effects. In addition, two-stage least squares with instrumental variable regression (2SLS-IV) and propensity score matching (PSM) approaches were employed to address the potential endogeneity. The findings of this study suggest that common- and civil-law FIIs differ in their monitoring capabilities to promote investment efficiency. The authors find evidence that increased equity ownership by common-law FIIs, not civil-law investors, strengthens the investment-Q sensitivity, resulting in higher investment efficiency. Consistent with the monitoring and information channel, the results further indicate that the positive impact of common-law FIIs on investment efficiency is stronger in host environments susceptible to agency conflicts and information asymmetry. This study offers novel evidence on the heterogeneous monitoring role of FIIs with regard to their home countries' legal origins and their impact on investment efficiency in an international context.International evidence on the monitoring role of foreign institutional investors in corporate investment efficiency
Muhammad Ilyas, Rehman Uddin Mian, Affan Mian
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study examines whether and how the legal origin of foreign institutional investors (FIIs) impacts corporate investment efficiency.

The study employs a large panel dataset of firms from 32 non-USA countries from 2005 to 2018. Financial and institutional ownership data are obtained from the COMPUSTAT Global and Public Ownership databases in S&P Capital IQ, respectively. The study employed ordinary least squares (OLS) regression with year and firm fixed effects. In addition, two-stage least squares with instrumental variable regression (2SLS-IV) and propensity score matching (PSM) approaches were employed to address the potential endogeneity.

The findings of this study suggest that common- and civil-law FIIs differ in their monitoring capabilities to promote investment efficiency. The authors find evidence that increased equity ownership by common-law FIIs, not civil-law investors, strengthens the investment-Q sensitivity, resulting in higher investment efficiency. Consistent with the monitoring and information channel, the results further indicate that the positive impact of common-law FIIs on investment efficiency is stronger in host environments susceptible to agency conflicts and information asymmetry.

This study offers novel evidence on the heterogeneous monitoring role of FIIs with regard to their home countries' legal origins and their impact on investment efficiency in an international context.

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International evidence on the monitoring role of foreign institutional investors in corporate investment efficiency10.1108/IJMF-03-2023-0149International Journal of Managerial Finance2023-12-22© 2023 Emerald Publishing LimitedMuhammad IlyasRehman Uddin MianAffan MianInternational Journal of Managerial Financeahead-of-printahead-of-print2023-12-2210.1108/IJMF-03-2023-0149https://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0149/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Institutional ownership stability and product quality failureshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0154/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study examines the effect of stable institutional investors on firms' product quality failures. Furthermore, the authors investigate the channels through which institutional ownership stability enhances product quality management. This study uses probit, ordered probit and negative binomial regression frameworks to investigate the research questions. In addition, the authors utilize the three-stage least-squares to address the endogeneity issues. Using a sample of product recall incidents from 2012 to 2021, the authors find that firms with more stable institutional ownership have a lower probability, frequency and severity of recall incidents and adopt a proactive product recall strategy. Institutional investors with significant and persistent holdings improve quality management by reducing overinvestment and the use of option-linked and relative performance executive compensations. Furthermore, the influence of stable institutional owners on product quality failures is more pronounced in firms with low managerial ability and specialist CEOs. Lastly, the empirical evidence demonstrates that stable holdings by active investors have a more substantial impact on reducing product recalls than passive and other stable institutional holdings. This study is the first to examine the impact of institutional ownership stability on firms' product recalls. The authors contribute to the literature on the benefits of stable institutional ownership on firm outcomes and the determinants of product quality failures.Institutional ownership stability and product quality failures
Thanh Dat Le, Nguyen Nguyen
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study examines the effect of stable institutional investors on firms' product quality failures. Furthermore, the authors investigate the channels through which institutional ownership stability enhances product quality management.

This study uses probit, ordered probit and negative binomial regression frameworks to investigate the research questions. In addition, the authors utilize the three-stage least-squares to address the endogeneity issues.

Using a sample of product recall incidents from 2012 to 2021, the authors find that firms with more stable institutional ownership have a lower probability, frequency and severity of recall incidents and adopt a proactive product recall strategy. Institutional investors with significant and persistent holdings improve quality management by reducing overinvestment and the use of option-linked and relative performance executive compensations. Furthermore, the influence of stable institutional owners on product quality failures is more pronounced in firms with low managerial ability and specialist CEOs. Lastly, the empirical evidence demonstrates that stable holdings by active investors have a more substantial impact on reducing product recalls than passive and other stable institutional holdings.

This study is the first to examine the impact of institutional ownership stability on firms' product recalls. The authors contribute to the literature on the benefits of stable institutional ownership on firm outcomes and the determinants of product quality failures.

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Institutional ownership stability and product quality failures10.1108/IJMF-03-2023-0154International Journal of Managerial Finance2023-12-21© 2023 Emerald Publishing LimitedThanh Dat LeNguyen NguyenInternational Journal of Managerial Financeahead-of-printahead-of-print2023-12-2110.1108/IJMF-03-2023-0154https://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0154/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Green finance when stakeholders’ interests collide with each other: the case of Bangladeshhttps://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0158/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study examines the impact of chief executive officer (CEO) power, institutional investors and their interaction on green financing provided by Bangladeshi financial institutions and the moderating effect of government policy and CEO political connections on these relations. We employ ordinary least squares (OLS) regressions and interaction terms among variables of interest for the empirical analysis. Green financing decreases with CEO power, implying that CEOs of this country’s financial institutions are averse to green loans, whereas institutional investors increase green financing extended by these institutions. The government policy, which includes financial incentives for complying financial institutions, strengthens institutional investors' positive impact on green financing, but it does not change CEOs' aversion to green loans. Institutional investors have a positive moderating effect on the relationship between green finance (GF) and CEO power, but this positive moderating effect is negated in banks where the government owns a stake, possibly because CEOs of state-owned financial institutions are politically connected, which reduces institutional investors’ influence over them. This study is unique in that it is the first to examine how the interaction among different stakeholders affects green financing in a unique setting. As the literature is almost silent on this topic, the findings of this paper are expected to raise policymakers’ awareness of the obstacles that hamper the efforts of developing countries to go green.Green finance when stakeholders’ interests collide with each other: the case of Bangladesh
Mahmoud Agha, Md Mosharraf Hossain, Md Shajul Islam
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study examines the impact of chief executive officer (CEO) power, institutional investors and their interaction on green financing provided by Bangladeshi financial institutions and the moderating effect of government policy and CEO political connections on these relations.

We employ ordinary least squares (OLS) regressions and interaction terms among variables of interest for the empirical analysis.

Green financing decreases with CEO power, implying that CEOs of this country’s financial institutions are averse to green loans, whereas institutional investors increase green financing extended by these institutions. The government policy, which includes financial incentives for complying financial institutions, strengthens institutional investors' positive impact on green financing, but it does not change CEOs' aversion to green loans. Institutional investors have a positive moderating effect on the relationship between green finance (GF) and CEO power, but this positive moderating effect is negated in banks where the government owns a stake, possibly because CEOs of state-owned financial institutions are politically connected, which reduces institutional investors’ influence over them.

This study is unique in that it is the first to examine how the interaction among different stakeholders affects green financing in a unique setting. As the literature is almost silent on this topic, the findings of this paper are expected to raise policymakers’ awareness of the obstacles that hamper the efforts of developing countries to go green.

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Green finance when stakeholders’ interests collide with each other: the case of Bangladesh10.1108/IJMF-03-2023-0158International Journal of Managerial Finance2024-03-05© 2024 Emerald Publishing LimitedMahmoud AghaMd Mosharraf HossainMd Shajul IslamInternational Journal of Managerial Financeahead-of-printahead-of-print2024-03-0510.1108/IJMF-03-2023-0158https://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0158/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2024 Emerald Publishing Limited
The real implications of mimicking peer firms' cash holdingshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0164/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study empirically examines the nonlinear effects of mimicking peer firms' cash holdings on shareholder value, with consideration of macroeconomic conditions. An instrumental variable approach for nonlinear models is estimated for a large sample of US firms over the period 1991–2019. This approach addresses the reflection problem in examining peer effects, whereby it is impossible to separate the individual's effects on the group, or vice versa, if both are simultaneously determined. The authors find an inverted U-shaped association between shareholder value and mimicking intensity of peer firms' cash holdings. This result suggests that mimicking peer firms' cash holdings is subject to diminishing returns. It is more beneficial at lower levels of mimicking intensity but less so or suboptimal at higher levels. Further evidence indicates that this inverted U-shaped shareholder value-mimicking intensity nexus is asymmetric. Specifically, it is salient for decreases relative to increases in cash holdings and, more importantly, in good relative to bad macroeconomic states. The findings are robust to several concerns and have important implications for liquidity management policies. The authors provide new empirical evidence of the nonlinear effects of mimicking peer firms' cash holdings on shareholder value, which varies with macroeconomic conditions.The real implications of mimicking peer firms' cash holdings
Marvelous Kadzima, Michael Machokoto, Edward Chamisa
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study empirically examines the nonlinear effects of mimicking peer firms' cash holdings on shareholder value, with consideration of macroeconomic conditions.

An instrumental variable approach for nonlinear models is estimated for a large sample of US firms over the period 1991–2019. This approach addresses the reflection problem in examining peer effects, whereby it is impossible to separate the individual's effects on the group, or vice versa, if both are simultaneously determined.

The authors find an inverted U-shaped association between shareholder value and mimicking intensity of peer firms' cash holdings. This result suggests that mimicking peer firms' cash holdings is subject to diminishing returns. It is more beneficial at lower levels of mimicking intensity but less so or suboptimal at higher levels. Further evidence indicates that this inverted U-shaped shareholder value-mimicking intensity nexus is asymmetric. Specifically, it is salient for decreases relative to increases in cash holdings and, more importantly, in good relative to bad macroeconomic states. The findings are robust to several concerns and have important implications for liquidity management policies.

The authors provide new empirical evidence of the nonlinear effects of mimicking peer firms' cash holdings on shareholder value, which varies with macroeconomic conditions.

