scholarly journals R&D Investment, Market Competition and Cost of Equity Financing

2021 ◽  
Author(s):  
Wang Mingxian ◽  
Ni Xiaonan
Keyword(s):  
Market Competition ◽  
Cost Of Equity ◽  
Equity Financing ◽  
D Investment

Customer Satisfaction and Implied Cost of Equity: Moderating Effects of Product Market Conditions and Chief Marketing Officer

2021 ◽  
pp. 183933492199395
Author(s):  
Youngdeok Lim ◽  
Jenny (Jiyeon) Lee ◽  
Hyungtae Kim
Keyword(s):  
Customer Satisfaction ◽  
Market Competition ◽  
Product Market ◽  
Cost Of Equity ◽  
Moderating Effects ◽  
Equity Financing ◽  
Market Conditions ◽  
Chief Marketing Officer ◽  
Financing Costs ◽  
Implied Cost Of Equity

A handful of prior marketing studies have examined the impact of customer satisfaction (CS) on the cost of equity (COE). These studies have estimated the COE using the ex post proxy (e.g., stock market beta) that may be susceptible to market fluctuations. Going beyond the conventional COE approach, we thus reestimate the effect of CS on COE, measured by the more robust ex ante expected returns (implied cost of equity [ICE]). Furthermore, we examine whether this relationship is subject to both external (product market conditions) and internal (chief marketing officer [CMO] presence) factors. Using 753 firm-year observations in the period 2000–2014, we find that firms with high satisfaction ratings have lower equity financing costs. The significant moderating effects of product market conditions and the presence of a CMO in firms are also observed. The negative relationship becomes weaker under conditions of greater product market competition and demand uncertainty, but stronger when a firm has a CMO in its senior management. Our findings provide useful insights for managers who need to justify and refine their marketing strategies in respect of CS to acquire a firm’s required level of equity financing costs. In addition, we highlight the importance of CMOs as significant contributors to the COE reduction. The results are also useful for investors when valuing a firm through the COE.

Ambiguous Customer Identity Disclosure and the Cost of Equity Capital

2017 ◽  
Vol 20 (03) ◽  
pp. 1750021 ◽  
Author(s):  
Hsin-Yi Yu ◽  
Li-Wen Chen
Keyword(s):  
Information Asymmetry ◽  
Market Competition ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Proprietary Information ◽  
Customer Information ◽  
Identity Disclosure ◽  
The Cost ◽  
Proprietary Cost

In deciding how much customer information to disclose, managers face a tradeoff between the benefits of reducing information asymmetry and the losses of revealing proprietary information. This paper investigates which factors affect the level of ambiguous customer identity disclosure and whether such ambiguous disclosure affects the cost of equity capital. The empirical evidence shows that the proprietary cost is a crucial factor in ambiguous customer identity disclosure. Firms with a higher level of ambiguous customer identity disclosure generate a higher cost of equity capital. Moreover, the higher cost of equity capital is concentrated among firms under imperfect market competition.

Uncertainty and R&D investment: Does product market competition matter?

2020 ◽  
Vol 52 ◽  
pp. 101167 ◽  
Author(s):  
Muhammad Arif Khan ◽  
Xuezhi Qin ◽  
Khalil Jebran ◽  
Irfan Ullah
Keyword(s):  
Market Competition ◽  
Product Market ◽  
Product Market Competition ◽  
D Investment

scholarly journals Carbon Information Disclosure, Marketization, and Cost of Equity Financing

2019 ◽  
Vol 16 (1) ◽  
pp. 150 ◽  
Author(s):  
Li Li ◽  
Quanqi Liu ◽  
Jun Wang ◽  
Xuefei Hong
Keyword(s):  
Negative Correlation ◽  
Information Disclosure ◽  
Cost Of Equity ◽  
Equity Financing ◽  
Heavy Pollution ◽  
The Cost ◽  
The Relationship

Using listed enterprises in China’s heavy pollution industry from 2009 to 2013, this study tests the relationship between marketization degree, carbon information disclosure, and the cost of equity financing. The results show that, regardless of marketization degree, the overall level of carbon information disclosure of listed enterprises in China’s heavy pollution industry is low. The content of carbon information disclosure is mainly non-financial carbon information, and the financial carbon information disclosure is very low. The cost of equity financing is different in areas with different marketization degrees, specifically speaking, the cost of equity financing is lower in regions with a high marketization degree than that of a low marketization degree. Carbon information disclosure, non-financial carbon information disclosure, and financial carbon information disclosure are negatively correlated with the cost of equity financing. The marketization degree has strengthened the negative correlation between carbon information disclosure, non-financial carbon information disclosure, financial carbon information disclosure, and the cost of equity financing, respectively.

