Sustainable growth rate, corporate value of US firms within capital and labor market distortions: The moderating effect of institutional quality

Research background: Understanding how distortions in capital and labor markets affect corporate value and sustainable growth is crucial in today's economy. These distortions can disrupt resource allocation and economic sustainability. Additionally, the role of institutional quality in shaping these dynamics requires thorough exploration.Purpose of the article: We quantify the effect of capital and labor market distortions on corporate value and sustainable growth rate (SGR) and how this association is moderated by institutional quality.Methods: Stemming from the sample criteria, we calibrated a final sample of 1971 United States-listed manufacturing firms for 2012–2022. This research offers insights into market inefficiencies and institutional effects. Progressing towards objectives, we use advanced techniques like feasible generalized least squares and generalized methods of moments. These methods help us rigorously analyze complex relationships among study variables.Findings & value added: Three key findings emerge: first, capital and labor market distortions have a negative and significant influence on corporate value and sustainable growth. Our primary finding implies that increasing distortions significantly reduce sustainable growth's value and potential. Second, we find institutional quality has a positive significant effect on corporate value and sustainable growth. Third, institutional quality positively moderates the association between capital and labor market distortions, corporate value, and sustainable growth. Findings suggest that institutional quality, as a potential mechanism, improves the efficiency of resource allocation and optimizes the sustainable economic system to lessen the negative effect of factor market distortions on corporate value and SGR. Besides, we conduct robustness checks to validate our findings. Finally, we offer policymakers and stakeholders actionable insights

Firm climate change risk and financial flexibility: Drivers of ESG performance and firm value

This study investigates how a firm's climate change risk (FCCR) and financial flexibility (FIFL) affect its value and environmental, social, and governance (ESG) performance. We use data from publicly listed US firms for 2012–2021. We employed four estimation methods: bootstrap quantile regression, feasible generalised least squares, a generalised method of moments, and fixed effects with Driscoll-Kraay standard errors. Our main findings indicate that climate change risk has a negative effect on firm value and a positive effect on ESG performance and that financial flexibility moderates these effects by reducing risk and enhancing value. These results are robust against alternative measures and estimation techniques. Our study provides novel insights into the influence of climate risk and financial flexibility on firm value and ESG performance. We also discuss the implications of our results for academics, practitioners, and policymaker

Determinants of corporate cash holdings among Asia’s emerging and frontier markets : empirical evidence from non-financial sector

Abstract: The determinants of Corporate Cash Holdings (CCH) have been a deep-seated debate among institutions and scholars over the last couple of years. Therefore, this paper aims to investigate the determinants of CCH among emerging and frontier markets (Bangladesh, China, India, Pakistan). Due to endogeneity, the generalized methods of moments (GMM) methodology was applied to capture the impacts of different variables, including profitability, firm size, financial leverage growth opportunity, dividend payout, and the business cycle on CCH. The result shows that the firm’s size positively enhances CCH in emerging and frontier markets. Growth opportunity is negatively influenced by CCH in the case of Bangladeshi firms while a positive driver in emerging markets. The business cycle has a negative bearing on CCH across Pakistan, India, and Bangladeshi firms while positive and significant in Chinese firms. Financial leverage and dividend payout were positive determinants of CCH in Chinese firms, while they appear negative for Pakistan, India and Bangladeshi firms. Finally, profitability has a positive and significant impact on CCH in frontier and emerging markets. The study contributes to the incumbent determinants of CCH literature by introducing a fresh outlook and offering policy insights helpful in emerging and frontier markets perspectives

The Corporate Social Responsibility and Firms' Financial Performance: Evidence from Financial Sector of Pakistan

Competitiveness of financial sector has increased manifold and the issue of corporate social responsibility (CSR) has become an indispensable concern parallel to concentrating on profitability enhancement. Businesses are consider as social units, they have to serve stakeholders, and tend to execute CSR on priority basis and subsequent disclosure as well. Unhealthy CSR policies may cause externalities and eventual relinquished customers. The main purpose of study is to shed light on the impact of corporate social responsibility on financial performance of banking sector of Pakistan, using a sample of 30 commercial banks listed with Pakistan stock exchange (PSX) for the period of 10 years from 2006 to 2015, selected based upon market capitalization. We applied pooled regression models to investigate the impact of CSR on financial performance. Empirical findings signify the robustness of pooled model that documented a positive and significant impact of CSR on ROA, ROE and EPS. This premise holds that CSR has positive and significant impact on FP of selected commercial banks of Pakistan. Based upon key findings, this study postulates CSR phenomenon is consider as an essential growth element and financial performance-boosting tool by banking industry of Pakistan. Eventually, mainstream of the studies on CSR are in context of well-established companies and nations, however, developing nations are least emphasized, thus the findings of this study greatly contribute in body of knowledge as well as offer pivotal implications for policy makers and governance of financial sector. Keywords: Corporate social responsibility (CSR), financial performance, financial sector, Pooled regression JEL Classifications: M14; L25; O1

