We investigate the effect of Lesbian, Gay, Bisexual, and Transgender (LGBT)-supportive corporate policies on credit ratings. To the extent that LGBT-friendly policies are beneficial to the firm and ...therefore improve its expected cash flows, credit rating agencies should assign more favorable credit ratings to the firm. To alleviate endogeneity concerns, we exploit the variations in the LGBT populations across the states in the U.S. as our instrument. Our instrumental-variable (IV) analysis reveals that firms that adopt LGBT-supportive corporate policies enjoy better credit ratings, supporting the stakeholder and good management hypothesis. Further analysis using propensity score matching also yields consistent results.
The quiet life hypothesis argues that, when managers are insulated from the discipline of the takeover market, they tend to be less ambitious, avoiding risky and complex investments that require more ...managerial time and efforts. In other words, they prefer to live a “quiet life.” Exploiting a distinctive measure of takeover vulnerability principally based on the staggered passage of state legislations, we investigate the quiet life hypothesis using corporate social performance. Our results show that more takeover exposure significantly raises CSR variability, consistent with the prediction of the quiet life hypothesis, where managers adopt riskier CSR strategies and investments when they are more exposed to takeover threats, resulting in higher CSR volatility. Specifically, an increase in takeover exposure by one standard deviation raises CSR variability by 5.23%–6.73%. Additional analysis corroborates the results, including propensity score matching, instrumental‐variable analysis, Lewbel's heteroscedastic identification, and entropy balancing.
Staggered board, social capital and sustainability Likitapiwat, Tanakorn; Treepongkaruna, Sirimon
Corporate social-responsibility and environmental management,
20/May , Letnik:
30, Številka:
3
Journal Article
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Maintaining good relationships with internal and external stakeholders can help companies gain competitive advantages and mitigate risks associated with social factors. However, building social ...capital is not an easy task, as it requires management to prioritize long‐term goals over short‐term gains. The board of directors is expected to ensure that management maximizes shareholders' value, commits to strengthening its relationship with stakeholders, and engages in socially responsible activities. These expectations depend heavily on the quality and effectiveness of the board. Certain board characteristics may impede its ability to drive long‐term vision or create good stakeholder relationships, leading to a decline in the company's social capital. In this paper, we analyze board characteristics of publicly listed US firms, focusing on staggered boards, and find evidence supporting the agency theory that staggered boards adversely affect firms' social capital. To ensure the robustness of our analysis, we conduct additional analyses including propensity score matching, entropy balancing, and instrumental‐variable analysis.
Based on the agency and stakeholder theories, effective boards, acting as an internal governance mechanism, reduce agency costs. This paper asks whether military connected boards represent a good ...governance tool by exploring how military connected boards affect stock price crash risk. Using instrumental variable analysis, we document that firms with military connected boards have lower risk of stock price crashes. Our findings are unlikely to have endogeneity concerns and shed light on the role of military connected boards as an effective internal governance tool. Consistent with the conservatism hypothesis and stakeholder theory, by being transparent about firm-specific bad news, military connected boards could effectively monitor managers to ensure they act on all stakeholders' interests.
Abstract
Exploiting a unique measure of takeover vulnerability principally based on state legislations, we investigate how corporate carbon reduction efforts are influenced by the takeover market, ...which is widely regarded as a crucial instrument of external corporate governance. Our results show that more takeover exposure brings about significantly greater efforts to reduce carbon emissions. A rise in takeover susceptibility by one standard deviation improves carbon reduction performance by 12.81%. The findings corroborate the notion that the takeover market, acting as an external governance mechanism, compels managers to adopt policies that benefit shareholders in the long run. Our results imply that carbon emissions are a crucial corporate outcome as it is subject to the pressure from the takeover market. Companies should pay a close attention to this matter. Further analysis robustly validates the results, including propensity score matching, entropy balancing, an instrumental variable analysis, and heteroscedastic identification. Our measure of takeover vulnerability is plausibly exogenous and thus probably reveals a causal effect, rather than a mere association.
