scholarly journals Risk committee, corporate risk-taking and firm value

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md. Borhan Uddin Bhuiyan ◽  
Muhammad A. Cheema ◽  
Yimei Man
Keyword(s):  
Risk Taking ◽  
Firm Value ◽  
Firm Risk ◽  
Content Type ◽  
Potential Risks ◽  
Risk Committee ◽  
Corporate Risk ◽  
The Impact ◽  
Practical Implications

PurposeThe authors empirically examine the impact of the stand-alone risk committee on corporate risk-taking and firm value.Design/methodology/approachThe authors argue that the existence of a stand-alone risk committee enhances the quality of corporate governance, which reduces corporate risk-taking and strengthens the firm value that might improve investor protection.FindingsThe authors find corporate risk-taking decline significantly for firms that have a stand-alone risk committee compared with firms that have a joint audit and risk committee. The authors also find that the presence of a stand-alone risk committee is positively associated with firm value.Practical implicationsThe evidence is consistent with the proposition that firms with a stand-alone risk committee can effectively evaluate potential risks and implement a proper risk management system.Originality/valueThis is the first paper that investigates the association between the existence of a stand-alone risk committee and firm risk-taking in a multi-industry setting. Also, our research extends the association between a stand-alone risk committee and firm value.

Shareholder risk-taking incentives in the presence of contingent capital

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahmoud Fatouh ◽  
Ayowande A. McCunn
Keyword(s):  
Risk Taking ◽  
Banking System ◽  
Capital Requirements ◽  
Content Type ◽  
Basic Model ◽  
Conversion Rates ◽  
A Minor ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to present a model of shareholders’ willingness to exert effort to reduce the likelihood of bank distress and the implications of the presence of contingent convertible (CoCo) bonds in the liabilities structure of a bank. Design/methodology/approach This study presents a basic model about the moral hazard surrounding shareholders willingness to exert effort that increases the likelihood of a bank’s success. This study uses a one-shot game and so do not capture the effects of repeated interactions. Findings Consistent with the existing literature, this study shows that the direction of the wealth transfer at the conversion of CoCo bonds determines their impact on shareholder risk-taking incentives. This study also finds that “anytime” CoCos (CoCo bonds trigger-able anytime at the discretion of managers) have a minor advantage over regular CoCo bonds, and that quality of capital requirements can reduce the risk-taking incentives of shareholders. Practical implications This study argues that shareholders can also use manager-specific CoCo bonds to reduce the riskiness of the bank activities. The issuance of such bonds can increase the resilience of individual banks and the whole banking system. Regulators can use restrictions on conversion rates and/or requirements on the quality of capital to address the impact of CoCo bonds issuance on risk-taking incentives. Originality/value To model the risk-taking incentives, authors generally modify the asset processes to introduce components that reflect asymmetric information between CoCo holders and shareholders and/or managers. This paper follows a simpler method similar to that of Holmström and Tirole (1998).

Corporate risk-taking after changes in credit rating

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hardjo Koerniadi
Keyword(s):  
Risk Taking ◽  
Credit Rating ◽  
Firm Risk ◽  
Content Type ◽  
Event Risk ◽  
Effect Regression ◽  
Investment Grade ◽  
Corporate Risk ◽  
Practical Implications

PurposeThe paper aims to investigate corporate risk-taking following changes in firms' credit ratings (CR) and the mechanisms the firms use in implementing the risk-taking.Design/methodology/approachThe paper employs fixed-effect regression models to examine risk-taking behaviour after firms experience changes in CR after their ratings are downgraded to the lower edge of the investment grade rating (i.e. BBB-) and after their CRs are downgraded below the investment rating.FindingsThe paper finds that, whilst in general, changes in CR are negatively associated with post-event risk-taking, firms downgraded to BBB- do not increase their risk-taking. Only when firms are rated below this grade, firms significantly increase their risk-taking, suggesting that the association between downgrades in CR and firm risk-taking following the event is not linear. Further analysis suggests that these downgraded firms do not increase research and development (R&D) expenses or capital expenditures but employ long-term debt as their risk-taking mechanism.Practical implicationsThe findings of the paper have practical implications for investors considering investing in downgraded-rating firms to shareholders of such firms and especially to those overseeing the firms' risk-taking policies.Originality/valueThe study fills the gap in the literature by providing empirical evidence on corporate risk-taking after changes in CR and also contributes to the optimal debt-maturity choice literature.

