Using 9283 stocks listed on the NYSE, AMEX, and NASDAQ, we document return reversals and show that overnight jump returns negatively predict short-term returns in both positive and negative episodes. This relationship remains robust across subperiods, including times of market distress, and across quintile portfolios formed on firm-specific factors. Although a frictionless long–short strategy following jump days generates 1.05% positive abnormal returns with the magnitude declining as the holding period expands, the same strategy based on extreme deciles of lagged overnight jump returns yields a 0.6% risk-adjusted loss over a one-month horizon, implying that the overreaction is transient. Overall, the findings suggest that price discovery is contingent on an active trading environment as well, and reversal patterns following overnight jumps are consistent with temporary mispricing that tends to diminish once continuous trading resumes.

This study examines the relationship between carbon emissions and stock returns, with a focus on the role of family ownership and management. Using a sample of 435 publicly listed firms from 14 Western European countries over the period 2010-2020, we explore whether financial markets perceive family-controlled firms, particularly those led by family-member CEOs, differently in terms of their commitment to sustainable practices. Consistent with prior research, our results indicate that firms with higher emissions earn higher stock returns while simultaneously experiencing lower market valuations, consistent with the presence of a carbon risk premium driven by elevated carbon transition risk. Crucially, we find that family firms led by family CEOs experience significantly greater carbon risk premiums and more pronounced valuation discounts compared to non-family firms and family firms led by professional CEOs. This differential is particularly pronounced in the period following the 2015 Paris Agreement, which heightened investor awareness of climate-related risks. This evidence is consistent with investors exhibiting lower confidence in the effectiveness of carbon transition risk management in family firms led by family CEOs. We attribute these findings to weaker governance, lower institutional oversight, and control-driven decision-making. This study advances the literature on ownership structure by elucidating how family control influences corporate responses to environmental pressures and by highlighting the financial implications of delayed climate action in family-controlled businesses.

The transition towards a net-zero economy faces a finite timeline, which increases the level of carbon-transition risk for companies with high pollution levels. Firms that voluntarily disclose a comprehensive breakdown of their carbon emissions across various geographic regions may signal carbon leakage through operational diversification. This disclosure also highlights the complexity and challenges these firms face in complying to diverse regulatory frameworks aimed at reducing their carbon footprint. We investigate the impact of the geographical dispersion of carbon emissions on firm value by analyzing voluntarily disclosed carbon emissions data from the Carbon Disclosure Project (CDP) on a global level for the period 2010-2020. We find that geographically dispersed carbon emissions reduce firm value. This suggests that spreading negative climate impacts across regions is costly for polluting firms.

This study examines the effect of acquisitions worldwide on R&D intensity of acquiring firms. Acquisitions on one hand could help acquirers with accessing innovation capabilities of target firms. On the other hand, R&D intensity of acquirers decreases after acquisitions because of integration problems between the acquirer and the target. The results do not show strong evidence that R&D intensity significantly changes after acquisitions in general. Industry relatedness and the listing status of targets do not seem to matter in regards to acquirers’ future R&D intensity, either. However, R&D intensity appears to be influenced by whether or not acquirers operate in industries with high R&D intensity. Moreover, R&D intensity of acquirers increases after cross-border acquisitions when cultural distance is high and the income level is similar between the acquirer and the target countries. An increase in R&D intensity is more pronounced when acquirers are not American firms.

This study examines how credit reforms impact commercial bank loans and nonfinancial firms' debt. Using two international samples for commercial banks and nonfinancial firms from 2004 to 2019, we find that global information-sharing reforms encourage banks to increase corporate loans, thus improving firm debt financing, particularly in countries with weak creditor rights. Legal rights reforms significantly boost corporate bank loans in emerging countries and enhance firms' debt financing in developed countries. Our findings suggest credit reforms positively impact firms' financing; however, their effects on debt financing supply and demand vary by economic development level and the strength of creditor rights.