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The real implications of mimicking peer firms' cash holdings10.1108/IJMF-03-2023-0164International Journal of Managerial Finance2023-11-28© 2023 Emerald Publishing LimitedMarvelous KadzimaMichael MachokotoEdward ChamisaInternational Journal of Managerial Financeahead-of-printahead-of-print2023-11-2810.1108/IJMF-03-2023-0164https://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0164/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
The more, the merrier? The role of an auditor's certification in loan pricinghttps://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0170/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe purpose of this paper is to explore the role of three different audit characteristics in loan pricing—the most significant credit term for borrowers. Three characteristics include audit reputation, audit tenure and audit specialization. To examine audit characteristics simultaneously to measure their effect on loan pricing, this study uses a full-rank, three-way interaction model and conducts slope difference tests. It also includes the joint effects of these variables to estimate any incremental benefits of possessing multiple qualifications. When studying the three qualifications together, none of them alone is strong enough to affect the loan interest. But, a Big 4 auditor with tenure can benefit the client by reducing the interest by about 1.98%. The more expertise the auditor has, the better value it brings to borrowers. A highly qualified auditor with additional expertise can significantly reduce loan pricing further by about 2.96 percent. Examining the costs and benefits of hiring certified auditors is crucial for borrowers. While the variables are not exhaustive, an understanding of the added value of hiring high-quality auditors with more than one or two qualifications to their potential premium fees helps borrowers in managers' audit selection decisions. At the same time, the results shed some light on which of the auditor's qualifications lenders might prioritize when pricing a borrower's loan.The more, the merrier? The role of an auditor's certification in loan pricing
Bolortuya Enkhtaivan, Zagdbazar Davaadorj
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

The purpose of this paper is to explore the role of three different audit characteristics in loan pricing—the most significant credit term for borrowers. Three characteristics include audit reputation, audit tenure and audit specialization.

To examine audit characteristics simultaneously to measure their effect on loan pricing, this study uses a full-rank, three-way interaction model and conducts slope difference tests. It also includes the joint effects of these variables to estimate any incremental benefits of possessing multiple qualifications.

When studying the three qualifications together, none of them alone is strong enough to affect the loan interest. But, a Big 4 auditor with tenure can benefit the client by reducing the interest by about 1.98%. The more expertise the auditor has, the better value it brings to borrowers. A highly qualified auditor with additional expertise can significantly reduce loan pricing further by about 2.96 percent.

Examining the costs and benefits of hiring certified auditors is crucial for borrowers. While the variables are not exhaustive, an understanding of the added value of hiring high-quality auditors with more than one or two qualifications to their potential premium fees helps borrowers in managers' audit selection decisions. At the same time, the results shed some light on which of the auditor's qualifications lenders might prioritize when pricing a borrower's loan.

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The more, the merrier? The role of an auditor's certification in loan pricing10.1108/IJMF-03-2023-0170International Journal of Managerial Finance2023-10-25© 2023 Emerald Publishing LimitedBolortuya EnkhtaivanZagdbazar DavaadorjInternational Journal of Managerial Financeahead-of-printahead-of-print2023-10-2510.1108/IJMF-03-2023-0170https://www.emerald.com/insight/content/doi/10.1108/IJMF-03-2023-0170/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Currency change and capital structure decisions: evidence from the birth of the Euro areahttps://www.emerald.com/insight/content/doi/10.1108/IJMF-04-2022-0153/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe paper investigates if the process that led to the birth of the Euro Area had a significant impact in homogenizing the capital structure decisions of European firms since the first introduction of the common currency. A large sample of firms was constructed, and a Tobit-censored regression model was utilized to investigate the determinants of firms' observed capital structures. The Black–Scholes–Merton model was used to infer market values of assets, as well as the volatility of those values, from the observed market values of equity and the corresponding volatility. The existing differences in national tax rules were considered for estimating firm-specific marginal tax rates. It was found that, despite the currency union and the institutional harmonization process, certain factors still play a different role. In particular, the impact of profitability is consistent with the pecking order view in some countries, and with the trade-off theory in others. Assets risk, measured as the annualized volatility of the market enterprise value, is the best predictor of observed leverage ratios. The sector of activity is significant in determining leverage decisions even when assets' risk is taken into account. Despite the monetary union and the increased financial and institutional integration in the Euro Area, the country of origin still plays a significant role in capital structure decisions, suggesting that other country-level factors may affect firms' financing behaviour. The paper indicates that, despite the long harmonization process of institutions, regulations and public budget required to join the Euro, firms' financing decisions are still affected by country-specific factors once the common currency is introduced. Therefore, new entrant countries in the Euro area should not expect their companies to immediately conform with those located in other countries within the common currency area. This article investigated the impact of the currency change from national currencies to the Euro on the determinants of capital structure choices. It was shown that, despite the long harmonization process that led to the birth of the Euro Area, national factors still affect firms' financing decisions. This provides guidance for policymakers in countries that are planning to join the Euro about the impact this will have on firms' financing decisions in the entrant country.Currency change and capital structure decisions: evidence from the birth of the Euro area
Marco Botta
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

The paper investigates if the process that led to the birth of the Euro Area had a significant impact in homogenizing the capital structure decisions of European firms since the first introduction of the common currency.

A large sample of firms was constructed, and a Tobit-censored regression model was utilized to investigate the determinants of firms' observed capital structures. The Black–Scholes–Merton model was used to infer market values of assets, as well as the volatility of those values, from the observed market values of equity and the corresponding volatility. The existing differences in national tax rules were considered for estimating firm-specific marginal tax rates.

It was found that, despite the currency union and the institutional harmonization process, certain factors still play a different role. In particular, the impact of profitability is consistent with the pecking order view in some countries, and with the trade-off theory in others. Assets risk, measured as the annualized volatility of the market enterprise value, is the best predictor of observed leverage ratios. The sector of activity is significant in determining leverage decisions even when assets' risk is taken into account. Despite the monetary union and the increased financial and institutional integration in the Euro Area, the country of origin still plays a significant role in capital structure decisions, suggesting that other country-level factors may affect firms' financing behaviour.

The paper indicates that, despite the long harmonization process of institutions, regulations and public budget required to join the Euro, firms' financing decisions are still affected by country-specific factors once the common currency is introduced. Therefore, new entrant countries in the Euro area should not expect their companies to immediately conform with those located in other countries within the common currency area.

This article investigated the impact of the currency change from national currencies to the Euro on the determinants of capital structure choices. It was shown that, despite the long harmonization process that led to the birth of the Euro Area, national factors still affect firms' financing decisions. This provides guidance for policymakers in countries that are planning to join the Euro about the impact this will have on firms' financing decisions in the entrant country.

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Currency change and capital structure decisions: evidence from the birth of the Euro area10.1108/IJMF-04-2022-0153International Journal of Managerial Finance2023-07-03© 2023 Marco BottaMarco BottaInternational Journal of Managerial Financeahead-of-printahead-of-print2023-07-0310.1108/IJMF-04-2022-0153https://www.emerald.com/insight/content/doi/10.1108/IJMF-04-2022-0153/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Marco Bottahttp://creativecommons.org/licences/by/4.0/legalcode
The impact of economic policy uncertainty on sustainability (ESG) performance: the role of the firm life cyclehttps://www.emerald.com/insight/content/doi/10.1108/IJMF-04-2022-0158/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study investigates the impact of economic policy uncertainty (EPU) on corporate sustainability [environmental, social and governance (ESG)] performance and aims to explore whether uncertainty-induced sustainability performance is influenced by the firm's life cycle (LC). The study uses data from European non-financial firms listed during the period from 2002 to 2022 to extend the nascent literature regarding EPU and sustainability performance while applying a dynamic panel data regression analysis (Generalized Method of Moments - GMM System) on 11,462 firm-year observations of 1,869 European firms. The authors find overwhelming evidence that policy uncertainty affects the sustainability performance of European firms. The firms restrict their environmental and governance-related activities and address immediate issues to survive during periods of high EPU. Conversely, the firms increase their social engagements to decrease uncertainty-induced information asymmetry. The authors' results show that the intensity and type of sustainability performance are also influenced by the firm's LC. The results imply that board gender diversity (BGD) increases while power concentration with the chief executive officer (CEO) decreases sustainability performance. These findings have important implications for policymakers, potential investors, firm management and other stakeholders given the firms' access to resources and preferences to encounter uncertainty vary across different LC stages. To the best of the authors' knowledge, this is the first study that investigates the role of the firm's LC in the relationship between policy uncertainty and sustainability performance in the European context.The impact of economic policy uncertainty on sustainability (ESG) performance: the role of the firm life cycle
Muhammad Azeem Qureshi, Tanveer Ahsan, Ammar Ali Gull, Zaghum Umar
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study investigates the impact of economic policy uncertainty (EPU) on corporate sustainability [environmental, social and governance (ESG)] performance and aims to explore whether uncertainty-induced sustainability performance is influenced by the firm's life cycle (LC).

The study uses data from European non-financial firms listed during the period from 2002 to 2022 to extend the nascent literature regarding EPU and sustainability performance while applying a dynamic panel data regression analysis (Generalized Method of Moments - GMM System) on 11,462 firm-year observations of 1,869 European firms.

The authors find overwhelming evidence that policy uncertainty affects the sustainability performance of European firms. The firms restrict their environmental and governance-related activities and address immediate issues to survive during periods of high EPU. Conversely, the firms increase their social engagements to decrease uncertainty-induced information asymmetry. The authors' results show that the intensity and type of sustainability performance are also influenced by the firm's LC. The results imply that board gender diversity (BGD) increases while power concentration with the chief executive officer (CEO) decreases sustainability performance.

These findings have important implications for policymakers, potential investors, firm management and other stakeholders given the firms' access to resources and preferences to encounter uncertainty vary across different LC stages.

To the best of the authors' knowledge, this is the first study that investigates the role of the firm's LC in the relationship between policy uncertainty and sustainability performance in the European context.

