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Since project finance is based on loans with no or limited recourse on project sponsors, both lenders and SPV shareholders must carefully assess the ability of the venture to generate sufficient cash flows to repay operating costs, debt service, and dividends to sponsors. In turn, interest and principal payments on loans, together with dividends, are determined by the selected capital structure (i.e., the mix of debt, subordinated debt, and equity) agreed between banks and shareholders. In this chapter, we first focus on the estimation of project cash flows during the different life cycle phases of the initiative and analyze the set of inputs needed for the valuation. Then, in Section 2, we discuss how to identify a sustainable capital structure. Sustainability is based on a satisfactory level of profitability for shareholders and banks but also requires the assessment of financial sustainability by means of specially designed cover ratios (Section 3). Section 4 presents an introduction to the valuation of project risk and the use of simulation techniques, sensitivity, and scenario analysis.

Purpose – This research examines and investigates the importance of sustainable business profit through customers and its impacts on three key business domains: technology-innovation-service (TIS). The main goal was to see what were the interrelationships of business-consumers and consumers-business analysis to have a sustainable profit based on the models: Innovation and Growth Teams (IGT), Innovative Customer Relationship Management (ICRM), Business-to-Consumer (B2C), Customer Service and Support (CSS), Customer Service Technology (CST), and Multidimensional Scaling model (MDS) or the factors (F1–F14). Were these factors important to businesses and which variables had the greatest impact on sustainable profit through consumer evaluation during purchase? Research methodology – This research was carried out on manufacturing, service, and distribution businesses (consumer-business analysis) and consumers (business-consumer analysis) in 200 businesses and consumers, through the completion of the online questionnaire and the meeting with the business managers, considering the same variables during the period (2019–2022). The data processing was done through (SPSS Statistics 23) using tests and econometric analysis (descriptive, factorial, reliability, multiple regression, and multidimensional scaling analysis) the model shows that all factors have great effects on sustainable business profit through consumers. Findings – However, it is suggested that of great importance for a sustainable business profit through customers are: the behavior of workers and staff, handling requests faster, business support before and after purchase, providing information applications (discount, usage, term of the expiration date, product content, payment methods as well as the provision of transport by the business for consumers. Research limitations – The limitations of this research are only a certain number of variables, years, and the number of businesses, but for other analyses and research, researchers can take a larger number of variables, businesses, and/or countries using the same models. Practical implications – Based on the above questions, it was confirmed that a (TIS) through models will make the profit even more stable by strengthening the position of businesses in the market against their competitors. So, in this case there are still practical implications in three key business domains (TIS) technology, innovation, and services. Therefore, businesses should pay attention to these findings to have a sustainable business profit. Originality/Value – Research related to sustainable profit through consumers considering three key business domains technology, innovations, and services (TIS) has not been analyzed earlier in terms of consumers as buyers and businesses as providers of products and services.

We use detailed assessments of CEO personalities to explore the nature of CEO overconfidence as it is commonly measured. Longholder, the option-based measure of CEO overconfidence introduced by Malmendier and Tate (2005a) and widely used in the behavioral corporate finance and economics literatures, is significantly related to several specific characteristics that are associated with overconfident individuals as well as individuals with lower ability. Similar relations hold for overconfidence measures based on CEOs’ earnings guidance. Investment-cash flow sensitivities are larger for both Longholder and less able CEOs. After controlling for ability and other characteristics, Longholder CEOs’ investments remain significantly more sensitive to cash flows. These results suggest that overconfidence, as measured by Longholder, is correlated with lower ability but still reflects empirically distinct aspects of overconfidence.

We exploit the staggered passage of state-level fair-employment laws in the post-World War II period to examine how stronger worker protection against racial discrimination affects firm profitability and financing decisions. We find that firms experience a decline in operating profitability after the passage of anti-discrimination laws. We also document that the adoption of these laws leads to a reduction in debt ratios, which suggests that firms are able to partially offset the negative effects on operating profitability by adjusting their capital structure. Consistent with theoretical predictions, these effects of anti-discrimination laws are more pronounced for firms in states and cities with a greater proportion of African Americans, firms with high labor intensity, firms in states experiencing high African American migration, and firms in concentrated industries. Some of our evidence suggests that anti-discrimination laws lead to a reduction in statistical discrimination or monopsony power rather than taste-based discrimination. Taken together, our results are supportive of theoretical models of discrimination and show that racial discrimination laws significantly affect firm operating performance and financial policies. This paper was accepted by David Simchi-Levi, finance.

