Corporate Social Responsibility and Firm Financial Performance: The Mediating Role of Productivity
Iftekhar Hasan, Nada Kobeissi, Liuling Liu, Haizhi Wang
Journal of Business Ethics,
No. 3,
2018
Abstract
This study treats firm productivity as an accumulation of productive intangibles and posits that stakeholder engagement associated with better corporate social performance helps develop such intangibles. We hypothesize that because shareholders factor improved productive efficiency into stock price, productivity mediates the relationship between corporate social and financial performance. Furthermore, we argue that key stakeholders’ social considerations are more valuable for firms with higher levels of discretionary cash and income stream uncertainty. Therefore, we hypothesize that those two contingencies moderate the mediated process of corporate social performance with financial performance. Our analysis, based on a comprehensive longitudinal dataset of the U.S. manufacturing firms from 1992 to 2009, lends strong support for these hypotheses. In short, this paper uncovers a productivity-based, context-dependent mechanism underlying the relationship between corporate social performance and financial performance.
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Coping with Change: International Differences in the Returns to Skills
Eric A. Hanushek, Guido Schwerdt, Simon Wiederhold, Ludger Woessmann
Economics Letters,
April
2017
Abstract
International data from the PIAAC survey allow estimation of comparable labor-market returns to skills for 32 countries. Returns to skills are larger in faster growing economies, consistent with the hypothesis that skills are particularly important for adaptation to economic change.
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Banks Credit and Productivity Growth
Fadi Hassan, Filippo di Mauro, Gianmarco Ottaviano
ECB Working Paper,
No. 2008,
2017
Abstract
Financial institutions are key to allocate capital to its most productive uses. In order to examine the relationship between productivity and bank credit in the context of different financial market set-ups, we introduce a model of overlapping generations of entrepreneurs under complete and incomplete credit markets. Then, we exploit firm-level data for France, Germany and Italy to explore the relation between bank credit and productivity following the main derivations of the model. We estimate an extended set of elasticities of bank credit with respect to a series of productivity measures of firms. We focus not only on the elasticity between bank credit and productivity during the same year, but also on the elasticity between credit and future realised productivity. Our estimates show a clear Eurozone core-periphery divide, the elasticities between credit and productivity estimated in France and Germany are consistent with complete markets, whereas in Italy they are consistent with incomplete markets. The implication is that in Italy firms turn to be constrained in their long-term investments and bank credit is allocated less efficiently than in France and Germany. Hence capital misallocation by banks can be a key driver of the long-standing slow productivity growth that characterises Italy and other periphery countries.
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CEO Political Preference and Corporate Tax Sheltering
Bill Francis, Iftekhar Hasan, Xian Sun, Qiang Wu
Journal of Corporate Finance,
2016
Abstract
We show that firms led by politically partisan CEOs are associated with a higher level of corporate tax sheltering than firms led by nonpartisan CEOs. Specifically, Republican CEOs are associated with more corporate tax sheltering even when their wealth is not tied with that of shareholders and when corporate governance is weak, suggesting that their tax sheltering decisions could be driven by idiosyncratic factors such as their political ideology. We also show that Democratic CEOs are associated with more corporate tax sheltering only when their stock-based incentives are high, suggesting that their tax sheltering decisions are more likely to be driven by economic incentives. In sum, our results support the political connection hypothesis in general but highlight that the specific factors driving partisan CEOs' tax sheltering behaviors differ. Our results imply that it may cost firms more to motivate Democratic CEOs to engage in more tax sheltering activities because such decisions go against their political beliefs regarding tax policies.
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Buy, Keep, or Sell: Economic Growth and the Market for Ideas
Ufuk Akcigit, Murat Alp Celik, Jeremy Greenwood
Econometrica,
No. 3,
2016
Abstract
An endogenous growth model is developed where each period firms invest in researching and developing new ideas. An idea increases a firm's productivity. By how much depends on the technological propinquity between an idea and the firm's line of business. Ideas can be bought and sold on a market for patents. A firm can sell an idea that is not relevant to its business or buy one if it fails to innovate. The developed model is matched up with stylized facts about the market for patents in the United States. The analysis gauges how efficiency in the patent market affects growth.
