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In the digital economy era, digital empowerment is a crucial measure to enhance capital allocation efficiency (CAE). To examine the effect of digital empowerment on CAE, we conducted a study using Chinese listed firms as a research sample. Our findings indicate that (1) Digital empowerment significantly enhances the CAE. (2) Digital empowerment improves the CAE in enterprises by reducing agency costs and enhancing operational capabilities. (3) This effect is even more pronounced in non-state-owned enterprises, enterprises with low leverage, and those with weak levels of external oversight. (4) Further research suggests that digital empowerment leads to a reduction in under investments and reduces operating investments. The research in the article provides a theoretical framework for enterprises to enhance CAE and governance level. It also offers policy insights for promoting effective digital transformation of businesses and presents valuable references for advancing digital economy in China. [ABSTRACT FROM AUTHOR]

In contrast to corporations in other countries, the role that party organizations play in Chinese firms is distinctly unique. This paper presents empirical evidence of a positive effect of party organization embeddedness on corporate environmental performance. This effect is particularly pronounced for firms operating in regulated industries and those with a stronger cultural system of environmental protection. The study also reveals that the embedding of party organization enhances corporate environmental performance through reducing agency costs and increasing access to environmental subsidies. Overall, this paper emphasizes the importance of the unique arrangement of corporate party organizations in China and provides policy implications for improving the distinct Chinese corporate governance system, promoting green development, and advancing ecological civilization. • The party organization embeddedness has a significantly positive effect on corporate environmental performance. • Regulated industries and cultural system of environmental protection exacerbate the effect. • The mechanisms include reducing agency costs and increasing access to environmental subsidies. [ABSTRACT FROM AUTHOR]

• Robots and advanced technology in production increase firms access to external financing. • Technological advancements impact loan approval rates and large loans. • Advanced technology in production reduces the gender gap in loan approvals. • Possible mechanisms are increasing firm productivity and mitigating agency problems. The integration of robots and advanced technology in firm-level production processes represents a transformative shift in modern industrial practices. However, there is a lack of cumulative knowledge about the advancement of technology in the production processes affects mitigating the gender gap. Through the lens of financial accessibility, the study investigates how technological advancements influence firms' capacity to secure external financing and get large loans. Using the 2020 WorldBank Enterprises Survey data and a probit model for the analysis, our results suggest that industry robots and a high level of technology in production have the potential to reduce the gender gap in loan approvals. The findings of this have implications for decision-makers and policymakers, seeking to navigate the evolving landscape of technology-driven production and finance to enhance productivity and inclusivity. [ABSTRACT FROM AUTHOR]

• We explore the effect of social credit improvement on enterprise investment. • Social credit improvement increases enterprise investment by mitigating agency cost and enhancing debt financing. • The impact is more significant for enterprises without political affiliations and with high institutional shareholding. • The economic significance of social credit is clarified. This research explores the effects of enhancing social credit on corporate investment, utilizing China's model city pilots for the Social Credit System Construction(SCSC) as a quasi-natural experiment. Our findings demonstrate that social credit improvement significantly increases enterprise investment levels, a conclusion supported by robustness tests. Mechanism analysis reveals that mitigating agency cost and enhancing debt financing are key factors driving increased corporate investment after the implementation of the SCSC. Heterogeneity results suggest that SCSC implementation is more effective for firms without political affiliation and with high institutional shareholding. [ABSTRACT FROM AUTHOR]

This study explores the relationship between ethnic diversity and corporate investment in Chinese listed firms. Based on data from China's A-share market companies and the national census dataset, we find that local ethnic diversity is negatively related to corporate investment efficiency. Furthermore, we explore the channel through which ethnic diversity affects corporate investment efficiency, and our study indicates that both social trust and agency cost play mediating roles between ethnic diversity and investment efficiency. Robustness tests verify our conclusions. [ABSTRACT FROM AUTHOR]

• Executive reduction is negatively related to corporate green innovation capability. • The higher the level of internal control of listed companies, the lower the degree of inhibition of corporate green innovation by executive takeovers. • The higher the agency cost, the lower the degree of executive shareholding reduction that inhibits corporate green innovation. This paper uses 2016–2022 data for China's A-share listed companies to explore the effects of reduced shareholdings by executives (RSE) on corporate green innovation (CGI). RSE behavior and CGI are found to be significantly negatively correlated. Further, greater internal control and higher agency costs for listed companies reduce the inhibition of CGI resulting from RSE. [ABSTRACT FROM AUTHOR]

