Corporate Diversification and Financial Policy

This dissertation provides new evidence on the financial impact inherent to the conglomerate form of organization (corporate diversification) and the associated creation of internal capital markets. The first part of the dissertation examines the funding benefits of corporate diversification; one of the basic financing-related synergies associated with this sort of integration. The results suggest economically large and persistent financing advantages of diversified firms. As a central contribution, the chapter identifies causal effects in a shock-based research design using the introduction of new segment reporting standards as a quasi-natural experiment. The second part fills an important gap in the literature by illuminating the largely unexplored role of managerial human capital in internal capital budgeting. The analysis reveals a new perspective on internal capital market efficiency by showing that budgeting decisions strongly reflect what theorists have called “winner-picking”: superior managers receive substantially larger capital allocations compared to their less able peers. This evidence reconciles the apparent contradiction that conglomerate investment patterns usually deviate from the predictions of the neoclassical model. While the focus of this dissertation is on examining the potential benefits associated with the conglomerate form of organization, the third part touches upon the ongoing debate on diversity and gender inclusion in organizations. The results of this part envision the importance of glass ceiling effects lower down the corporate hierarchy that prevent women from ascending the corporate ladder

Determinan dan Konsekuensi Pengungkapan Integrated Reporting

Penelitian ini bertujuan untuk menganalisis determinan dan konsekuensi pengungkapan integrated reporting. Sampel diambil dari 103 perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia selama tahun 2017-2019 (n=309). Penelitian ini terdiri dari dua model, di mana model pertama menguji determinan-determinan yang memengaruhi sebuah perusahaan untuk mengungkapkan elemen-elemen integrated reporting pada pelaporan perusahaan, kemudian model kedua menguji konsekuensi dari pengungkapan elemen-elemen integrated reporting tersebut, spesifiknya pada nilai perusahaan yang diukur dengan rasio price-to-book value. Pengungkapan sesuai kerangka integrated reporting dilakukan dengan mencantumkan delapan elemen integrated reporting yang diterbitkan oleh International Integrated Reporting Council pada annual report. Hasil analisis penelitian menunjukkan bahwa variabel ukuran perusahaan berpengaruh positif terhadap pengungkapan integrated reporting, dan variabel integrated reporting berpengaruh positif terhadap nilai perusahaan. Sedangkan variabel leverage, komisaris independen, dan kepemilikan institusional tidak berpengaruh terhadap pengungkapan integrated reportin

Essays on corporate risk and transition disclosures in the IFRS era

High-quality narrative communication in corporate financial reports is important to make company reporting more useful to investors. However, standard-setters face a taxing challenge in deciding how these sections in corporate financial reports could be regulated most effectively. The objective of this dissertation is to examine risk and transition disclosures by Finnish listed firms in the IFRS era. It will address whether corporate risk and transition disclosures can be improved by releasing a detailed risk disclosure standard and authoritative disclosure recommendations. Also, the economic consequences of high-quality risk disclosures on stock markets will be examined. Finally, this research examines the non-regulatory determinants of risk and transition disclosures. This research uses positivist research methodology, which is the mainstream methodological avenue in financial accounting research. The main test methods are the standard mean test and the multivariate regression analysis. The sample firms in all essays consist of Finnish listed firms. The disclosure data were manually collected and coded. Data for the other variables were retrieved from the Thomson One Banker Financial, IBES, Worldscope and Datastream databases, or collected manually from the annual reports of the firms or from the register of Euroclear Finland Oy. This dissertation documents that a detailed national risk disclosure standard increases the quality of overall risk reviews in several dimensions. The results also demonstrate that risk disclosure quality associates negatively with information asymmetry. Additionally, it was found that the usefulness of risk disclosures to investors depends on firm riskiness, investor interest and market conditions. Regarding corporate transition disclosure, the results indicate that recommended disclosure has more mandatory characteristics than voluntary disclosure. Moreover, this dissertation documents several significant non-regulatory determinants of risk and transition disclosures such as firm size, profitability, financial leverage, growth prospects, listing on the NYSE, and board independence. The results benefit regulators, managers, investors, and analysts. This dissertation demonstrates for standard-setters such as the IASB, and the FASB, the SEC, and other national regulatory bodies that risk reporting under IFRS can be influenced through a detailed national disclosure standard. The findings suggest that a single legislative provision may not be effective enough to ensure transparent disclosure of abstract issues such as risks. Many managers may need detailed descriptions of the required disclosures with illustrative examples. We also demonstrate that managers react to the CESR (now ESMA) transition disclosure recommendation, which is actively promoted by the Finnish Financial Supervision Authority. Thus, in some cases (for example when urgent disclosure improvements are needed) authoritative disclosure recommendations may be a faster and more cost-efficient way to achieve disclosure improvements than laws or standard

Which of These is Not Like the Other? The Role of Segment Reporting Differentiation in Determining Firm Value

This study examines a firm’s excess value based on segment reporting for the firm and its peer group. Firms often operate in industry segments not reported by peers. When such operating segments are reported separately, the assessed covariance between the focal firm’s cash flows and those of its peers is reduced. As a result, I hypothesize that a larger difference in reported operating segments between the focal firm and its peer group increases the focal firm’s excess value. Additionally, when a peer group reports greater differences in operating segments, the focal firm will benefit from increased differentiation between firms in the peer group, also increasing focal firm excess value. Using peer groups based on product descriptions from Form 10-K filings, I construct a measure of segment reporting differentiation and find evidence consistent with my expectations. I also find the effects of reporting differentiating segment are more pronounced after an increase in mandatory disclosure precision (ASC 280), suggesting possible externalities due to increased mandatory reporting requirements. Overall, results are consistent with the idea that higher levels of differentiation by the focal firm and by peers reduce correlations between firms, affecting the focal firm’s excess value