We investigate the relationship between research and development (R&D) and firm-level carbon emissions to determine whether firm type matters. Multinational corporations (MNCs) with high-level R&D expenditure have a greater ability than domestic companies to generate technologies that will contribute to controlling environmental pollution and climate change. However, we know less about whether MNCs contribute to reducing carbon emissions worldwide, because they also have the ability to overcome controls on pollution levels by shifting their production facilities from regions with more restrictions to those with fewer restrictions. The sample we use includes roughly 20,000 firm-year observations from 44 countries for the period 2003-2019. We find that MNCs decrease their carbon emissions by increasing their R&D spending more than domestic companies do. We further demonstrate that foreign direct investment (FDI) creates opportunities for MNCs to adjust their overall carbon emissions if they are located in developed countries. Key policy insights R&D investment in low-carbon technologies and practices decreases carbon emissions intensity and the impact on average is larger for MNCs than for domestic companies, showing that firm-type matters to emission reduction outcomes. MNCs manage their geographically diversified production so as to avoid reducing overall net global carbon emissions. MNCs may seek to operate in places that are weaker in enforcement of emissions reduction, which in turn raises their net global carbon emissions. MNCs located in developed countries are comparatively more important as corporate actors to drive carbon emission reductions due to changing location of operations.

Information asymmetry can affect the propensity of firms to pay dividends directly and indirectly by reducing the agency costs of free cash flow (FCF). However, designing a research framework to identify whether information asymmetry or agency cost directly explains the propensity to pay dividends is challenging, as both are partially endogenous. To overcome this challenge, this study investigates the role of two independent external shocks in explaining the propensity of firms to pay dividends. We use the mandatory adoption of International Financial Reporting Standards (IFRS) as an information asymmetry–reducing event and the global financial crisis (GFC) as an agency cost–reducing event to disentangle the effects of information asymmetry and agency costs. Using a large international sample of more than 100,000 firm-year observations and a matched sample of more than 35,000 observations, we find that the propensity to pay dividends declined after the mandatory adoption of IFRS and then declined further due to the economic shock of the GFC. We also provide evidence that firms facing high information asymmetry and high agency costs have a lower propensity to pay dividends because of the combined effects of IFRS adoption and the GFC. These findings suggest that the agency costs of FCF are more directly relevant in explaining dividend payout policy.

We study whether differences in shareholder protection by countries are important in explaining lower corporate social performance (CSP) of family firms vis-à-vis non-family firms. We create a dataset covering 46 countries for the period 2002–2016. Using a novel approach, we show that the difference in CSP of family firms relative to similar non-family firms is smaller when family firms experience stronger minority shareholder protection to reduce conflicts of interest than non-family firms do. Moreover, we find that the difference in CSP of family firms relative to similar non-family firms is larger when family firms experience stronger shareholders’ rights in corporate governance than non-family firms do. Our results support the view that differences in country-level shareholder protection play an important role in explaining the differences in CSP between family and non-family firms.

We investigate whether the quality of financial markets matters for the relationship between net external financing, voluntary carbon disclosure and firms' cost of capital. External financing needs may create incentives for firms to engage in environmental strategies, such as disclosing their carbon emissions in response to demands from stakeholders. In countries with low financial market quality, firms may build a reputation when complying with stakeholders' demands. In these countries, firms disclosing carbon emissions and with high external financing needs may be rewarded with a lower cost of capital. Using an international sample of 24,253 firm-year observations from 35 countries, we show that the higher firms' net external financing in the previous year, the more likely they are to disclose their carbon emissions in the current year. Moreover, the positive association between the likelihood of carbon disclosure and net external financing needs is stronger in countries with low financial market quality. We further show that disclosing firms with high external financing needs have a lower cost of capital as compared to disclosing firms with low external financing needs. This evidence also differs between countries with high versus low financial market quality.

