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Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper investigates the relationship between cross-shareholding networks and internal controls quality using a sample of all listed A-share firms in China during 2007–2020. We find that the higher the centrality of cross-shareholding networks, the lower the quality of internal control. This finding passes a series of robustness regressions. Moreover, we further test the influence channel of cross-shareholding on the internal control quality and find that the agency cost is the corresponding intermediary. That is, the cross-shareholding network increases the agency cost of the firm and thus reduces the quality of internal control. [ABSTRACT FROM AUTHOR]

In recent years, the registration-based IPO system has been gradually introduced and promoted in China's capital market, and its implementation effect has attracted considerable attention. This paper focuses on companies that were first listed between 2019 and 2021. We empirically investigate the impact of the registration system reform on enterprise innovation using the staggered difference-in-differences model, with R&D investment as the measure of enterprise innovation. The findings demonstrate that, in comparison to companies listed via the approval system, those listed via the registration system exhibit a higher level of R&D investment in the three years following listing. This suggests that the reform of the registration system effectively stimulates an increase in R&D investment among IPO companies. Furthermore, the reform of the registration system has been found to significantly promote the R&D investment of IPO companies on the STAR Market (i.e., the Science and Technology Innovation Board), while having no significant impact on the R&D investment of IPO companies on the ChiNext Market (i.e., the Growth Enterprise Board). Further analysis indicates that the registration system reform encourages IPO firms to increase R&D investment by reducing agency costs, alleviating financing constraints, and accumulating human capital. This study elucidates the impact of registration system reform on enterprise innovation and its mechanism and provides novel empirical evidence for the evaluation of the effect of registration system reform pilot. [ABSTRACT FROM AUTHOR]

This study examines the impact of short selling on firm-level employment growth. Exploiting the staggered short-sale deregulation in China, we find that short selling has a significant negative effect on employment growth. We establish causality by applying a propensity score matching difference-in-differences (PSM-DiD) method and an instrumental variable (IV) approach. Exploring the underlying mechanisms, we find that financial constraints, information transparency, and agency costs are three plausible channels by which short selling affects employment growth. Furthermore, a series of cross-sectional tests suggest that the effect of short selling on employment growth is concentrated in non-state-owned enterprises (non-SOEs), firms with higher operating risk, firms with lower governance quality, firms in regions with weaker labor protection, and in periods prior to the Covid-19 pandemic. Overall, our study offers novel evidence on the consequences of short selling on employment growth in an emerging market, complementing the literature on short sales and labor market outcomes. [ABSTRACT FROM AUTHOR]

Economic literature suggests that banks change their dividend payouts for three main reasons. They may be willing to signal good future profitability to shareholders to address information asymmetry, or use dividends to mitigate the agency costs, or could come under pressure from prudential supervisors and regulators to retain earnings. The COVID-19 pandemic led to introduction of sector-wide recommendation by regulators to suspend dividend payouts in view of prevailing large uncertainty. Using a panel data approach for two samples of listed and unlisted European banks, this paper provides evidence that, over a decade and a half preceding the pandemic, bank dividend payouts were adjusted in line with the three motivations found in the literature. The results are robust to selection of alternative variables representing these motivations. Banks are however found not to discount expectations about future economic conditions or their own profitability when making payouts. Simulations shown in the paper suggest that, in the absence of supervisory recommendations, banks would likely have reduced the payouts only slightly in the first year of the pandemic. [ABSTRACT FROM AUTHOR]

The innovation of defense industry base requires not only technological progress but also scientific organization and management and reasonable business model. Based on the data of A‐share listed companies related to defense industry base in China from 2013 to 2021, this paper employs panel‐probit model with instrumental variable to empirically test the relationship and influence mechanism of financing efficiency on non‐technological innovation. It is found that the financing efficiency of the defense industry base has a significantly positive effect on organizational innovation and market innovation, which is more prominent in state‐owned enterprises and military enterprises. The influence mechanism is mainly to improve information symmetry and reduce agency costs. Internally, the defense industry base should strengthen the management of financing and innovation activities; from the external point of view, the government needs to improve the construction of capital market, and financial institutions need to play the role of professional institutional investors and external supervisors, which is conducive to improving the non‐technical innovation ability of defense industry base. [ABSTRACT FROM AUTHOR]

This study examines whether qualitative disclosure in tax footnotes affects the market valuation of tax avoidance activities. We predict that more disclosures in tax footnotes mitigate investors' concerns over the agency risk of managers engaging in potentially illegal tax avoidance and improve the transparency of firm performance, thus increasing firm valuation. Consistent with the prediction, we find that the market valuation of tax avoidance increases when firms' tax footnotes disclose more qualitative information related to their tax avoidance activities. We provide several tests to show mechanisms underlying our main findings and mitigate concerns about alternative explanations. Overall, our study suggests that the tax-related disclosures in tax footnotes are useful for investors assessing the value of tax avoidance. [ABSTRACT FROM AUTHOR]

This paper examines the impact of managerial ability on bank loan contracting. We find that firms with higher‐ability managers obtain more favourable loan contract terms, including lower loan spreads, fewer covenants, and more short‐term maturities. Furthermore, the negative relation between managerial ability and loan spread is concentrated in firms with higher information asymmetry, higher default risk, or lower agency costs of debt. Finally, we find that firms with higher‐ability managers are more likely to choose public bonds over bank loans. [ABSTRACT FROM AUTHOR]