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The impact of economic policy uncertainty on sustainability (ESG) performance: the role of the firm life cycle10.1108/IJMF-04-2022-0158International Journal of Managerial Finance2023-11-27© 2023 Emerald Publishing LimitedMuhammad Azeem QureshiTanveer AhsanAmmar Ali GullZaghum UmarInternational Journal of Managerial Financeahead-of-printahead-of-print2023-11-2710.1108/IJMF-04-2022-0158https://www.emerald.com/insight/content/doi/10.1108/IJMF-04-2022-0158/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Uncertainty and cash holdings: the moderating role of political connectionshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-05-2023-0245/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis paper aims to investigate the relationship between uncertainty and corporate cash holdings with the moderating role of political connections. We employ fixed effects estimation on a panel dataset of 669 Vietnamese listed firms over the 2010–2020 period, with one- and two-way standard error clustering. We conduct various robustness tests, including two-stage least squares/instrumental variable and generalized method of moments regressions, alternative cash holding measure, and additional controls for macroeconomic conditions and ownership types. The effect of uncertainty on cash holdings is weakened for firms with political connections relative to those without the connections. Although general firms depend on cash flows to adjust their cash holding behavior when uncertainty increases, our findings suggest that politically connected firms do not rely on internal cash flows to accumulate cash when confronted high uncertainty. Our findings on the role of political connections in moderating the relationship between cash holding and economic policy uncertainty have practical implications for policymaking. Since political connections serve as a buffer for a firm’s liquidity, firms may want to seek those connections, which can, in turn, lead to increasing informal costs and unfair business environment. This is the first study investigating the role of political connections to the nexus of cash, cash flow and uncertainty, providing novel evidence regarding the less dependence on internal cash flows to save cash by politically connected firms. Second, the paper enriches the literature on the motives of cash holdings by proposing a modified agency view in the context of weak investor protection. Therefore, our findings strengthen the explanation for the positive effect of uncertainty on firms’ cash holdings in emerging markets.Uncertainty and cash holdings: the moderating role of political connections
Ly Thi Hai Tran, Thoa Thi Kim Tu, Bao Cong Nguyen To
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This paper aims to investigate the relationship between uncertainty and corporate cash holdings with the moderating role of political connections.

We employ fixed effects estimation on a panel dataset of 669 Vietnamese listed firms over the 2010–2020 period, with one- and two-way standard error clustering. We conduct various robustness tests, including two-stage least squares/instrumental variable and generalized method of moments regressions, alternative cash holding measure, and additional controls for macroeconomic conditions and ownership types.

The effect of uncertainty on cash holdings is weakened for firms with political connections relative to those without the connections. Although general firms depend on cash flows to adjust their cash holding behavior when uncertainty increases, our findings suggest that politically connected firms do not rely on internal cash flows to accumulate cash when confronted high uncertainty.

Our findings on the role of political connections in moderating the relationship between cash holding and economic policy uncertainty have practical implications for policymaking. Since political connections serve as a buffer for a firm’s liquidity, firms may want to seek those connections, which can, in turn, lead to increasing informal costs and unfair business environment.

This is the first study investigating the role of political connections to the nexus of cash, cash flow and uncertainty, providing novel evidence regarding the less dependence on internal cash flows to save cash by politically connected firms. Second, the paper enriches the literature on the motives of cash holdings by proposing a modified agency view in the context of weak investor protection. Therefore, our findings strengthen the explanation for the positive effect of uncertainty on firms’ cash holdings in emerging markets.

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Uncertainty and cash holdings: the moderating role of political connections10.1108/IJMF-05-2023-0245International Journal of Managerial Finance2024-03-21© 2024 Emerald Publishing LimitedLy Thi Hai TranThoa Thi Kim TuBao Cong Nguyen ToInternational Journal of Managerial Financeahead-of-printahead-of-print2024-03-2110.1108/IJMF-05-2023-0245https://www.emerald.com/insight/content/doi/10.1108/IJMF-05-2023-0245/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2024 Emerald Publishing Limited
Oil price uncertainty and corporate inventory investmenthttps://www.emerald.com/insight/content/doi/10.1108/IJMF-05-2023-0261/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study examines the relationship between oil price uncertainty (OPU) and corporate inventory investments using a sample of 6,072 USA manufacturing firms from 1992 to 2019. The author's study employs a panel dataset to examine the relationship between OPU and corporate inventory investments. The author uses several alternative specifications such as fixed effects models, an instrumental variable analysis, an impact threshold for confounding variable (ITCV) analysis, alternative measures, additional control variables and the percent bias analysis to account for endogeneity issues. Corporate inventory investments decrease in response to high OPU. This decrease in inventory investments happens regardless of firms' expected stockout costs, information environment and reliance on external financing. As a potential mechanism, an uncertainty-induced increase in cash holdings contributes to this reduction in inventory investments. Also, the effect of OPU is non-linear and asymmetric. In response to the volatility of positive (negative) oil price changes, inventory investments decrease (increase) up to a certain point and increase (decrease) after that. Further, uncertainty-induced adjustments in inventory investments positively influence the operating performance of firms. The author's study adds to the growing literature that examines the impact of OPU on corporate outcomes. Inventory investments directly affect business operations and could better reflect firms' responses to an uncertain environment.Oil price uncertainty and corporate inventory investment
Amanjot Singh
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study examines the relationship between oil price uncertainty (OPU) and corporate inventory investments using a sample of 6,072 USA manufacturing firms from 1992 to 2019.

The author's study employs a panel dataset to examine the relationship between OPU and corporate inventory investments. The author uses several alternative specifications such as fixed effects models, an instrumental variable analysis, an impact threshold for confounding variable (ITCV) analysis, alternative measures, additional control variables and the percent bias analysis to account for endogeneity issues.

Corporate inventory investments decrease in response to high OPU. This decrease in inventory investments happens regardless of firms' expected stockout costs, information environment and reliance on external financing. As a potential mechanism, an uncertainty-induced increase in cash holdings contributes to this reduction in inventory investments. Also, the effect of OPU is non-linear and asymmetric. In response to the volatility of positive (negative) oil price changes, inventory investments decrease (increase) up to a certain point and increase (decrease) after that. Further, uncertainty-induced adjustments in inventory investments positively influence the operating performance of firms.

The author's study adds to the growing literature that examines the impact of OPU on corporate outcomes. Inventory investments directly affect business operations and could better reflect firms' responses to an uncertain environment.

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Oil price uncertainty and corporate inventory investment10.1108/IJMF-05-2023-0261International Journal of Managerial Finance2023-10-30© 2023 Emerald Publishing LimitedAmanjot SinghInternational Journal of Managerial Financeahead-of-printahead-of-print2023-10-3010.1108/IJMF-05-2023-0261https://www.emerald.com/insight/content/doi/10.1108/IJMF-05-2023-0261/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
The impact of international money transfer cost transparency on remittance flows to emerging economieshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2022-0254/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe purpose of this study is to explore the impact of cost transparency introduced by the Remittance Prices Worldwide (RPW) online transaction cost comparison tool on remittance inflows of remittance recipient countries in emerging economies. Panel fixed-effect model was employed to test the hypothesis focussing on the period five years before and five years after the adoption of the RPW tool. Macroeconomic determinants of international remittances were also included in the model, and the study focused on 115 emerging economies. The econometric results reveal that financial development, gross domestic product (GDP) and inflation encourage remittance inflows, whereas interest rate and age dependency ratio discourage remittances. Political stability and migrant stock seem not to influence remittances flowing into emerging markets. Empirical evidence corroborates the hypothesis that an increase in cost transparency boosts remittance flows. The findings suggest cost transparency is another lever for policymakers to target in boosting remittance flows.The impact of international money transfer cost transparency on remittance flows to emerging economies
Primrose Gurira
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

The purpose of this study is to explore the impact of cost transparency introduced by the Remittance Prices Worldwide (RPW) online transaction cost comparison tool on remittance inflows of remittance recipient countries in emerging economies.

Panel fixed-effect model was employed to test the hypothesis focussing on the period five years before and five years after the adoption of the RPW tool. Macroeconomic determinants of international remittances were also included in the model, and the study focused on 115 emerging economies.

The econometric results reveal that financial development, gross domestic product (GDP) and inflation encourage remittance inflows, whereas interest rate and age dependency ratio discourage remittances. Political stability and migrant stock seem not to influence remittances flowing into emerging markets.

Empirical evidence corroborates the hypothesis that an increase in cost transparency boosts remittance flows. The findings suggest cost transparency is another lever for policymakers to target in boosting remittance flows.

