Market or government: who plays a decisive role in R&D resource allocation?

2019 ◽  
Vol 9 (1) ◽  
pp. 110-136 ◽  
Author(s):  
Shoufu Xu ◽  
Xuehui He ◽  
Longbing Xu
Keyword(s):  
Resource Allocation ◽  
Stock Prices ◽  
Government Intervention ◽  
Decisive Role ◽  
Market Mechanism ◽  
Market Valuation ◽  
Content Type ◽  
The Impact ◽  
The Relationship ◽  
D Investment

Purpose The purpose of this paper is to empirically investigate the impact of equity market valuation and government intervention on the research and development (R&D) investments of listed companies in China and their relationship. Design/methodology/approach Using a manually collected R&D database in the period 2007–2015, this paper constructs a sample of 6,595 firm–year observations and applies the methods of pooled OLS regressions to examine the effects of market valuation and government intervention on corporate R&D expenditures. Findings This paper finds that market valuation enhances corporate R&D investments, but there is no evidence that government intervention may significantly affect the R&D investments. Government intervention also decreases the sensitivity of corporate R&D investment to stock price, which implies that government intervention weakens the promotion of market mechanism to corporate R&D investment. Furthermore, these effects are stronger in the non-state-owned firms and the non-regulated industries. Practical implications This study suggests that the functional borders of markets and government should be reasonably defined and markets play a decisive role in resource allocation to improve corporate innovation and national innovation. Originality/value This paper provides a micro view of the relationship between market and government at the stage of transitional economy in China as well as directions for further research on the relationship between stock prices and corporate investments.

scholarly journals Does collective bargaining influence the way the size of the firm impacts wage dispersion? Spanish evidence

2020 ◽  
Vol 41 (4) ◽  
pp. 357-374
Author(s):  
Juan Francisco Canal Domínguez ◽  
César Rodríguez Gutiérrez
Keyword(s):  
Collective Bargaining ◽  
Firm Size ◽  
Decisive Role ◽  
Collective Agreement ◽  
Wage Dispersion ◽  
Content Type ◽  
Wage Negotiation ◽  
The Impact ◽  
The Relationship ◽  
Wage Compression

PurposeThis paper analyses the relationship between wage dispersion and firm size within a “two-tier” system of collective bargaining (firm bargaining and multi-employer bargaining levels). Collective bargaining has a decisive role in setting wages in Spain, and its regulation highly limits the possibility for smaller firms to negotiate their own collective agreement.Design/methodology/approachBased on the Spanish Structure of Earnings Survey 2006, 2010 and 2014, the authors use variance decomposition in order to deeply analyse the effect of bargaining level on wage dispersion and compare the value of each decile of the distribution of wages for the purposes of identifying the quantitative differences in wage compression.FindingsIn general, the outcomes positively linked firm size and firm bargaining to wage dispersion. However, if firm size is taken into account, the effect of firm bargaining is limited among small firm workers because this type of firm is not usually covered by firm bargaining. On the other hand, the time analysis allows observing a wage compression that follows different patterns depending on firm size, compressing the higher part of the distribution in case of small firms and the lower part in case of large firms. This should be explained by the fact that wage negotiation is dependent on firm size.Social implicationsFirm size has determined firm adjustment strategies to face the recent economic crisis and allows to evaluate the impact that changes in collective bargaining can have on wage distributionOriginality/valueThere is no research that has tried to analyse the relationship between wage dispersion and firm size in a context where collective bargaining is essential to understand the wage structure. Normally, firm size plays a decisive role in wage policy given that the capacity of a company to negotiate an agreement is closely linked to its size.

Family ownership and R&D investment: the moderating role of banks and private equity

2019 ◽  
Vol 57 (7) ◽  
pp. 1675-1694 ◽  
Author(s):  
Alessandro Cirillo ◽  
Mario Ossorio ◽  
Luca Pennacchio
Keyword(s):  
Family Involvement ◽  
Private Equity ◽  
Family Firms ◽  
Negative Relationship ◽  
Future Research ◽  
Family Ownership ◽  
Content Type ◽  
The Impact ◽  
The Relationship ◽  
D Investment

Purpose The purpose of this paper is to contribute to innovation and family business literature by establishing whether institutional involvement of private equity (PE) and banks in family firms moderates the relationship between family ownership and research and development (R&D) investment. Design/methodology/approach This paper used the socio-emotional wealth lens to carry out an econometric analysis on a large sample of Italian non-listed family firms. Using the sample selection model meant it was possible to account for potential selection bias arising from firms’ discretionary disclosure of R&D expenditure. Findings Family involvement in ownership reduced firms’ R&D intensity. When PE investors also held shares, the negative relationship was diverted. Bank involvement, however, did not have a significant effect on the relationship. Research limitations/implications This paper enriches the innovation management literature by increasing the understanding of the determinants of R&D investments in family firms. The results support the view that non-financial priorities in family firms are contingent upon non-family shareholders. This enriches the debate about the heterogeneity of family businesses and is consistent with the socio-emotional wealth framework, which has shown that risk preferences may vary if desired and actual performances are different. This may be a fruitful area for future research. Originality/value Contradicting the assumption that institutional owners all share the same perspective, this study is the first to assess the impact of different institutional shareholders on R&D intensity of private family firms.

