Although the stakeholder framework proposes the multidimensionality of corporate social responsibility (CSR) (
Clarkson, 1995), previous research has yet to investigate the relationship between ...certain dimensions of CSR and corporate financial performance (CFP) in tourism-related industries. The purpose of this study was to disaggregate CSR into five dimensions based on corporate voluntary activities for five primary stakeholder issues: (1) employee relations, (2) product quality, (3) community relations, (4) environmental issues, and (5) diversity issues, and examine how each dimension would affect financial performance among firms within four tourism-related industries (airline, casino, hotel, and restaurant). While all CSR dimensions were proposed to have positive financial effects, results revealed that each dimension had a differential effect on both short-term and future profitability and that such financial impacts varied across the four industries. The findings can provide tourism managers with insights into which dimensions of CSR activities would improve their companies’ financial performance.
Recent declines in housing prices have focused attention on the relationship between negative housing equity and mortgage default. Theory implies that negative equity is a necessary condition for ...default, but not a sufficient one. This often-misunderstood result is clearly illustrated in a dataset of Massachusetts homeowners during the early 1990s; fewer than 10 percent of borrowers likely to have had negative equity at the end of 1991 experienced a foreclosure during the following three years. An econometric model of default estimated on two decades of Massachusetts housing data also predicts low default rates for current negative-equity borrowers. We develop a simple theoretical model to interpret these empirical findings and to assess potential foreclosure-reduction policies. Our results imply that lenders and policymakers face an information problem in trying to help borrowers with negative equity, because it is hard to determine which owners really need help in order to stay in their homes.
This study examines the impact that research and development (R&D) intensity has on corporate social responsibility (CSR). We base our research on the resource-based view (RBV) theory, which ...contributes to our analysis of R&D intensity and CSR because this perspective explicitly recognizes the importance of intangible resources. Both R&D and CSR activities can create assets that provide firms with competitive advantage. Furthermore, the employment of such activities can improve the welfare of the community and satisfy stakeholder expectations, which might vary according to their prevailing environment. As expressions of CSR and R&D vary throughout industries, we extend our research by analysing the impact that R&D intensity has on CSR across both manufacturing and non-manufacturing industries. Our results show that R& D intensity positively affects CSR and that this relationship is significant in manufacturing industries, while a non-significant result was obtained in non-manufacturing industries.
Sarbanes-Oxley and corporate risk-taking Bargeron, Leonce L.; Lehn, Kenneth M.; Zutter, Chad J.
Journal of accounting & economics,
02/2010, Volume:
49, Issue:
1
Journal Article
Peer reviewed
We empirically examine whether risk-taking by publicly traded US companies declined significantly after adoption of the Sarbanes-Oxley Act of 2002 (SOX). Several provisions of SOX are likely to ...discourage risk-taking, including an expanded role for independent directors, an increase in director and officer liability, and rules related to internal controls. We find several measures of risk-taking decline significantly for US versus non-US firms after SOX. The magnitudes of the declines are related to several firm characteristics, including pre-SOX board structure, firm size, and R&D expenditures. The evidence is consistent with the proposition that SOX discourages risk-taking by public US companies.
Inflexibility and Stock Returns Gu, Lifeng; Hackbarth, Dirk; Johnson, Tim
The Review of financial studies,
01/2018, Volume:
31, Issue:
1
Journal Article
Peer reviewed
Investment-based asset pricing research highlights the role of irreversibility as a determinant of firms’ risk and expected return. In a neoclassical model of a firm with costly scale adjustment ...options, we show that the effect of scale flexibility (i. e., contraction and expansion options) is to determine the relation between risk and operating leverage: risk increases with operating leverage for inflexible firms, but decreases for flexible firms. Guided by theory, we construct easily reproducible proxies for inflexibility and operating leverage. Empirical tests provide support for the predicted interaction of these characteristics in stock returns and risk.
Spillovers from Costly Credit Melzer, Brian T.
Review of financial studies/The Review of financial studies,
09/2018, Volume:
31, Issue:
9
Journal Article
Peer reviewed
Open access
Low-income households with proximate access to payday loans exhibit greater economic distress, higher take-up of food assistance benefits, and greater delinquency on child support payments than peers ...without proximate loan access. These findings suggest that borrowing can exacerbate distress, leading borrowers to use transfer programs and to prioritize payday loan payments over other liabilities like child support. In that way, payday lending produces negative externalities—costs imposed on taxpayers that fund transfer programs and nonresident family members that fail to receive child support.
This paper shows empirically how asset risk and financial leverage interact to explain the equity risk dynamics of value versus growth stocks. During economic downturns, the asset betas and leverage ...of value firms increase, contributing to a sharp rise in equity betas. Asset betas of growth firms are much less sensitive to economic conditions, and, consistent with the tradeoff theory of capital structure, growth firms are also less levered, contributing to the relative stability of their equity betas. By incorporating instruments that better capture beta dynamics, I show that the interactions of conditional betas with the market risk premium and volatility explain approximately 40% of the unconditional value premium.
A parsimonious framework linking advertising expenditures and research and development expenditures to brand value, and brand value in turn to firm-level financial performance, was proposed and ...empirically investigated under four data conditions: data form, brand type, financial performance metric, and lag structure. Using pooled data from 125 firms (848 firm-year observations) over the period 1991–2007, 108 path analyses were conducted to compute five path model output metrics. Data on these metrics were then compared for each of the data conditions by means of analysis of variance. Although significant relationships were generally observed among framework variables, study results differed considerably across three of the four data conditions. The principal take-away from the study is that the impact of marketing activities on firm-level financial performance is likely to be in large part a function of the specific research purpose and methodology employed. As such, the take-away has implications when interpreting value-relevance findings, when constructing theories involving market-based assets, and when designing studies to investigate relationships between marketing and financial performance.
This article measures the extent to which prices exceed marginal costs in the U.S. natural gas distribution market during the period 1991–2007. We find large departures from marginal cost pricing in ...all 50 states, with residential and commercial customers facing average markups of over 40%. Based on conservative estimates of the price elasticity of demand, these distortions impose hundreds of millions of dollars of annual welfare loss. Moreover, current price schedules are an important preexisting distortion which should be taken into account when evaluating carbon taxes and other policies aimed at addressing external costs.
We examine how country-level legal and institutional investor protection shapes contractual creditor protection. We examine debt covenant information from foreign corporate bonds issued in the US ...from more than 50 countries between 1991 and 2007. We find that bonds of firms incorporated in countries with stronger creditor rights use fewer covenants. This finding suggests that creditor protection substitutes for covenants in reducing the agency cost of debt. In contrast, bonds of firms with stronger shareholder rights or firms with stronger firm-level corporate governance use more covenants. These findings support the notion that firms with stronger shareholder control may face an increase in the shareholder-bondholder conflict and therefore prefer to use more covenants. However, greater shareholder rights are not associated with the use of more covenant restrictions on equity issuance, as firms with greater minority shareholder protection are unlikely to suffer such equity dilution.
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