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The impact of international money transfer cost transparency on remittance flows to emerging economies10.1108/IJMF-06-2022-0254International Journal of Managerial Finance2023-08-25© 2023 Emerald Publishing LimitedPrimrose GuriraInternational Journal of Managerial Financeahead-of-printahead-of-print2023-08-2510.1108/IJMF-06-2022-0254https://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2022-0254/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Sources of incentive and entrenchment effects in family firms: balancing self-dealings with operating efficiencieshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2022-0257/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe purpose of the study is to examine how operating efficiencies from incentive alignment compensate for rent extraction in family firms. The author asks whether ownership (1) improves operating efficiencies to increase firm value, (2) positively affects related-party transactions (RPTs), or (3) destroys firm value. Finally, the author assesses whether the incentive effect dominates the entrenchment effect. This study employs a panel of 333 listed family firms (and 185 nonfamily firms) and handles endogeneity using a dynamic panel system GMM and panel VAR. Ownership decreases discretionary expenses and increases asset utilization to add firm value. The efficiency gains generate more value in family firms, especially majority-held ones, than in nonmajority ones. However, ownership is also related to increased RPTs (especially dubious loans/guarantees), reducing firm value. RPTs destroy value more severely in the family (or group) firms than in nonfamily (nongroup) firms. It could be why ownership's positive impact on value is lower in family firms than in nonfamily firms. Overall, the incentive effect dominates the entrenchment effect and is robust to controlling private benefits of control in the dynamic ownership-value model. (1) A family firm's ownership may not be optimal. (2) The firm's long-term commitment as a dynasty limits the scale of expropriation yet sustains impetus for long-term value creation. The paradox partly explains why large family holdings and firm-specific investments endure over generations. (3) This way, large ownership substitutes weak investor protection in India despite tunneling as skin in the game provides necessary investor confidence. (4) Future studies can examine whether extraction varies with family generations and how family characteristics affect the incentive effects. (1) Concentrated ownership may not be a wrong policy choice in emerging markets to draw firm-specific investments. (2) Investors, auditors, or creditors must pay closer attention to loans/guarantees. (3) More vigorous enforcement, auditor scrutiny, and board oversight are needed. Family firms are not necessarily a bad organization type that destroys investor wealth. They can be valuably efficient due to their ownership and wealth concentration, and frugality. They matter in the economic growth of a developing market like India. (1) Extends ownership-performance research to family firms and shows that although ownership facilitates tunneling, the incentive effect dominates; (2) family ownership is not impacted by firm value; (3) family ownership levels reduce discretionary expenses and increase asset utilization to create added value, especially in majority-held family firms; (4) RPTs and loans/guarantees increase with ownership; (5) value erosion from RPTs is higher in family (group) firms than in other firms.Sources of incentive and entrenchment effects in family firms: balancing self-dealings with operating efficiencies
Kinshuk Saurabh
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

The purpose of the study is to examine how operating efficiencies from incentive alignment compensate for rent extraction in family firms. The author asks whether ownership (1) improves operating efficiencies to increase firm value, (2) positively affects related-party transactions (RPTs), or (3) destroys firm value. Finally, the author assesses whether the incentive effect dominates the entrenchment effect.

This study employs a panel of 333 listed family firms (and 185 nonfamily firms) and handles endogeneity using a dynamic panel system GMM and panel VAR.

Ownership decreases discretionary expenses and increases asset utilization to add firm value. The efficiency gains generate more value in family firms, especially majority-held ones, than in nonmajority ones. However, ownership is also related to increased RPTs (especially dubious loans/guarantees), reducing firm value. RPTs destroy value more severely in the family (or group) firms than in nonfamily (nongroup) firms. It could be why ownership's positive impact on value is lower in family firms than in nonfamily firms. Overall, the incentive effect dominates the entrenchment effect and is robust to controlling private benefits of control in the dynamic ownership-value model.

(1) A family firm's ownership may not be optimal. (2) The firm's long-term commitment as a dynasty limits the scale of expropriation yet sustains impetus for long-term value creation. The paradox partly explains why large family holdings and firm-specific investments endure over generations. (3) This way, large ownership substitutes weak investor protection in India despite tunneling as skin in the game provides necessary investor confidence. (4) Future studies can examine whether extraction varies with family generations and how family characteristics affect the incentive effects.

(1) Concentrated ownership may not be a wrong policy choice in emerging markets to draw firm-specific investments. (2) Investors, auditors, or creditors must pay closer attention to loans/guarantees. (3) More vigorous enforcement, auditor scrutiny, and board oversight are needed.

Family firms are not necessarily a bad organization type that destroys investor wealth. They can be valuably efficient due to their ownership and wealth concentration, and frugality. They matter in the economic growth of a developing market like India.

(1) Extends ownership-performance research to family firms and shows that although ownership facilitates tunneling, the incentive effect dominates; (2) family ownership is not impacted by firm value; (3) family ownership levels reduce discretionary expenses and increase asset utilization to create added value, especially in majority-held family firms; (4) RPTs and loans/guarantees increase with ownership; (5) value erosion from RPTs is higher in family (group) firms than in other firms.

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Sources of incentive and entrenchment effects in family firms: balancing self-dealings with operating efficiencies10.1108/IJMF-06-2022-0257International Journal of Managerial Finance2023-06-09© 2023 Emerald Publishing LimitedKinshuk SaurabhInternational Journal of Managerial Financeahead-of-printahead-of-print2023-06-0910.1108/IJMF-06-2022-0257https://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2022-0257/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Labor unions, pay disparity and financial statement comparabilityhttps://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2023-0294/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study examines how the presence of labor unions affects a firm’s pay disparity between executives and employees and its financial statement comparability. It uses firm-level labor union data in Korea and applies regression analyses to a sample of 1,776 firm-year observations from 2004 to 2008. The authors find that unionized firms have a smaller pay disparity between executives and employees than non-unionized firms, suggesting that labor unions place pressure on the pay structure. Unionization also lowers financial statement comparability, which helps managers of unionized firms maintain information asymmetry. Further, this negative relationship between unionization and financial statement comparability is stronger in non-chaebol firms, implying that they are more motivated than chaebol firms to reduce their financial statement comparability in response to the presence of labor unions. In addition, the negative relationship between unionization and financial statement comparability is pronounced in profit-making firms, firms with less analyst following, firms with fewer foreign investors and firms in more competitive product markets. The finding that firms adjust comparability in response to labor unions interests regulators and policymakers, who emphasize the role of comparability in providing usefulness to information users. The findings add to the existing literature on the effect of labor unions on firms' pay structures and accounting choices.Labor unions, pay disparity and financial statement comparability
Eun Hye Jo, Jung Wha Lee
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study examines how the presence of labor unions affects a firm’s pay disparity between executives and employees and its financial statement comparability.

It uses firm-level labor union data in Korea and applies regression analyses to a sample of 1,776 firm-year observations from 2004 to 2008.

The authors find that unionized firms have a smaller pay disparity between executives and employees than non-unionized firms, suggesting that labor unions place pressure on the pay structure. Unionization also lowers financial statement comparability, which helps managers of unionized firms maintain information asymmetry. Further, this negative relationship between unionization and financial statement comparability is stronger in non-chaebol firms, implying that they are more motivated than chaebol firms to reduce their financial statement comparability in response to the presence of labor unions. In addition, the negative relationship between unionization and financial statement comparability is pronounced in profit-making firms, firms with less analyst following, firms with fewer foreign investors and firms in more competitive product markets.

The finding that firms adjust comparability in response to labor unions interests regulators and policymakers, who emphasize the role of comparability in providing usefulness to information users.

The findings add to the existing literature on the effect of labor unions on firms' pay structures and accounting choices.

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Labor unions, pay disparity and financial statement comparability10.1108/IJMF-06-2023-0294International Journal of Managerial Finance2024-01-04© 2023 Emerald Publishing LimitedEun Hye JoJung Wha LeeInternational Journal of Managerial Financeahead-of-printahead-of-print2024-01-0410.1108/IJMF-06-2023-0294https://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2023-0294/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Can a firm's hierarchical complexity affect its stock price behavior? Evidence from stock price crash riskhttps://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2023-0299/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis paper examines how a firm's hierarchical complexity, which is determined by the way it organizes its subsidiaries across the hierarchical levels, can impact its stock price crash risk. The authors employ a measure of hierarchical complexity that captures the depth and breadth of how subsidiaries are organized within a firm. This measure is calculated using information about firms' subsidiaries extracted from the Bureau van Dijk (BvD) database that allows the authors to construct each firm's hierarchical structure. The data sample includes 2,461 USA firms for the period from 2012 to 2017 (11,006 firm-year observations). Univariate tests and panel regression are used for the main analysis. Two-stage-least-squares (2SLS) instrumental variable regression and various other tests are employed for robustness check. The results show a positive relationship between hierarchical complexity and stock price crash risk. This relationship is amplified in firms with a greater number of subsidiaries that are hierarchically distanced from the parent company as well as in firms with a greater number of foreign subsidiaries in countries with weaker rule of law. This paper is the first to investigate the impact hierarchical complexity has on crash risk. The results highlight the role that a firm's organizational structure can have on asset pricing behavior.Can a firm's hierarchical complexity affect its stock price behavior? Evidence from stock price crash risk
Hoàng Long Phan, Ralf Zurbruegg
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This paper examines how a firm's hierarchical complexity, which is determined by the way it organizes its subsidiaries across the hierarchical levels, can impact its stock price crash risk.

The authors employ a measure of hierarchical complexity that captures the depth and breadth of how subsidiaries are organized within a firm. This measure is calculated using information about firms' subsidiaries extracted from the Bureau van Dijk (BvD) database that allows the authors to construct each firm's hierarchical structure. The data sample includes 2,461 USA firms for the period from 2012 to 2017 (11,006 firm-year observations). Univariate tests and panel regression are used for the main analysis. Two-stage-least-squares (2SLS) instrumental variable regression and various other tests are employed for robustness check.

The results show a positive relationship between hierarchical complexity and stock price crash risk. This relationship is amplified in firms with a greater number of subsidiaries that are hierarchically distanced from the parent company as well as in firms with a greater number of foreign subsidiaries in countries with weaker rule of law.

This paper is the first to investigate the impact hierarchical complexity has on crash risk. The results highlight the role that a firm's organizational structure can have on asset pricing behavior.

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Can a firm's hierarchical complexity affect its stock price behavior? Evidence from stock price crash risk10.1108/IJMF-06-2023-0299International Journal of Managerial Finance2023-09-05© 2023 Emerald Publishing LimitedHoàng Long PhanRalf ZurbrueggInternational Journal of Managerial Financeahead-of-printahead-of-print2023-09-0510.1108/IJMF-06-2023-0299https://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2023-0299/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Debt overhang and carbon emissionshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2023-0305/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study investigates the association between debt overhang and carbon emissions (both direct and indirect emissions) using a sample of US publicly listed firms. The study applies generalized least squares (GLS) regression analyses to a sample of 2,043 US firm-year observations over a period of 14 years from 2007 to 2020. The methods include contemporaneous effect, lagged effect, alternative measures of carbon emissions and debt overhang, intensive versus non-intensive analysis, channel analysis, firm fixed effects, change analysis, controlling for credit rating analysis, propensity score matching approach, instrumental variable analysis with industry and year fixed effect. This study's findings reveal that the debt overhang problem increases carbon emissions. This finding holds when the authors use alternative measures of carbon emissions and debt overhang. The authors find that carbon abatement investment is a channel that is negatively impacted by debt overhang, which in turn increases carbon emissions. This study's results are robust for several endogeneity tests, including firm fixed effects, change analysis, propensity score matching approach and two-stage least squares (2SLS) instrumental variable analysis. The outcome of this research has policy implications for several stakeholders, including investors, firms, market participants and regulators. This study's findings offer insights for investors and firms, helping them allocate resources effectively and make financing decisions aimed at reducing carbon emissions. Regulators and policymakers can also use the findings to formulate policies that promote alternative sustainable finance practices. The outcome of this research is likely to help firms develop their understanding of the debt overhang problem and undertake strategies that yield a significant amount of funding to invest in reducing carbon emissions.Debt overhang and carbon emissions
Md Safiullah, Muhammad Nurul Houqe, Muhammad Jahangir Ali, Md Saiful Azam
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study investigates the association between debt overhang and carbon emissions (both direct and indirect emissions) using a sample of US publicly listed firms.