• We compare the dividend smoothing between dual-class firms and single-class firms. • We find that dual-class firms have a quick dividend adjustment speed and engage less in dividend smoothing compared to single-class firms. • The effect is more prominent for mature firms, firms with low growth opportunities and firms with higher free cash flow. • We use the four indicators as proxies for dividend change propensity. Overall, the dividend policy of dual-class firms is more sensitive than that of single-class firms. • Our findings are consistent with the viewpoint that firms incurring fewer Type I agency costs will reduce their participation in dividend smoothing. This paper delves into the implications of the dual-class share structure, an increasingly prevalent ownership model, for dividend smoothing behaviors. Using a large sample of the U.S., our analysis reveals that firms with dual-class share structures exhibit lesser dividend smoothing behaviors compared to their single-class counterparts. The influence of the dual-class share structure on dividend smoothing is more significant among firms characterized by high free cash flows, limited growth prospects, and those in their mature stages. Furthermore, we observe a higher propensity for dividend reductions or omissions in dual-class firms. [ABSTRACT FROM AUTHOR]

• This study shows industrial robot adoption significantly increases firm value. • Possible mechanisms are operating performance improvement, effective tax rate reduction, net profit margin increase, and agency cost mitigation. • This study provides new insight into the impact of automation on firms. • This study highlights the role of the production technological innovation of firm value. This study examines the effect of automated production technology on firm value. Examining evidence from listed Chinese manufacturing companies from 2012 to 2019, our findings show that industrial robot adoption increases firm value, and the effect is more pronounced in labor-intensive industries, private companies, and firms with executive shareholding. Possible mechanisms include operating performance improvement, effective tax rate reduction, net profit margin increase, and agency cost mitigation. This study contributes to a comprehensive evaluation of the overall impact of automation on firms and deepens the understanding of the productivity innovation drivers of firm value. [ABSTRACT FROM AUTHOR]

Abstract Drawing on an agency theory approach, this paper examines conflict of interests and the resulting agency costs in the provision of urban public transport services in Istanbul's public transport system, particularly the private bus and minibus operators' relationship with local government. The agency problem in Istanbul's urban mobility system shows itself most explicitly in private bus and minibus operators because of the net-cost (NC) contract model in place. The private bus and minibus operators' relationship with local government is examined as a case study of agency relationships. Conceptually, government transport authorities and transport operators, together with the passengers, are the main actors of this urban public transport system. They all have distinct needs, interests and requirements and interact with each other, all embedded in a specific institutional environment. Service quality provided by public transport operators depends on the positive interactions between these actors. Whereas passengers demand reliable, affordable, safe and comfortable mobility services, private bus and minibus operators aim to increase their revenue and maximise their profits. In contrast to this, government bus operators provide in-house bus services without much concern for profitability. Regulators or local authorities, on the other hand, are expected to set up an institutional environment where passengers' and operators' expectations are met in a satisfactory manner. Empirical analyses and interviews with key agents demonstrate that agency costs are shown to be the result of misaligned interests between the government transport authority and private operators that lead to reduced service quality in terms of safety, comfort, reliability and affordability. We conclude that the agency costs of current NC contracting on passengers in Istanbul has deficiencies and propose instead a performance-based gross-cost (PrGC) contracting model. PrGC contracting can alleviate agency costs by changing the incentives of operators where regulatory and financing mechanisms are not enough to handle NC contracting. Istanbul represents some transferable lessons and implications, especially for developing cities around the world. Highlights • Explores the conflicts of interests between urban transport operators and authorities through agency theory approach. • Gives an empirical application of agency analysis for Istanbul's private operators. • Reveals the agency costs of current net-cost contracting on service quality in Istanbul. • Proposes a performance-based gross-cost contracting to mitigate agency costs. • Provides policy recommendations to reduce the undesirable impacts of agency costs on urban mobility policies. [ABSTRACT FROM AUTHOR]