How does capital market respond to Certified Emission Reductions (CERs) announcements in India

2019 ◽  
Vol 45 (7) ◽  
pp. 950-965 ◽  
Author(s):  
Praveen Kumar ◽  
Mohammad Firoz
Keyword(s):  
Event Study ◽  
Stock Prices ◽  
Abnormal Returns ◽  
Share Price ◽  
Emission Reductions ◽  
Content Type ◽  
Share Prices ◽  
The Mean ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to analyze the relationship between Certified Emission Reductions (CERs) information and a firm’s stock prices. Design/methodology/approach The present study is based on 193 CERs announcements by Indian firms over a 13-year period 2005–2017. The event study methodology is used to examine the impact of CERs announcements on a firm’s share prices. Findings The study suggests that the issuance of CERs did not produce any significant abnormal return. More specifically, the outcomes of event study shows that over a two-day event window from the event day to the day after the event (i.e. days 0 to 1), the mean and median of AARs are −0.25 and −0.34 percent, respectively. The abnormal returns on day 1 are not statistically significant as per the t-test. Moreover, the mean and median of abnormal returns after one day (−1) are negative, indicating that investors react negatively to CERs announcements. However, the mean and median of CAARs over both the two-day (i.e. days −1 to 0 and days 0 to +1) and three-day (i.e. days −1 to +1) event windows are positive, but not statistically significant based on the t-test. Research limitations/implications The findings of the study are quite comprehensive, relatively used only market-based criteria of a firm’s financial performance, e.g., share price, at times, inhibits generalizing the results. Originality/value To the best of the author’s knowledge, the present study is a first of its kind to investigate the relationship between the CERs information and a firm’s stock prices.

Dividend policy and the downside risk in stock prices: evidence from the MENA region

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Omar Farooq ◽  
Harit Satt ◽  
Fatima Zahra Bendriouch ◽  
Diae Lamiri
Keyword(s):  
Stock Prices ◽  
Dividend Policy ◽  
Agency Problems ◽  
Downside Risk ◽  
Mena Region ◽  
Content Type ◽  
Financial Firms ◽  
Dividend Policies ◽  
The Impact ◽  
The Relationship

PurposeThe aim of this paper is to document the impact of dividend policies on the downside risk in stock prices.Design/methodology/approachThe authors use the data for non-financial firms from the MENA region to test our arguments by estimating the pooled OLS regressions. The data cover the period between 2010 and 2018.FindingsThis paper shows that firms with higher dividend payouts have significantly lower downside risk in their stock prices than the other firms. The findings of this paper are robust across various proxies of dividend policy and across various sub-samples. This paper contends that lower downside risk associated with the stock prices of firms paying high dividends is due to the fact that these firms have lower agency problems. Lower agency problems reduce the downside risk in stock prices.Originality/valueTo the best of the authors’ knowledge, most of the prior research (covering the MENA region) overlooks the impact of dividend policy on the downside risk in stock prices. This paper fills this gap by documenting the relationship between the two by using the data for firms from the MENA region.

scholarly journals Impact of marketization process on China's forestry economic growth – based on the statistical yearbook data from 1978 to 2016

2020 ◽  
Vol 2 (1) ◽  
pp. 43-60
Author(s):  
Dan Qiao ◽  
Shuifa Ke ◽  
Xiaoxiao Zhang ◽  
Qiya Feng
Keyword(s):  
Economic Growth ◽  
Market Mechanism ◽  
Three Dimensions ◽  
Production Factor ◽  
Content Type ◽  
Forestry Production ◽  
Reform And Opening Up ◽  
The Impact ◽  
The Relationship ◽  
Opening Up

