In this study, we examine the individual social responsibility of corporate executives in the context of excessive executive pay and further explore whether executives’ individual social responsibility can translate into their firms’ corporate social responsibility (CSR). Given the morally charged discussion surrounding excessive executive pay, we analyze the research questions through the lens of social–psychological theories of morality. We find that executives’ individual social responsibility in the form of personal donations is a responsive moral cleansing action that executives take to restore their threatened moral self-image due to the public disclosure of their excessive pay. However, executives who make personal donations to charities do not engage their corporations in more CSR activities. The findings demonstrate that corporate executives’ individual social responsibility does not necessarily translate into corporate social responsibility. We attribute the lack of transferability from individual to corporate social responsibility to the compensatory nature of morality.

We examine how private foundations balance their conventional charitable granting and unconventional program-related investing (PRI), a unique in-house hybrid investment that can also fulfill foundations' charitable missions. As grant-making agencies, private foundations traditionally distribute grants to program-operating charities to fulfill their charitable missions, but recently more private foundations embrace PRI. We analyze the competing institutional logics and the divergent stakeholder interests that are embodied in PRI. We find that private foundations follow the behavioral pattern of hybrid organizations and treat PRIs as an extension of their traditional charitable grants. More specifically, we find that PRIs do not substitute but supplement charitable grants. The findings also offer policy and practical implications.

We examine how governments use accounting information, specifically administrative ratios, in their decisions regarding the funding of nonprofit organizations (NPOs). Using data in the setting of Canada, we find that when funding NPOs for the first time, governments consider NPOs’ sustainability and are more likely to award funds to NPOs with reasonably high administrative ratios, as long as these ratios are below the government-suggested threshold. In subsequent funding decisions, governments tend to ignore administrative ratios and stick with previously funded NPOs to extend subsequent funding(s). We further find that governments react to low-quality accounting ratios by reducing the likelihood and the value of funds awarded, and this reaction is more pronounced at initial funding than at subsequent funding(s). The practical and policy implications of these findings are discussed.

This study examines the effects of professionalization on the cost efficiency of fundraising organizations in a unique research context, Chinese charitable foundations. Two important professionalization measures, professionalized human resource management and accounting practices, are adopted. Using data from audited annual reports from 2005 to 2009, we find that professionalization in general enables foundations to increase their fundraising cost efficiencies. However, further analysis indicates that this positive effect only occurs in private but not in public foundations. Furthermore, the positive effect of professionalization is more significant when raising unrestricted funds than when raising restricted funds from donors.

This study examines whether three factors-the transparency of expense disclosures, donor evaluation focus, and organization performance-influence how directors monitor management expense misreporting in nonprofit organizations. An experiment with 189 nonprofit directors finds that the enhanced transparency of expense disclosures increases director monitoring by reducing the tendency to accept management expense misreporting. Further, an organization's nonfinancial performance and the perceived fairness of donor evaluation focus interact to influence director monitoring practices. Specifically, when directors know an organization's nonfinancial performance is poor and understand that this performance will negatively influence the willingness of donors to contribute, directors monitor less if they think that donors are adopting a more balanced approach to organizational evaluation that focuses on both financial and nonfinancial performance; that is, there is a reverse fair process effect as this donor approach is perceived as being fairer than if donors focus solely on financial performance. However, monitoring is equally strong regardless of donor evaluation focus when directors know that an organization's nonfinancial performance is good and a donation is forthcoming.

This study reviews family business in mainland China from 1872 to 1949 and provides evidence of its early development and its origins in 1872 when the first modern manufacturing firm was founded. We analyse the social, economic, and political environment in which family firms in mainland China were embedded to improve our understanding of how this unique organisational form was established and developed. Our analyses cover the late Qing Dynasty and the period from 1912 to 1949 during which the Republic of China (ROC) ruled mainland China. Implications for current family business theory and practice are discussed.

In this study, we use the promise-breaking events of listed companies as a proxy for information credibility and adopt the event-study method to examine the market reactions to changes in firms' information credibility. We then investigate the channels through which the effects of information credibility are transmitted to the stock market and examine the moderating effects of institutional shareholders and ownership concentration. Our empirical findings indicate that changing the purpose of the funds raised through Initial Public Offerings reduces information credibility, which leads to negative market reactions. Moreover, the market reaction is more pronounced when dominant ownership or institutional shareholders are present. The implications of our findings with regard to the quality of the information environment are discussed.

This article aims to understand if a change in accounting standards offers new avenues for helping entrepreneurial firms, especially those family-controlled ones, to obtain debt financing from foreign banks. We find that amid the global wave of adopting International Accounting Standards (IAS), family-controlled firms tend not to voluntarily switch from local generally accepted accounting principles to IAS. After self-selection issues are taken into account, furthermore, entrepreneurial firms adopting IAS experience less difficulty accessing loans from international banks. However, IAS adoption differentially influences private firms, family owned versus nonfamily controlled, in terms of their access to debt capital.