Difference-in-differences analysis with staggered treatment timing is frequently used to assess the impact of policy changes on corporate outcomes in academic research. However, recent advances in econometric theory show that such designs are likely to be biased in the presence of treatment effect heterogeneity. Given the pronounced use of staggered treatment designs in applied corporate finance and accounting research, this finding potentially impacts a large swath of prior findings in these fields. We survey the nascent literature and document how and when such bias arises from treatment effect heterogeneity. We apply recently proposed methods to a set of prior published results, and find that correcting for the bias induced by the staggered nature of policy adoption frequently impacts the estimated effect from standard difference-in-difference studies. In many cases, the reported effects in prior research become indistinguishable from zero.

Relative performance evaluation (RPE) awards have become an important component of executive compensation. We examine whether RPE awards, particularly the peer group, are structured in a manner consistent with economic theory. For RPE awards using a custom peer group, we find that the custom group is significantly more effective than four plausible alternative peer groups at filtering out common shocks, lowering the cost of compensation, and increasing managerial incentives. For RPE awards using a market index, we find some evidence that firms could have selected a custom set of peers with better filtering properties at a lower cost with similar incentives. For example, firms could have saved around $118,000 in present value terms, on average, for an RPE award had they chosen a custom group comprising their product market peers instead of a market index.

Author(s): Hu, Jinshuai; Li, Siqi; Shevlin, Terry J | Abstract: Income taxes are a major expense for profitable corporations, oftentimes 25 percent or more of pretax income. This study exploits a setting – the market for corporate control – to test competing agency-based and risk-based explanations of corporate tax planning. Exploiting the staggered enactment of MaA laws across countries that increased the threat of takeover as an exogenous shock that allows a powerful difference-in-differences design, we find a significant reduction in tax avoidance following the takeover law passage. Our analysis suggests that reduced management private benefits consumption (i.e., rent extraction), rather than managerial effort aversion or increased risk concerns associated with aggressive tax strategies, is the likely mechanism through which takeover laws impact tax avoidance. Collectively, our findings extend the literature by highlighting the role of the corporate control market in shaping cross-sectional variation in corporate tax avoidance.

Outlook Perbankan Syariah 2021 berisikan antara lain: Analisa mengenai Pertumbuhan Aset, Pembiayaan yang Disalurkan (PYD), dan Dana Pihak Ketiga (DPK) Bank Syariah di masa pandemi COVID-19; Kinerja Profitabilitas Bank Syariah di masa pandemi COVID-19; Kualitas Pembiayaan Bank Syariah di masa pandemi COVID-19; Outlook Perbankan Syariah 2021; Proyeksi Bank Syariah 2021; Segmen Prioritas 2021; dan Sub-Sequent Events.

How do companies harmonize forecast based project funding processes with agile way of working?

Managers and corporate directors need to recognize two key behavioral impediments that obstruct the process of value maximization, one internal to the firm and the other external. I call the first obstruction behavioral costs. Behavioral costs, like agency costs, tend to prevent value creation. Behavioral costs are the costs associated with errors that people make because of cognitive imperfections and emotional influences. The second obstruction stems from behavioral errors on the part of analysts and investors. These errors can create gaps between fundamental values and market prices. When they do, managers may find themselves conflicted, unsure of how to factor the errors of analysts and investors into their own decisions. Proponents of value based management emphasize that with properly designed incentives, managers will maximize the value of the firms for which they work. As such, either they treat behavioral costs as simply another form of agency costs, or they deny the relevance of cognitive errors. In contrast, proponents of behavioral finance argue that behavioral costs are typically large, and cannot be addressed though incentives alone. This is not to say that incentives are immaterial. On the contrary, incentives are of critical importance. The point, however, is that there are limits to incentives. If employees have a distorted view of what is in their own self-interest, or if they have a mistaken view of what actions they need to take in order to maximize their self-interest, then incentive compatibility, although necessary for value maximization, will not be sufficient.

Strong reliance on technical and figurative terminology in corporate finance allows effective communication between professionals while simultaneously impairing the accessibility and understandability of the domain by non-professionals or not-yet-professionals (e.g., students). To facilitate the understandability and learning process, we have compiled an English-German corporate finance dictionary. We translate relevant terms using conventional textbooks and the authors’ expertise. This dictionary contributes to the finance profession and provides a teaching resource for students in higher education programs. Such a dictionary is particularly helpful in these times of increasing financial market integrations. Our main finding is that the translation process is a challenging and time-consuming task. Moreover, such a dictionary will always be constrained by the meaning and interpretations the developers attach to the relevant concepts and will need to be updated as new concepts arise.