This study aimed to explore the influence of risk committee characteristics on agency costs and financial performance as well as investigate whether the attributes of a risk committee moderate the association between the agency costs and financial performance of financial firms listed in the Saudi Stock Market (TASI). We primarily concentrate on six attributes of risk committees (risk committee existence, size, independence, meetings, financial expertise, and busyness) and their impact on agency costs and financial performance. This study employed the ordinary least squares (OLS) and generalized methods of moments (GMM) models to explore these relationships. Using a sample of 455 observations representing the financial corporations listed on the TASI for the period from 2010 to 2022, we found that risk committees' existence, risk committee independence, and financial expertise have negative and significant associations with agency costs, but a positive influence on financial performance. However, risk committee size and busyness are positively related to agency costs and adversely associated with firms' financial performance. Furthermore, we showed that agency costs influence banks' financial performance negatively, yet risk committees oversee this risk and enhance banks' financial performance. The findings of this study have implications for financial firms, policymakers, and regulators. Beyond making empirical contributions by investigating a relatively unexplored topic in a developing Middle Eastern economy, this analysis provides valuable insights into optimizing risk committee characteristics and structures to improve financial monitoring within the framework of Saudi Arabia. This area of research has been relatively limited compared to studies conducted in developed countries. [ABSTRACT FROM AUTHOR]

Purpose: Research on the effect of executive equity incentives is equivocal. Based on agency theory, some scholars take the convergence of interest logic to highlight the benefits of executive equity incentives. In contrast, others adopt the entrenchment logic to emphasize the increased agency costs. This study attempts to reconcile the debate on executive equity incentives and integrates the opposing views to unveil how executive equity incentives impact corporate social responsibility (CSR) performance. Design/methodology/approach: Using the panel dataset of Chinese A-share listed firms from 2006 to 2022, this study integrates the convergence of interest and entrenchment logic to examine how executive equity incentives affect CSR performance. Findings: We find that the relationship between executive equity incentives and CSR performance follows an inverted U-shaped form. According to the convergence of interest logic, executive equity incentives reduce agency costs when allocating resources to engage in CSR activities and enable firms to increase their CSR investments, ultimately realizing increased CSR performance. After a threshold, however, the accumulation of extensive equity incentives causes the entrenchment effect, resulting in declined CSR performance. Our empirical results also shed new light on its contingent perspective – the inverted U-shaped relationship is attenuated when firms' stock liquidity is high. Originality/value: This study attempts to reconcile the debate on executive equity incentives and integrates the opposing views to unveil the inverted U-shaped relationship between executive equity incentives and CSR performance. Our study opens promising avenues for further research on corporate governance and CSR strategies. [ABSTRACT FROM AUTHOR]

Using the sample of Chinese A-share listed firms from 2010 to 2020, this study examines the impact of non-controlling large shareholders (NCLSs) on corporate capital structure adjustment. The results show that NCLSs significantly increase the dynamic capital structure adjustment speed and reduce capital structure deviation. NCLSs have an asymmetric influence on capital structure adjustment speed for different deviation directions, i.e. compared to the speed of upward adjustment after a downward deviation of the capital structure, the effect of NCLSs on the speed of downward adjustment of the capital structure after an upward deviation is stronger. Whether in state-owned enterprises (SOEs) or non-state-owned enterprises (NSOEs), NCLSs significantly increase the dynamic capital structure adjustment speed. However, compared with SOEs, NCLSs in NSOEs have a more significant positive impact on the dynamic capital structure adjustment speed. The mechanism analysis suggests that reducing agency costs and mitigating financing constraints serve as the important channels through which NCLSs influence the dynamic adjustment of capital structure. This paper not only enriches and improves the theoretical basis of dynamic capital structure adjustment, but also helps to deepen the understanding of dynamic capital structure adjustment of Chinese listed firms. [ABSTRACT FROM AUTHOR]

Based on data from A-share listed companies from 2007 to 2021, this study constructs an enterprise resilience index using the entropy-weighted TOPSIS method. On this basis, the impact of digital transformation on enterprise resilience is examined through empowerment theory. The empirical results indicate that digital transformation significantly enhances enterprise resilience, a conclusion that remains valid after a series of robustness tests. Mechanism analysis reveals that digital transformation enhances enterprise resilience by reducing agency costs, increasing information transparency, and alleviating financing constraints. Heterogeneity analysis shows that micro-characteristics of enterprises, such as the stage of the life cycle and factor intensity, as well as macro-environmental factors like regional intellectual property rights protection and industry competition level, have differential impacts on the resilience-enhancing effects of digital transformation. Further analysis suggests that the level of corporate governance influences the positive impact of digital transformation on enterprise resilience. [ABSTRACT FROM AUTHOR]

In China, where the corporate social responsibility (CSR) process is relatively underdeveloped, the government has promulgated a series of laws and regulations on CSR disclosure in recent years to promote the sustainable transformation of the economy. Using data from A-share listed Chinese firms from 2009 to 2021, this study empirically examines the relationship between CSR disclosure quality and firm investment efficiency in China. The results indicate that (1) improvements in CSR disclosure quality significantly mitigate firms' underinvestment and overinvestment, thereby enhancing investment efficiency. (2) Further analysis shows that high-quality CSR information also promotes investment efficiency by reducing agency costs and financing constraints and improving media evaluations of firms. (3) A heterogeneity analysis suggests that the positive effect of CSR disclosure on investment efficiency is stronger for firms with lower equity incentives, more severe financing constraints, and higher media attention. Our study extends the understanding of the mechanisms through which CSR disclosure affects firms' investment efficiency, potentially providing insights for research in related fields and guiding future CSR disclosure practices in other developing countries. [ABSTRACT FROM AUTHOR]

