Family Control and Financing Decisions

Empirical studies examining the financing decisions of the firm focus exclusively on publicly held firms, not family-controlled firms despite their economic importance. This study investigates the external financing behavior of family-controlled firms, using a comprehensive sample of 777 large European firms during the period 1998 to 2008. We document that, unlike nonfamily-controlled firms, the external financing decisions of family-controlled firms are influenced by control incentives and information asymmetry considerations. We find that family firms have a strong preference for debt financing, a noncontrol diluting security, while they are more reluctant to raise capital through equity offerings in comparison to nonfamily firms. We also find that credit markets, view family firms as more risk-averse and that family firms invest more in low-risk (fixed-asset capital expenditures (CAPEX)), than in high-risk investments (R&D expenditures) confirming their non-risk seeking behavior.Family firms, financing decisions, equity issues, debt issues, capital structure.

Creditor Rights, Country Governance, and Corporate Cash Holdings

This study examines the impact of creditor rights on cash holdings using a sample of firms from 48 countries. We argue that creditor rights affect the willingness of lenders to provide credit, which in turn affects the need for internal liquidity and cash holdings. Consistent with this, we find that corporate cash holdings decline with the strength of creditor rights. We also find that this relation depends on the quality of country governance. Among well-governed countries, firms hold less cash as creditor rights strengthen. In contrast, cash holdings increase with creditor rights in poorly governed countries. In these countries, it appears that the fear of expropriation motivates creditors with stronger rights to require higher levels of cash holding by borrowers

Balance Sheet Exchange Rate Exposure, Investment and Firm Value : Evidence from Turkish Firms

This paper provides evidence for the effects of a combination of balance sheet exchange rate exposure and real exchange rate movements on investment. In highly inflationary developing economies like Turkey, firms use the foreign curency denominated assets and debts to defend themselves against inflationary effects and try to benefit from open positions when the currency is undervalued or overvalued. With measuring balance sheet foreign currency exposures for Turkish Industrial firms in the period of 2000-2003, we show that the degree of exchange rate exposure is correlated with financial positions of the firms, but not with the size and affiliation with either holdings or banks. Based on the evidence that firms value and investment are endogenous, we find that the firms with negative (positive) balance sheet exchange rate exposure decrease their investment by the depreciation (appreciation) of the value of TL. In addition, we show that there is a positive association of expansion in investment with the firm value.Balance Sheet Exposure, Foreign Exchange Risk, Investment, Firm Value, Emerging Markets

The Long-Term Performance of Initial Public Offerings (IPOs): Venture Capitalists, Reputation of Investment Bankers, and Corporate Structure

The Initial Public Offerings (IPOs) literature has uncovered the underpricing, hot issue markets, and long-term underperformance anomalies. The long-term underperformance of IPO firms has gained the focus of recent academic attention. Recent studies document that venture capitalists, and the reputation of investment bankers are associated with the long-term performance of firms going public. The lack of venture capitalists has been shown to relate with the long-term underperformance of IPO firms. On the other hand, IPO firms underwritten by less reputable underwriters have been found to experience more negative long-term market adjusted returns. Unlike previous studies, this study examines the interactive effects of venture capitalists, and the reputation of investment bankers on the long-term performance of IPOs using alternative performance measures. Moreover, we examine the possible interactive effects of institutional ownership with venture capitalists and the reputation of investment bankers. It is argued that the investigation of the joint effects of venture capitalists, reputation of investment bankers, and institutional investors on the long-term performance of IPO firms is more likely to throw additional light on the long-term underperformance of IPO firms than examining the role of these factors independently. In addition, this study investigates whether the corporate structure of the firm is associated with the long-term performance of IPOs. This investigation relies on 456 IPO transactions over the period of 1989–1994. Results based on raw and adjusted buy- and-hold returns show that the reputation of investment bankers on the long-term performance of IPO firms is negligible, if any. These results are inconsistent with the findings of Carter, Dark, and Singh (1998). However, venture backed IPOs with considerable institutional ownership experience superior long-term performance. Consistent with Brav and Gampers (1997), our evidence shows that long-term performance of IPO firms is not significantly different from counterpart IPO firms. Size/book-to-market/industry adjustment not only decreases underperformance of non-venture backed IPO firms, but also eliminates the superior performance of venture-backed IPO firms relative to both, market and non-venture backed IPO firms. Finally, the analysis provides little evidence in support of the corporate diversification hypothesis which states that diversified IPO firms have lower long-term performance in comparison to focused IPO firms