To explore the real effects of corporate leverage on aggregate risk and welfare, I develop a tractable general equilibrium model with endogenous capital structure driven by time-varying economic uncertainty. Fitting the model leads to interesting insights as to the shortcomings of the standard paradigm. Contrary to the trade-off version, the empirical relation between uncertainty and aggregate leverage is positive. This association is not attributable to supply-side constraints or adjustment costs. An alternative formulation in which debt incentives rise with uncertainty can account for the observed dynamics of uncertainty, credit spreads and leverage. This version, unlike the trade-off model, implies that the real effects of debt on the equilibrium can become severely negative.

We use financial disclosures to develop a novel proxy for net operating loss carryforward (NOL) tax benefits. This approach more accurately identifies firms with tax losses, more precisely measures the tax loss, and better predicts reductions in future taxes than existing proxies. We derive a prediction model, which future researchers can employ to better approximate the NOL tax benefits based on readily available financial data. We also demonstrate how NOL nonlinearity affects measurement of corporate tax status. By proposing a new measure and demonstrating trade-offs across competing proxies, we contribute to the work in public economics, corporate finance, and tax accounting that examines the responsiveness of the business sector to corporate tax incentives.

Despite their importance, the discussion of spillover effects in empirical research often misses the rigor dedicated to endogeneity concerns. We analyze a broad set of workhorse models of firm interactions and show that spillovers naturally arise in many corporate finance settings. This has important implications for the estimation of treatment effects: (i) even with random treatment, spillovers lead to a complicated bias; (ii) fixed effects can exacerbate the spillover-induced bias. We propose simple diagnostic tools for empirical researchers and illustrate our guidance in an application.

We examine whether dividends serve as substitutes or complements to accounting information in firm valuation. Consistent with dividends substituting for earnings information, we find that dividend paying firms have 11%–15% lower earnings response coefficients (ERCs) than non-payers. We find more substitution when the dividend provides a stronger signal of permanent earnings: when the firm is less likely to cut the dividend, when the firm is likely to fund the dividend out of earnings rather than cash reserves, or when the dividend is larger. We then show that dividend payers have lower absolute returns, less trading volume, and fewer analyst forecasts at the earnings announcement (EA), suggesting that dividend payers attract less attention to their less informative EAs. Finally, we show that the lower EA attention translates into less earnings management and fewer earnings-related disclosures for dividend payers relative to non-payers. Collectively, this evidence suggests that dividends supply information about permanent earnings and, although costly, could be an efficient way for some firms to satisfy investors’ demand for earnings information.

This paper studies differential employee responses to the public disclosure of individual performance information throughout an organization. We argue that, to the extent that employees care about their colleagues’ perceptions of their productivity, public disclosure will increase motivation. Moreover, the effect should be stronger for employees whose colleagues expect them to have higher performance. We obtained data from a bank that transitioned from private to public disclosure of employee rankings and, consistent with our hypothesis, find heterogeneity in employee responses to public disclosure. Employees with a history of poor performance increase their output more than past good performers when rankings become public. Additionally, more highly educated employees react more strongly to the change. However, contrary to the literature that finds gender differences in competitive environments, we do not find systematic differences in the response to public disclosure on this dimension. Overall, the results suggest that public disclosure is an important dimension to consider when designing a compensation system.

Prior research finds an association between short selling volume and aggressive non-GAAP earnings disclosures but does not explore whether increased short selling pressure actually constrains aggressive non-GAAP reporting. Attribution of causality is problematic in this setting due to multiple self-selection issues. Firms self-select into providing non-GAAP performance metrics, and they also decide the timing of these disclosures strategically. Furthermore, short sellers carefully select the stocks they want to short. We exploit a randomized natural experiment—the SEC’s Regulation SHO—as an exogenous shock to mitigate endogeneity concerns and investigate the causal effect of short selling on the proliferation of aggressive non-GAAP reporting. The specific starting and ending dates of Regulation SHO allow us to conduct two separate difference-in-differences (DiD) tests. Our double DiD analyses indicate that the threat of increased short selling prompted by Regulation SHO significantly curbs managers’ aggressive non-GAAP earnings disclosures. However, the regulation does not affect non-GAAP exclusions that are presumed to be nonstrategic and informative. We find that short sellers’ disciplining effect is stronger when the pre-disclosure information environment is relatively impoverished and corporate governance is weak. Our results are robust to extensive sensitivity testing. Overall, we find strong evidence that the threat of increased short selling constrains aggressive non-GAAP reporting.