Purpose: Section 177 of the Company Act 2013 and Regulation 18 of the Listing Obligations and Disclosure Requirements 2015 allow the audit committee to invite firm executives to participate in the audit committee meetings. In this study, we investigate the negative impact of the presence of invitees in the audit committee on firm value. Design/methodology/approach: The study uses the Propensity Score Matching and Difference-In-Difference methodology (henceforth, PSM-DID) to establish a causal relationship between the presence of invitees and firm value. The final sample consists of 24,232 firm-year observations representing 4,493 distinct firms from 2016 to 2021. We also address the endogeneity and autocorrelation issues using the system-generalized method of moments (henceforth, GMM) as a robustness test. Findings: We find that the presence of invitees in the audit committee decreases the firm value because investors consider this an alarming signal. We further find that the firms, audited by the Big 4, do not experience a decrease in firm value due to higher audit quality, whereas the firms with high promoter ownership experience a decrease due to the presence of agency cost. Originality/value: We contribute to the literature on firm value and strengthen the literature on the importance of good governance in a developing nation using the signalling theory. This study adds to the understanding of firm value. The findings have implications for management literature and are valuable for policymakers and standard setters in evaluating the impact of disclosures in the capital market. The managerial implications emphasize the need for careful consideration of invitees in audit committees, considering industry, regulatory environment, and firm goals. Firms are advised to assess the benefits and costs, monitor the impact regularly, and strengthen internal controls. [ABSTRACT FROM AUTHOR]

The existing studies on the relationship between ESG and earnings management provide mixed evidence and ignore ESG rating divergence. Using a sample of Chinese listed firms from 2009 to 2021, we examine the effect of ESG performance on earnings management under different levels of ESG rating divergence. The results reveal a negative association between ESG performance and earnings management. Meanwhile, among firms with high (low) ESG rating divergence, our results show that the degree of earnings management rises (falls) when the firms engage in ESG practices. Our findings are robust to alternative variable definitions and the Heckman two‐stage selection model. In addition, we exclude alternative explanations and consider the effect of greenwashing. Cross‐sectional analyses show that the moderating effect of ESG rating divergence is significant only among firms with greater CEO power and higher agency costs, suggesting that agency problems are the mechanism by which ESG rating divergence positively moderates the relationship between ESG performance and earnings management. This study advances the existing research on ESG and earnings quality by presenting new empirical evidence and revisits ESG rating divergence through the lens of agency theory, revealing that management could use ESG for opportunistic behavior in the presence of ESG rating divergence. Our study shows that the divergence in ESG ratings can affect the economic consequences of firms' ESG practices, offering insights for future research on ESG and ESG rating divergence and for regulators to improve the regulation of ESG disclosure and rating. [ABSTRACT FROM AUTHOR]

This paper investigated how hiring one of the Big 4 auditing firms helps initial public offering (IPO) owners attract venture capitalists' (VCs) backing when going public to address the gap in auditing and venture capital literature. For this, the paper examined a large dataset from 1995 to 2019 consisting of 33,536 IPO firms from 22 countries with diverse socioeconomic, political, and cultural contexts. The study found that hiring Big 4 auditors increases IPO owners' chances of recruiting VCs by up to 50%. The analysis also supports prior findings, which state that IPO owners strategically choose Big 4 audit firms to lower agency costs and send quality signals to improve openness and disclosure as well as boost VCs' confidence in the IPO market. This research offers multiple benefits to academics, policymakers, investors, and issuers. [ABSTRACT FROM AUTHOR]

Since 2014, China has been actively promoting the transformation of manufacturing servitization, clarifying the importance of manufacturing servitization. This paper investigates the correlation between manufacturing servitization and cost stickiness, supplementing the research on the economic consequences of manufacturing servitization and the influencing factors of cost stickiness. This paper launches an empirical study with a sample of A-share manufacturing companies from 2014 to 2022. The research results show that, first, manufacturing servitization can inhibit enterprise cost stickiness; second, manufacturing servitization affects enterprise cost stickiness through the path of reducing enterprise adjustment costs, reducing managers' optimistic expectations and reducing enterprise agency costs; third, the negative relationship between manufacturing servitization and cost stickiness is stronger among firms with a low level of internal control, a strong degree of financing constraints, a good quality internal information environment, a strong degree of competition in the market, and firms that are in capital-intensive manufacturing industries; fourth, the role of embedded servitization on enterprise cost stickiness is not significant, while hybrid servitization can have a significant negative effect on enterprise cost stickiness; and fifth, the impact of manufacturing servitization on enterprise cost stickiness mainly lies in the cost of material resources rather than the cost of human resources. [ABSTRACT FROM AUTHOR]