The study applies generalized least squares (GLS) regression analyses to a sample of 2,043 US firm-year observations over a period of 14 years from 2007 to 2020. The methods include contemporaneous effect, lagged effect, alternative measures of carbon emissions and debt overhang, intensive versus non-intensive analysis, channel analysis, firm fixed effects, change analysis, controlling for credit rating analysis, propensity score matching approach, instrumental variable analysis with industry and year fixed effect.

This study's findings reveal that the debt overhang problem increases carbon emissions. This finding holds when the authors use alternative measures of carbon emissions and debt overhang. The authors find that carbon abatement investment is a channel that is negatively impacted by debt overhang, which in turn increases carbon emissions. This study's results are robust for several endogeneity tests, including firm fixed effects, change analysis, propensity score matching approach and two-stage least squares (2SLS) instrumental variable analysis.

The outcome of this research has policy implications for several stakeholders, including investors, firms, market participants and regulators. This study's findings offer insights for investors and firms, helping them allocate resources effectively and make financing decisions aimed at reducing carbon emissions. Regulators and policymakers can also use the findings to formulate policies that promote alternative sustainable finance practices.

The outcome of this research is likely to help firms develop their understanding of the debt overhang problem and undertake strategies that yield a significant amount of funding to invest in reducing carbon emissions.

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Debt overhang and carbon emissions10.1108/IJMF-06-2023-0305International Journal of Managerial Finance2023-12-29© 2023 Emerald Publishing LimitedMd SafiullahMuhammad Nurul HouqeMuhammad Jahangir AliMd Saiful AzamInternational Journal of Managerial Financeahead-of-printahead-of-print2023-12-2910.1108/IJMF-06-2023-0305https://www.emerald.com/insight/content/doi/10.1108/IJMF-06-2023-0305/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Military CEOs and firm dividends and cash holdingshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-08-2022-0355/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe purpose of this study is to examine the relationships between chief executive officers (CEOs) with military service and firm dividend and cash holding decisions. The authors use a sample of Standard and Poor's (S&P) 1500 firms in the USA over a sample period from 1999 to 2017 and a panel data approach, as well as instrumental variable (IV)analysis. The models control for firm characteristics as well as industry and year-fixed effects. The results show CEOs with military service are associated with higher total payout and less cash. Higher dividends appear to drive the total payout result. When cash holdings are split into pure cash and short-term investments, the reduction in cash holdings is driven by a reduction in pure cash. The findings are more pronounced for powerful CEOs and CEOs with low labor mobility. Military CEOs are also associated with less risk, measured by stock return volatility and return on assets (ROA) volatility. Overall, the results are consistent with military CEOs implementing conservative policies that reduce firm risk, curtailing the demand for precautionary cash and reducing the necessity to forego dividend payouts.Military CEOs and firm dividends and cash holdings
Nam Hoang Le, Zhe Li, Megan Ramsey
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

The purpose of this study is to examine the relationships between chief executive officers (CEOs) with military service and firm dividend and cash holding decisions.

The authors use a sample of Standard and Poor's (S&P) 1500 firms in the USA over a sample period from 1999 to 2017 and a panel data approach, as well as instrumental variable (IV)analysis. The models control for firm characteristics as well as industry and year-fixed effects.

The results show CEOs with military service are associated with higher total payout and less cash. Higher dividends appear to drive the total payout result. When cash holdings are split into pure cash and short-term investments, the reduction in cash holdings is driven by a reduction in pure cash. The findings are more pronounced for powerful CEOs and CEOs with low labor mobility. Military CEOs are also associated with less risk, measured by stock return volatility and return on assets (ROA) volatility.

Overall, the results are consistent with military CEOs implementing conservative policies that reduce firm risk, curtailing the demand for precautionary cash and reducing the necessity to forego dividend payouts.

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Military CEOs and firm dividends and cash holdings10.1108/IJMF-08-2022-0355International Journal of Managerial Finance2023-09-26© 2023 Emerald Publishing LimitedNam Hoang LeZhe LiMegan RamseyInternational Journal of Managerial Financeahead-of-printahead-of-print2023-09-2610.1108/IJMF-08-2022-0355https://www.emerald.com/insight/content/doi/10.1108/IJMF-08-2022-0355/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Analyzing the static and dynamic dependence among green investments, carbon markets, financial markets and commodity marketshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2021-0428/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis paper investigates the static and dynamic directional return spillovers and dependence among green investments, carbon markets, financial markets and commodity markets from January 2013 to September 2020. This study employed both the quantile vector autoregression (QVAR) and time-varying parameter VAR (TVP-VAR) technique to examine the magnitude of static and dynamic directional spillovers and dependence of markets. Results show that the magnitude of connectedness is extremely higher at quantile levels (q = 0.05 and q = 0.95) compared to those in the mean of the conditional distribution. This connotes that connectedness between green bonds and other assets increases with shock size for both negative and positive shocks. This further indicates that return shocks spread at a higher magnitude during extreme market conditions relative to normal periods. Additional analyses show the behavior of return transmission between green bond and other assets is asymmetric. The findings of this study offer significant implications for portfolio investors, policymakers, regulatory authorities and investment community in terms of carefully assessing the unique characteristics offered by each markets in terms of return spillovers and dependence and diversifying the portfolios. The study, first, uses a relatively new statistical technique, the QVAR advanced by Ando et al. (2018), to capture upper and lower tails’ quantile price connectedness and directional spillover. Therefore, the results possess adequate power against departure from mean-based conditional connectedness. Second, using a portfolio of green investments, carbon markets, financial markets and commodity markets, the uniqueness of this study lies in the examination of the static and dynamic dependence of the markets examined.Analyzing the static and dynamic dependence among green investments, carbon markets, financial markets and commodity markets
Emmanuel Joel Aikins Abakah, Aviral Kumar Tiwari, Johnson Ayobami Oliyide, Kingsley Opoku Appiah
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This paper investigates the static and dynamic directional return spillovers and dependence among green investments, carbon markets, financial markets and commodity markets from January 2013 to September 2020.

This study employed both the quantile vector autoregression (QVAR) and time-varying parameter VAR (TVP-VAR) technique to examine the magnitude of static and dynamic directional spillovers and dependence of markets.

Results show that the magnitude of connectedness is extremely higher at quantile levels (q = 0.05 and q = 0.95) compared to those in the mean of the conditional distribution. This connotes that connectedness between green bonds and other assets increases with shock size for both negative and positive shocks. This further indicates that return shocks spread at a higher magnitude during extreme market conditions relative to normal periods. Additional analyses show the behavior of return transmission between green bond and other assets is asymmetric.

The findings of this study offer significant implications for portfolio investors, policymakers, regulatory authorities and investment community in terms of carefully assessing the unique characteristics offered by each markets in terms of return spillovers and dependence and diversifying the portfolios.

The study, first, uses a relatively new statistical technique, the QVAR advanced by Ando et al. (2018), to capture upper and lower tails’ quantile price connectedness and directional spillover. Therefore, the results possess adequate power against departure from mean-based conditional connectedness. Second, using a portfolio of green investments, carbon markets, financial markets and commodity markets, the uniqueness of this study lies in the examination of the static and dynamic dependence of the markets examined.

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Analyzing the static and dynamic dependence among green investments, carbon markets, financial markets and commodity markets10.1108/IJMF-09-2021-0428International Journal of Managerial Finance2023-05-08© 2023 Emerald Publishing LimitedEmmanuel Joel Aikins AbakahAviral Kumar TiwariJohnson Ayobami OliyideKingsley Opoku AppiahInternational Journal of Managerial Financeahead-of-printahead-of-print2023-05-0810.1108/IJMF-09-2021-0428https://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2021-0428/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Feverish sentiment, lockdown stringency, oil volatility, and clean energy stocks during COVID-19 pandemichttps://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2021-0457/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study seeks to investigate role of the coronavirus disease 2019 (COVID-19) pandemic on clean energy stocks for the United States for the period 21 January 2020–16 August 2021. At the empirical stage, the Fourier-augmented vector autoregression approach has been used. According to the empirical results, the response of the clean energy stocks to the feverish sentiment, lockdown stringency, oil volatility, dirty assets, and monetary policy dies out within a short period of time. In addition, the authors find that there is a unidirectional causality from the feverish sentiment index and the lockdown stringency index to the clean energy stock returns; and from the monetary policy to the clean energy stocks. At the same time, there is a bidirectional causality between the lockdown stringency index and the feverish sentiment index. The empirical findings can be helpful to both practitioners and policy-makers. Among the COVID-19 variables used in this study is a new feverish sentiment index, which has been constructed using principal component analysis. The importance of the feverish sentiment index is that it allows us to examine the impact of the aggregate level of fear in the economy on clean energy stocks.Feverish sentiment, lockdown stringency, oil volatility, and clean energy stocks during COVID-19 pandemic
Sakiru Adebola Solarin, Muhammed Sehid Gorus, Veli Yilanci
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study seeks to investigate role of the coronavirus disease 2019 (COVID-19) pandemic on clean energy stocks for the United States for the period 21 January 2020–16 August 2021.

