Institutional Forces and Knowledge Search Strategies as Predictors of Entrepreneurial Venture Performance

Acknowledgment We are grateful to JSBM editor Eric Liguori and three anonymous reviewers for insightful comments on previous versions of this paper. We also acknowledge the guidance and input from Haiyang Li, the International Finance Corporation’s Enterprise Surveys program, and the Chinese National Bureau of Statistics. This research was supported by grants SRG2019-00146-FBA and CPG2020-00018-FBA awarded to Jean Jinghan Chen by the University of Macau.Peer reviewedPostprin

Strategic Forward-Looking Nonearnings Disclosure and Overinvestment

We examine whether tone management in different aspects of forward-looking statements (FLSs) is related to managers’ self-serving overinvestments. Using data for U.S.-listed firms between 2003 and 2019, we provide novel evidence that the abnormal tone of nonearnings-related qualitative FLSs' is significantly and positively related to firms’ overinvestments but that other aspects of FLSs are insignificant to overinvestments. Moreover, this relation is more substantial in financially unconstrained firms. Our findings reveal the heterogeneous roles of different aspects of FLSs in firms’ opportunistic disclosures concerning future overinvestments. Further analyses also indicate that this relationship is more pronounced for firms with less monitoring and managers with greater career concerns. We also employ instrumental variables with a two-stage least-square approach and a Heckman selection model to mitigate the endogeneity issue. Our results are robust after conducting a battery of robustness tests. Overall, our findings provide robust evidence that managers are likely to strategically manipulate nonearnings-related qualitative FLSs to mislead investors’ perception of firms' future fundamentals to achieve self-serving purposes

Impression Management, Forward-Looking Strategy-Related Disclosure, and Excess Executive Compensation: Evidence from China

We investigate whether overpaid executives in Chinese listed firms engage in impression management by using forward-looking strategy-related disclosure (FLSD) in management discussion and analysis (MD&A) narratives to justify their excess compensation. Using a sample of 8,437 firm-year observations of Chinese nonfinancial listed firms from 2007 to 2016, we find a significant and positive relationship between executive overpayment and impression management in FLSD. This positive relationship is more pronounced in state-owned enterprises (SOEs) than non-SOEs. We also find that a higher degree of board independence, higher institutional shareholdings, auditors, analysts, and the introduction of the anti-corruption campaign could lower such a positive relationship. These findings suggest that impression management in FLSD is reduced when corporate governance is strengthened. We also find that CEO duality could enhance this positive relationship. Further examining how the market reacts to such impression management, we find an immediate positive and significant market reaction to such impression management at the time of the annual report filing, which could further mitigate the negative perceptions from stakeholders due to excessive pay. Such a positive market reaction is reversed over a longer time horizon, which supports the opportunistic/symbolic nature of impression management in FLSD

Does board independence influence financial performance in IPO firms? The moderating role of the national business system

Prior evidence suggests that board independence may enhance financial performance, but this relationship has been tested almost exclusively for Anglo-American countries. To explore the boundary conditions of this prominent governance mechanism, we examine the impact of the formal and information institutions of 18 national business systems on the board independence-financial performance relationship. Our results show that while the direct effect of independence is weak, national-level institutions significantly moderate the independence-performance relationship. Our findings suggest that the efficacy of board structures is likely to be contingent on the specific national context, but the type of legal system is insignificant

International Cases of Corporate Governance

This book provides insights into current issues in corporate governance by examining twelve cases from the 2010s and 2020s where corporate governance was seen to be an issue. The cases are designed to introduce the reader to ‘real life’ episodes with corporate governance implications, shedding light on why corporate scandals continue to occuer, to what extent these are a corporate governance failure, and in which ways corporate governance – and the behaviour of those involved in ensuring good governance and an ethical culture in their business - may be improved in the future. This book will be of interest to businesspeople, students of business, and lawyers and motivate discussion on the reasons why corporate governance failed, or was seen to be inadequate

Determinants of capital structure - empirical evidence from Chinese company panel data

This paper develops a preliminary study to explore the determinants of capital structure of Chinese-listed companies using firm-level panel data. The findings reflect the transitional nature of the Chinese corporate environment. They suggest that some of the insights from modern finance theory of capital structure are portable to China in that certain firm-specific factors that are relevant for explaining capital structure in developed economies are also relevant in China. However, neither the trade-off model nor the Pecking order hypothesis derived from the Western settings provides convincing explanations for the capital choices of the Chinese firms. The capital choice decision of Chinese firms seems to follow a “new Pecking order”—retained profit, equity, and long-term debt. This is because the fundamental institutional assumptions underpinning the Western models are not valid in China. These significant institutional differences and financial constraints in the banking sector in China are the factors influencing firms' leverage decision and they are at least as important as the firm-specific factors. The study has laid some groundwork upon which a more detailed evaluation of Chinese firms' capital structure could be based

The characteristics and current status of China's construction industry

The development of China's construction industry is presented by describing its current status and highlighting its achievements, identifying the main constraints preventing the industry from playing a more effective and efficient role in the country's economic development. Fundamental changes occurred in the construction industry after the economic reform, and the industry has been playing a very important role in the national economy, having made impressive progress and been developed at an amazing speed. However, reforms in the construction industry are difficult since this industry is not a single sector. The reform process by its very nature is not systematic. The challenges ahead are serious, and deeper reforms of the economic system are required.China, Construction Industry, Economic Reform, Business Environment,

Expansion strategy of international hotel firms

This paper examines the expansion choice between ‘hierarchical’ and ‘market’ modes of development decision of international hotel companies. It develops a theoretical framework, combining both transaction cost economics (TCE) and agency theory (AT), to identify the country- and firm-specific factors that influence the choice among franchising, management contracts, and company ownership. The robustness of framework is supported by the empirical results using cross-sectional data of new development for international hotels. It suggests that the most influential factor on the development decision is the degree of proprietary content and idiosyncratic knowledge embedded in the service provided. The higher the market segment of operation, the higher the specialised skills and managerial expertise required for hotels to operate according to standards; therefore, the more likely a hierarchical mode will be used for their development

Development of urban housing policies in China

Housing in China has proved problematic for many years. Since economic reform started in the 1980s, urbanization has been a token of modernization, and consequently housing provision in urban areas has been a major social and economic issue. The major housing problem in China is the scarcity of supply of housing provision. This paper analyses the initial housing reform prior to 1993, and points out the reasons for the lack of success and the lessons drawn from it. It also studies the present reform programme from 1993, and highlights the problems associated with it. It shows that the housing reforms so far, while having moved away from a complete socialist provision of housing, have gone only a small part of the way to a free market in housing. The reforms have been proved disappointing. Although privatization of housing has been the major objective of housing reforms, the reforms are still focused on the rental sector. On the economics side, the rents are set below costs, and the link between the value that people place on housing and the cost to the country's economy has failed to be appreciated. On the management side, the critical shortcoming of the strategy is its inability to bring an end to the state-owned enterprise's direct obligations for employee housing. Several problems associated with the current reforms have also been identified, especially on the legal side.China, Economic Reform, Urban Housing, Privatization, State-owned Enterprise,