The advent of the digital economy has ushered in unprecedented opportunities for corporate development. Utilizing a comprehensive data set comprising Chinese listed companies spanning the period 2011–2020, this study empirically examines the impact of digital transformation on corporate illegality. The findings reveal a significant reduction in corporate illegality attributable to digital transformation. This empirical result retains its significance even when subjected to a battery of robustness tests. In terms of the underlying mechanisms, this paper conjecture that digital transformation reduces the internal and external information asymmetry, thereby curbing corporate illegality. Further heterogeneous analysis shows that digital transformation is more effective among corporates with higher agency cost (state‐owned or large corporates) or corporates located in regions with lower degree of marketization level. These heterogeneous effects provide supportive evidence to the above conjecture. The implications of this study extend the boundaries of digital transformation research and furnish novel and actionable insights into the prevention of corporate illegality. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine how capital structure influences earnings management for firms in the Saudi market, which is influenced by an Islamic environment that discourages excessive borrowing. Design/methodology/approach: This study uses a data set that covers the period from 2013 to 2020 for firms listed on the Saudi Stock Exchange (Tadawul) and uses panel data regression models to test the impact of capital structure on earnings management. Findings: The empirical results reveal that earnings manipulation is less common among firms that have less debt, which implies that firms in the Saudi market face high scrutiny to maintain lower leverage to meet the investment requirements of stakeholders based on religious status, which in turn reduces information asymmetry and constrains opportunistic behaviour in managing earnings. Practical implications: This study provides insights for regulators, investors, and managers on the role of religion in shaping capital structure and monitoring financial reporting practices. This study recognises that firms' decision-making can be explained by non-economic motives, such as religion, which can serve as a less costly external mechanism to alleviate agency costs compared to other economic motives. Originality/value: This study contributes to the literature by exploring how capital structure and earnings management relate to a distinctive and unique Islamic context that remains largely unexamined. This context allows us to investigate this issue by examining how the Islamic environment, which is not driven by economic or legal reasons, affects managers' choices of capital structure and earnings management. This study reveals how a strong religious setting can shape firms' choices regarding capital structure and financial reporting practices. [ABSTRACT FROM AUTHOR]

Copyright of Journal of International Business Studies is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This study investigates the impact of macroeconomic shocks to firm investment opportunities on firm debt contracting policy. We find that adverse shocks to investment opportunities lead to a significant reduction in the use of debt covenants in syndicated bank loans. Consistent with incomplete contract theory, we show that firms mitigate debt–equity conflicts arising out of investment opportunities by employing accounting‐based financial covenants rather than non‐accounting‐based prepayment covenants. Adverse shocks to investment opportunities also lead to a concomitant decrease in the cost of borrowing. We find consistent evidence for corporate bond covenants and bond market borrowing costs as well. Overall, this study resolves prior mixed evidence concerning the impact of investment opportunities on debt contracting and connects macroeconomic theory with the accounting literature on debt contracting. [ABSTRACT FROM AUTHOR]

As the pivotal figure of information transmission in the capital market, the mainstream financial press has a significant impact on the operation of the stock market. Based on the mainstream financial press, this study obtains the news reports of 945 China A‐share listed companies in 2010–2019 and analyzes the relationship between the attention of the mainstream financial press and the efficiency of stock pricing. Further, we explore the mediating effect of corporate governance in this correlation. The empirical results show that the more reports on listed companies from the mainstream financial press the lower the delay level of the stock price of listed companies. At the same time, the characteristics information of the stock price increases, the higher the stock pricing efficiency. The attitude of press reports of listed companies also has an impact on the efficiency of stock pricing. The improvement of pricing efficiency will be achieved through neutral reporting. Mainstream financial press reports indirectly improve the efficiency of stock pricing by reducing the agency costs of the two types, and corporate governance plays a significant intermediary role in it. Finally, compared with market‐oriented media, the effect of policy‐oriented mainstream financial press on pricing efficiency is more significant. [ABSTRACT FROM AUTHOR]

Based on a sample of Chinese listed companies from 2009 to 2021, this study finds that environmental, social, and governance (ESG) performance has a positive impact on having a sustainable growth rate (SGR). Our heterogeneity analysis reveals that ESG performance leads to higher SGR, particularly among firms with lower SGR or non-state-owned enterprises. The mechanism analysis suggests that ESG performance enhances SGR by stimulating patent applications, reducing agency costs, and mitigating corporate risk. Further analysis indicates that the environmental score has a negative influence on SGR, whereas social and governance scores have a positive impact. Ultimately, this research emphasizes that ESG performance can enhance financial performance by driving SGR.

The inefficiency observed in investment within state-owned enterprises presents a significant practical challenge that can affect the sustainable development of China's economy. To address this issue, this study comprehensively explores the intricate mechanisms underlying the governance implications of mixed ownership on the investment efficiency of listed companies. Drawing on unbalanced panel data encompassing Shanghai and Shenzhen Stock Exchange A-share listed companies in China spanning the period from 2008 to 2022, this study employs a fixed-effects model to unveil the nuanced ways in which mixed ownership influences investment efficiency through the lens of agency costs. This study transcends the boundaries of traditional agency conflicts between managers and shareholders. It delves deeper, illuminating the diverse effects of agency conflicts between significant controlling shareholders and minority shareholders. The results revealed a noteworthy positive correlation between mixed ownership and investment efficiency, and verified the intermediary role of agency costs between mixed ownership and investment efficiency, which is an important result of our research. Heterogeneity analysis indicates that the relationship between the two can be affected by external events, such as during the COVID-19 pandemic, investment efficiency is not the most concerned issue for enterprises. The findings have practical implications for practitioners and policymakers, as they offer avenues for optimizing investment strategies and fostering efficient and effective corporate governance practices. [ABSTRACT FROM AUTHOR]