Co‐opted board, environment, social and governance Maneenop, Sakkakom; Padungsaksawasdi, Chaiyuth; Treepongkaruna, Sirimon
Business strategy and the environment,
February 2024, Letnik:
33, Številka:
2
Journal Article
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The ultimate goal shared by society is sustainable development, a process of addressing current needs without sacrificing resources of future generations. To achieve sustainability, companies should ...consider of environmental, social, and governance (ESG) in their stakeholder engagement process. Investment in ESG activities is unavoidably decided at the board, making board characteristics become crucial for sustainability. We explore the effect of co‐opted directors, appointed after the incumbent CEO assumes office, on corporate ESG performance. Our findings show that firms with co‐opted directors tend to have poorer ESG performance. Investing in ESG is a long‐run corporate policy. Consistent with the managerial myopia hypothesis, the co‐opted directors, representing weaker governance mechanisms with ineffective monitoring roles, provide managers fewer incentives to invest in the long run. We address endogeneity concerns by conducting instrumental variable analyses.
This paper asks whether algorithm traders (AT) mitigate insider trading profits in the Thai stock market over the period of 2010–2016. We find that in general it does but not in the case of buy side, ...big trades nor the executive trades. Our findings suggest that, to some extent, AT can take important role to increase an efficiency in stock market by processing the public information and incorporating it into price at ultra-fast speed. Additional robustness checks based on the instrumental variable approach confirm our findings.
•We investigate how firms adjust their corporate governance in response to economic policy uncertainty, focusing on board size as a governance mechanism.•We find that firms reduce board size in the ...presence of EPU. In particular, a rise in EPU by one standard deviation reduces board size by 21.61% on average.•Our results are consistent with the notion that agency conflicts are more severe in the presence of EPU. Accordingly, firms strengthen their corporate governance by reducing board size.
Prior research shows that board size has a significant effect on firm performance. Therefore, board size is a crucial aspect of the board of directors. Drawing on institutional theory, we investigate how firms adjust board size in response to economic policy uncertainty (EPU). We find that firms reduce board size in the presence of EPU. In particular, a rise in EPU by one standard deviation reduces board size by 21.61% on average. Our results are consistent with the notion that agency conflicts are more severe in the presence of EPU. Accordingly, firms strengthen their corporate governance by reducing board size.
This paper utilizes intraday five-minute stock market indices to investigate the causal relation between global stock market volatility and investor attention measured by the Google search volume ...index during the COVID-19 pandemic. Using the bi-power variation method proposed by Barndorff-Nielsen and Shephard (2004), we separate the realized volatility into two components: Continuous and Jump. Based on 5,583 stock indices-day observations, we find that investor attention is positively related to the realized volatility and its continuous component, but to a lesser extent to jumps. A growth in confirmed cases is positive to all measures of market volatility. Moreover, when the number of confirmed cases increases, more attentive investors reduce market volatility. Our findings are robust regarding various estimation approaches and are less likely to suffer from omitted variable biases and endogeneity concerns. Understanding the findings revealed in this paper is crucial to regulators and policymakers as warnings of additional risks facing retail investors around the globe over the extremely volatile periods.
JEL Codes: G14; G15; G40; G41
We use a general Markov switching model to examine the relationships between returns over three different asset classes: financial assets (US stocks and Treasury bonds), commodities (oil and gold) ...and real estate assets (US Case–Shiller index). We confirm the existence of two distinct regimes: a “tranquil” regime with periods of economic expansion and a “crisis” regime with periods of economic decline. The tranquil regime is characterized by lower volatility and significantly positive stock returns. During these periods, there is also evidence of a flight from quality – from gold to stocks. By contrast, the crisis regime is characterized by higher volatility and sharply negative stock returns, along with evidence of contagion between stocks, oil and real estate. Furthermore, during these periods, there is strong evidence of a flight to quality – from stocks to Treasury bonds.
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