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.

Does the second wave of COVID-19 undermine corporate immunity? International evidence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Huy Viet Hoang ◽  
Cuong Nguyen ◽  
Khanh Hoang
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Fixed Effects ◽  
Management Strategies ◽  
The United States ◽  
Least Square ◽  
Content Type ◽  
The Impact ◽  
Second Wave ◽  
Practical Implications

PurposeThis study compares the impact of the COVID-19 pandemic on stock returns in the first two waves of infection across selected markets, given built-in corporate immunity before the global outbreak.Design/methodology/approachThe data are collected from listed firms in five markets that have experienced the second wave of COVID-19 contagion, namely the United States (US), Australia, China, Hong Kong and South Korea. The period of investigation in this study ranges from January 24 to August 28, 2020 to cover the first two COVID-19 waves in selected markets. The study estimates the research model by employing the ordinary least square method with fixed effects to control for the heterogeneity that may confound the empirical outcomes.FindingsThe analysis reveals that firms with larger size and more cash reserves before the COVID-19 outbreak have better stock performance under the first wave; however, these advantages impede stock resilience during the second wave. Corporate governance practices significantly influence stock returns only in the first wave as their effects fade when the second wave emerges. The results also suggest that in economies with greater power distance, although stock price depreciation was milder in the first wave, it is more intense when new cases again surge after the first wave was contained.Practical implicationsThis paper provides practical implications for corporate managers, policymakers and governments concerning crisis management strategies for COVID-19 and future pandemics.Originality/valueThis study is the first to evaluate built-in corporate immunity before the COVID-19 shock under successive contagious waves. Besides, this study accentuates the importance of cultural understanding in weathering the ongoing pandemic across different markets.

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.

The impact of the Food Safety and Modernization Act on firm value

2016 ◽  
Vol 76 (2) ◽  
pp. 233-245 ◽  
Author(s):  
Mark Steven Johnson ◽  
Tolani Lawson
Keyword(s):  
Food Safety ◽  
Firm Value ◽  
Factor Model ◽  
Abnormal Returns ◽  
Market Value ◽  
Capital Asset Pricing ◽  
President Obama ◽  
Content Type ◽  
Time Period ◽  
The Impact

Purpose – The purpose of this paper is to determine the impact of the passage and signing of P.L. 111-353, the Food Safety Modernization Act (FSMA), on the market value of agribusiness firms. Design/methodology/approach – The authors conduct an event study of the shareholder value effects of FSMA. The short-window analyses estimate the three-, five-, and seven-day market responses to three key event dates: passage by the House, passage by the Senate, and the signing of FSMA by President Obama. The long-window analyses examine a time period that encompasses the three informational events, as well as the 30 months after the signing of FSMA. To control for the effects of market-wide fluctuations, the authors use two alternative models of the returns generating process to calculate abnormal returns, the Capital Asset Pricing Model (CAPM) and the Fama-French three-factor model. Findings – The short-window analyses show no evidence of a significant reaction to the passage of FSMA by the House or the Senate, but evidence of a significant negative reaction to the signing of FSMA by President Obama. The long window results which span the of passage by House, passage by the Senate and signing by the President indicate a decline in the average market value of agribusiness firms on the order of – 10 percent over the period. Additionally, the authors find some evidence that this effect is not evenly spread out across different types of agribusiness firms (wholesale, grocery, and processing). Originality/value – The study is the first to examine the impact of P.L.111-353 on the market value of agribusiness firms.

The impact of business strategy on corporate cash policy

2020 ◽  
Vol 21 (4) ◽  
pp. 677-699
Author(s):  
Efstathios Magerakis ◽  
Dimitris Tzelepis
Keyword(s):  
Business Strategy ◽  
Firm Value ◽  
Corporate Strategy ◽  
Cash Holdings ◽  
Market Value ◽  
Theoretical Background ◽  
Empirical Literature ◽  
Content Type ◽  
The Impact ◽  
The Relationship