We posit that lender monitoring increases the general outcomes of borrowers' tax avoidance while reducing opportunistic tax aggressive behaviors. We identify four lender related monitoring measures that could affect borrowers' tax planning. We find firms with a larger portion of loan shares held by lead lenders, with loans led by reputable lenders, and with a single lending relationship to have more tax avoidance and less tax aggressiveness, and firms with loan sales that weaken lenders' monitoring incentives to have less tax avoidance and more tax aggressiveness. We further find the lender monitoring effect on tax planning to be more pronounced for firms closer to financial distress and bankruptcy. [ABSTRACT FROM AUTHOR]

Abstract This study investigates the impact of corruption on corporate cash holdings in China. The political extraction argument predicts that firms might shelter liquid assets to avoid extraction by corrupt officials. Using data on A-shared listed firms between 2007 and 2012, we find that firms located in more corrupt regions hold less cash, supporting this hypothesis. Political resources help to diminish the risk of exploitation, reducing the extent to which liquid assets are sheltered. We find that the negative association between corruption and cash holding is more significant for non-state-owned enterprises (Non-SOEs) than for state-owned enterprises (SOEs). Moreover, the cash holdings of Non-SOEs without political connections are more sensitive to corruption than those of Non-SOEs with political connections. These findings demonstrate that expropriation by corrupt officials is an important factor driving firms to manage liquidity. [ABSTRACT FROM AUTHOR]

This paper presents a continuum approximation model for the operating cost of demand responsive transit (DRT) systems in large urban networks. Applications of the proposed model shed light on ways demand and characteristics of the DRT system affect major components of cost: fleet, vehicle hours, and vehicle miles traveled. Verifying the relationship with empirical data, results show an accurate approximation of the operating cost for the paratransit system in New Jersey. Furthermore, we develop a systematic approach for evaluating the efficiency of policy implementations for DRTs. Finally, the circumstances where coordinated taxis could be a cost reduction strategy are identified. [ABSTRACT FROM AUTHOR]

In this study, we examine the impact of fair value accounting on corporate debt structures, i.e., debt conversion privilege and maturity term. We argue that fair value accounting affects agency conflicts between debtholders and shareholders via its impact on financial reporting quality. Consequently, it should affect corporate decisions on the debt structure. Our empirical results show that ceteris paribus, more use of fair value measures in financial statements are associated with a greater demand for convertible debt and debt with short maturity, and the results are mainly driven by Level 2 and Level 3 fair value measures. These findings suggest that it is the lack of reliability of fair value measures that gives rise to more demand for debt structure tools that mitigate debtholder-shareholder agency conflicts. In addition, we find that the negative association between the use of Level 3 fair value measures and the debt conversion privilege or debt maturity term is more pronounced for high-performance firms, suggesting that high-performance firms benefit more by issuing convertible debt or shortening debt maturity. This study provides novel insights regarding the impact of fair value accounting on corporate debt structure. It also provides regulatory implications, calling for better measurement guidance on fair value inputs. [ABSTRACT FROM AUTHOR]

This paper discusses the impact mechanism of compulsory liability insurance on agency costs. Studying the companies listed in China's food manufacturing industries in 2011–2018, we find that compulsory liability insurance significantly reduces the two types of agency costs, namely, alleviating the principal-agent problem and the principal–principal problem. Robustness tests confirm this finding. The reduction of information asymmetry and the improvement of internal control quality are the mechanisms leading to this result. Compulsory food safety liability insurance plays a significant role in reducing agency costs when company ownership is concentrated or when media coverage is high. This paper provides empirical evidence for joint regulation by the public and private sectors, also provides theoretical reference for further optimizing food safety governance mode. [Display omitted] • This paper explores the effects of compulsory food safety liability insurance on agency costs. • We find that compulsory food safety liability insurance significantly reduces the two types of agency costs. • The mechanisms leading to this result are reducing information asymmetry and improving internal control quality. • The effect is more significant in the companies with high ownership concentration or high media attention. [ABSTRACT FROM AUTHOR]