Managers may strategically use discretion over disclosure language to reduce the effect of bad news, amplify the effect of good news, or both. We experimentally test how a warning highlighting management’s discretion over disclosure language affects investors’ reactions to more and less readable disclosures. We find that the warning works as intended for good news disclosures, causing investors to reduce their valuations of the firm when readability choices match management incentives. In the case of bad news disclosures, however, investors do not react as intended to the warning. Additional experiments yield two key findings. (1) The warning works for good news disclosures because of its reference to the way disclosure content could be communicated and not because of its reference to the disclosure content itself. (2) The warning does not work as intended for bad news disclosures because investors do not believe that management strategically uses readability in this situation. Our results should inform regulators, given their interest in both promoting more readable disclosures and protecting investors.

Social media outlets provide nonprofit organizations the opportunity of opening new communication and disclosure channels. Organizations must decide whether to set up these channels. They – and in turn their target audiences – must also decide how much to use social media. In this study we test a novel multi-level signaling theory framework to examine the relationship between social media investments and financial returns. Employing both cross-sectional and cross-temporal samples of 427 of the largest US non-hospital charities, we look at the association between donations and three dimensions of organizations’ social media efforts: 1) whether the organization has a social media presence, 2) how much the organization uses social media, and 3) the level of engagement of the organization’s audience. The findings support our conjecture that financial returns result from establishing a particular communication channel, from using that channel, and from having channel-specific audience engagement. We also consider how our three social media signaling dimensions condition the core donations demand variables, finding that social media substitutes for traditional fundraising expenditures. These results carry implications for the signaling and donation demand literatures and further our understanding of how these new media are changing the rules of donor engagement.

Using unique new data, we examine whether brokerage trading volume creates a conflict of interest for analysts. We find that earnings forecast optimism is associated with higher brokerage volume, even controlling for forecast and analyst quality, recommendations, and target prices. However, forecast accuracy is also significantly associated with higher volume. When analysts change brokerage houses, they bring trading volume with them, influencing trading volume at the new brokerage. This indicates that analysts drive the volume effects we observe. Consistent with a reward for generating volume, brokerage houses are less likely to demote analysts who generate more volume. Finally, analysts strategically adjust forecast optimism based on expected volume impact. Analysts become more (less) optimistic if their optimistic forecasts in the prior year were more (less) successful at generating volume. However, consistent with higher costs to increasing accuracy, analysts do not update accuracy based on expected volume impact. Overall, our results are consistent with a brokerage trading volume conflict of interest moving analysts towards more optimistic earnings forecasts, despite the volume reward for accuracy.

This paper investigates the time-varying relationship between earnings momentum and price momentum. Using a Markov-switching framework, allowing for variation between high volatility and low volatility states, we find that price momentum is significantly more influenced by earnings momentum in the high volatility state. Further for price momentum we find that loser firms display a higher degree of differential response to earnings momentum across the low and high volatility states than winner firms. Limited financing and investor sensitivity to future investment opportunities might explain these two results. Additional analysis indicates that loser firms tend to be more financially constrained. The results are robust using alternative instrument variables.

The purpose of this study is to empirically examine the relations between audit outcomes and accounting standard design (principles-based vs. rules-based) for U.S. firms. Considering that audit outcomes may vary with audit risk which may differ under different accounting standards, we examine and find that audit risk and audit fees are lower when client firms rely more on principles-based standards. Next, we find that principles-based standards are associated with lower likelihood of receiving a going concern opinion and shorter audit report lag. However, for firms that rely more on principles-based standards and, have greater incentives to engage in earnings management, audit fees are higher. Collectively, our results inform the FASB, the SEC, and the PCAOB of the potential benefits of using principles-based standards with respect to audit outcomes and more broadly, provide evidence on the role that accounting standard design plays in auditing.

This paper examines the impact of a firm’s social performance on the CEO’s employment prospects. We find that CEOs are more (less) likely to leave office when there is a significant recent decline (improvement) in social performance. We then track departing CEOs’ subsequent employment records and find that the social performance of their previous employers improves their labor market outcomes. These CEOs are more likely to find a new executive position, move up to a larger public firm, and receive higher compensation from the new public firm. Using a Cox proportional hazard model, we find that the strong social performance of the previous employer helps CEOs find their next executive positions sooner. Overall, our results suggest that corporate social performance enhances CEOs’ labor market potential.

