We investigate the impact of family control on corporate social responsibility (CSR) performance. Using newly collected data on the ultimate ownership structure of publicly traded firms in nine East ...Asian economies, we find that family-controlled firms exhibit lower CSR performance, consistent with the expropriation hypothesis of family control. The negative relationship between family control and CSR is robust to alternative measures of family control, different components of CSR, as well as to endogeneity tests, subsample tests, and alternative estimation methods. We further find that CSR underperformance concentrates in family firms with greater agency problems and in countries with weaker institutions. Moreover, the underperformance of East Asian family firms holds when controlling for the effects of other large shareholders and when comparing with family firms from other countries. These findings contribute to understanding the determinants of CSR and highlight the importance of corporate governance and the institutional environment in improving CSR performance of family-controlled firms.
National culture and dividend policy Shao, Liang; Kwok, Chuck CY; Guedhami, Omrane
Journal of international business studies,
10/2010, Letnik:
41, Številka:
8
Journal Article
Recenzirano
This interdisciplinary study examines how national culture affects corporate dividend policies. The dividend puzzle is one of the most studied, yet unresolved, issues in financial economics. Prior ...theoretical and empirical research has suggested several explanations of the dividend puzzle that are rooted mainly in agency, asymmetric information, "bird in hand", and pecking order theories. The main intuition behind our analysis is that dividend policy may be determined not only by an objective assessment of the severity of agency and asymmetric information problems within a firm, but also by management's and investors' subjective perceptions of these problems, which hinge on their national culture. Using Schwartz's national culture dimensions, Conservatism and Mastery, we find that Conservatism is positively related and Mastery negatively related to dividend payouts for a sample of 27,462 firm-years from 21 countries between 1995 and 2007. These effects are robust to controls for a wide variety of other determinants of dividend policy -including investor protection, stock market performance, financial system configuration, tax advantage, economic development, and dividend catering premium -and to alternative culture proxies and sub-period windows. Our findings that national culture affects perceptions of and responses to agency and information asymmetry have important implications for policymakers and multinational enterprises.
We examine the effect of corporate social responsibility (CSR) on the cost of equity capital for a large sample of US firms. Using several approaches to estimate firms’ ex ante cost of equity, we ...find that firms with better CSR scores exhibit cheaper equity financing. In particular, our findings suggest that investment in improving responsible employee relations, environmental policies, and product strategies contributes substantially to reducing firms’ cost of equity. Our results also show that participation in two “sin” industries, namely, tobacco and nuclear power, increases firms’ cost of equity. These findings support arguments in the literature that firms with socially responsible practices have higher valuation and lower risk.
National culture and corporate investment Shao, Liang; Kwok, Chuck C Y; Zhang, Ran
Journal of international business studies,
09/2013, Letnik:
44, Številka:
7
Journal Article
Recenzirano
We explore the relation between individualism and horizons and types of corporate investment, based on individualism's implications for risk taking. We find that firms in individualistic countries ...invest more in long-term (risky) than in short-term (safe) assets. Moreover, the effect of individualism on long-term investment hinges on R&D: firms in individualistic countries invest more in R&D projects but not more in physical assets. To test whether risk taking is the channel through which individualism works, we employ two-stage ordinary least squares and other analyses to nullify alternative explanations, such as: (1) uncontrolled institutions determine both individualism and R and (2) firms in individualistic countries invest more in R&D because they have higher investment efficiency, or pick less-risky R&D projects. We further find that individualistic firms tend to employ excess cash to increase R&D rather than increase dividends, and R&D decisions are less reliant on internal financing but more responsive to growth opportunities in individualistic countries.
National culture and corporate debt maturity Zheng, Xiaolan; El Ghoul, Sadok; Guedhami, Omrane ...
Journal of banking & finance,
02/2012, Letnik:
36, Številka:
2
Journal Article
Recenzirano
We investigate the influence of national culture on corporate debt maturity choice. Based on the framework of Williamson, we argue that culture located in social embeddedness level can shape ...contracting environments by serving as an informal constraint that affects human actors' incentives and choices in market exchange. We therefore expect national culture to be related to debt maturity structure after controlling for legal, political, financial, and economic institutions. Using Hofstede's four cultural dimensions (uncertainty avoidance, collectivism, power distance, and masculinity) as proxies for culture, and using a sample of 114,723 firm-years from 40 countries over the 1991-2006 period, we find robust evidence that firms located in countries with high uncertainty avoidance, high collectivism, high power distance, and high masculinity tend to use more short-term debt. We interpret our results as consistent with the view that national culture helps explain cross-country variations in the maturity structure of corporate debt. PUBLICATION ABSTRACT
Collectivism and corruption in bank lending Zheng, Xiaolan; Ghoul, Sadok El; Guedhami, Omrane ...