This paper investigates empirically the impact of managerial discretion on agency cost from the perspective of SG&A cost asymmetry and examines how corporate governance moderates this relationship. The analysis shows mixed evidence in favor for cost behavior and managerial choices in the Indian market. The cost asymmetry involves not only cost stickiness but also the anti-sticky behavior of SG&A cost under certain circumstances. The main drivers for this disparity are owing to manager's resource adjustment decision, the future expectation of sales and managers' empire-building behavior. Furthermore, findings suggest that strong corporate governance alleviates empire-building behavior of managers. Additional analysis shows, the asymmetric behavior of SG&A cost in crisis period is mainly a result of managers' resource adjustment decision and future expectation of sales change. Manager's empire-building behavior does not play an explicit role in this period. Next, the findings show that managers' discretion is influenced by future value creation potential of SG&A cost. Manager's empire-building behavior is more pronounced in low-value creation sample firms compared to high-value creation sample. Thus, manager's choice for resource adjustment decision and empire-building behavior changes according to the future value creation of SG&A cost, financial conditions and corporate governance mechanisms in Indian companies. To the best of our knowledge, this is the first study performed in Indian capital market where the SG&A cost asymmetry tests the managers' empire-building behavior. Overall, findings of the study indicate manager's resource adjustment decisions and empire-building behavior caused by their consideration and this results in a form of agency costs. In comparison with developed markets, Indian markets have relatively less agency problem due to managerial empire-building behavior. [ABSTRACT FROM AUTHOR]

Our study investigates whether a firm's organizational structure as measured by the number of investment layers connecting the parent firm and the lowest-tiered subsidiaries is negatively associated with earnings quality when the investment structure has high agency costs as measured by high deviation between voting rights and cash flow rights. We find that in firms with high deviation, information asymmetry as measured by bid-ask spread and share turnover increases with the number of layers, and earnings quality declines as the number of layers increases. The findings are more pronounced in family firms than in other firms, supporting the theory that agency problems between controlling and non-controlling shareholders are more severe in family firms. In additional analyses, we also find that high deviation and long investment chains increase expropriation, which can be covered up by manipulating earnings. [ABSTRACT FROM AUTHOR]

We examine the relation between the geographic proximity of institutional investors and debt maturity. We hypothesize and find that firms with more or closer local institutional investors have shorter maturity debt. Analyses based on new debt issues and using SOX as a natural experiment and firm headquarter relocations as exogenous shocks indicate a causal effect of local institutional monitoring on debt maturity. Tests of the underlying mechanism suggest that firms monitored by local institutional investors choose shorter maturity debt to reduce debt and equity agency costs. The results demonstrate that local institutional investors affect firms' debt maturity choices. • Local institutional investors affect firms' debt maturity choices. • Firms with more or closer local institutional investors have more short-term debt and issue shorter-term debt. • Firms monitored by local institutional investors choose short-term debt to reduce debt and equity agency costs. [ABSTRACT FROM AUTHOR]

• Firms with high executive pay dispersion invest less in CSR. • Under higher pay dispersion, executives felt unfair about pay structure. • Unsatisfied executives neglect signals regarding social irresponsibility. • Under higher agency costs, executives are motivated to neglect CSR more. Inspired by social comparison theory, this study examines how the pay dispersion among top executives affects critical strategic decisions regarding corporate social responsibility (CSR) in the US. The results indicate that highly dispersed executive pay evokes a sense of unfairness that drives executives to pursue personal rather than stakeholder interests by ignoring signals of unethicality. The effects are more pronounced for firms that have higher agency costs, because they are less able to monitor their executives. This study contributes to the CSR and pay dispersion literature by showing how pay dispersion is associated with executive decisions regarding CSR. [ABSTRACT FROM AUTHOR]

• We employ text-based tools to construct a new measurement of firm-specific economic policy uncertainty (FEPU): the share of sentences related to EPU in management discussion and analysis (MD&A). • Our measure enables us to exploit the wide range of variation in actual and perceived EPU across firms and over time. • Linking our FEPU to stock price crash risk shows that FEPU negatively affects stock price crash risk. • We extend extant research on impacts of EPU by capturing time-varying firms' exposures to EPU. We employ text-based tools to construct a new measurement of firm-specific economic policy uncertainty (FEPU, hereafter): the share of sentences related to EPU in management discussion and analysis (MD&A, hereafter). Our measure enables us to exploit the wide range of variation in actual and perceived EPU across firms and over time. Linking our FEPU to stock price crash risk shows that FEPU negatively affects stock price crash risk, which still holds after addressing endogeneity problem, and varies across firms' ownership and asset irreversibility. We extend extant research on impacts of EPU by capturing time-varying firms' exposures to EPU. [ABSTRACT FROM AUTHOR]