We develop an endogenous growth model with public consumption and infrastructure services provided by two-tier governments. Growth performance and welfare implication are compared under the centralized and decentralized fiscal federal systems. In general, there is a trade-off between welfare and growth due to conflicts of interest and asymmetric information between central and local governments. By numerical simulations, we show that the optimal fiscal federalism should impose restrictions on expenditure−GDP ratio, rather than on expenditure−budget ratio or central−local expenditure ratio, because expenditure−GDP ratio can align the incentives of the two-tier governments. Furthermore, it is suggested that decentralized fiscal systems are generally superior to the centralized system because the efficiency loss overweighs the agency cost. The model is then applied to analyzing different growth experiences in the West and China by institutional and cultural differences. [ABSTRACT FROM AUTHOR]

Using Chinese A-share listed companies from 2006 to 2013 as the research sample, this paper empirically examines the impact and mechanism of the mandatory CSR disclosure policy on Chinese firms' risk-taking by combining the difference-in-differences (DID) approach. This study finds that the implementation of the policy increases firms' operating costs and leads to an increase in their financing constraints, which ultimately creates a disincentive for firms to take risks. Second, we also find that, relative to firms that do not disclose CSR reports, the sales revenues, R&D investment and investment levels of firms subject to CSR disclosure are significantly reduced, which may be the result of firms' tendency to operate conservatively. In addition, heterogeneity analyses suggest that the dampening effect of mandatory CSR disclosure policies on risk-taking is stronger for firms with higher financing costs and for non-state-owned firms. This study further explores the mechanism of the impact of mandatory CSR disclosure on firms' risk-taking, which will help the government to formulate and improve the information disclosure policy regarding driving the transformation of corporate development in the future. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between institutional investor association and stock price crash risk, using data from all listed non-financial sector companies in the Chinese capital market. The findings indicate a significant positive correlation between institutional investor association and stock price crash risk. Moreover, property rights and agency costs play significant moderating roles in this relationship. Specifically, the impact of institutional investors on stock price crash risk is more pronounced in non-state-owned enterprises (non-SOEs) than in state-owned enterprises (SOEs). Furthermore, this impact is more pronounced in firms with high agency costs and prominent agency problems compared to firms with low agency costs. This research contributes to financial regulators being able to identify better and prevent stock price crashes, ensuring the stability of investors' returns from their invested enterprises. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of debt financing on dividend payments when they face the agency costs of free cash flow. It focuses on a sample of 120 firms listed on the Saudi Stock Exchange during the period of 2011–2021. The findings from the Generalized Least Squares regression model revealed that the presence of agency costs of free cash flows may limit the funds available for dividend payments. Regarding the moderating effect of debt structure, the research highlights the significant role of long-term debt in making more prudent use of free cash flow. The use of long-term debt becomes more effective and can enhance shareholder wealth when a firm is facing agency costs of free cash flow. More specifically, bondholders primarily focus on affirmative covenants which require the firm to undertake specified actions such as maintaining assets and financial ratios, or paying taxes, but they do not restrict financing activities such as dividend payments. Since interest and debt repayments are fixed obligations, using free cash flow for dividend disbursement is considered a more profitable and beneficial approach for shareholders in the context of Saudi Arabia. This study contributes to our understanding of financial management under different debt structures and improves our scientific knowledge of the culture of Saudi firms regarding the dividend distribution policy. [ABSTRACT FROM AUTHOR]

One of the most important developments underlying capital markets in recent years is the increase in the influence of activist minority shareholders. In a company without a controlling shareholder, dominant and activist shareholders, who hold only a low proportion of the company's shares, can influence and even tip the scales in the decisions made and direct the company's business. The legal system therefore imposes a fiduciary duty not only on controlling shareholders but also on those with effective control. Alongside the obligation, however, the absence of a clear and explicit definition of the concepts of effective power and effective control stands out. The Article empirically analyzes key court decisions litigated under Delaware law and finds that only two explanatory variables significantly explain court decisions in cases where the question of effective control arises. It therefore proposes a test for estimating shareholders' effective power borrowed from the field of cooperative game theory. The test is based on the Shapley Value and Shapley and Shubik's Power Index. The Article presents its application to decisions made at shareholders' meetings to estimate the effective power of activist minority shareholders in various decisions. This test is simple to operate, objectively examines the situation based on the factual system that existed at the time the decision was made, and is not limited to specific ownership structures, particular markets, or current times. Adoption of the test is expected to increase the legal certainty regarding the imposition of duties on activist minority shareholders with effective control, thereby reducing the agency costs created as a result of the gap between their formal share in the corporation and their effective power. [ABSTRACT FROM AUTHOR]

Corporate social responsibility (CSR) disclosure is an important way for firms to achieve social goals. As stakeholders pay more attention to CSR performance, the CSR report strategy has attracted academic attention. Prior studies have stressed the important role of positive CSR disclosure strategies in a firm's reputation and market value, but our study shows different findings. Using a sample of China's A‐share listed firms from 2008 to 2019, we find a significant negative correlation between administrative penalties and the use of pictures and tables in CSR reports, which is more significant for firms being penalized rather than individuals in firms. Investor attention and agency costs provide a mechanism explanation. Heterogeneity analysis shows that in regions with a low level of legal institutions, the effects of administrative penalties on the use of pictures and tables in CSR reports are more significant. Nevertheless, the seemingly negative disclosure strategy ultimately contributes to corporate value. [ABSTRACT FROM AUTHOR]