The Impact of Working Capital Management on Firms Financial Performance: Evidence from Pakistan

The purpose of this study was to empirically explore the impact of working capital management on firms performance of chosen manufacturing firms listed in Karachi Stock Exchange (KSE). The quantitative research methods, correlation matrix and multiple regressions, secondary data and purposive sampling have been worked out. A random sample of 50 listed non-financial companies on Pakistani Stock Market was selected for the period ranging from year 2005 to 2014. The working capital management has been used as an independent variable i.e. inventory turnover (ITO), cash conversion cycle (CCC), average collection period (ACP), and average payment period (APP). The firm performance (FP) has been used as dependent variable i.e. Return on Asset (ROA), Return on Equity (ROE) and Earning per Share (EPS). The results of multiple regression articulated that the APP, ITO and CCC have negative and significant impact on ROA but ACP has positive and significant impact on ROA. While APP has negative significant impact on ROE. The Inventory turnover (ITO) has negative significant impact on EPS while ACP has positive and statistically significant impact on. The study results advocated that the firm performance of selected firms is influenced by working capital management. By validating the findings with previous researchers, this endeavor will contribute to the literature. It will be beneficial to the academic, social and practical deportment. The study findings endowed with deeper insights into working capital management practices and present recommendations that in turn bring improvements in the firm performance of the targeted firms. Keywords: Working capital, working capital management, financial performance, Pakistan JEL Classifications: C10, C30, D73, E37, F6

Impact of boardroom diversity on corporate financial performance

Abstract This study investigates the impact of boardroom diversity (BD) on firms’ financial performance (FP), drawing on economic and resource dependency theory. The study further explores the influence of strategic change (SC) on this nexus, using a six-dimensional index to measurse BD and SC. A dataset of 240 non-financial firms listed on four stock exchanges (Moscow, Shanghai, Bombay, and Pakistan) over a 13-year period (2008–2020) is analyzed employing the generalized method of moments to address the common endogeneity problem in econometrics specification. The empirical results indicate that BD has a positive impact on FP, however, the impact is weakened by SC. The robustness of the findings is confirmed through alternative estimators. The study provides useful policy implications for managers and practitioners, suggesting that increasing BD can lead to improved FP, but careful consideration must be given to how SC may influence this connection

Effect of Economic Policy Uncertainty on China’s Stock Price Index: A Comprehensive Analysis Using Wavelet Coherence Approach

Amid China’s dynamic economic backdrop, Economic Policy Uncertainty (EPU) and stock market indices hold pivotal roles, this research delves into EPU and its connection with the stock price index (SPI). By uncovering patterns linking these variables, the study aims to provide a nuanced understanding of their relationship. We employ wavelet coherence analysis and a phase difference approach to investigate EPU impact on China’s SPI from 2010 to 2020. Through this lens, the interactions between these economic variables are illuminated. Using wavelet coherence analysis, the temporal dynamics of EPU and SPI are explored. The phase difference approach further highlights the temporal alignment of fluctuations, capturing the intricate relationship. The analysis reveals compelling findings. A robust correlation between EPU and the SPI emerges, particularly at low frequencies, underscoring a substantive connection. The phase difference analysis indicates a positive influence of EPU on stock prices, highlighting its impact on SPI. Besides, implications imply EPU shapes stock market behavior, moving beyond mere correlation. A causal link is established, emphasizing EPU’s proactive role in influencing stock prices. Bidirectional causation underscores the interdependence of EPU and stock price movements. This research enhances understanding of EPU’s effects on stock prices in China. Finally, this study provides important implications for investors, policymakers, and businesses, guiding strategic decisions amid a dynamic economic landscape