We examine the effect of capitalization vs expensing on UK firms’ R&D expenditures. Our investigation is motivated by the UK’s mandatory switch from UK GAAP to IFRS in 2005. Under UK GAAP, firms could elect to expense or capitalize development expenditures, but IFRS mandates capitalization. Thus, “capitalizers” maintained their accounting method, while “switchers” were required to change from expensing to capitalization. Using a difference-in-difference design, we examine the effect of the rule change on the amount and riskiness of the two groups’ R&D expenditures. Consistent with arguments that expensing’s deleterious effect on income causes firms to reduce their R&D outlays, we find that switching firms increased their R&D expenditures more than firms that continued to capitalize. We subject our results to numerous robustness tests, using propensity score matched samples, comparing early vs late switchers, switchers with high vs low R&D expenditure growth, examining R&D behavior in the last year before IFRS adoption, and a placebo test in which we alter the switch date. Across all of these tests, our results support the conclusion that the accounting method affects the amount that firms invest in R&D. Our results attest to the real effects of accounting policy on firms’ R&D investments.

Public equity is an important source of risk capital, especially in China. The Chinese government has occasionally suspended IPOs, exposing firms already approved to IPO to indeterminate listing delays. The temporary bar on going public increases uncertainty about access to public markets for affected firms. We show that suspension-induced delay reduces corporate innovation activity both during the delay and for years after listing. Negative effects on tangible investment and positive effects on leverage are temporary, consistent with financial constraints during the suspensions being resolved after listing. Our results suggest that predictable, well-functioning IPO markets are important for firm value creation. They demonstrate that corporate innovation is cumulative and is negatively affected by policy uncertainty. This paper was accepted by Gustavo Manso, finance.

This study aims to identify a theoretical fair value of the Sharpe ratio. For this purpose, we propose a formula with a closed-form solution to estimate a fair, expected, or ex ante value for the Sharpe ratio by framing it in the option pricing model. We find that firm value, growth rate, return volatility, risk-free rate, and the maturity and face value of the debt contract are determinants of the Sharpe ratio. In particular, a firm’s investing and financing policies can affect the firm stock’s Sharpe ratios. Contrary to what might reasonably be expected, our results show that a firm with a higher equity value tends to have a lower Sharpe ratio value. The results show the potential and feasibility of integrating three fields in future research: performance evaluations, option pricing, and corporate finance.

This paper aims to conduct a comprehensive retrospective analysis of the International Review of Economics and Finance (IREF). Using the bibliometric approach, the study analyses the journal's performance, citation structure, network connection, and mapping analysis through which a conceptual structure is developed. The Scopus database is used to retrieve data and a wide range of bibliometric tools are utilized for analysis such as RStudio “Biblioshiny” package, VOSviewer, and Microsoft Excel. Analysing IREF performance over the last twenty-nine-years (1992–2020), the findings reveal that the most prolific authors have USA and China affiliations; the journal's authors derive their information and build on research from sources that are ranked (Q1, A*, 4, 4* and SSCI), which indicates high connectedness between IREF content and published work in top sources in economics and finance. Moreover, the citation of the journal is surging in an unprecedented way during the last five years. Thus, IREF has positioned itself as one of the most influential sources, especially in finance. Its citation performance is close to the Journal of Finance, Journal of Banking and Finance, and Journal of Corporate Finance, while being above many esteemed finance journals, such as Review of Finance, Emerging Markets Finance and Trade, and Journal of Empirical Finance. The most prominent themes discussed in the journal are capital structure, economic growth, corporate governance, monetary policy, foreign direct investment, exchange rates, and emerging markets. This article presents the trending topics in IREF over the last three decades, which is helpful for the journal's board of editors in drawing a successful strategy based on a bibliometric study of the economics and finance field, where it is likely to garner interest.

Stephen A. Ross was one of the most influential scholars in the field of financial economics in the late twentieth century. Ross's work was central to several novel domains of economic inquiry. His contributions included the arbitrage pricing theory (APT), the risk-neutral pricing of contingent claims, the binomial option pricing model, a theory of the term structure of interest rates, a seminal contribution to the economic theory of agency, and insights about conditioning biases in ex post performance measurement. In this article, we discuss his seminal papers and the broad scope of his curiosity within the arc of a remarkably productive and influential career that spanned five decades and yet ended sooner than most who knew him expected.

We show that free agent signings in U.S. professional sports are associated with localized sentiment trading effects. Responses are influenced by player performance, labor contract and sport structure characteristics unique to each league. Football signings lack guarantees and are noisy signals while the most informative baseball signings reflect player performance. Sentiment effects of basketball signings are mixed. Investors respond positively to contract extension announcements, but negatively to new contract negotiations, with either the current team or a different franchise. Exceptions are for free agents with high performance rankings or who are perceived to improve the odds of winning a championship. We also provide some evidence that sentiment trading is driven primarily by retail investors.