Creditor Rights and R&D Expenditures

Manuscript Type: Empirical Research Question?Issue: This study examines the impact of creditor rights on R&D intensity (R&D/total assets). We argue that managers in countries with strong creditor rights have more incentives to reduce cash flow risk and therefore limit expenditures on R&D more than managers located in countries with weak creditor rights. Research Findings/Insights: Using a sample of over 21,000 firms from 41 countries, our research is one of the first to document that strong creditor rights are indeed associated with reduced R&D intensity. This negative relationship is observed in market‐based countries, but not in bank‐based countries. Moreover, the results show that the negative effect of creditor rights on R&D intensity is usually stronger (more negative) for firms facing or near financial distress. We observe that the determinants for R&D intensity consist of both country and firm level variables and firm level variables appear to be more important in explaining the variance of R&D intensity. Theoretical/Academic Implications: This study documents an important link between creditor rights and R&D intensity. Our empirical procedure specifically accounts for the fact that R&D intensity and debt are likely to be jointly determined. Practitioner/Policy Implications: This research is important to policy makers interested in understanding the determinants of firms\u27 R&D intensity. In particular, our study suggests a possible harmful effect of strong creditor rights, namely the possibility that R&D intensity will be lowered

Environmental and Financial Performance of Fossil Fuel Firms:A Closer Inspection of their Interaction

We investigate the relationship between environmental and financial performance of fossil fuel firms. To this extent, we analyze a large international sample of firms in chemicals, oil, gas, and coal with respect to several environmental indicators in relation to financial performance for the period 2002-2013. We find that these firms have significantly higher scores on environmental performance efforts than other firms. We use a simultaneous equations system to identify the direction of the relationship between environmental and financial performance of the firms. We find that environmental outperformance has no impact on financial performance for chemical firms, reduces returns and risks for coal companies, has a mixed impact on returns in oil and gas, and reduces financial risks for oil and gas firms. Financial outperformance reduces environmental performance in all fossil fuel (sub)industries investigated. Our findings mainly support the opportunistic view regarding the impact of financial returns, which holds that financial performance negatively impacts social performance. Regarding financial risk, we find support for the stakeholder perspective where good environmental performance is beneficial from a finance perspective. We conclude to substantial differences in the environmental-financial performance relationship along fossil fuel firms in different subindustries. (C) 2016 Elsevier B.V. All rights reserved.</p

The Impact of Executive Pay Gap on Environmental and Social Performance in the Energy Sector:Worldwide Evidence

This study examines the impact of the executive pay gap on corporate social performance (CSP), which is the average of social and environmental performance scores for firms in the energy sector worldwide. Following agency theory, we find that firms that pay their executives more than the industry average (pay gap) have lower CSP. We also examine the role of corporate governance at the firm level and market-supporting institutions at the country level to explain the relationship between the pay gap and CSP. The negative effect of the pay gap on CSP is less pronounced for firms located in countries with weaker market-supporting institutions. This evidence is consistent with the idea that firms use CSP to reach a broad investor base in weak market conditions. However, our results show that firm-level corporate governance is not as effective as country-level market institutions. This evidence supports the notion that development of country-level institutions drives CSP in the energy sector

Reforms protecting minority shareholders and firm performance:International evidence

This study investigates the effect of corporate governance reforms protecting minority shareholders on the firm value measured by Tobin’s Q. Using the difference-in-differences estimation and a large international sample from 65 countries for the period 2005–2018, the results show that the firm values increase more in the reform countries than non-reform countries relative to pre-reform levels. This positive effect changes for firms with high and low levels of debt. Moreover, the values after reforms increase more for firms located in civil countries and in countries with rule-based reform approaches and low debt enforcement because the reforms strengthening minority shareholder protection are more efficient in those countries. The evidence is robust to accounting-based performance as well

Board Gender Diversity and Voluntary Carbon Emission Disclosure

In this study, we investigate the effect of board gender diversity on the decision to disclose carbon emissions voluntarily. Using an international sample consisting of 22,841 firm-year observations from 38 countries for the period 2010&ndash;2019, we determine the existence of a positive relationship between the percentage of female directors on the board and carbon disclosure. This evidence supports agency and resource dependency theories, as a gender diverse board indicates strong governance and better communication among stakeholders. Additionally, we examine the moderating effect of gender quotas across sample countries, where either soft or hard quotas have been implemented. We show that the number of firms disclosing their carbon emissions is, on average, higher in countries with either hard or soft quotas than in countries with no quota. Moreover, the positive effect of board gender diversity on voluntary carbon emission disclosure is similar across firms in countries with quotas and without quotas. The reported results demonstrate that there seems to be no need for country-level strict regulations regarding the firm-level percentage of female representation on the board to be effective, as gender board diversity in countries with no quotas has a similar effect in explaining voluntary carbon disclosure as in countries with quotas and those changing to quota regulation