PurposeThe paper aims to explore the impact of marketization on forestry economic growth. Firstly, the development process of forestry marketization was summarized. Secondly, from the three dimensions of forestry production factor marketization, production marketization and product marketization, the framework of marketization is constructed by the authors.Design/methodology/approachBased on the yearbook data from 1978 to 2016, the relationship between forestry marketization and forestry growth was demonstrated through multiple regression and Granger test in this paper.FindingsThe results showed that forestry marketization was one of the important driving factors that impacted on China's forestry economic growth. Since the reform and opening up, China's forestry marketization degree has been constantly strengthened, but there is still room for improvement. China has provided an important model as forestry marketization reform and development sample for the world.Social implicationsMany useful references and inspirations have been provided from China such as gradually promoting market-oriented reforms; paying attention to the important role of reform and opening up in the construction of market mechanism; dynamic coordination of market and government relations; developing and connecting the relationship between domestic and international market; and coordinating the development of forestry state-owned economy, private economy and mixed ownership economy.Originality/valueThis paper creates a measure index of forestry marketization from three dimensions of forestry production factor marketization, production marketization and product marketization.

scholarly journals Market valuation and corporate investment in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
K. Dhananjaya
Keyword(s):  
Stock Price ◽  
Investment Decisions ◽  
Corporate Investment ◽  
Market Valuation ◽  
Stock Valuation ◽  
Firm Level ◽  
Content Type ◽  
Market Sentiment ◽  
The Impact ◽  
The Relationship

Purpose This study aims to examine the impact of stock market valuation on corporate investment. Specifically, it attempts to understand the influence of both the fundamental and non-fundamental components of stock price on firms’ investment decisions. Design/methodology/approach The study decomposes the market-to-book (MB) ratio into three components, namely, firm-level mispricing, industry mispricing and growth component to examine the effect of each of these components on corporate investment decisions. Based on the literature review, four testable hypotheses concerning the relationship between market valuation and corporate investment have been generated. These hypotheses have been tested on the panel data of 1,311 Indian Public Limited Manufacturing Firms using a pooled data regression model. Findings The study finds that both the fundamental and non-fundamental components of stock price influence the investment decisions along with the cash flow variable. The market valuation–investment nexus is more pronounced in the case of equity-dependent firms, which shows that stock valuation affects corporate investment predominantly through the equity transaction channel. Further, the positive relationship between industry mispricing and corporate investment demonstrates that the market sentiment also affects firms’ investment decisions. Originality/value The relationship between the different components of market value and corporate investment decisions has not been explored in India. Hence, the present study is unique because it breaks the MB ratio down into growth and mispricing components and examines the impact of each of these components on corporate investment.

Broker-dealer leverage volatility and the US stock prices

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Khandokar Istiak
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Asset Prices ◽  
Multivariate Garch ◽  
Content Type ◽  
The Us ◽  
Key Driver ◽  
First Moment ◽  
The Impact ◽  
The Relationship

Purpose Broker-dealer leverage volatility increases during booms and crisis periods, but its impact on stock prices is relatively unexplored. This paper aims to investigate whether broker-dealer leverage volatility is a key driver for stock prices. Design/methodology/approach This paper collects the US quarterly data of broker-dealer book leverage and three leading stock market indicators (S&P 500, DJIA and Nasdaq) for the period of 1967–2018. The research uses a multivariate GARCH-in-mean VAR to examine the impact of leverage volatility on each of the stock market indicators. A split-sample analysis (pre-1990 and post-1990) has also been performed to show the robustness of the result. Findings The research finds that broker-dealer leverage volatility does not have any significant impact on stock prices. Originality/value Broker-dealers are important financial intermediaries, and there is a huge literature exploring the relationship between their leverage and asset prices. But, the relationship between broker-dealer leverage volatility and asset prices is not explored yet. This study fills the gap and provides the first evidence that broker-dealer leverage volatility does not play any major role in the theory of stock pricing. The research proposes that the stock holding decisions of the investors should depend only on the first moment of leverage and not on the second moment of leverage. The study concludes that high broker-dealer leverage volatility is not a sinister signal for the US stock market.

The angel-halo effect

2016 ◽  
Vol 28 (6) ◽  
pp. 709-722 ◽  
Author(s):  
Kent Walker ◽  
Zhou Zhang ◽  
Bing Yu
Keyword(s):  
Firm Performance ◽  
Halo Effect ◽  
Market Valuation ◽  
Negative Effects ◽  
Content Type ◽  
Corporate Social ◽  
The Impact ◽  
The Relationship ◽  
Positive Effect ◽  
Combined Data