• This study explores the influence of gambling culture on investment efficiency. • Using local lottery sales to measure gambling culture, we find that gambling culture is significantly negatively associated with investment efficiency. The effect is mainly manifested as the over-investment caused by the gambling culture. • The paper also implies that state ownership, highly educated management teams, equity incentives, and higher corporate transparency can help mitigate the effect of gambling culture. • Moreover, agency cost and risk-taking level play the role of intermediary effect. Our findings are still robust when addressing the endogeneity issue with various methods. This study explores the influence of gambling culture on investment efficiency. Using local lottery sales to measure gambling culture, we find that gambling culture is significantly negatively associated with investment efficiency. The effect is mainly manifested as the over-investment caused by the gambling culture. The paper also implies that state ownership, highly educated management teams, equity incentives, and higher corporate transparency can help mitigate the effect of gambling culture. Moreover, agency cost and risk-taking level play the role of intermediary effect. Our findings are still robust when addressing the endogeneity issue with various methods. [ABSTRACT FROM AUTHOR]

We examine whether firms' political connection affects their corporate social responsibility (CSR) engagements and how the effects vary with different political ties, namely symbolic and material connections. These ties reflect different degrees of political embeddedness, interest alignment, network size, and monitoring with the government, and therefore impart divergent effects on managerial incentives for CSR practices. Our analysis indicates that CSR in firms with symbolic connection is much more associated with agency cost than CSR in firms with material connection. We also find that large firms with symbolic connection exhibit lower CSR performance than those with material connection, probably because the former group tends to substitute the prestige of their political capital for the goodwill associated with CSR engagement. These results show that accounting for the effects of different types of political connection on managerial incentives contributes some clarity to the debate about the compatibility of CSR with primary corporate mandates. • We examine whether a firm's political connection affects its CSR engagements • CSR engagement in firms with symbolic connection is associated with agency cost • CSR engagement in firms with material connection is associated with good governance • Large firms with symbolic connections exhibit lower CSR performance [ABSTRACT FROM AUTHOR]

As the number of "ownerless" enterprises in China's capital market increases, so does the importance of paying attention to their behavior. From the perspective of enterprises' control rights allocation, we find that non-actual controllers can inhibit corporate innovation by intensifying agency conflicts, reducing corporate risk-taking and strengthening financing constraints. We also find that a larger proportion of independent directors, higher audit quality, greater managerial ownership and less environmental uncertainty weaken the negative effect of non-actual controllers on corporate innovation. In contrast, multiple large shareholders strengthen the inhibitory effect of non-actual controllers on corporate innovation, but this inhibitory effect comes from over-supervision rather than from collusion. We further divide non-actual controllers into real and hidden types and find that real non-actual controllers still have a significant inhibitory effect on corporate innovation. Finally, we rule out the competitive explanation of equity dispersion, whereby non-actual controllers inhibit corporate innovation. This study enriches the literature on the factors influencing corporate innovation and provides evidence of the adverse impact of non-actual controllers. [ABSTRACT FROM AUTHOR]

• This study investigates the impact of public attention on executive perks. • Firms with their actual controller on the Rich List generate fewer executive perks than those that are not influenced by the event. • External information environments and corporate governance serve as the economic mechanisms. • Reduced information asymmetry and improved corporate governance discourage the executive perks. This paper investigates the impact of public attention on executive perks. To establish causality, we exploit an exogenous shock in public attention measured by whether the actual controller of the firm appeared on the Rich List in China. Using a difference-in-difference approach, we find that firms with their actual controller on the Rich List generate fewer executive perks than those that are not influenced by the event. Our findings also demonstrate that external information environments and corporate governance can serve as the economic mechanisms. With the increase of public attention, the information asymmetry is reduced and the corporate governance is improved, thus discouraging the executive perks. [ABSTRACT FROM AUTHOR]