For the period 2003–2018, we show that U.S. firms have a higher cash-to-assets ratio than European firms have—in particular, among firms with high R&D expenditures and those in industries with high cash flow volatility, indicating the potential roles of precaution and uncertainty respectively in cash holding. We find evidence that industry cash flow volatility is relevant throughout the period, while R&D seems to matter only during the crisis years of 2008–2009. With respect to European cash holdings, there are slight differences between Anglo-Saxon European and non-Anglo-Saxon European firms.

In this study, we investigate the effect of board gender diversity on the decision to disclose carbon emissions voluntarily. Using an international sample consisting of 22,841 firm-year observations from 38 countries for the period 2010–2019, we determine the existence of a positive relationship between the percentage of female directors on the board and carbon disclosure. This evidence supports agency and resource dependency theories, as a gender diverse board indicates strong governance and better communication among stakeholders. Additionally, we examine the moderating effect of gender quotas across sample countries, where either soft or hard quotas have been implemented. We show that the number of firms disclosing their carbon emissions is, on average, higher in countries with either hard or soft quotas than in countries with no quota. Moreover, the positive effect of board gender diversity on voluntary carbon emission disclosure is similar across firms in countries with quotas and without quotas. The reported results demonstrate that there seems to be no need for country-level strict regulations regarding the firm-level percentage of female representation on the board to be effective, as gender board diversity in countries with no quotas has a similar effect in explaining voluntary carbon disclosure as in countries with quotas and those changing to quota regulation.

In a rapidly changing technology world, companies need to conform to their customers’ expectations if they wish to remain competitive in the marketplace. New products, services, processes, marketing, management, and organizational innovation can all be tools to keep companies competitive. Research and development (R&D) expenditure is a critical component in the development of a design process. According to the scientific literature, corporate governance and financial performance can be essential variables with a significant impact on the innovation process. By acting transparently and honestly with all stakeholders (employees, suppliers, customers, creditors, government, community), companies can ensure and enhance the economic sustainability of the whole country through efficient management of financial resources and work toward high value-added innovation. Therefore, the aim of this work was to analyze whether corporate governance and financial performance affect the development of corporate innovation investments and, at the same time, the sustainability of the country’s economy. Additionally, this research proposes a methodology for integrated assessment of corporate innovation investments in the context of economic sustainability, aimed at companies and countries for more efficient investment in innovation and sustainable development outcomes. The object of the research was corporate innovation investment intensity as the driver for economic sustainability. An evaluation methodology for integrated assessment of corporate innovation investment can be used as an instrument for the stimulation of business innovation and strategic development of a country’s economy. The evaluation methodology of integrated assessment of corporate innovation investments can be utilized to evaluate different companies and governments. Evidence-based empirical calculations show that synchronized corporate governance and financial performance influence the intensity of corporate innovation investments in the context of economic sustainability.

This study investigates the effect of corporate governance reforms protecting minority shareholders on the firm value measured by Tobin’s Q. Using the difference-in-differences estimation and a large international sample from 65 countries for the period 2005–2018, the results show that the firm values increase more in the reform countries than non-reform countries relative to pre-reform levels. This positive effect changes for firms with high and low levels of debt. Moreover, the values after reforms increase more for firms located in civil countries and in countries with rule-based reform approaches and low debt enforcement because the reforms strengthening minority shareholder protection are more efficient in those countries. The evidence is robust to accounting-based performance as well.

We study the relationship between financial performance and responsibility in the banking industry. Given the wide diversity in business models and operations, this relationship needs to be studied at the level of specific industries. We contribute to the debate about financial and social performance in the banking industry by using highly detailed responsibility and financial performance information, which helps to understand why this relationship exists and how the relationship evolves over time. We rely on a diverse international sample for the period 2002–2015 and use a wide range of financial performance measures next to various specific indicators for corporate governance, environmental, and social performance. By using simultaneous equation system estimations to address the causality between financial performance and responsibility, we find that the Tier-1 capital adequacy ratio is significantly and positively associated with responsibility indicators. As such, stronger institutions appear to be able to act in a more responsible manner and such responsibility signals banks’ health. We also establish that the global financial crisis did have a profound impact on the finance-responsibility nexus. We show that there are changes in the underlying relationships in this nexus during the post-crisis period compared to the pre-crisis period. Furthermore, such changes are different between countries with high and low income, civil and common law, single and multiple supervision authorities, and central bank and non-central bank supervision.