The influence of the structure of employees on sensory quality of restaurants' food

2014 ◽  
Vol 116 (3) ◽  
pp. 527-543 ◽  
Author(s):  
Dragan Tešanovic ◽  
Milovan Krasavcic ◽  
Bojana Miro Kalenjuk ◽  
Milijanko Portic ◽  
Snježana Gagic
Keyword(s):  
Sensory Quality ◽  
Second Phase ◽  
Content Type ◽  
Level Of Education ◽  
Third Phase ◽  
Practical Evaluation ◽  
Quality Of Food ◽  
The Impact ◽  
Practical Implications

Purpose – The aim of this paper is to determine the sensory quality of food in restaurants by professional food evaluators and to research the impact of education, age and number of employees on the quality of food. Design/methodology/approach – In the first phase five trained food tasters evaluated the sensory quality of food. In the second phase, the analysis of the structure of employees was done by establishing their level of education, age and number of employees. In the third phase the regression and correlation analysis was done with the aim to establish the impact of the level of education, age and number of employees on the sensory quality of food. Findings – The sensory evaluation has shown that the evaluated food is of moderate quality. Correlation matrix has shown that the education level of employees has a high impact on the sensory quality of food. There is a correlation between the number of employees, their age and their education. Practical implications – Obtained results are the indicators of the quality of food in restaurants in the region and they can serve for the improvement of quality. They have shown that education and staff training can contribute to a better quality of food. Established methodology can also contribute to the practical evaluation of quality. Originality/value – This paper is reflected on the specific application of methodology of the sensory analysis of food in restaurants. The paper pointed to the impact of employees on the sensory quality of food by statistical methods. Statistical results which point to the great impact of the level of education of employees on the sensory quality of food in restaurants are particularly valuable.

Comparing the informativeness of sustainability disclosures versus ESG disclosure ratings

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Li Li Eng ◽  
Mahelet Fikru ◽  
Thanyaluk Vichitsarawong
Keyword(s):  
Information Content ◽  
Firm Value ◽  
Stock Price ◽  
Market Value ◽  
Content Type ◽  
Company Valuation ◽  
Incremental Information ◽  
The Impact ◽  
Different Sources ◽  
Practical Implications

Purpose The purpose of this paper is to examine the impact of sustainability disclosures and disclosure ratings on firm value. This paper compares the informativeness of sustainability disclosures in company reports versus environmental, social and governance (ESG) disclosure ratings. The authors examine the extent to which they provide incremental information. Design/methodology/approach The sample consists of panel data from over 2,600 publicly-listed non-financial US companies for the period 2014–2018. The authors obtain sustainability disclosures from Sustainability Accounting Standards Board (SASB) Navigator and ESG disclosure scores from Bloomberg. The authors regress market value and/or stock price on sustainability disclosures and ESG scores to evaluate information content. Findings ESG scores are positively associated with market value and price. Sustainability disclosures in the form of metrics and company-tailored narratives provide incremental information content on market value and/or price. Boilerplate disclosures reduce market value and price. Sustainability disclosures and ESG scores provide incremental information, suggesting that it would be beneficial to harmonize standards for reporting sustainability disclosures. Research limitations/implications The limitation is that the authors have only considered sustainability disclosures for a sample of US companies from two sources – SASB Navigator and Bloomberg. Practical implications The paper provides some evidence that may be pertinent to the debate on whether to harmonize the guidance on reporting sustainability issues. Social implications The paper provides evidence on the benefits to firms for reporting sustainability issues. Originality/value This paper is among the first to analyze company sustainability disclosures obtained from two different sources – SASB Navigator and ESG disclosure ratings – and compare them for relevance for company valuation. With SASB Navigator, the authors obtain further refinement into the nature of the information provided in the sustainability disclosures, that is, boilerplate, company-tailored or metrics disclosures.