Journal of international business studies,
05/2013, Letnik:
44, Številka:
4
Journal Article
Recenzirano
This paper examines how national culture, and collectivism in particular, influences corruption in bank lending. We hypothesize that interdependent self-construal and particularist norms in ...collectivist countries lead to a higher level of lending corruption through their influence both on the interactions between bank officers and bank customers and on the dynamics among bank colleagues. Using a sample covering 3835 firms across 38 countries, we find strong evidence that firms domiciled in collectivist countries perceive a higher level of lending corruption than firms domiciled in individualist countries. In terms of economic magnitude, the effect of collectivism is substantially larger than the effects of other cultural dimensions (uncertainty avoidance, masculinity, and power distance) and institutional factors identified in prior studies (bank supervision, bank competition, information sharing, and media monitoring). We further find that the positive relationship between collectivism and lending corruption is not driven by endogeneity, and that it is robust to different measures of bank corruption, different measures of collectivism, and different estimation methods. Finally, we find that the link between collectivism and lending corruption cannot be explained by the role of the government in the economy, political connections, biased responses from disgruntled borrowers, or relationship lending.
It is well known that firm-level corporate governance practices vary mainly between rather than within countries, but country-level factors such as legal and financial institutions explain less than ...50% of this cross-country variation. In this article we show that two dimensions of national culture - individualism and uncertainty avoidance - capture about 90% of the country fixed effects and outperform the country-level explanatory variables used in prior literature. We argue that culture works through a tradeoff between managerial expertise and certainty of control, a tradeoff largely overlooked by prior literature, that captures a country's preference for the Anglo-Saxon approach versus the direct control approach for governance. Consistent with this argument, we find that the effect of culture on corporate governance varies across firms with different needs for managerial expertise and certainty of control. We also find that culture interacts with other factors to determine firm-level governance.
Most empirical research examines how the institutional environment of corruption shapes the behavior of multinational corporations (MNCs). In this study, we would like to highlight the other side of ...the picture: how the presence of MNCs may shape the institutional environment of corruption over time. We propose three avenues through which the MNCs may have an impact on its host institutions: regulatory pressure effect, demonstration effect, and professionalization effect. Based on extensive data on foreign direct investment and corruption for a large sample of countries over the last 30 years, the empirical results are generally consistent with our hypothesis. Such findings provide a glimmer of hope for the future of the host country where corruption is prevalent.
Using a large hand-collected database of 605 privatized firms from 48 countries, we examine the relationship between the collectivism measure of culture and residual state ownership in privatized ...firms. We find that the continued role of government in privatized firms is positively related to collectivism. This result is robust to using alternative measures of collectivism and government control, as well as when we address the endogeneity of collectivism. Finally, we examine the economic outcomes of culture at the firm level, focusing primarily on performance, efficiency, risk-taking, and valuation measures. We report that privatized firms with high residual state ownership exhibit lower performance, valuation, efficiency, and risk-taking in collectivist societies. Our results suggest that formal institutions are not, as sustained by previous studies, the main/exclusive constraints on the privatization reform.
Recent events, most notably the Global Financial Crisis and the COVID-19 pandemic, have made it increasingly apparent that liquidity is synonymous with corporate survival. In this paper, we explore ...how governments can fulfill an important need as suppliers of liquidity. Building on the financing advantage view of state ownership, we theorize how state-owned enterprises (SOEs) may provide capital by offering trade credit to customer firms. The data indicate a positive relation between the level of state ownership and the provision of trade credit. Using an institution-focused framework, we further determine that the nation’s institutional environment systematically affects the opportunities and motivations for SOEs to grant trade credit. Specifically, we find that SOEs grant more trade credit in countries with less developed financial markets, weaker legal protection of creditors, less comprehensive information-sharing mechanisms, more collectivist societies, left-wing governments, and higher levels of unemployment. Firm-level factors also influence the credit-granting decisions of SOEs, with SOEs with lower levels of state ownership and higher extents of internationalization offering lower amounts of trade credit. Overall, our study offers novel insights regarding the important role of state-owned firms as providers of liquidity.
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