This article explores the interactive effects of digital finance and environmental, social responsibility, and corporate governance (ESG) performance on corporate financing efficiency using data en...

This paper studies whether banking practices affect borrowing firms’ financial reporting quality. Specifically, I examine the effect of bank cross-selling activities (i.e., a bank’s joint provisions of lending and underwriting services to the same firm) on borrowers’ financial reporting quality for debt contracting purposes. Compared to issuing stand-alone loans, cross-selling increases a bank’s risk exposure to the firm and therefore gives the bank more motivation to monitor the borrower’s financial condition (incentive effect). In addition, cross-selling enables information sharing between the underwriting and lending divisions and allows the bank to have a closer understanding of the borrower’s underlying economics, thereby better disciplining the borrower’s ability to withhold bad news (information effect). Consistent with these arguments, I expect and find that cross-selling is associated with an improvement in the debt contracting value (DCV) of accounting information at borrowing firms. I also provide evidence in support of the incentive effect and the information effect.

After decades of fast growth, the Chinese housing market has become twice as large as the US housing market. In this paper, we examine the effect of the housing boom on the capital structure of Chinese public-listed firms. We find a reverse U-shape relationship between the growing real estate prices and firm leverage. At a lower level of price growth, firms tend to increase leverage to exploit the appreciation of pledgeable assets from the boom. When the price growth reaches to a certain high level, the housing boom creates a positive wealth shock effect on shareholders that reduces the use of debt for their tunneling activities, given that shareholder tunneling is very predominant in China. The wealth shock effect is more dominant when the shareholders’ tunneling activities are more vigorous. Moreover, the reserve U-shape relation is more pronounced for firms with more powerful controlling shareholders, and for firms with high level of fixed assets or in the manufacturing industry. The results are still robust after we address the endogeneity issue that both housing price and firm leverage could be affected by a common factor.

Auditors tend to be more conservative in their audits when they face greater litigation risk. However, it is unclear whether this conservatism is always desirable or whether it can be excessive. To evaluate the usefulness of greater auditor conservatism, we examine whether auditor conservatism improves audit quality and imposes real operating consequences for clients. We examine auditor behavior in a sample of auditors’ client banks, when one of the auditor’s other client banks fails (as deemed by the FDIC). We find that auditors that experience a bank failure within their portfolio become more conservative for surviving clients. However, we find that the larger loan loss provisions at surviving clients are no more timely, are less accurate, and reverse in subsequent periods. This finding suggests that auditors’ initial portfolio-wide response to a specific client failure may be overly conservative. We also document that surviving client banks face real consequences in terms of constraints on their lending because of the auditor’s excessive conservatism. Overall, we conclude that, in some situations, auditors may overreact, leading to excessive conservatism, which in turn has adverse consequences for clients.

Purpose of the study: The subject of consideration is the behavioral aspects of corporate finance. The consideration is devoted to the basic inclinations of psychological nature characteristic of managers. The main purpose of the article is to characterize the irrational behavior of managers in the process of financial decision-making in the enterprise. Methodology: The paper was prepared with the use the critical literature review method mainly in the field of behavioral corporate finance. Main findings: The discussion shows that behavioral corporate finance focuses mainly on cognitive and motivational-emotional processes in managers, which may occur in various decision areas within which managers make choices. There are three groups of psychological phenomena and inclinations that are characteristic of managers who manage business entities, namely predispositions to systematic inference errors, heuristics, and the presentation effect. Application of the study: The presented article refers to the irrational behavior of managers in the process of making financial decisions in the company. It implies reflections in such scientific fields as, among others, economics and finance, management and psychology. The use of the tools of psychology allows analyzing the problems of financial decision-making of managers in the enterprise, noticing in them some deviations from rationality that can affect the efficiency of the enterprise. The content of the article can be useful for managers making financial decisions in an enterprise. Originality/Novelty of the study: Behavioral finance is a young discipline of finance, the scientific output of which in Poland is still small. Behavioral aspects are just beginning to gain importance in the decision-making process, especially the financial one. The tendencies of managers to irrationality in the decision-making process presented in this article allow us to better understand the errors, psychological factors that may cause wrong decisions, which in turn may translate into poorer financial condition of the whole enterprise. The article can inspire further research and inquiry in the field of behavioral finance and contribute to other interesting scientific studies.