At the empirical stage, the Fourier-augmented vector autoregression approach has been used.

According to the empirical results, the response of the clean energy stocks to the feverish sentiment, lockdown stringency, oil volatility, dirty assets, and monetary policy dies out within a short period of time. In addition, the authors find that there is a unidirectional causality from the feverish sentiment index and the lockdown stringency index to the clean energy stock returns; and from the monetary policy to the clean energy stocks. At the same time, there is a bidirectional causality between the lockdown stringency index and the feverish sentiment index. The empirical findings can be helpful to both practitioners and policy-makers.

Among the COVID-19 variables used in this study is a new feverish sentiment index, which has been constructed using principal component analysis. The importance of the feverish sentiment index is that it allows us to examine the impact of the aggregate level of fear in the economy on clean energy stocks.

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Feverish sentiment, lockdown stringency, oil volatility, and clean energy stocks during COVID-19 pandemic10.1108/IJMF-09-2021-0457International Journal of Managerial Finance2022-08-16© 2022 Emerald Publishing LimitedSakiru Adebola SolarinMuhammed Sehid GorusVeli YilanciInternational Journal of Managerial Financeahead-of-printahead-of-print2022-08-1610.1108/IJMF-09-2021-0457https://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2021-0457/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2022 Emerald Publishing Limited
Do all CEO pay regulations hurt firm performance? Evidence from Chinahttps://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2021-0458/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe authors study and compare the effects of three CEO compensation restricting policies issued by the Chinese government in 2009, 2012 and 2015. This paper aims to shed light on the conditions under which CEO compenstation can be effectively regulated without negatively affecting firm performance. These policies targeted state-owned enterprises (SOEs), especially central state-owned enterprises (CSOEs). Using these policies as natural experiments, the authors investigate how their effects differ on CEO compensation, firm performance and two known performance-decreasing mechanisms: perk consumption and tunneling activities. The authors show that restricting CEO pay does not necessarily backfire in terms of deteriorating firm performance. This non-decreasing firm performance can be achieved by restricting perk consumption and tunneling activities while introducing CEO pay regulations. The authors exploit a powerful experimental setting in the context of China. The evidence contributes to the literature on CEO pay regulations and is relevant to the managerial decisions of policy makers and boards of directors.Do all CEO pay regulations hurt firm performance? Evidence from China
Xiaochuan Tong, Weijie Wang, Yaowu Liu
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

The authors study and compare the effects of three CEO compensation restricting policies issued by the Chinese government in 2009, 2012 and 2015. This paper aims to shed light on the conditions under which CEO compenstation can be effectively regulated without negatively affecting firm performance.

These policies targeted state-owned enterprises (SOEs), especially central state-owned enterprises (CSOEs). Using these policies as natural experiments, the authors investigate how their effects differ on CEO compensation, firm performance and two known performance-decreasing mechanisms: perk consumption and tunneling activities.

The authors show that restricting CEO pay does not necessarily backfire in terms of deteriorating firm performance. This non-decreasing firm performance can be achieved by restricting perk consumption and tunneling activities while introducing CEO pay regulations.

The authors exploit a powerful experimental setting in the context of China. The evidence contributes to the literature on CEO pay regulations and is relevant to the managerial decisions of policy makers and boards of directors.

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Do all CEO pay regulations hurt firm performance? Evidence from China10.1108/IJMF-09-2021-0458International Journal of Managerial Finance2023-10-03© 2023 Emerald Publishing LimitedXiaochuan TongWeijie WangYaowu LiuInternational Journal of Managerial Financeahead-of-printahead-of-print2023-10-0310.1108/IJMF-09-2021-0458https://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2021-0458/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Effects of time-varying political connections on loan contractshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2022-0400/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThe authors construct two time-varying political connection (PC) indexes to measure a firm's political tendencies toward ruling and opposing parties and analyze whether a firm with ruling party tendencies obtains better bank loan contracts compared to the contracts obtained by a firm with opposing party tendencies and a firm with fixed PC tendencies. Linguistic text mining is used to construct the two time-varying PC indexes from news sources that reflect the tone and frequencies of characteristic texts to determine a firm's tendencies to favor the ruling or opposing parties. The results show that varying PC firms connected to the ruling party receive preferential loan contracts when their political tendencies increase but varying PC firms connected to the opposition party do not. In contrast, fixed PC firms gain similar benefits only when the connection is determined in the presidential election year but not in other years. Firms supporting two parties receive minimal financial rewards in terms of loan terms. In past studies, once a firm is identified as having a connection with a political party, it is assumed to have PC throughout the sample period (i.e. fixed PC firms). The authors lift this assumption and examine how varying PC affect bank loan contracts. The two time-varying PC indexes can identify a firm's more immediate party tendencies and more precise effects of a firm's party tendencies on bank loan contracts.Effects of time-varying political connections on loan contracts
Hao Fang, Chieh-Hsuan Wang, Joseph C.P. Shieh, Chien-Ping Chung
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

The authors construct two time-varying political connection (PC) indexes to measure a firm's political tendencies toward ruling and opposing parties and analyze whether a firm with ruling party tendencies obtains better bank loan contracts compared to the contracts obtained by a firm with opposing party tendencies and a firm with fixed PC tendencies.

Linguistic text mining is used to construct the two time-varying PC indexes from news sources that reflect the tone and frequencies of characteristic texts to determine a firm's tendencies to favor the ruling or opposing parties.

The results show that varying PC firms connected to the ruling party receive preferential loan contracts when their political tendencies increase but varying PC firms connected to the opposition party do not. In contrast, fixed PC firms gain similar benefits only when the connection is determined in the presidential election year but not in other years. Firms supporting two parties receive minimal financial rewards in terms of loan terms.

In past studies, once a firm is identified as having a connection with a political party, it is assumed to have PC throughout the sample period (i.e. fixed PC firms). The authors lift this assumption and examine how varying PC affect bank loan contracts. The two time-varying PC indexes can identify a firm's more immediate party tendencies and more precise effects of a firm's party tendencies on bank loan contracts.

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Effects of time-varying political connections on loan contracts10.1108/IJMF-09-2022-0400International Journal of Managerial Finance2023-10-10© 2023 Emerald Publishing LimitedHao FangChieh-Hsuan WangJoseph C.P. ShiehChien-Ping ChungInternational Journal of Managerial Financeahead-of-printahead-of-print2023-10-1010.1108/IJMF-09-2022-0400https://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2022-0400/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
The impact of the knowledge economy on the financing constraints of firms: within and between country effectshttps://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2023-0436/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study employs firm-level data to evaluate how the knowledge economy impacts the financing constraints of businesses across 106 low- and middle-income nations, focusing on the influence of technological transformation on corporate financing choices. The research centers on privately held, unlisted firms and examines the distinct effects of knowledge at both the within-country and between-country levels using a panel dataset. Rigorous sensitivity and endogeneity analyses are conducted to ensure the reliability of the findings. The findings indicate that greater levels of the knowledge economy correlate with reduced financing constraints for firms. However, this effect varies depending on the location within a country and across different geographical regions. Firms situated in larger urban centers and more innovative regions reap the most significant benefits from the knowledge economy when seeking external funding. Conversely, firms in smaller cities, rural areas and regions characterized by structural and institutional inefficiencies in knowledge generation experience fewer advantages. The impact of knowledge exhibits variability not only within and among countries but also between poor and affluent developing nations, as well as between larger and smaller countries. The knowledge effect on firms' access to external finance is influenced by factors such as financial openness and development, educational quality, technological absorption capabilities and agglomeration conditions within each country.The impact of the knowledge economy on the financing constraints of firms: within and between country effects
Charilaos Mertzanis, Asma Houcine
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study employs firm-level data to evaluate how the knowledge economy impacts the financing constraints of businesses across 106 low- and middle-income nations, focusing on the influence of technological transformation on corporate financing choices.

The research centers on privately held, unlisted firms and examines the distinct effects of knowledge at both the within-country and between-country levels using a panel dataset. Rigorous sensitivity and endogeneity analyses are conducted to ensure the reliability of the findings.

The findings indicate that greater levels of the knowledge economy correlate with reduced financing constraints for firms. However, this effect varies depending on the location within a country and across different geographical regions. Firms situated in larger urban centers and more innovative regions reap the most significant benefits from the knowledge economy when seeking external funding. Conversely, firms in smaller cities, rural areas and regions characterized by structural and institutional inefficiencies in knowledge generation experience fewer advantages.

The impact of knowledge exhibits variability not only within and among countries but also between poor and affluent developing nations, as well as between larger and smaller countries. The knowledge effect on firms' access to external finance is influenced by factors such as financial openness and development, educational quality, technological absorption capabilities and agglomeration conditions within each country.

