How is moral hazard related to financing R&D and innovations?

This study investigates which corporate governance and firm-specific characteristics lead firms to be prone to ex-post moral hazard by misallocating the funds that they specifically borrowed for financing their R&D activities. We study 106 firms that received a specially designed loan by a Turkish government to be invested only in R&D and technological innovations. We find that as the size of the loan increases firms are less prone to moral hazard. For family firms our results support the agency theory. For large shareholders, initially our results are aligned with the agency theory but after controlling for the loan size our results hold for the stewardship theory. We also find that as amount of the loans increases relative to size of firms, the performance of projects financed by these loans plummets. Finally, we show that moral hazard related to R&D and innovation activities varies across industries.peer-reviewe

Firms cash management, adjustment cost and its impact on firms’ speed of adjustment-A cross country analysis

We investigate the firms’ specific attributes that determine the difference in speed of adjustment (SOA) towards the cash holdings target in the Scandinavian countries: Denmark, Norway and Sweden. We examine whether Scandinavian firms maintain an optimal level of cash holdings and determine if the active cash holdings management is associated with the firms’ higher SOA and lower adjustment costs. Our findings substantiate that a higher level of off-target cost induces professional managers to rebalance their cash level towards the optimal balance of cash holdings. Our results reveal that Scandinavian firms accelerate SOA towards cash targets primarily for the precautionary motive. Moreover, our results show that SOA is heterogeneous across Scandinavian firms based on adjustment cost and deviate cash holdings towards the target mainly with the support of internal financing. Furthermore, our empirical findings show that the SOA of Norwegian firms is significantly higher than the Danish and Swedish firms

The Impact of Environmental Strengths and Concerns on the Accounting Performance of Firms in the Energy Sector

Energy sector firms are highly affected by the imposition of costs and community attitudes related to their environmental impact. In this chapter, we study the impact of environmental strengths and concerns of firms in the energy sector on their firm performance. We aim to uncover whether positive environmental activities add extra costs or help firms in the energy industry achieve a higher future profitability and compare this impact with firms that do not belong to that industry. Based on the environmental scores compiled by Kinder, Lyndenberg and Domini Research and Analytics, Inc., we show that the environmental concerns of US firms in the energy industry are significantly lower than their environmental strengths and this difference is much larger for energy firms than for firms that do not belong to the energy industry. In addition, we find that only the environmental concerns of energy sector firms have predictive value in terms of future corporate performance that is incremental to a group of earnings-predicting variables. Our results for the energy sector indicate that reducing environmental concerns pays off by improving corporate profitability

The financial reward for environmental performance in the energy sector

This article studies the financial reward for environmental performance of firms in the energy sector. Because of their substantial impact on environment, energy sector firms convey a particular status in the environmental–financial performance question, as compared with firms outside this sector. We use the environmental scores compiled by Kinder, Lyndenberg, and Domini Research and Analytics to construct two portfolios that differ in their environmental performance. We find that, between 2000 and 2011, energy sector firms with good environmental performance financially outperform energy sector firms with poor environmental performance. A portfolio strategy with a long (short) position in energy sector firms with good (poor) environmental performance generates an annual abnormal return of 9.624% after correcting for market, size, book-to-market and momentum risks. For firms outside the energy sector, the performance of the two portfolios is statistically insignificant. Using the VIX index, we also show that the market does not reward environmental performance of energy sector firms in periods of high financial uncertainty

Introduction: Financial implications of regulations in the energy industry

The characteristics of the energy industry lead to natural monopoly. The technological and economic features of the industry are such that a single provider is often able to serve the overall demand at a lower total cost than any combination of smaller entities could. Competition cannot thrive under these conditions. For this reason, the regulations on this industry are not only targeted at fair pricing but also ensuring reliability and safety. Regulations on energy industry also target at their environmental impact as well. This book provides cross country studies on the financial, economic, and legal aspects of the regulations of energy firms

When corporate social responsibility causes tone inflation in earnings press releases: Evidence from the oil and gas industry

no ISSN. no volume/ issue.edition: Forthcomingstatus: publishe

The Impact of Environmental Strengths and Concerns on the Accounting Performance of Firms in the Energy Sector

Energy sector firms are highly affected by the imposition of costs and community attitudes related to their environmental impact. In this chapter, we study the impact of environmental strengths and concerns of firms in the energy sector on their firm performance. We aim to uncover whether positive environmental activities add extra costs or help firms in the energy industry achieve a higher future profitability and compare this impact with firms that do not belong to that industry. Based on the environmental scores compiled by Kinder, Lyndenberg and Domini Research and Analytics, Inc., we show that the environmental concerns of US firms in the energy industry are significantly lower than their environmental strengths and this difference is much larger for energy firms than for firms that do not belong to the energy industry. In addition, we find that only the environmental concerns of energy sector firms have predictive value in terms of future corporate performance that is incremental to a group of earnings predicting variables. Our results for the energy sector indicate that reducing environmental concerns pays off by improving corporate profitability.status: publishe

The Financial Reward for Environmental Performance in the Energy Sector

This article studies the financial reward for environmental performance of firms in the energy sector. Because of their substantial impact on environment, energy sector firms convey a particular status in the environmental–financial performance question, as compared with firms outside this sector. We use the environmental scores compiled by Kinder, Lyndenberg, and Domini Research and Analytics to construct two portfolios that differ in their environmental performance. We find that, between 2000 and 2011, energy sector firms with good environmental performance financially outperform energy sector firms with poor environmental performance. A portfolio strategy with a long (short) position in energy sector firms with good (poor) environmental performance generates an annual abnormal return of 9.624% after correcting for market, size, book-to-market and momentum risks. For firms outside the energy sector, the performance of the two portfolios is statistically insignificant. Using the VIX index, we also show that the market does not reward environmental performance of energy sector firms in periods of high financial uncertainty.status: publishe