We examine the impact of covenant violation on corporate operational efficiency. Using an aggregate measure of operational efficiency developed by Demerjian et al. (Management Science, 58, 2012, 1229–1248), we provide strong empirical evidence that covenant violations hinder firms from achieving operational efficiency. Our finding is robust to alternative definitions of operational efficiency and various model specifications to address potential endogeneity issues. Further analyses show that lower operational efficiency is attributable to covenant‐violating firms' under‐investments in capital and labour. In addition, the negative effect of covenant violation on operational efficiency is not universally the same, and is less evident in violating firms with greater agency problems. [ABSTRACT FROM AUTHOR]

Research summary: How a new venture improves performance when facing both principal and agency problems is an important yet understudied question. This study examines the effectiveness of CEO duality in mitigating the principal problem and enhancing entrepreneurial success. By granting more power to CEOs, CEO duality can alleviate the principal problem; however, CEO duality may simultaneously exacerbate CEOs' agency problems. Using manually collected panel data on 1403 newly established U.S. commercial banks, we find a positive relationship between CEO duality and new venture performance. The CEO duality–new venture performance relationship strengthens when CEOs are also founders of their firms and weakens when the share of corporate ownership reflects heavy investment by incumbent firms. Our findings highlight that venture governance needs to address principal and agency problems simultaneously. Managerial summary: Large corporations typically face agency problems due to the separation of ownership and control such that managers do not act in the best interests of owners. New ventures tend to experience fewer agency problems because owners/principals are also likely to be managers/agents. New ventures often face severe principal problems due to directors' potential conflict of interests such as investments in rival companies. Our study suggests that new ventures can mitigate principal problems by appointing a CEO as the chair of the board of directors. Our longitudinal analysis of new U.S. commercial banks finds that this dual CEO‐chair structure leads to better performance. This relationship strengthens in the case of founder‐CEOs and weakens among new banks co‐founded by other large bank holding companies. [ABSTRACT FROM AUTHOR]

Despite the recent proliferation of research on internationalization, little attention has been paid to understanding the reasons behind the decrease in firm value accompanying international expansion. By delving into the underlying mechanisms and applying the concept of agency theory to a sample of US firms spanning from 2000 to 2022, we posit that an increased level of information asymmetry in internationally diversified firms incentivizes managers to prioritize their own interests. To protect their careers, CEOs of internationally diversified firms often suppress bad news. This behavior can lead to the accumulation of negative news and heighten the risk of a stock-price crash. Furthermore, we propose that higher levels of international experience, enhanced monitoring effectiveness, and efficient investment practices will negatively moderate the positive relationship between internationalization and stock-price crash risk. [ABSTRACT FROM AUTHOR]

Nowadays, the call for sustainable development is becoming stronger in all countries of the world, and environmental, social, and governance (ESG) performance, as a vivid practice of this concept, has gradually received extensive attention from enterprises and investors. Financial institutions have an important position in the national economy as an important tool for the state to regulate the macroeconomy. Whether ESG performance can improve financial institutions' efficiency is of key significance for boosting sustainable development. Based on data from China's listed financial institutions from 2015 to 2021, this study aims to investigate the impact of ESG performance on financial institutions. The robust nonparametric boundary model and fixed-effects model are employed for analysis. The empirical results demonstrate that ESG performance and its sub-indicators of environmental performance and social responsibility performance can significantly enhance financial institutions' efficiency. In particular, this effect is more pronounced in the securities industry and diversified financial industry, as well as in non-state and small-scale financial institutions. The results remain unchanged after a series of robustness tests. Furthermore, the mechanism tests indicate that ESG performance can enhance financial institutions' efficiency by reducing downside risk and agency costs. [ABSTRACT FROM AUTHOR]

Corporate governance (CG) is the system of rules, procedures, and processes by which an organization is operated and controlled. Effective corporate governance helps mitigate risk by ensuring the company complies with applicable laws and regulations and maintains appropriate internal controls. CG is an essential aspect of the overall management of companies and can have a significant impact on their Financial Performance (FP). In China, CG practices have undergone significant modifications over the last few years as the country shifted from a centrally planned economy to a market‐based economy. The study's novelty evaluated the effect of corporate governance on finance and Chinese‐listed firm creation. Data obtained from 345 employees working in 8 firms in China, the relationship between CG, financial performance, and innovation is investigated. The study adopted PLS‐SEM analysis and the findings of the study indicate that CG is positively related to better FP and innovation output. The study analysis found that firms with stronger governance structures have better access to external financing, lower agency costs, and higher levels of innovation investment. Also, the result identified that improving CG can lead to better FP and innovation, which in turn improves the firm's competitiveness and long‐term sustainability. [ABSTRACT FROM AUTHOR]

In this study, we examine whether and how banks employ dividend payout policies in response to the risk of stock price crashes. Using a sample of U.S. banks, we find that banks increase their dividend payouts when faced with a higher risk of stock price crashes. In addition, we find that well-capitalized banks tend to pay more dividends when the risk of a stock price crash is elevated. This aligns with the regulatory pressure theory that banks distribute dividends when they have sufficient capital that meets or exceeds the regulatory standards. This is also in line with the signaling theory that dividend payments reflect a bank's confidence in its financial health. Furthermore, we find that financially opaque banks tend to make more dividend payments when they are at a higher risk of stock price crashes. This supports the agency cost theory, suggesting that dividends counterbalance the need to monitor bank managers in less transparent reporting environments. [ABSTRACT FROM AUTHOR]