PurposeThe purpose of this study is to explore the association between cash holdings and business strategy for nonfinancial and nonutility US firms over the period from 1970 to 2016.Design/methodology/approachThe authors have used Miles and Snow's (1978, 2003) theoretical background and followed Bentley et al. (2013) to construct a strategy index. Thus, the authors have distinguished two extreme corporate strategies, prospectors and defenders, based on a firm's resource allocation and investment behavior patterns. Following the methodology of Bates et al. (2009), the authors have used the multiple regression analysis to explore the relationship between business strategy and corporate cash holdings.FindingsThe empirical results show that business strategy is positively related to cash holdings. Prospectors are more likely to hold higher cash levels than defenders. Furthermore, the authors have found that cash holding's speed of adjustment (SOA) is slower for prospectors than for defenders, suggesting that business strategy influences cash holding's trend. Interestingly, the results show that the market value of cash increases significantly only for the firms that pursue a defender strategy.Research limitations/implicationsThe results of this work have valuable implications for researchers, by unveiling the relationship between corporate strategy and firm's cash holdings. This study, however, is limited to a sample of US firms; empirical evidence based on international samples of firms would add value to the current literature.Practical implicationsThe findings could be useful to financial managers and investment strategists, who seek to maximize firm value through the adoption of an effective liquidity policy. What is more, this study provides support for the view that strategic choice and optimal cash management are of great importance for firms' market value.Originality/valueThis study enriches the knowledge of business strategy's impact on financing policy of firms and contributes to the empirical literature of cash holdings' determinants. In addition, it complements previous studies on US firms by documenting the effect of business strategy on the SOA in cash holdings and firm value.

Workplace safety events and firm performance

2018 ◽  
Vol 29 (1) ◽  
pp. 104-120 ◽  
Author(s):  
Qazi S. Kabir ◽  
Kevin Watson ◽  
Theekshana Somaratna
Keyword(s):  
Firm Performance ◽  
Firm Value ◽  
Stock Price ◽  
Large Scale ◽  
Workplace Safety ◽  
Content Type ◽  
Working Environments ◽  
Negative Effect ◽  
The Impact ◽  
Safe Working

Purpose The purpose of this paper is to address a deficiency in the literature by exploring the impact of negative workplace safety announcements on firm performance. The authors analyze the issue from a corporate social responsibility perspective and explore ways supply chain managers can contribute to improve firm performance through the development of safe working environments. Design/methodology/approach Utilizing a sample of 227 negative workplace safety announcements, this paper explores the implications of negative workplace safety announcements on the stock price of a firm using event study methodology. Findings The authors find that negative workplace announcements are associated with an abnormal decrease in shareholder value. Furthermore, the authors find evidence that negative workplace safety announcements have a more pronounced negative effect on firm value in the present environment than in any previous time period. Practical implications Operations managers need to play leading roles in ensuring safe working environments. The results provide the support needed to acquire the financial resources necessary to mitigate exposure to unsafe working conditions. Originality/value This study explores the impact of negative workplace safety announcements on a firm’s stock performance. It is the first large-scale study to look at public announcements of workplace incidents and to explore the impact of such announcements in the context of time.

Acquisitions and the shareholder base

2019 ◽  
Vol 45 (10/11) ◽  
pp. 1416-1432
Author(s):  
Nicholas Wonder ◽  
Claire Lending
Keyword(s):  
Design Methodology ◽  
Market Value ◽  
Empirical Literature ◽  
Content Type ◽  
Short And Long Term ◽  
Long Term Impact ◽  
The Impact ◽  
Instrumental Variables Approach ◽  
Practical Implications

Purpose The purpose of this paper is to study the impact of acquisitions on the number of shareholders of the acquirer (the shareholder base) and relate that effect to the method of payment and the ratio between the target’s and acquirer’s shareholder bases prior to the acquisition. Design/methodology/approach Using 348 acquisitions from 1993 to 2013 for which both parties are public, American firms, the paper measures changes in the acquirer’s shareholder base from before announcement through to four years after completion. OLS regressions, together with an instrumental variables approach addressing the endogeneity of acquisition payment, indicate the determinants of those changes. Findings Acquisitions completed partly or entirely in stock lead to large increases in the shareholder base, and the increases mostly endure over the four-year window examined in the study. Regression results indicate that the target to acquirer shareholder ratio has a much greater impact on the acquirer’s base for stock acquisitions than for cash acquisitions. The ratio is also associated with changes in beta. Practical implications Because existing theoretical and empirical literature shows that the shareholder base impacts the risk, liquidity, and market value of stock, managers evaluating potential targets and modes of payment may wish to consider the likely impact on their firms’ shareholder bases, as may investors contemplating the effects of an acquisition announcement. Originality/value This is the first work documenting both a short- and long-term impact of acquisitions on the shareholder base and the first to investigate the determinants of the change in the base.

