While prior research has emphasized the institutional alignment of firms, limited attention has been paid to the different penalties firms face when they deviate from legitimate governance practices prescribed by formal versus informal institutions. Drawing on institutional theory and agency theory, this study investigates the influence of CEO duality on firm-specific downside risk, measured by stock price crash risk, under formal versus informal institutional contexts that favor CEO non-duality. Analyzing 48,521 firm-year observations from 28 economies between 1999 and 2014, we find that firms with CEO duality experience significantly higher levels of stock price crash risk under formal institutional contexts than informal ones. We also find that CEO duality firms can reconcile efficiency and institutional logics by appointing more outside directors. This hybrid governance structure proves more effective in mitigating the firms’ stock price crash risk under formal institutional contexts than informal ones.

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Motivated by the tremendous financial and strategic advantages of participating in M&A waves early, we investigate the causes of the timing of firm entry into an M&A wave from a corporate governance perspective. Drawing on agency theory, we argue that creditors are risk-averse and limit risky strategic moves of borrowing firms. Based on a large sample of industry M&A waves worldwide, we provide compelling evidence that the higher the proportion of bank loans a firm owns, the later the firm enters an M&A wave, and this delaying effect is more pronounced for firms conducting industry-unrelated or cross-border M&As than conducting industry-related or domestic M&As. In addition, CEO tenure amplifies while institutional ownership attenuates the delaying effect of debt on the timing of firm action within M&A waves. The present study offers agency-grounded theoretical and empirical insights into the role of creditors in the timing of firm action within M&A waves, thereby contributing to the M&A and corporate governance literature.

Drawing on a behavioral theory of the firm with corporate governance theory, our study addresses the question with 4,222 cross-border acquisitions in 1999-2019 of acquiring firms from 60 countries. We firstly differentiate the effects of acquiring firms’ historical and social performance feedbacks on their entry timing choices in a host merger wave into a host country via cross-border acquisitions. The results show that as historical performance shortfall enlarges, acquiring firms eager to conduct cross-border acquisitions earlier of host merger waves. Meanwhile, based on a consolidated social aspiration that we construct to unify domestic and host industrial average performance as thresholds, we find acquiring firms will postpone the implementation of cross-border acquisitions in host merger waves as their social performance gets negatively and positively remote to social aspiration. Moreover, we scrutinize the extent to which their power matters in aforementioned relations. The results show that powerful CEOs will propel earlier cross-border acquisitions as acquiring firms’ historical/social performance shortfall enlarges or as social performance surplus increases.

Based on the characteristics of monetary policy and term structure of bond yields, this paper proposes an interest rate model to evaluate the consequences of interest rate liberalization in China. Our empirical results show that benchmark interest rates and expected inflation are strongly correlated, although the relationship between expected inflation and market interest rates of all terms is relatively weak. Additionally, our model provides a superior goodness-of-fit over the predicted mean, the variance and the correlations of treasury bond yields, and the inflation estimated from the proposed model demonstrates more preferable forecasting accuracy by outperforming the results estimated from either Langrun or Baidu CPI index. Our findings suggest that adjustment of benchmark rates and reserve requirement are the most important price-based tools for the central bank to transmit the effects of monetary policy along the yield curve. The development of interest rate liberalization further requires prudential managements by the central bank to focus on short-term interest rate intervention besides policy support, in emphasizing the power of market forces to eventually link the change in market interest rates with economic fundamentals.

This paper proposes the Cramér–von Mises type test statistic for testing heteroskedasticity in predictive regression when regressors are nonstationary. A Monte Carlo simulation study is conducted to illustrate the finite sample performance and a real empirical example is examined.

When do multinational corporations (MNCs) derive the most from internalizing the transfer of proprietary technological knowhow? We revisit this question, which lies at the core of theories on multinationality and performance, from the perspective of corporate strategy involving a mix of green versus nongreen innovation effort and foreign operations focusing on countries with high versus low environmental standards. We find that high exposure to foreign markets with more stringent environmental regulations stimulates MNCs' green patent applications. Predictably, the pursuit of green innovation is positively associated with firm value in the long run. This long-run advantage produces higher economic rents when MNCs' home countries rely on more clean energy for power generation, have a more developed economy and have a more effective government. We further show that this long-run value enhancement effect is more pronounced in Mining & Oil and energy sectors (i.e., more polluting) than sales and service sectors (i.e., less polluting). In addition, MNCs' environmental competitive advantage obtained through green innovation activities is coupled with exposure to MNCs' host countries with high long-term and femininity orientations. Overall, our study highlights that green technology development is a main source of value creation for multinationals.