This paper aims to understand the effects of the transition from “comply or explain” to a partially mandatory corporate governance regime on the firm value using the recent sequential corporate governance reforms in Turkey. Using a sample of 1,120 Turkish listed firms for the years 2009 to 2014, we document that, in the short term, the initial market reaction to the new corporate governance regime is positive. Our initial results indicate that the induced benefits of the new corporate governance code outweigh the compliance costs imposed by the new code. Furthermore, our results entail that, over the period, there is a shift in the expectations of the market participants toward more the compliance costs. In the long term, we find a significant increase in Tobin’s Q for firms with strong corporate governance in the pre-reform period and subject to greater mandatory provisions in the post-reform period. In corporate governance literature, a central question not yet answered is whether an “Anglo-Saxon”-based corporate governance system is well suited to an emerging market context. Our paper contributes to the debate on the optimal corporate governance regime by documenting additional empirical results to the limited academic studies regarding the value implications of a partially mandatory corporate governance regime in an emerging market. Our results provide useful insights for other capital market regulators in emerging markets to understand possible impacts of such a transition in an emerging market context.

The previous evidence shows that firms experience lower returns after a period with higher growth in assets. Two alternative explanations have been raised to explain this effect: mispricing and optimal investment. This study examines this effect in 26 emerging markets over the period of 2005-2013 with a special attention to the recent global financial crisis. We find a stronger asset growth effect during the crisis years relative to other years. This effect is stronger in firms with small or medium stock turnover ratio and firms operating in industries with low R&D intensity. We also investigate the heterogeneity across countries and find that a stronger asset growth effect during the crisis years exists only for emerging markets with low protection of shareholders and creditors. We argue that this evidence is in line with the mispricing hypothesis.

We examine the effects of both country and firm-level governance on cash holdings and the value of cash for a large international sample during the period 2002–2013. We find that both strong country and strong firm-level governance reduce the amount of cash holdings. We observe that a number of the components of both firm and country-level governance are significantly related to the decrease in cash holdings. We show that the value of cash increases as a result of good country-level governance and we provide mixed evidence that good firm-level governance also increases the value of cash. Our analysis also confirms that the payment of dividends adds to the value of cash.

We investigate the relationship between environmental and financial performance of fossil fuel firms. To this extent, we analyze a large international sample of firms in chemicals, oil, gas, and coal with respect to several environmental indicators in relation to financial performance for the period 2002–2013. We find that these firms have significantly higher scores on environmental performance efforts than other firms. We use a simultaneous equations system to identify the direction of the relationship between environmental and financial performance of the firms. We find that environmental outperformance has no impact on financial performance for chemical firms, reduces returns and risks for coal companies, has a mixed impact on returns in oil and gas, and reduces financial risks for oil and gas firms. Financial outperformance reduces environmental performance in all fossil fuel (sub)industries investigated. Our findings mainly support the opportunistic view regarding the impact of financial returns, which holds that financial performance negatively impacts social performance. Regarding financial risk, we find support for the stakeholder perspective where good environmental performance is beneficial from a finance perspective. We conclude to substantial differences in the environmental-financial performance relationship along fossil fuel firms in different subindustries.

This study examines the impact of creditor rights and country governance on cash holdings using a sample of firms from 47 countries. We hypothesize that cash holdings are smaller when both creditor rights and country governance are high. In these circumstances firms will not need to hold as much cash for future investments needs (precautionary funds) because firms will expect that funds will be available in the future. Our findings support our hypothesis and hold for alternative definitions for cash holdings, different country samples, different definitions of governance and concerns about endogeneity.