Which formula for corporate risk-taking around the world? Exploring happiness as the “black box”

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Thao Phuong Tran ◽  
Anh-Tuan Le
Keyword(s):  
Risk Taking ◽  
Negative Influence ◽  
Current Debate ◽  
Alternative Measure ◽  
Firm Risk ◽  
Content Type ◽  
Financial Decisions ◽  
The World ◽  
Corporate Risk

PurposeThis paper examines how the degree of happiness affects corporate risk-taking and the moderating influence of family ownership of firms on this relationship.Design/methodology/approachThe authors use an international sample of 17,654 firm-year observations from 24 countries around the world from 2008 to 2016.FindingsUsing the happiness index from the World Happiness Report developed by the United Nations Sustainable Development Solutions Network, the authors show that a country's overall happiness is negatively correlated with risk-taking behavior by firms. The findings are robust to an alternative measure of risk-taking by firms. Further analyses document that the negative influence of happiness on firm risk-taking is more pronounced for family-owned firms.Practical implicationsThe paper is consistent with the notion that happier people are likely to be more risk-averse in making financial decisions, which, in turn, reduces corporate risk-taking.Originality/valueThis study contributes to the broad literature on the determinants of corporate risk-taking and the growing literature on the role of sentiment on investment decisions. The authors contribute to the current debate about family-owned firms by demonstrating that the presence of family trust strengthens the negative influence of happiness on corporate risk-taking, a topic that has been unexplored in previous studies.

scholarly journals The impact of related party transactions on firm value

2019 ◽  
Vol 17 (3) ◽  
pp. 571-588
Author(s):  
Ahmed A. Diab ◽  
Ahmed Aboud ◽  
Arafat Hamdy
Keyword(s):  
Firm Value ◽  
Design Methodology ◽  
Emerging Market ◽  
Content Type ◽  
Related Party Transactions ◽  
Intermediary Role ◽  
The Impact ◽  
The Relationship ◽  
Practical Implications

Purpose The purpose of this study is to address the impact of the related party transactions (RPTs) on firm value. The authors bring evidence from a usually ignored empirical setting: an African emerging market. Design/methodology/approach In particular, the authors focus on companies listed on the Egyptian stock market using a sample of EGX 30 from 2012 to 2017. Findings Unlike the literature, the authors find no significant relationship between RPTs and market value. Practical implications This research provides insights for policymakers and other interested parties concerning the perception of RPTs in Egypt. Originality/value The reported different findings of this study assure the intermediary role of the context and the local culture in the relationship between RPTs and firm value, in contrast to the negative view that is mostly reported in the literature.

Corporate risk taking and sustainability: a case of listed firms from USA and Germany

2019 ◽  
Vol 10 (1) ◽  
pp. 2-15 ◽  
Author(s):  
Zahid Irhsad Younas ◽  
Ameena Zafar
Keyword(s):  
Risk Taking ◽  
Profit Maximization ◽  
Well Being ◽  
Least Square ◽  
Board Structure ◽  
Best Interest ◽  
Content Type ◽  
Listed Firms ◽  
Corporate Risk ◽  
The Impact

PurposeThis study aims to analyze the impact of corporate risk taking on the sustainability of firms in USA and Germany. As risk taking is an expensive phenomenon, the firm may shift the resources from stakeholder well-being to profit maximization of shareholders. Ultimately, risk taking results in the reduction of firm’s sustainability.Design/methodology/approachTo capture the impact of corporate risk taking, the corporate-governance variables, i.e. “independent board structure” and “board size,” were used as instrumental variables to control excessive corporate risk taking and restrict it at a healthy level. A sample of 3,387 unbalanced panel observations from USA and Germany, for the period 2004-2015, were assessed.FindingsThe results confirm that corporate risk taking has a negative and significant impact on the sustainability of firms.Research limitations/implicationsGovernment and policymakers in USA and Germany may introduce regulations to curb excessive corporate risk taking for sustainable corporations and sustainable society. This research suggests that corporate risk taking is not in the best interest of stakeholders.Originality/valuePrevious literature only finds the impact of sustainability on corporate risk taking and there is not a single study that examines the impact of corporate risk taking on the sustainability of a firm. Thus, this study contributes to existing literature on corporate risk taking and sustainability. The study further contributes by using the instrumental variable two stage least square.