This study examines whether an acquirer’s pre-announcement corporate social responsibility (CSR) engagement can provide an insurance-like effect to preserve acquirer returns during the announcement of an acquisition event. Drawing on stakeholder theory and signaling theory, we posit that CSR engagement accrues positive moral capital for an acquirer and sends a positive signal indicating the acquirer’s altruism, both of which temper stakeholders’ negative responses and prevent a reduction in market returns around the announcement of an acquisition. However, high-CSR engagement could backfire when the acquirer makes a hostile takeover announcement. Incongruent signals between high-CSR engagement and the hostile practice are a sign of hypocrisy in the eyes of stakeholders, which can worry investors and hurt acquirer returns. By analysing 1310 acquisition transactions from 2002 to 2012, the results of our event study show that high-CSR acquirers generally enjoy positive acquirer returns during their acquisition announcements, but negative returns when the acquisitions are hostile. These findings support the idea that CSR engagement can provide insurance-like benefits during an event that is often seen as “negative”, while also identifying signal incongruence as an important boundary condition.

This study inspects the influence of CSR engagement on the level of acquisition performance from the insurance-like perspective. We argue that CSR activities prior to merger and acquisition (M&A) can generate positive moral capital that alleviates the negative assessments of stakeholders on an acquirer’s bad intentionality of impairing the interests of stakeholders. Using data of SDC M&A transactions from 2002 to 2012, the results show that CSR engagement has a non-significant influence on short-term market performance, because M&A strategy raises both opportunities and risks for the relational wealth of an acquirer. The socially responsible firms can alleviate the negative influences of unrelated and debt-financed M&As, as well as the hostile and cross-border acquirers. However, the insurance-like effect of CSR engagement turns to be receding on the level of long-term financial performance of the acquirers taking the four risky configurations.

This paper examines the impact of changes in job security on corporate innovation in 20 non-U.S. OECD countries. Using a difference-in-differences approach, we provide firm-level evidence that the enhancement of labor protection has a negative impact on innovation. We then discuss possible channels and find that employee-friendly labor reforms induce inventor shirking and a distortion in labor flow. Further investigation reveals that the negative relation is more pronounced in (1) firms that heavily rely on external financing, (2) firms that have high R&D intensity, (3) manufacturing industries, and (4) civil-law countries. Our micro-level evidence indicates that enhanced employment protection impedes corporate innovation.

We exploit emerging market sovereign CDS spreads to examine the reaction of sovereign credit risk to changes in country-specific and global financial factors. Utilizing a VAR model fitted with DCC GARCH, we find that comovements of spreads generally exhibit significant time-varying correlations, suggesting that spreads are commonly affected by global financial factors. We construct 19 country-specific commodity price indexes to instrument for country terms of trade, obtaining striking novel results. Our commodity price indexes account for significant variation in CDS spreads, controlling for global financial factors. In addition, sovereign spreads are found to be related to U.S. stock market returns and the VIX volatility risk premium global factors. Notwithstanding, our results suggest that terms of trade and commodity prices have a statistically and economically significant effect on the sovereign credit risk of emerging economies. Our results apply broadly to investors, financial institutions and policy makers motivated to utilize profitable factors in global portfolios.

This paper examines the impact of changes in job security on corporate innovation in 20 non-U.S. OECD countries. Using a difference-in-differences approach, we provide firm-level evidence that the enhancement of labor protection has a negative impact on innovation. We then discuss possible channels and find that employee-friendly labor reforms induce inventor shirking and a distortion in labor flow. Further investigation reveals that the negative relation is more pronounced in 1) firms that heavily rely on external financing, 2) firms that have high R&D intensity, 3) manufacturing industries, and 4) civil-law countries. Our micro-level evidence indicates that enhanced employment protection impedes corporate innovation.