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How Selective Are Real Wage Cuts? A Micro-analysis Using Linked Employer–Employee Data
Boris Hirsch, Thomas Zwick
LABOUR: Review of Labour Economics and Industrial Relations,
No. 4,
2015
Abstract
Using linked employer–employee panel data for Germany, we investigate whether firms implement real wage reductions in a selective manner. In line with insider–outsider and several strands of efficiency wage theory, we find strong evidence for selective wage cuts with high-productivity workers being spared even when controlling for permanent differences in firms' wage policies. In contrast to some recent contributions stressing fairness considerations, we also find that wage cuts increase wage dispersion among peers rather than narrowing it. Notably, the same selectivity pattern shows up when restricting our analysis to firms covered by collective agreements or having a works council.
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Bank Market Power, Factor Reallocation, and Aggregate Growth
R. Inklaar, Michael Koetter, Felix Noth
Journal of Financial Stability,
2015
Abstract
Using a unique firm-level sample of approximately 700,000 firm-year observations of German small and medium-sized enterprises (SMEs), this study seeks to identify the effect of bank market power on aggregate growth components. We test for a pre-crisis sample whether bank market power spurs or hinders the reallocation of resources across informationally opaque firms. Identification relies on the dependence on external finance in each industry and the regional demarcation of regional banking markets in Germany. The results show that bank markups spur aggregate SME growth, primarily through technical change and the reallocation of resources. Banks seem to need sufficient markups to generate the necessary private information to allocate financial funds efficiently.
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Public Bank Guarantees and Allocative Efficiency
Reint E. Gropp, Andre Guettler, Vahid Saadi
Abstract
In the wake of the recent financial crisis, many governments extended public guarantees to banks. We take advantage of a natural experiment, in which long-standing public guarantees were removed for a set of German banks following a lawsuit, to identify the real effects of these guarantees on the allocation of credit (“allocative efficiency”). Using matched bank/firm data, we find that public guarantees reduce allocative efficiency. With guarantees in place, poorly performing firms invest more and maintain higher rates of sales growth. Moreover, firms produce less efficiently in the presence of public guarantees. Consistently, we show that guarantees reduce the likelihood that firms exit the market. These findings suggest that public guarantees hinder restructuring activities and prevent resources to flow to the most productive uses.
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Regulation, Innovation and Technology Diffusion - Evidence from Building Energy Efficiency Standards in Germany
Makram El-Shagi, Claus Michelsen, Sebastian Rosenschon
Discussionpapers des DIW Berlin,
No. 1371,
2014
Abstract
The impact of environmental regulation on technology diffusion and innovations is studied using a unique data set of German residential buildings. We analyze how energy efficiency regulations, in terms of minimum standards, affects energy-use in newly constructed buildings and how it induces innovation in the residential-building industry. The data used consists of a large sample of German apartment houses built between 1950 and 2005. Based on this information, we determine their real energy requirements from energy performance certificates and energy billing information. We develop a new measure for regulation intensity and apply a panel-error-correction regression model to energy requirements of low and high quality housing. Our findings suggest that regulation significantly impacts technology adoption in low quality housing. This, in turn, induces improvements in the high quality segment where innovators respond to market signals.
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An Empirical Analysis of Legal Insider Trading in The Netherlands
Frank de Jong, Jérémie Lefebvre, Hans Degryse
De Economist,
No. 1,
2014
Abstract
In this paper, we employ a registry of legal insider trading for Dutch listed firms to investigate the information content of trades by corporate insiders. Using a standard event-study methodology, we examine short-term stock price behavior around trades. We find that purchases are followed by economically large abnormal returns. This result is strongest for purchases by top executives and for small market capitalization firms, which is consistent with the hypothesis that legal insider trading is an important channel through which information flows to the market. We analyze also the impact of the implementation of the Market Abuse Directive (European Union Directive 2003/6/EC), which strengthens the existing regulation in the Netherlands. We show that the new regulation reduced the information content of sales by top executives.
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