Purpose This study aims to investigate the relationship between a commercial bank’s micro-loaning activity and overall performance over a 10-year period. Design/methodology/approach Quarterly data was obtained from the Wind Database, China Minsheng Banks’s official annual reports and annual corporate social responsibility reports from 2009 to 2019, to test the linear relationship between micro-loan activities and the overall financial performance of the bank. Findings The results of this study empirically demonstrate that there is a positive relationship between increases in micro-loaning activity and the overall performance of the bank. Some key recommendations for the sector are shared in the conclusion of this paper. Originality/value In the financial sector, some corporate social responsibility activities focus on the issuance of micro-loans. It is unclear, however, if this has also served as a means to increase profitability and overall performance for such institutions.

This study investigates the role of Chinese audit committees in social responsibility and environmental disclosures. We examine whether audit committee characteristics are related to the disclosures. By using a balanced panel dataset of Chinese energy firms and firm fixed-effects regressions, we find that audit committees’ female representation is positively associated with the likelihood of issuing social responsibility reports and the level of environmental disclosures. Nevertheless, there is no consistent evidence that some conventional measures of audit committee effectiveness including audit committee independence and financial expertise can positively affect the disclosures. The findings suggest that female audit committee members are more effective in enhancing the disclosures than their male counterparts, which may pose a demand for the presence of more female directors on Chinese audit committees. Meanwhile, there is room for Chinese audit committee members to extend their oversight role. This study enriches the research on the role of audit committees in social responsibility and environmental disclosures, which has been little addressed in the literature.

This paper intends to apply the Altman Z-score model to all the companies active in the wholesale of motor vehicle parts and accessories (NACE 4531), with extended financial statements. Using the panel data model over the time series for 2008-2016 on the companies of this sector, we conclude that 99% of the Z-score is explained by the independent variables (working capital, capital structure, turnover, earnings before interest and tax), with estimated parameters very close to the model`s classical values. The sample description of the paper and the corresponding results highlight the Z-score evolution by turnover clusters and principal components, with the largest companies performing the best (the only cluster with Z-score median above 3). We notice a tendency for decreasing high-risk companies and increase in the medium risk companies, whereas the low-risk companies are relatively stable. This improvement is mostly due to the increasing capitalization rate and less external debt, despite the deteriorating working capital and operating margin. We believe that future research to evaluate Z-score sensitivity under stress test scenarios would be very useful to provide an insight into companies’ insolvency risk amid increasing interest rates and different fiscal tax on dividends.

This study investigates whether and how social security contributions affect corporate financing decisions. Treating the 2011 Social Insurance Law in China as a quasi-natural experiment, our difference-in-differences framework utilizes two-dimensional variations: initial social security contribution rates across firms (i.e., high vs. low) and year (i.e., before and after 2011). We find that more social security contributions cause firms to issue less debt in their capital structure, particularly firms with more severe labor market frictions, greater labor intensity, unhealthier financial status, tighter financial constraints, and those located in low-income areas with less developed financial systems and greater fiscal pressure. Mechanism tests show that firms’ operating leverage, bank credit default risk, and profitability volatility increase, while the supply of trade credit decreases, which is consistent with the financial distress hypothesis. The findings suggest that firms tend to choose conservative financing policies to mitigate the likelihood of financial distress caused by increasing social security contributions.

We show analysts’ own earnings forecasts predict error in their own forecasts of earnings at other horizons, which we argue provides a measure of the extent to which analysts inefficiently use information. We construct our measure by exploiting two sources of variation in analysts’ incentives: (i) more recent forecasts have greater salience at the time of the earnings release so accuracy incentives are higher (lower) at shorter (longer) forecast horizons and (ii) analysts have greater incentives for optimism (pessimism) at longer (shorter) horizons. Consistent with these incentives affecting the incorporation of information into forecasts, we document (i) current year forecasts underweight (overweight) information in shorter (longer) horizon forecasts and (ii) the mis-weighting is more pronounced when recent news is negative—when analysts have greater (weaker) incentives to incorporate the news into shorter (longer) horizon forecasts. Finally, returns tests suggest that forecasts adjusted for the inefficiency we document better represent market expectations of earnings.

This study investigates the determinants of the presence and success of initial coin offering (ICO) campaigns using data on 503 ICOs from 60 countries launched between 2015 and 2018. The analysis i...

Hilferding was not an orthodox Marxist but an eclectic. Two examples illustrate this: first, the terms Gemeinschaft/community and Gesellschaft/society from Tonnies, which Hilferding used as the basis for his description of the development of capitalism; and, second, the literature on American corporate finance, which Hilferding used as the basis for his definition of promoter’s profit. Evidently for Hilferding, this profit is primarily capitalised monopoly profit in the concentration process. The analysis of Hilferding’s private library helps explore these backgrounds. Besides, as honourable as the translation of Hilferding into English is, in principle, the translation is not always as precise as necessary to make these connections visible.