We find a positive association between institutional ownership and social capital. The social norms in a region, while not imposed by businesses or laws, play a monitoring role that disciplines managers from self‐serving behaviors. The resulting trustworthiness, through its mitigation of agency problems, drives the investment preferences of institutions. Our subsample analyses based on information asymmetry and financial performance support this inference. Further, the positive association is evident for transient investors and quasi‐indexers but not for dedicated institutional investors. Overall, our study underscores the impact of informal governance on institutions' investment decisions. [ABSTRACT FROM AUTHOR]

This research aims to test and analyze the influence of agency costs, intellectual capital, managerial ownership, and institutional ownership on firm value with financial performance as a moderating variable. The population in this study are LQ45 index companies listed on the Indonesia Stock Exchange (BEI) for the 2020-2022 period. This research used a purposive sampling technique with a sample size of 18 companies for three consecutive years for a total of 54 observations. Partial research results show that agency costs and intellectual capital have no effect on firm value. Meanwhile, managerial ownership and institutional ownership have a positive effect on firm value. Financial performance is unable to moderate the influence of agency costs on firm value, nor is it able to moderate the influence of intellectual capital on firm value. However, financial performance can moderate the influence of managerial ownership and the influence of institutional ownership on firm value. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to analyze the relationship between corporate social responsibility (CSR) and quality of accounting report, especially on earnings management (EM). In addition, potential moderators of this relationship are examined. Design/methodology/approach: After a comprehensive study of potential mechanisms, the authors obtain plenty of empirical results to open the black box of the link between CSR and EM. Meta-analysis is applied on 51 studies from 35 papers. Further analysis is also carried out to determine the moderating effects, such as the cultural and sample selection differences in these papers. Findings: CSR is negatively associated with EM. In addition, this effect is moderated by cultural difference, CSR measurement, and year of sample selection. Research limitations/implications: Two patterns of the hypothesis between CSR and EM are confirmed based on agency cost theory, a theoretical shift of corporate ethics based on organizational moral perspective. Several useful suggestions are also provided for future studies on the empirical model and sample selection. Further research is necessary to clarify the agency cost behind the two theoretical patterns. Practical implications: CSR is not a tool for firms to market but rather a strategy to ensure their consistency with moral principles, indicating that management should pay more attention to the potential damage of the incongruence between CSR and accounting reporting quality. CSR reporting quality remains an important issue for legislature to guarantee continued firm operations. Originality/value: To the best of the authors' knowledge, this study is the first to analyze the CSR and EM link using a meta-analysis and to consider its underlying mechanism under the global environment. Previous method design and sample selection are reviewed to provide reference for future studies. [ABSTRACT FROM AUTHOR]

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The survival of zombie firms severely crowds out healthy corporate investment and employment growth, eventually undermining economic growth potential. Hence, how to properly address the problem of corporate zombification is an essential part of achieving high‐quality economic development in China. In recent years, the phenomenon of common institutional ownership has become increasingly widespread in the capital markets and has a significant impact on the strategic decisions of companies. There are currently two views on the corporate governance role of common institutional ownership: the synergistic governance effect and the collusive fraud effect. Using data from Chinese‐listed firms from 2009 to 2021, this paper finds that common institutional ownership can significantly inhibit the formation of zombie firms. The higher the degree of their linkage and the greater the shareholding, the more pronounced the synergistic effect. The findings remained valid after considering the endogeneity issue and conducting robustness tests. Furthermore, the mechanism test suggests that common institutional ownership inhibits the formation of zombie firms by improving internal control quality and reducing agency costs. This paper contributes to the study of how to inhibit the formation of zombie firms by identifying common institutional ownership from the perspective of external governance mechanisms. In addition, this paper enriches the research on the economic consequences of common institutional ownership. Finally, various practical implications for policymakers may be realised, which may help curb the trend of corporate zombification through equity‐based instruments. [ABSTRACT FROM AUTHOR]

Two dimensions of the intensity of interparty rivalry are used to test the hypothesis that greater interparty competition enhances government efficiency. Using data from a set of 14 large Indian state governments between 1957 and 2018, we find confirmation for two political rivalry hypotheses. The first is that the ex-post size of the first versus second place seat share winning margin is a useful metric of the (in)effectiveness of rival party policing of incumbent spending behavior. The second is the hypothesis that excessive spending by the incumbent governing party is decreased by the expectation of greater election contestability and that contestability is related to the expected effective number of competing parties (ENPSeats) nonmonotonically. Our analysis suggests that contestability across Indian States reaches a maximum when the incumbent faces an expectation of ENPSeats that is closer to 5 than to Duverger's 2. [ABSTRACT FROM AUTHOR]

This study examines the effect of directors' and officers' liability insurance (D&O insurance) on corporate cash holdings in China. We propose a collusion theory in which D&O insurance can exacerbate the conflicts of interest between controlling and minority shareholders by shielding directors and officers from shareholder litigation in emerging countries. Consistent with our expectation, we find that insured firms tend to have high cash holdings that are appropriated by both controlling shareholders and directors/officers rather than being invested or paid to shareholders. Moreover, the positive relationship between D&O insurance and cash holdings is more pronounced in firms with high litigation risks, whereas the effect is attenuated in firms with political connections, strong external monitoring mechanisms and strong controlling shareholder power. Compared with uninsured firms, the market discounts the value of cash holdings for insured firms. [ABSTRACT FROM AUTHOR]