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The impact of the knowledge economy on the financing constraints of firms: within and between country effects10.1108/IJMF-09-2023-0436International Journal of Managerial Finance2024-02-26© 2024 Emerald Publishing LimitedCharilaos MertzanisAsma HoucineInternational Journal of Managerial Financeahead-of-printahead-of-print2024-02-2610.1108/IJMF-09-2023-0436https://www.emerald.com/insight/content/doi/10.1108/IJMF-09-2023-0436/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2024 Emerald Publishing Limited
Electricity access and green financing in the African regionhttps://www.emerald.com/insight/content/doi/10.1108/IJMF-10-2021-0513/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study aims to provide empirical evidence on two research questions: firstly, whether green finance is positively related to electricity access, and, secondly, if the domestic economic environment moderates the relationship between green finance and electricity access? This paper pays particular attention to the regional disparities in Africa. While pursuing the study objectives, the authors apply a variety of statistical approaches and tools to assess the robustness of the findings. The authors use panel dataset for analysing data. In order to empirically examine the relationship between green finance and electricity access in the African region, the paper employs static and dynamic panel estimation methods, Poisson method and adopts two-step system generalized method of moments (GMM) approach for dealing with issues relating to endogeneity. The authors also use alternate proxy for the electricity access, which is drawn from the regulatory indicators for sustainable energy (RISE) scores. The authors find that despite the fact that green funding appears to support job creation, household incomes aren't high enough to drive rising demand for electricity. The study underscores the role and responsibilities of external funding agencies to ensure that funds at the receiving end are effectively routed to encourage access to clean and sustainable energy, which is good to the economic and domestic environment. Further, due to the relatively modest size of some funds, the cost to administer those funds is larger than the funds themselves. This causes inefficiencies, which may temporarily provide jobs but not lasting growth. This means there is no regular need for energy, therefore larger investors have no reason to enter the market. This discourages investors from public-private partnerships or private investments and prevents future investment. The provide insights into the private-public partnerships and whether the challenges to electricity access are being turned into investment opportunities. The effects of the power Africa project initiatives are revealing, with, sanitation being an impediment to the development of electricity infrastructure, specifically in low-income group countries. The study confirms the view that trivial amounts of green financing (US-Aid or grants) impose a burden on the absorptive capacity of the recipient government and increases the transaction costs and is likely to be an impediment (Kimura et al., 2012) to initiating projects that enhance electricity access. The results indicate that although green financing seems to be supporting employment opportunities, income levels are insufficient to create demand for electricity usage. It, therefore, becomes imperative that sanitation (SDG 6) is fully addressed in order to ensure that SDG 7 is attained. The authors provide insights around the private public partnerships and whether the challenges to electricity access are being turned into investment opportunities. The effects of the power Africa project initiatives are revealing, with, sanitation being an impediment to the development of electricity infrastructure, specifically in low-income group countries.Electricity access and green financing in the African region
Geeta Rani Duppati, Stifanos Hailemariam, Roselyn Murray, Jana Kivell
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study aims to provide empirical evidence on two research questions: firstly, whether green finance is positively related to electricity access, and, secondly, if the domestic economic environment moderates the relationship between green finance and electricity access? This paper pays particular attention to the regional disparities in Africa.

While pursuing the study objectives, the authors apply a variety of statistical approaches and tools to assess the robustness of the findings. The authors use panel dataset for analysing data. In order to empirically examine the relationship between green finance and electricity access in the African region, the paper employs static and dynamic panel estimation methods, Poisson method and adopts two-step system generalized method of moments (GMM) approach for dealing with issues relating to endogeneity. The authors also use alternate proxy for the electricity access, which is drawn from the regulatory indicators for sustainable energy (RISE) scores.

The authors find that despite the fact that green funding appears to support job creation, household incomes aren't high enough to drive rising demand for electricity. The study underscores the role and responsibilities of external funding agencies to ensure that funds at the receiving end are effectively routed to encourage access to clean and sustainable energy, which is good to the economic and domestic environment. Further, due to the relatively modest size of some funds, the cost to administer those funds is larger than the funds themselves. This causes inefficiencies, which may temporarily provide jobs but not lasting growth. This means there is no regular need for energy, therefore larger investors have no reason to enter the market. This discourages investors from public-private partnerships or private investments and prevents future investment.

The provide insights into the private-public partnerships and whether the challenges to electricity access are being turned into investment opportunities. The effects of the power Africa project initiatives are revealing, with, sanitation being an impediment to the development of electricity infrastructure, specifically in low-income group countries.

The study confirms the view that trivial amounts of green financing (US-Aid or grants) impose a burden on the absorptive capacity of the recipient government and increases the transaction costs and is likely to be an impediment (Kimura et al., 2012) to initiating projects that enhance electricity access.

The results indicate that although green financing seems to be supporting employment opportunities, income levels are insufficient to create demand for electricity usage. It, therefore, becomes imperative that sanitation (SDG 6) is fully addressed in order to ensure that SDG 7 is attained.

The authors provide insights around the private public partnerships and whether the challenges to electricity access are being turned into investment opportunities. The effects of the power Africa project initiatives are revealing, with, sanitation being an impediment to the development of electricity infrastructure, specifically in low-income group countries.

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Electricity access and green financing in the African region10.1108/IJMF-10-2021-0513International Journal of Managerial Finance2022-12-08© 2022 Emerald Publishing LimitedGeeta Rani DuppatiStifanos HailemariamRoselyn MurrayJana KivellInternational Journal of Managerial Financeahead-of-printahead-of-print2022-12-0810.1108/IJMF-10-2021-0513https://www.emerald.com/insight/content/doi/10.1108/IJMF-10-2021-0513/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2022 Emerald Publishing Limited
How does the heterogeneity of institutional investors influence corporate tax avoidance? The moderating role of family ownershiphttps://www.emerald.com/insight/content/doi/10.1108/IJMF-11-2022-0501/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study provides new insights into the relationship between the heterogeneity of institutional investors (IIs) and corporate tax avoidance (CTA). It also investigates whether family ownership moderates this relationship. Based on a sample of 200 French-listed firms from 2008 to 2017, we use the generalized method of moment (GMM) estimator proposed by Arellano and Bover (1995) and developed by Blundell and Bond (1998) to address endogeneity and omitted variable concerns. The results show that passive IIs are associated with an increase in the level of tax avoidance. However, active ones significantly decrease the levels of tax avoidance practices. Moreover, we show that institutional activism is not sufficient to control managerial actions, particularly in the context of controlled family businesses. The results suggest that families may expropriate the rights of minority shareholders through a controlling coalition with passive IIs. This study has several practical implications. First, the results are useful for policymakers who should constrain passive IIs to provide only one service (asset management). Second, this study may sensitize family owners to the need to cooperate with active IIs that are effective in monitoring the firm. In particular, families should be willing to sacrifice some of their socioemotional wealth to promote a balanced ownership structure, which is important for responsible and effective corporate governance. This paper extends previous research by investigating the heterogeneity of IIs in terms of horizon, ownership and control. In addition, this paper sheds a new light on how family firms behave regarding tax avoidance practices in the presence of active and passive IIs.How does the heterogeneity of institutional investors influence corporate tax avoidance? The moderating role of family ownership
Ramzi Benkraiem, Faten Lakhal, Afef Slama
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study provides new insights into the relationship between the heterogeneity of institutional investors (IIs) and corporate tax avoidance (CTA). It also investigates whether family ownership moderates this relationship.

Based on a sample of 200 French-listed firms from 2008 to 2017, we use the generalized method of moment (GMM) estimator proposed by Arellano and Bover (1995) and developed by Blundell and Bond (1998) to address endogeneity and omitted variable concerns.

The results show that passive IIs are associated with an increase in the level of tax avoidance. However, active ones significantly decrease the levels of tax avoidance practices. Moreover, we show that institutional activism is not sufficient to control managerial actions, particularly in the context of controlled family businesses. The results suggest that families may expropriate the rights of minority shareholders through a controlling coalition with passive IIs.

This study has several practical implications. First, the results are useful for policymakers who should constrain passive IIs to provide only one service (asset management). Second, this study may sensitize family owners to the need to cooperate with active IIs that are effective in monitoring the firm. In particular, families should be willing to sacrifice some of their socioemotional wealth to promote a balanced ownership structure, which is important for responsible and effective corporate governance.

This paper extends previous research by investigating the heterogeneity of IIs in terms of horizon, ownership and control. In addition, this paper sheds a new light on how family firms behave regarding tax avoidance practices in the presence of active and passive IIs.

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How does the heterogeneity of institutional investors influence corporate tax avoidance? The moderating role of family ownership10.1108/IJMF-11-2022-0501International Journal of Managerial Finance2024-02-19© 2024 Emerald Publishing LimitedRamzi BenkraiemFaten LakhalAfef SlamaInternational Journal of Managerial Financeahead-of-printahead-of-print2024-02-1910.1108/IJMF-11-2022-0501https://www.emerald.com/insight/content/doi/10.1108/IJMF-11-2022-0501/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2024 Emerald Publishing Limited
Family involvement and corporate financialization: evidence from Chinahttps://www.emerald.com/insight/content/doi/10.1108/IJMF-11-2022-0513/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestUnder the background of continuous sluggishness of the real economy and expansion of asset sectors, the Chinese economy exists a trend of “from the real to the virtual.” Managing the corporate financialization is the key to prevent the real economy “from real to virtual.” The paper explores the influence of family involvement on corporate financialization since family firms are an important proportion of real sectors. Based on Socioemotional Wealth Theory, this paper makes empirical study using the data of Chinese A-share listed companies from 2008 to 2022 to explore the influence of family involvement on corporate financialization, mainly from the perspectives of family engagement, family identity of CEO and family control power. These are the findings: (1) Family engagement will inhibit corporate financialization; (2) Compared with employing external managers, family members acting as CEOs will decrease corporate financialization; (3) The proportion of family ownership is negatively correlated with the level of corporate financialization. The originality of this paper include these: (1) Analyzing the differences in the financialization of real enterprises with different characteristics and attributes; (2) Expanding the research on the internal motivation of the financialization of the real enterprises, and supplementing the research literature on family firms and corporate financialization; (3) Exploring the internal influence mechanism of financialization of family firms under the background of Chinese culture.Family involvement and corporate financialization: evidence from China
Lixia Wang, Yingqian Gu, Wanxin Liu
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

Under the background of continuous sluggishness of the real economy and expansion of asset sectors, the Chinese economy exists a trend of “from the real to the virtual.” Managing the corporate financialization is the key to prevent the real economy “from real to virtual.” The paper explores the influence of family involvement on corporate financialization since family firms are an important proportion of real sectors.

Based on Socioemotional Wealth Theory, this paper makes empirical study using the data of Chinese A-share listed companies from 2008 to 2022 to explore the influence of family involvement on corporate financialization, mainly from the perspectives of family engagement, family identity of CEO and family control power.

These are the findings: (1) Family engagement will inhibit corporate financialization; (2) Compared with employing external managers, family members acting as CEOs will decrease corporate financialization; (3) The proportion of family ownership is negatively correlated with the level of corporate financialization.