Navigating the entrepreneurial quest for high export performance

2020 ◽  
Vol 36 (5) ◽  
pp. 13-15
Keyword(s):  
Risk Taking ◽  
Entrepreneurial Orientation ◽  
Export Performance ◽  
Foreign Market ◽  
Strategic Choices ◽  
Content Type ◽  
Probability Of Success ◽  
Pertinent Information ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings This research paper concentrates on the impact of entrepreneurial orientation (EO) on strategic choices when entering a foreign market. On balance the results reveal that combining all three EO trait dimensions – innovativeness, risk taking, and proactiveness – creates the best probability of success when entering a product into a new foreign market by deploying either an explorative or an exploitative product marketing strategy. Although a riskier explorative strategy is the most promising option for building longer-term competitive advantage, blending this with elements of a more conservative but growth-lacking exploitative strategy can yield synergistic benefits. Originality/value The briefing saves busy executives, strategists and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Does location in a science park really matter for firms’ intellectual capital performance?

2014 ◽  
Vol 15 (4) ◽  
pp. 497-515 ◽  
Author(s):  
Francesco Schiavone ◽  
Antonio Meles ◽  
Vincenzo Verdoliva ◽  
Manlio Del Giudice
Keyword(s):  
Intellectual Capital ◽  
Firm Characteristics ◽  
Science Park ◽  
Firm Level ◽  
Policy Makers ◽  
Science System ◽  
Content Type ◽  
The Impact ◽  
Practical Implications

Purpose – The purpose of this paper is to investigate the effect of being located in a science park (SP) on the level of a firm's intellectual capital (IC) performance. Design/methodology/approach – Using a sample of 183 Italian firms (i.e. 61 tenant and 122 non-tenant firms), and through the GLS technique, the authors regress the firms’ IC performance across various explicative variables including a dummy that discriminates tenant and non-tenant firms. Findings – Consistently with expectations, the results show that the location of a firm in a SP leads to improved IC performance. Moreover, the authors find that some other firm characteristics, such as size, age, and leverage, are important predictors of its IC-based performance. Research limitations/implications – The sample is small and the impact on performance might be biased by factors related to the regional context (e.g. level of industrialization, quality of education, and science system). Practical implications – Implications for policy makers: support the growth of firms in SPs especially in those industries full of firms with scarce performance in IC. Implications for SP managers: they could “sell” (in terms of marketing) to both entrepreneurs to attract and policy makers this result. Implications for institutional investors: they should look at SPs with greater interest to find high-quality firms and improve their screening activity. Originality/value – This paper aims to extend literature about factors explaining the level of a firm's IC performance and the current understanding of the impact of SPs at firm level.

Risky business and the boards who play that way

2016 ◽  
Vol 32 (8) ◽  
pp. 21-23
Keyword(s):  
Risk Taking ◽  
Design Methodology ◽  
Firm Risk ◽  
Content Type ◽  
Women On Boards ◽  
Board Directors ◽  
Pertinent Information ◽  
Equity Ownership ◽  
Risky Business ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings Examines data from 260 companies on the UK’s FTSE 350 market to consider the extent to which risk-taking in businesses is related to the composition of boards. Establishes that there are board attributes that are significantly related to firm risk. In particular, these boards might be small in size, have high equity ownership among executive board directors and also have high institutional investor ownership. There is some lesser evidence that a greater number of women on boards might lead to a decrease in risk-taking. Practical implications The paper provides strategic insights and practical thinking that have influenced some of the world’s leading organizations. Originality/value The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Sign in / Sign up

Export Citation Format

Share Document