Based on the analysis of data from listed enterprises in China between 2011 and 2022, we investigate the influence of digital transformation on the governance efficiency for minority shareholders. The results show that the extent of digital transformation exert a negative effect on the agency costs incurred from related-party transactions. The mechanism examination elucidates that digital transformation augments the governance efficiency for minority shareholders by boosting attendance at shareholders' meetings and enhancing the exit threat for minority shareholders. Subsequent analysis reveals that non-state-owned enterprises, compared to state-owned enterprises, exhibit a more pronounced effect in diminishing the second type of agency costs through digital transformation. Furthermore, the impact of digital transformation in curtailing agency costs is more significant in the eastern regions than central and western regions. The better the equity checks and balances in listed enterprises, the more effective digital transformation is in reducing agency costs. This study offers valuable insights for bolstering the governance capacity of minority shareholders in the context of digital transformation. [ABSTRACT FROM AUTHOR]

Mobility as a Service (MaaS) is a recent innovative transport concept, anticipated to oblige significant changes in current transport practices. This study aimed to develop a methodology to justify the potential MaaS adoption. For this purpose, an innovative methodology is presented to identify four types of stations, including "Transit (servicing travelers by bus)", "Micro-mobility (servicing travelers by bike and scooter)", "MaaS (servicing travelers by bus, bike, scooter, and Uber)", and "None (no station)" for each node. The proposed methodology minimizes the total user and agency costs, including user travel time cost, out-of-pocket costs, agency construction costs for MaaS and agency MaaS operating costs. The methodology was tested with a 100 node transport network with existing bus routes. The following results were acquired: 1) Construction of micro-mobility station was not justified for 42 nodes and 37 nodes in 20-years and 30-years life cycles if only 20% of demand from shortest path demand select micro-mobility options 2) Over 20-years and 30-years life cycles, the operator benefits from daily savings amounting to $18,520 and $16,033, respectively, and 3) There are no consistent results to justify the MaaS construction and operation based on existence of the transit stations. In other words, the justification depends on users' shortest trip paths, amount of demand, and existing transit stations. [ABSTRACT FROM AUTHOR]

Bridge components are subject to both structural loads and environmental stressors, rendering them susceptible to accelerated deterioration and potential collapse in the absence of effective maintenance and rehabilitation strategies. Moreover, the phenomenon of wet-dry cycling, coupled with elevated chloride concentrations prevalent in coastal regions, further expedites the degradation process of bridges, thereby escalating maintenance frequency and repair costs. In response to this challenge, the integration of innovative materials such as Ultra High-Performance Concrete (UHPC) is being explored for the development and implementation of maintenance and rehabilitation strategies. This study presents a comparative analysis between conventional methods and UHPC applications for bridge repairs, utilizing Life Cycle Cost Analysis (LCCA) to encompass both agency and user costs, and applies Monte Carlo simulation to account for the variability of the modeling factors. A practical case study illustrates the applicability of the LCCA methodology, revealing that the utilization of UHPC contributes to a reduction in the total life cycle cost for bridge maintenance and rehabilitation. Life expectancy, Average Daily Traffic (ADT), and the duration of construction activities during rehabilitation emerge as the most influential factors affecting life cycle costs. The main contributions of the study are the development of the life-expectancy model and step-by-step Life-Cycle Cost Analysis (LCCA) methodology. Findings from this study aim to identify cost-effective retrofitting techniques for maintaining bridges in a "State of Good Repair." [ABSTRACT FROM AUTHOR]

Purpose: This study aims to exploit Tobin's Q model of investment to examine the relationship between corporate governance and green innovation. Design/methodology/approach: The study is based on a sample of 3,896 firms from 2002 to 2021, covering 45 countries worldwide. The authors adopt Tobin's Q model to conceptualize the relationship between corporate governance and investment in green research and development (R&D). The authors argue that agency costs and financial market frictions affect corporate investment and are fundamental factors in R&D activities. By limiting agency conflicts, effective governance favors efficiency, facilitates access to external financing and encourages green innovation. The authors analyzed the causal effect by using the system-generalized method of moments (system-GMM). Findings: The results reveal that the better the corporate governance, the more the firm invests in green R&D. A 1%-point increase in the corporate governance ratings leads to an increase in green R&D expenses to the total asset ratio of about 0.77 percentage points. In addition, an increase in the score of each dimension (strategy, management and shareholder) of corporate governance results in an increase in the probability of green product innovation. Finally, green innovation is positively related to firm environmental performance, including emission reduction and resource use efficiency. Practical implications: The findings provide implications to support managers and policymakers on how to improve sustainability through corporate governance. Governance mechanisms will help resolve agency problems and, in turn, encourage green innovation. Social implications: Understanding the impact of corporate governance on green innovation may help firms combat climate change, a crucial societal concern. The present study helps achieve one of the precious UN's sustainable development goals: Goal 13 on climate action. Originality/value: This study goes beyond previous research by adopting Tobin's Q model to examine the relationship between corporate governance and green R&D investment. Overall, the results suggest that effective corporate governance is necessary for environmental efficiency. [ABSTRACT FROM AUTHOR]