Abstract: In many cases, the cost of hiring an agent to acquire information is lower than the cost for the principal to perform that task. However, because of a difference in preferences between the principal and the agent, the principal often cannot fully utilize the agent’s expertise. This paper considers the cost of motivating the agent to acquire information and inducing him to report truthfully. The larger the private benefit, the greater is the cost of eliciting true information. At the same time, a private benefit may reduce the cost of motivating information acquisition. Thus, there are cases in which an agent with a different preference is desirable. [Copyright &y& Elsevier]

The option pricing method is used to analyze the agency problem between airlines and travel agencies. An Airline Agency Option Pricing model is employed whereby different ticket price processes, the quantity targets of tickets sold, the correlation between the ticket price and ticket quantity, and various incentive programs affect the agency costs between airlines and travel agencies. It is found that airlines should cautiously design their incentive programs to mitigate the impact caused by the agency problem that could influence the operations of travel-related suppliers. [Copyright &y& Elsevier]

• We study how shareholders react to changes in agency cost in an intention-to-treat analysis. • Vote support decreases following adoption of corporate opportunities waiver by state legislatures. • The effect is stronger in more established firms and firms with more outside opportunities. • Long-term institutional investors increase monitoring in response to increase in agency cost. We examine how proxy voting responds to increased agency cost with an intention-to-treat analysis. Using staggered adoption of Corporate Opportunities Waiver laws that erode the fiduciary duty when managers (including directors) appropriate business opportunities from focal firms, we find that shareholders are less likely to support contentious incumbent director elections, especially in more established firms and firms with more outside opportunities. Moreover, we show that proxy voting by long-term institutional investors contributes to this effect. Overall, our results suggest that shareholders respond to increased agency cost with increased monitoring. [ABSTRACT FROM AUTHOR]

This paper investigates the determination of corporate liquidity in Organization of Islamic Cooperation (OIC) countries with emphasis on whether and how national governance (NG) has bearings on corporate liquidity in such countries. Using the Sharia-compliant liquidity measure to examine non-financial firms' liquidity in 22 OIC countries during the period 2000–2016, results reveal that liquidity determination in OIC countries resembles that in other countries. Additionally, NG positively affects corporate liquidity. Furthermore, the positive and negative effects of growth opportunities and leverage, respectively, on corporate liquidity strengthen with NG. Overall, results suggest that NG improves corporate governance in OIC countries. • Liquidity determination in OIC countries resembles that in other countries. • National governance (NG) positively affects corporate liquidity. • NG strengthens growth opportunities' positive effect on corporate liquidity. • NG strengthens leverage's negative effect on corporate liquidity. • NG improves corporate governance in OIC countries. [ABSTRACT FROM AUTHOR]

This study investigates the impact of the Board characteristics, Chief Executive Officer's (CEO) power and Shariah supervision on Earnings Management (EM) within conventional and Islamic banks. We provide evidence that EM levels do not significantly differ between Islamic and conventional banks. Contrary to public belief, additional value-based attributes such as the Shariah Supervisory Board (SSB) that promotes ethical and religious values, do not help in the restriction of opportunistic behaviour in Islamic banks. Additionally, attributes such as board size, firm size and leverage have a significant negative influence on EM of both Islamic and conventional banks. Our results are important in deliberating that the word 'Islamic' must not be used merely as a profit manifestation, but instead must promote a value-based business, which in turn could ensure reliability and sustainability. [ABSTRACT FROM AUTHOR]

Stock price crash risk could be lower in family firms because the controlling family investors have a longer-term interest, hold greater decision rights and are better informed than investors in diffusely owned firms (alignment effect). However, the agency costs between family and nonfamily investors (entrenchment effect) could affect crash risk in two opposing ways. Non-controlling investor skepticism about insider entrenchment limits overvaluation and reduces the crash risk. In contrast, entrenched insiders could hide bad news to exploit private benefits, which could increase the crash risk. We show that family firms exhibit a lower crash risk than similar nonfamily firms after controlling for lower overvaluation, which is consistent with the better alignment effect. Moreover, we show that better governance further reduces the crash risk, which indicates that the substitutive relationship between strong governance and family ownership shown in countries with low investor protection rights does not carry over to the U.S. where investor protection rights are strong. [ABSTRACT FROM AUTHOR]