Rank and File Employee Satisfaction and the Implied Cost of Equity Capital

2020 ◽  
pp. 0148558X2097194
Author(s):  
Jiajia Fu ◽  
Yuan Ji ◽  
Jiao Jing
Keyword(s):  
Employee Satisfaction ◽  
Market Competition ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Data Set ◽  
Financing Cost ◽  
The Cost ◽  
Market Benefits ◽  
The Impact

Rank and file employees execute firms’ daily operating activities, but prior research rarely examines their importance due to a lack of employee information. In this article, we use a novel data set—company reviews by rank and file employees—to provide evidence on the impact of employee satisfaction on a firm’s cost of equity capital. We find that firms with higher employee satisfaction have a lower cost of equity. Our results are robust to a variety of endogeneity tests and model specifications. We also find that the effect of employee satisfaction is more pronounced for firms with higher risk, greater financial constraints, and higher labor intensity or product market competition where labor is more critical to firm success. Further analysis shows that the negative association between employee satisfaction and the cost of equity is primarily grounded in reviews from current rather than former employees. Finally, we document that firms with high employee satisfaction experience lower systematic and idiosyncratic risk. Overall, our article presents novel evidence on the capital market benefits of higher employee satisfaction, particularly with regard to financing cost reduction.

Market power and R&D investment: the case of China

2021 ◽  
Author(s):  
Xiaohua Sun ◽  
Fang Yuan ◽  
Yun Wang
Keyword(s):  
Market Power ◽  
Small Firms ◽  
Market Competition ◽  
Industry Concentration ◽  
Alternative View ◽  
Large Firms ◽  
Industry Level ◽  
Depth Analysis ◽  
The Impact ◽  
D Investment

Abstract This article presents an in-depth analysis of market power and its impact on firm research and development (R&D) investment in China. Two opposing theories have been proposed in the literature. The first, due to Schumpeter, suggests that monopoly power has a positive effect on firms’ propensity to innovate hence their investment in R&D. The alternative view, first proposed by Arrow, suggests that firms invest in R&D in order to escape competition, and thus market competition stimulates innovation. In testing these theories, prior studies have measured market power in different ways. Some use the so-called Lerner index, which measures the profit margin of a particular firm. Others use measures of industry concentration, for example, the Herfindahl index. This article tests the competing theories using a sample of 300,095 Chinese manufacturing firms in 29 two-digit manufacturing industries. We unify the two measures of market power, using a hierarchical linear model, to determine whether industry-level measures add power to specifications based on firm-level markups alone. We find, first, that firms are less likely to carry out R&D activities as their market power intensifies. The effect is nonlinear: firms with higher markups spend even less on R&D than a linear specification predicts. This finding supports Arrow’s theory and contradicts Schumpeter’s theory. Second, for the sample as a whole, the impact of industry-level concentration is negligible. However, when we break the sample into large, medium, and small firms, industry concentration has a significant effect on large and medium-sized firms but no impact on small firms. Thus, large firms with high markups in concentrated industries spend less on R&D than large firms with high markups in less concentrated industries. We interpret this as further evidence in support of the escape competition theory: less concentrated industries are more competitive, forcing the leaders to invest more heavily on R&D.

Does More Voluntary “Green” Information Disclosure Cut Down the Cost of Equity: Heavy Pollution Industries in China

2021 ◽  
Author(s):  
Lv Wendai ◽  
Feng Jing ◽  
Li Bin
Keyword(s):  
Voluntary Disclosure ◽  
Information Disclosure ◽  
Positive Impact ◽  
Environmental Information ◽  
Cost Of Equity ◽  
Equity Financing ◽  
Positive Effects ◽  
Heavy Pollution ◽  
Csr Disclosure ◽  
The Cost

Abstract Focusing on the unique background of the coexistence of mandatory and voluntary disclosure of environmental information by domestic companies in heavy pollution industries for which is lost sight of in the existing literature. The purpose of this paper is to identify, under the premise of compulsory disclosure of environmental information in the financial report and separate environmental report, whether the further voluntary environmental information disclosure in the corporate social responsibility (CSR_E) captures the discount from investors during equity financing. Employing the sample of 4390 China’s A-share listed companies in the heavy pollution industries between 2010 and 2018, we adopt Python to conduct texture analysis and image recognition, applying the fixed effect regression model to text hypothesizes, within the robust analysis, our empirical results show that the CSR disclosure, higher quality of CSR reports, greater extent of CSR_E disclosure including accurate environmental investment information as well as the amount of graphs and texts all have the positive impact on the cost reduction of equity financing. Moreover, the degree of CSR_E disclosure in reducing cost of equity is 30 times that of CSR disclosure, which indicates that voluntary disclosure of environmental information is better to get extra discount of equity financing by satisfying favor of investors instead of keep silent on the basis of compulsory disclosure of environmental information. In addition, the charts have specific positive effects that’s not available for the text, the accurate quantitative environmental information creates more values for those enterprises disclosed. This study offers guidelines for regulatory authorities to explore the coordination effect of mandatory and voluntary disclosure policies, and achieve environmental governance and sustainable development of enterprises by improving their corporate governance.

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