Manuscript TypeEmpiricalResearch IssueWe investigate the joint effects of family control and the regulatory environment on entrepreneurial growth through the lens of socio-emotional wealth (SEW) theory.Research FindingsTaking into consideration both economic and non-economic goals of entrepreneurial firms, measured by sales growth and employment growth respectively, we find that, compared to their non-family-controlled counterparts, family-controlled firms tend to have lower sales growth rates, but higher employment growth rates. Furthermore, less favorable regulatory environments reduce both sales and workforce growth rates to a greater extent for family-controlled firms than for non-family-controlled firms.Theoretical/Academic ImplicationsWe add to the corporate governance and family business management literature by documenting that the regulatory environment moderates the corporate governance effect of family control on the economic and non-economic goals of family-controlled firms. The findings also contribute to the family business management literature by enriching and providing strong evidence in favor of the SEW theory through our exploration of the moderating role that macro-governance plays in the family control-SEW relation. This research also makes contributions to the entrepreneurship literature, laying a foundation for future empirical studies on entrepreneurial growth by separating its economic from its non-economic dimensions.Practitioner/Policy ImplicationsOur findings provide practical implications for both policy makers and entrepreneurs. They not only help entrepreneurs better understand growth strategies in various macro-governance settings, but also provide governments and policymakers with potential policy implications to encourage entrepreneurial and economic growth. Policies that improve the macro-governance environment can help family firms to prosper by contributing to their economic and non-economic growth, both of which are important for economic development.

ABSTRACT Donors to nonprofit organizations have gradually shifted from an evaluation process that focuses on financial metrics to a process that considers both financial and nonfinancial metrics. This paper examines whether the shift prompts fairness judgments of the board of directors of nonprofit organizations and what factors contribute to their perceptions of fairness. Using an experimental methodology with nonprofit directors as participants, this study finds that directors perceive a balanced donor evaluation process to be procedurally fairer than a financially focused donor evaluation process. Furthermore, the informational feature of the donor evaluation process, not the donation outcome resulting from the donor evaluation process, contributes to forming the fairness perceptions of directors.

We investigate how foreign involvement in the ownership of privately held entrepreneurial firms affects pollution fees levied by national and provincial governments in China (environmental levies). Because provincial governments have considerable control over environmental policies, differences in environmental levies provide a good proxy for measuring provincial concessions made for the purpose of attracting investment, and particularly foreign direct investment (FDI). Furthermore, because we consider privately held entrepreneurial firms rather than publically listed firms, foreign involvement in ownership provides a good proxy for FDI. We find that firms with foreign ownership do indeed pay lower environmental levies, which indicates that concessions are made to attract FDI to China. However, these concessions are conditional on the level of development of the province offering them, with better developed provinces providing fewer concessions for FDI. We also find that greater concessions are made to foreign joint venture firms having a foreign ownership stake of less than or equal to 50%.

Prior studies found that to solicit donations, management of not-for-profit (NFP) organizations tends to misallocate expenses to boost the ratio of program spending to total spending. This paper examines in the context of such management expense misallocations whether the director oversight is influenced by the transparency of the organization’s expense disclosures and the donor’s evaluation focus. The results from an experiment with 189 NFP directors indicate that the enhanced transparency of expense disclosures increases the director monitoring intensity by reducing their tendency to endorse management expense misallocations. However, directors decrease their monitoring when donors evaluate both financial and nonfinancial performance metrics to make the donation decision, compared to when donors focus only on evaluating financial metrics to decide donations. The effect of donor evaluation focus occurs when directors anticipate donors will not donate, but it does not occur when directors anticipate donors will donate. This paper contributes to a richer understanding of the monitoring role of board directors in NFP organization expense misallocations.

When the financial performance of nonprofit organizations is poor — more specifically, the ratio of reported program expense to total expense is low, managers of these organizations are found to misreport expenses in order to boost the ratio. This study examines whether three factors — the transparency of expense disclosures, donor evaluation focus and nonfinancial performance — influence how directors monitor management expense misreporting under these circumstances. An experiment with 189 nonprofit directors finds that the enhanced transparency of expense disclosures increases director monitoring by reducing the tendency to accept management expense misreporting. Further, an organization’s nonfinancial performance and the perceived fairness of donor evaluation focus interact to influence director monitoring practices. Specifically, when directors know an organization’s nonfinancial performance is poor and understand that this performance will negatively influence the willingness of donors to contribute, the experimental results show that directors monitor less if they think that donors are adopting a more balanced approach to organizational evaluation that focuses on both financial and nonfinancial performance, i.e., there is a reverse fair process effect as this donor approach is perceived as being fairer than if donors focus solely on financial performance. However, monitoring is equally strong regardless of donor evaluation focus when directors know that an organization’s nonfinancial performance is good and a donation is forthcoming.

Audits are claimed to not only enhance the detection of fraud but also the deterrence of fraud. This study examines whether different audit procedures and attitudes conveyed to management deter aggressive earnings management that may be fraudulent, and whether such different procedures and attitudes conveyed influence managers’ perceptions about the ethicality of any anticipated earnings management. In an experiment with 171 senior corporate managers, we find that compared to the condition where the audit proceeds the same as last year, managers anticipate that there would be less earnings management when the nature of evidence collected has increased probative value; and when the auditor conveys a more sceptical attitude via more critical inquiry combined with either an increase in the evidence extent (increased sample size) or the nature of the evidence. However, this reduction in anticipated earnings management is not found with either the increased extent of evidence collected alone or more critical inquiry alone, suggesting that a combination of action and attitude changes compared to a change in either action alone or attitude alone better signals to managers the heightened scepticism that enhances the effectiveness of auditor deterrence. We also find, after controlling for the underlying ethical disposition of managers, that the different audit procedures and attitudes conveyed to management affect managers’ perceptions of the ethicality of anticipated earnings management. Interestingly, the conditions that engender greater earnings management also paradoxically increase managers’ perceived unethicality of the anticipated earnings management. Together these findings have implications for how different changes in audit approaches may result in differential managerial responses about their intention to commit fraud and its appropriateness. This study is one of the first papers to provide experimental empirical evidence that specific audit actions conveying heightened scepticism have significant influence on managerial judgments and behaviours with respect to committing aggressive earnings management.