Do Foreigners Invest Less in Poorly Governed Firms?

As domestic sources of outside finance are limited in many countries around the world, it is important to understand the factors that influence whether foreign outside investors provide capital to a country's firms. This study examines whether and why investor concern about corporate governance results in fewer foreign holdings. We use a comprehensive set of foreign holdings by U.S. investors as a proxy for foreign investment and analyze a sample of 4,411 firms from 29 emerging market and developed economies. We find that foreigners invest significantly less in firms that are poorly governed, i.e., firms that have ownership structures that are more conducive to outside investor expropriation. Interestingly, this finding is not simply a matter of a country's economic development but appears to be directly related to a country's information rules and legal institutions. We therefore argue that information problems faced by foreign investors play an important role in this result. Supporting this explanation, we show that foreign investment is lower in firms that appear to engage in more earnings management.

Social capital, trust, and firm performance: the value of corporate social responsibility during the financial crisis

During the 2008-2009 financial crisis, firms with high social capital, measured as corporate social responsibility (CSR) intensity, had stock returns that were four to seven percentage points higher than firms with low social capital. High-CSR firms also experienced higher profitability, growth, and sales per employee relative to low-CSR firms, and they raised more debt. This evidence suggests that the trust between the firm and both its stakeholders and investors, built through investments in social capital, pays off when the overall level of trust in corporations and markets suffers a negative shock

Trust, social capital, and the bond market benefits of ESG performance

We investigate whether a firm’s social capital and the trust that it engenders are viewed favorably by bondholders. Using firms’ environmental and social (E&S) performance to proxy for social capital, we find no relation between social capital and bond spreads over the period 2006–2019. However, during the 2008–2009 financial crisis, which represents a shock to trust and default risk, high-social-capital firms benefited from lower bond spreads. These effects are stronger for firms with higher expected agency costs of debt and firms whose E&S efforts are more salient. During the crisis, high-social-capital firms were also able to raise more debt, at lower spreads, and for longer maturities. We find no evidence that the governance element of ESG is related to bond spreads. The gap between E&S performance of firms in the bottom and top E&S terciles has narrowed since the financial crisis, especially in the year prior to accessing the bond market

Does family control matter? International evidence from the 2008-2009 financial crisis

We study whether and how family control affects valuation and corporate decisions during the 2008–2009 financial crisis using a sample of more than 8,500 firms from 35 countries. We find that family-controlled firms underperform significantly, they cut investment more relative to other firms, and these investment cuts are associated with greater underperformance. Further, we find that within family groups liquidity shocks are passed on through investment cuts across the group. Our evidence is consistent with families taking actions to increase the likelihood that the firms under their control and their control benefits survive the crisis, at the expense of outside shareholders

Firm-Level Evidence of Shifts in the Supply of Credit

Using panel data of 68,800 small and large firms, I examine whether firms are subject to shifts in the supply of credit over the business cycle. Shifts in the supply of credit are identified by exploring how firms substitute between commitment credit - lines of credit - and non-commitment credit. I find that firms on average rely more on commitment credits when monetary policy is tight and when the financial health of banks is weaker. The results are consistent with a bank lending channel of monetary policy and with shifts in the supply of credit following deteriorations in banks' balance sheets

To which world regions does the valence–dominance model of social perception apply?

Over the past 10 years, Oosterhof and Todorov’s valence–dominance model has emerged as the most prominent account of how people evaluate faces on social dimensions. In this model, two dimensions (valence and dominance) underpin social judgements of faces. Because this model has primarily been developed and tested in Western regions, it is unclear whether these findings apply to other regions. We addressed this question by replicating Oosterhof and Todorov’s methodology across 11 world regions, 41 countries and 11,570 participants. When we used Oosterhof and Todorov’s original analysis strategy, the valence–dominance model generalized across regions. When we used an alternative methodology to allow for correlated dimensions, we observed much less generalization. Collectively, these results suggest that, while the valence–dominance model generalizes very well across regions when dimensions are forced to be orthogonal, regional differences are revealed when we use different extraction methods and correlate and rotate the dimension reduction solution.C.L. was supported by the Vienna Science and Technology Fund (WWTF VRG13-007); L.M.D. was supported by ERC 647910 (KINSHIP); D.I.B. and N.I. received funding from CONICET, Argentina; L.K., F.K. and Á. Putz were supported by the European Social Fund (EFOP-3.6.1.-16-2016-00004; ‘Comprehensive Development for Implementing Smart Specialization Strategies at the University of Pécs’). K.U. and E. Vergauwe were supported by a grant from the Swiss National Science Foundation (PZ00P1_154911 to E. Vergauwe). T.G. is supported by the Social Sciences and Humanities Research Council of Canada (SSHRC). M.A.V. was supported by grants 2016-T1/SOC-1395 (Comunidad de Madrid) and PSI2017-85159-P (AEI/FEDER UE). K.B. was supported by a grant from the National Science Centre, Poland (number 2015/19/D/HS6/00641). J. Bonick and J.W.L. were supported by the Joep Lange Institute. G.B. was supported by the Slovak Research and Development Agency (APVV-17-0418). H.I.J. and E.S. were supported by a French National Research Agency ‘Investissements d’Avenir’ programme grant (ANR-15-IDEX-02). T.D.G. was supported by an Australian Government Research Training Program Scholarship. The Raipur Group is thankful to: (1) the University Grants Commission, New Delhi, India for the research grants received through its SAP-DRS (Phase-III) scheme sanctioned to the School of Studies in Life Science; and (2) the Center for Translational Chronobiology at the School of Studies in Life Science, PRSU, Raipur, India for providing logistical support. K. Ask was supported by a small grant from the Department of Psychology, University of Gothenburg. Y.Q. was supported by grants from the Beijing Natural Science Foundation (5184035) and CAS Key Laboratory of Behavioral Science, Institute of Psychology. N.A.C. was supported by the National Science Foundation Graduate Research Fellowship (R010138018). We acknowledge the following research assistants: J. Muriithi and J. Ngugi (United States International University Africa); E. Adamo, D. Cafaro, V. Ciambrone, F. Dolce and E. Tolomeo (Magna Græcia University of Catanzaro); E. De Stefano (University of Padova); S. A. Escobar Abadia (University of Lincoln); L. E. Grimstad (Norwegian School of Economics (NHH)); L. C. Zamora (Franklin and Marshall College); R. E. Liang and R. C. Lo (Universiti Tunku Abdul Rahman); A. Short and L. Allen (Massey University, New Zealand), A. Ateş, E. Güneş and S. Can Özdemir (Boğaziçi University); I. Pedersen and T. Roos (Åbo Akademi University); N. Paetz (Escuela de Comunicación Mónica Herrera); J. Green (University of Gothenburg); M. Krainz (University of Vienna, Austria); and B. Todorova (University of Vienna, Austria). The funders had no role in study design, data collection and analysis, decision to publish or preparation of the manuscript.https://www.nature.com/nathumbehav/am2023BiochemistryGeneticsMicrobiology and Plant Patholog

International Evidence on Cash Holdings and Expected Managerial Agency Problems

This article uses managerial control rights data for over 5000 firms from 31 countries to examine the net costs and benefits of cash holdings. We find that when external country-level shareholder protection is weak, firm values are lower when controlling managers hold more cash. Further, when external shareholder protection is weak we find that firm values are higher when controlling managers pay dividends. Only when external shareholder protection is strong do we find that cash held by controlling managers is unrelated to firm value, consistent with generally prevailing U.S. and international evidence. , Oxford University Press.