The originality of this paper include these: (1) Analyzing the differences in the financialization of real enterprises with different characteristics and attributes; (2) Expanding the research on the internal motivation of the financialization of the real enterprises, and supplementing the research literature on family firms and corporate financialization; (3) Exploring the internal influence mechanism of financialization of family firms under the background of Chinese culture.

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Family involvement and corporate financialization: evidence from China10.1108/IJMF-11-2022-0513International Journal of Managerial Finance2023-11-10© 2023 Emerald Publishing LimitedLixia WangYingqian GuWanxin LiuInternational Journal of Managerial Financeahead-of-printahead-of-print2023-11-1010.1108/IJMF-11-2022-0513https://www.emerald.com/insight/content/doi/10.1108/IJMF-11-2022-0513/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Investing in a leveraged worldhttps://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2022-0538/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThroughout the 21st century, US households have experienced unprecedented levels of leverage. This dynamic has been exacerbated by income shortfalls during the COVID-19 crisis. Leveraging and deleveraging decisions affect household consumption. This study investigates the effect of the dynamics of household leverage and consumption on the stock market. The authors explore the relation between household leverage and consumption in the context of the consumption capital asset pricing model (CCAPM). The authors test the model's implication that leverage has a negative risk premium by transforming the asset pricing restriction into an unconditional linear factor model and estimate the model using the general method of moments procedure. The authors run time-series regressions to estimate individual stocks' exposures to leverage, and cross-sectional regressions to investigate the leverage risk premium. The authors show that shocks to household debt have strong and lasting effects on consumption growth. The authors extend the CCAPM to accommodate this effect and find, using various test assets, a negative risk premium associated with household deleveraging. Looking at individual stocks the authors show that the deleveraging risk premium is not explained by well-known risk factors. This paper contributes to the literature on the role of leverage in economics and finance by establishing a relation between household leverage and spending decisions. The authors provide novel evidence that households' leveraging and deleveraging decisions can be a fundamental and influential force in determining asset prices. Further, this paper argues that household leverage might explain the small, persistent, and predictable component in consumption growth hypothesised in the long-run risk asset pricing literature.Investing in a leveraged world
Keunbae Ahn, Gerhard Hambusch, Kihoon Hong, Marco Navone
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

Throughout the 21st century, US households have experienced unprecedented levels of leverage. This dynamic has been exacerbated by income shortfalls during the COVID-19 crisis. Leveraging and deleveraging decisions affect household consumption. This study investigates the effect of the dynamics of household leverage and consumption on the stock market.

The authors explore the relation between household leverage and consumption in the context of the consumption capital asset pricing model (CCAPM). The authors test the model's implication that leverage has a negative risk premium by transforming the asset pricing restriction into an unconditional linear factor model and estimate the model using the general method of moments procedure. The authors run time-series regressions to estimate individual stocks' exposures to leverage, and cross-sectional regressions to investigate the leverage risk premium.

The authors show that shocks to household debt have strong and lasting effects on consumption growth. The authors extend the CCAPM to accommodate this effect and find, using various test assets, a negative risk premium associated with household deleveraging. Looking at individual stocks the authors show that the deleveraging risk premium is not explained by well-known risk factors.

This paper contributes to the literature on the role of leverage in economics and finance by establishing a relation between household leverage and spending decisions. The authors provide novel evidence that households' leveraging and deleveraging decisions can be a fundamental and influential force in determining asset prices. Further, this paper argues that household leverage might explain the small, persistent, and predictable component in consumption growth hypothesised in the long-run risk asset pricing literature.

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Investing in a leveraged world10.1108/IJMF-12-2022-0538International Journal of Managerial Finance2023-12-29© 2023 Emerald Publishing LimitedKeunbae AhnGerhard HambuschKihoon HongMarco NavoneInternational Journal of Managerial Financeahead-of-printahead-of-print2023-12-2910.1108/IJMF-12-2022-0538https://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2022-0538/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
CEO overconfidence and tax avoidance: role of institutional and family ownershiphttps://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2022-0545/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study aims to investigate the effect of overconfident chief executive officers (CEOs) on corporate tax avoidance and whether this relationship is affected by institutional and family ownership. Using a sample of French-listed firms from 2009 to 2021, the authors find that firms managed by overconfident CEOs engage in more tax avoidance practice. The authors further find that institutions and families are likely to discourage tax avoidance practices, paying close attention to their long-term horizons and reputational concerns. Overall, the authors' findings shed light on the monitoring role of institutional and family shareholders in restraining the effect of CEO behavioral bias on companies' tax avoidance. To the authors' knowledge, no study has investigated the impact of managerial overconfidence on the tax behavior of French firms. The authors also extend the growing literature regarding managerial effects by providing new evidence that French firms held by concentrated institutional and family ownership curtail CEO overconfidence behavior toward corporate tax avoidance practices.CEO overconfidence and tax avoidance: role of institutional and family ownership
Zahra Souguir, Naima Lassoued, Houssam Bouzgarrou
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study aims to investigate the effect of overconfident chief executive officers (CEOs) on corporate tax avoidance and whether this relationship is affected by institutional and family ownership.

Using a sample of French-listed firms from 2009 to 2021, the authors find that firms managed by overconfident CEOs engage in more tax avoidance practice.

The authors further find that institutions and families are likely to discourage tax avoidance practices, paying close attention to their long-term horizons and reputational concerns. Overall, the authors' findings shed light on the monitoring role of institutional and family shareholders in restraining the effect of CEO behavioral bias on companies' tax avoidance.

To the authors' knowledge, no study has investigated the impact of managerial overconfidence on the tax behavior of French firms. The authors also extend the growing literature regarding managerial effects by providing new evidence that French firms held by concentrated institutional and family ownership curtail CEO overconfidence behavior toward corporate tax avoidance practices.

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CEO overconfidence and tax avoidance: role of institutional and family ownership10.1108/IJMF-12-2022-0545International Journal of Managerial Finance2023-10-02© 2023 Emerald Publishing LimitedZahra SouguirNaima LassouedHoussam BouzgarrouInternational Journal of Managerial Financeahead-of-printahead-of-print2023-10-0210.1108/IJMF-12-2022-0545https://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2022-0545/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited
Managerial ability and climate change exposurehttps://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2022-0551/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatestThis study aims to investigate how a firm's management team's capacity to efficiently use its resources affects the firm's exposure to climate change. Specifically, the authors investigate the intriguing question – does managerial ability affect a firm's climate change exposure? The authors use an unbalanced panel dataset of 4,230 US based firms listed on Compustat from 2002–2019 and test the hypothesis by panel regression analysis. To mitigate endogeneity concerns, difference-in-differences and instrumental variable approaches are used. The baseline analysis shows a negative, statistically significant impact of managerial ability on climate change exposure. The findings hold after controlling for endogeneity using two-stage least squares regression and difference-in-differences tests. The authors find the negative effect is stronger for managers engaged in socially responsible activities, and after climate change issues receiving greater public awareness following the 2006 release of the Stern Review and the 2016 signing of the Paris Accord. Motivated by the resource-based theory and the natural resource-based view of the firm model, the empirical results support the view that greater managerial ability protects the firm against environmental challenges through efficient use of firm resources. Compared with traditional climate change measures that are plagued by disclosure issues, the use of the Sautner, Van Lent, Vilkov and Zhang's machine learning based dataset utilizing earning conference calls provides stronger, robust findings that will be useful to management and investors in environmental performance assessments. Motivated by the resource-based theory and the natural resource-based view of the firm model, the empirical results support the view that greater managerial ability protects the firm against environmental challenges through efficient use of firm resources. Compared with traditional climate change measures that are plagued by disclosure issues, the use of the machine learning based dataset utilizing earning conference calls provides stronger, robust findings that will be useful to management and investors in environmental performance assessments.Managerial ability and climate change exposure
G.M. Wali Ullah, Isma Khan, Mohammad Abdullah
International Journal of Managerial Finance, Vol. ahead-of-print, No. ahead-of-print, pp.-

This study aims to investigate how a firm's management team's capacity to efficiently use its resources affects the firm's exposure to climate change. Specifically, the authors investigate the intriguing question – does managerial ability affect a firm's climate change exposure?

The authors use an unbalanced panel dataset of 4,230 US based firms listed on Compustat from 2002–2019 and test the hypothesis by panel regression analysis. To mitigate endogeneity concerns, difference-in-differences and instrumental variable approaches are used.

The baseline analysis shows a negative, statistically significant impact of managerial ability on climate change exposure. The findings hold after controlling for endogeneity using two-stage least squares regression and difference-in-differences tests. The authors find the negative effect is stronger for managers engaged in socially responsible activities, and after climate change issues receiving greater public awareness following the 2006 release of the Stern Review and the 2016 signing of the Paris Accord.

Motivated by the resource-based theory and the natural resource-based view of the firm model, the empirical results support the view that greater managerial ability protects the firm against environmental challenges through efficient use of firm resources. Compared with traditional climate change measures that are plagued by disclosure issues, the use of the Sautner, Van Lent, Vilkov and Zhang's machine learning based dataset utilizing earning conference calls provides stronger, robust findings that will be useful to management and investors in environmental performance assessments.

Motivated by the resource-based theory and the natural resource-based view of the firm model, the empirical results support the view that greater managerial ability protects the firm against environmental challenges through efficient use of firm resources. Compared with traditional climate change measures that are plagued by disclosure issues, the use of the machine learning based dataset utilizing earning conference calls provides stronger, robust findings that will be useful to management and investors in environmental performance assessments.

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Managerial ability and climate change exposure10.1108/IJMF-12-2022-0551International Journal of Managerial Finance2023-08-30© 2023 Emerald Publishing LimitedG.M. Wali UllahIsma KhanMohammad AbdullahInternational Journal of Managerial Financeahead-of-printahead-of-print2023-08-3010.1108/IJMF-12-2022-0551https://www.emerald.com/insight/content/doi/10.1108/IJMF-12-2022-0551/full/html?utm_source=rss&utm_medium=feed&utm_campaign=rss_journalLatest© 2023 Emerald Publishing Limited