We want to find out how Advanced Analytics, the semi-autonomous examination of data, can affect the internal budgeting process so it could make the reporting to internal stakeholders easier and more precise. In this research we focus on manufacturing companies. The study will be based on interviews.

Exchange rate volatility is a vital issue in international finance due to its effect on the value of the firm, depending on firm's exposure to the exchange rate risk. However, this impact is not clear in literature as evidence is mixed. This article analyses the impact of exchange rate fluctuations on firm value. A system dynamics-based corporate planning model has been developed that incorporates the modules for financial and physical processes, firm valuation and exchange rate determination. Simulation results reveal that a stronger home currency leads to an increase in market price per share of the firm and vice versa. The results provide counter intuitive evidence on the impact of exchange rate on firm value and provide nonlinear feedback loop-based explanation. The study fills the gap in literature by incorporating a systemic approach in the strategic planning process to assess the composite impact of parameter changes on key variables. publishedVersion

Research methodology We obtained information on China Gerui from secondary published sources, including annual reports downloaded from the Securities and Exchange Commission’s (SEC) EDGAR database, news sites and newspapers, the company’s website and journal articles. One of the authors visited the China Gerui plant in Henan, China. Case overview/synopsis China Gerui, a Chinese metal fabrication company, enjoyed exponential growth because of its location, product innovation and ability to move up the value chain. At the height of its success, the company listed on the Nasdaq and had plans to raise capital to fund ambitious expansion plans. Unfortunately, four years after listing on Nasdaq, the company received a letter from the listing qualifications department notifying China Gerui that they were not in compliance with Nasdaq’s filing requirements because it had not filed its Form 20-F. Now, the company had only five days to decide whether to request an appeal of the letter. Complexity academic level This case is best suited for higher-level undergraduate accounting and finance courses such as intermediate accounting, auditing, international accounting, financial statement analysis, corporate finance and investments analysis. It is especially appropriate for graduate-level global accounting and advanced financial statement analysis courses. In these courses, the best placement is after coverage of SEC regulations and requirements for financial statement reporting and disclosure. Moreover, the case may be used as a tool to demonstrate the step-by-step process for searching and retrieving information from a public company’s filings through the SEC’s EDGAR database. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

We examine whether delays in the expected release of annual earnings have implications for the future auditor-client relationship. Managers have strong incentives to release earnings on schedule, and auditors play an important role in helping their clients avoid costly earnings announcement delays. We find an increased likelihood of subsequent auditor-client realignments after earnings announcement delays. We further find that clients changing auditors realign with audit firms that better meet their earnings announcement timing demands, without finding evidence of a significant compromise in the reliability of the financial statement numbers in the earnings announcement. Our results help inform regulatory concerns about audit market concentration and how audit firm turnover has the potential to impact the auditor-client dynamic. While it is possible that auditor turnover could lead to a power imbalance where clients gain leverage in the relationship, our results suggest otherwise.

We investigate the relationship between cost management and dividend payout decisions. Prior studies document that firms with consistent earnings or transitory losses tend to pay out dividends (Skinner and Soltes in Rev Acc Stud 16:1–28, 2011). Ham et al. (J Financ Econ 136: 547–570, 2020) suggest that dividends contain information about the level of permanent earnings. In addition, sales changes influence cost management because cost management has a direct effect on earnings. Prior research shows that when a firm experiences a temporary sales decline, managers are resistant to cutting resources (as quickly as they increase resources when sales grow) due to the expectation that sales will rebound (Anderson et al. J Account Res 41:47–63, 2003). We find that cost stickiness is positively associated with dividend yield. Furthermore, we show that this positive association is concentrated in firms with: (a) selling, general, and administration (SGA (b) higher ability managers; and (c) no successive sales decreases.

We use required 8-K filings around major borrowings to shed light on firms’ choices of whether to comply with SEC disclosure rules. Exploiting within-firm variation, we find that firms are more likely to hide loans with high spreads and tight financial covenants. We further find that firms appear to exploit the ambiguity of the definition of materiality, as they are more likely to selectively disclose (hide) “immaterial” loans when interest rates are low (high). Firms are less likely to hide loans when investors anticipate borrowing during asset acquisition, when firms are followed by more equity analysts or receive more investor attention, and when the firms’ stock prices are more volatile. Lastly, we provide evidence that the SEC does not rigorously enforce compliance with 8-K loan disclosures.