Purpose This paper aims to examine how increases in corporate social responsibility (CSR) and corporate social irresponsibility (CSiR) relate to firm performance. Further, this paper investigates how increases in CSR (CSiR) while CSiR (CSR) is present relate to three measures of firm performance: profitability, management efficiency and market valuation. Design/methodology/approach Using over 10,000 observations from 2009-2013 and combined data from Sustainalytics and Compustat, this paper examines how increases in either CSR or CSiR relate to firm performance. Findings The paper finds that increased CSR significantly relates to increased firm performance in all three measures, and that increased CSiR significantly relates to decreased profitability only. Furthermore, increased CSR when CSiR is present relates to increased efficiency and market valuation. Finally, increased CSiR when CSR is present relates to increased profitability and efficiency. The results suggest that CSR dominates the relationship to firm performance, as it was positively related to all three measures of firm performance, and when CSR and CSiR exist simultaneously, CSR has a dominant positive effect. Research limitations/implications The study sample consists of US firms only from 2009-2013, thus the generalizability of the results to other countries and periods is unknown. Practical implications The results demonstrating differing effects based on the measure of firm performance suggest that managers should be specific with which measures are used to gauge the impact of CSR and CSiR. In addition, managers would be wise to invest in CSR, as the results suggest that they can improve profitability, efficiency and market value. Even further, the empirically identified angel-halo effect suggests that investments in CSR may counter any potential negative effects from CSiR. Finally, the latter results suggest that firms can “get away” with some degree of CSiR when CSR is present. Originality/value By examining changing levels of CSR and CSiR independently and conjunctly across various measures of firm performance, this paper found a dominating role for CSR, which is labeled as the angel-halo effect.

Managerial overconfidence, government intervention and corporate financing decision

2016 ◽  
Vol 12 (1) ◽  
pp. 4-24 ◽  
Author(s):  
Irene Wei Kiong Ting ◽  
Hooi Hooi Lean ◽  
Qian Long Kweh ◽  
Noor Azlinna Azizan
Keyword(s):  
Government Intervention ◽  
Moderating Effect ◽  
Ownership Concentration ◽  
Government Ownership ◽  
Corporate Financing ◽  
Content Type ◽  
Financing Decision ◽  
Managerial Overconfidence ◽  
The Impact ◽  
The Relationship

Purpose – The purpose of this paper is to investigate the impact of managerial overconfidence on corporate financing decision and the moderating effect of government ownership on the relationship between managerial overconfidence and corporate financing decision. Design/methodology/approach – Pooled OLS, fixed effect models (FEM), and Tobit regressions are employed to examine the relationship between managerial overconfidence, government ownership and corporate financing decision of publicly listed companies in Malaysia for the period of 2002-2011. Findings – The authors conclude that: first, CEO overconfidence is significantly and negatively related to corporate financing decision; second, a higher degree of managerial overconfidence would result in lower leverage in GLCs, whereas the effect does not significantly exist in NGLCs; third, a larger ownership of government in a firm will reduce the negative effect of managerial overconfidence on corporate financing decision; fourth, the moderating effect of government ownership on the association between managerial overconfidence and corporate financing decision in GLCs is more effective than NGLCs; and fifth, government intervention plays its role as moderating effect on the relationship between managerial overconfidence and corporate financing decision in firms with lower ownership concentration but not in firms with high ownership concentration (more or equal than 50 percent). Practical implications – The finding implies that the moderating effect of government ownership on the association between managerial overconfidence and corporate financing decision in GLCs is more effective than NGLCs. Originality/value – The authors make the first attempt to test the moderating effect of government ownership on the relationship between ownership concentration and corporate financing decision.

When do job insecure employees adapt to change?

2019 ◽  
Vol 25 (3) ◽  
pp. 271-286 ◽  
Author(s):  
Kristi N. Lavigne ◽  
Victoria L. Whitaker ◽  
Dustin K. Jundt ◽  
Mindy K. Shoss
Keyword(s):  
Job Insecurity ◽  
Small Sample ◽  
Adaptive Performance ◽  
Work Behaviors ◽  
Content Type ◽  
Work Tasks ◽  
Main Effect ◽  
Low Levels ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between job insecurity and adaptive performance (AP), contingent on changes to core work tasks, which we position as a situational cue to employees regarding important work behaviors. Design/methodology/approach Employees and their supervisors were invited to participate in the study. Supervisors were asked to provide ratings of employees’ AP and changes to core tasks; employees reported on job insecurity. Findings As predicted, changes to core tasks moderated the relationship between job insecurity and AP. Job insecurity was negatively related to AP for those experiencing low levels of change, but was not related to AP for those experiencing high levels of change. Counter to expectations, no main effect of job insecurity was found. Research limitations/implications This study employed a fairly small sample of workers from two organizations, which could limit generalizability. Practical implications The study identifies changes to core tasks as a boundary condition for the job insecurity–AP relationship. Findings suggest that organizations may not observe deleterious consequences of job insecurity on AP when changes to core tasks are high. Originality/value Few researchers have examined boundary conditions of the impact of job insecurity on AP. Furthermore, inconsistent findings regarding the link between job insecurity and AP have emerged. This study fills the gap and expands upon previous research by examining changes to core tasks as a condition under which job insecurity does not pose an issue for AP.

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