New information in continuous disclosure

2015 ◽  
Vol 27 (2) ◽  
pp. 229-263 ◽  
Author(s):  
Mark Russell
Keyword(s):  
Information Content ◽  
Stock Price ◽  
Price Sensitivity ◽  
Firm Characteristics ◽  
Disclosure Regulation ◽  
Stock Price Synchronicity ◽  
Content Type ◽  
New Information ◽  
Study Support ◽  
Practical Implications

Purpose – This paper aims to examine the price-sensitivity of information under capital market disclosure regulation, the Australian continuous disclosure regulation (CDR). Design/methodology/approach – The study tests the information content of continuous disclosures and identifies the firm characteristics that condition the price-sensitivity of information under CDR. Findings – The study provides evidence that continuous firm disclosures are significantly associated with stock price adjustment to information. Further results are consistent with firm disclosure and its information content being determined by the economics of the firm. Practical implications – The findings of the study support the introduction of ongoing and continuous disclosure regimes in a number of capital markets, and assist firms and regulators model the price-sensitivity of information under CDR. Originality/value – The study highlights the sources of an informed market, and contributes to our understanding of the conditions under which the CDR reveals unexpected information. The results provide evidence of an association between firm disclosure and stock price synchronicity, consistent with managerial incentives to disclose information.

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.

Corporate social responsibility behaviors and corporate reputation

2019 ◽  
Vol 15 (3) ◽  
pp. 395-408 ◽  
Author(s):  
Scott Jeffrey ◽  
Stuart Rosenberg ◽  
Brianna McCabe
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Financial Performance ◽  
Corporate Reputation ◽  
Stock Price ◽  
Content Type ◽  
Corporate Social ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to study how corporate social responsibility (CSR) behaviors can lead to corporate membership on Fortune Magazine’s Most Admired Companies list. Design/methodology/approach Regression analysis using environmental, social and governance (ESG) statistics published by MSCI-KLD as independent variables to predict the behaviors that lead to most admired status. Findings Not surprisingly, corporate financial performance (CFP) is the largest contributor to membership on the list. However, after controlling for CFP, the analysis finds that specific social responsibility behaviors contribute to membership on the Fortune list. Practical implications This paper finds that CSR behaviors are important to a firm’s reputation as measured by Fortune’s Most Admired Companies list. Therefore, companies should continue with social responsibility activities to improve their reputation with investors. Originality/value Many articles test the effect of ESG on financial performance and the role of financial performance on stock price. This paper is unique in that it measures the impact of CSR on corporate reputation using an important financial market benchmark – the Fortune Most Admired Companies list.

Impact of market-wide versus firm-specific information on financial analysts

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Omar Farooq
Keyword(s):  
Firm Value ◽  
Stock Price ◽  
Economies Of Scale ◽  
Financial Analysts ◽  
Specific Information ◽  
Analyst Coverage ◽  
Content Type ◽  
Different Types ◽  
Types Of Information ◽  
The Impact

PurposeThis paper documents the effect of different types of information on the value of financial analysts.Design/methodology/approachThe authors use the pooled OLS regression and the data of nonfinancial firms from France to test our hypotheses. The data covers the period between 1997 and 2019.FindingsThe results show that analysts are more likely to cover those firms that incorporated greater proportion of market-wide information in their prices. Consistent with the economies of scale view, the authors argue that analysts specialize in the interpretation market-wide information. By doing so, they are able to cover relatively large number of firms simultaneously. The results also show that the value of analyst coverage (measured as the impact of analyst coverage on firm value, probability of stock price crash and probability of stock price jump) is a function of the extent to which different types of information are incorporated in prices. The authors’ results suggest that the impact of analyst coverage on firm value and on probability of crash is less pronounced in firms that incorporate greater proportion of market-wide information. In case of probability of jump, the results show that the impact of analyst coverage is more pronounced firms that incorporate greater proportion of market-wide information.Originality/valueThe major contribution of this paper is to document the impact of different types of information on the extent of analyst coverage. Furthermore, this paper also uses various measures (the impact of analyst coverage on firm value, probability of stock price crash and probability of stock price jump) to show how different types of information affects the value of analyst coverage.

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