Ingredient branding refers to a practice whereby the maker of a final product invites or allows a supplier to brand its ingredient. If limited to a single supplier, ingredient branding is also called co-branding, which combines the product brand and the ingredient brand to enhance reputation signaling to shoppers. In this study, we argue that, on top of reputation enhancement, ingredient branding also serves to improve the governance efficiency of inter-firm cooperation. Treating the physical facilities of an international hotel as an ingredient, we use the two competing theories to compare two franchise formats: conventional franchising (where the hotel carries only the brand of the foreign chain) and co-brand franchising (where the hotel also carries the brand of the local developer). The results based on a sample of international franchise hotels in China support both theories: co-brand franchising can deliver reputation enhancement and governance improvement at a level that cannot be achieved through conventional franchising. This is the first large-sample study on ingredient branding in an international service sector, from which both researchers and practitioners can derive useful insights.
The main objective of this report is to introduce readers to the Hang Seng Index derivative warrants. These contracts share the same expiration cycle and settlement price as the Hang Seng Index options. However, the warrants are traded on the Stock Exchange of Hong Kong (SEHK) the cash stock market under the edifice of the Hong Kong Exchanges and Clearing Limited (HKEX) while the options are traded on the derivatives market of the exchange. The options are traded in a highly competitive symmetric global market where every participant can take both long and short positions in every listed product to balance its demand and supply; whilst the warrants are traded in an asymmetric market where only issuers can take short positions and investors/speculators are clustered on the long side of the market. The full concentration of buyers on one side of the market against a monopoly on the opposite shore creates the ideal condition for a “pump and dump”. However, unlike the conventional scheme, the issuer/liquidity provider can jack up both the bid and ask price to force buyers who seek immediacy to pay an above “market price” while pushing the “patient” buyer also to raise their bid above the market price. Further, it is widely known that the speculative or time value of options generally experiences steep declines during the last few trading days before expiry. The study shows with actual examples constructed from synchronous reported data that DW holders incur significant opportunity loss compared to using the identical option contracts.
The study examines the return performance and resilience to market volatility of the recently introduced Environment, Social/Sustainable, and Governance (ESG) weight-tilted Hang Seng Index (HSIESG) compared to its parent, the Hang Seng Index (HSI). The ESG-infused index has a higher mean return and lower return volatility than the parent index, although the differences are statistically insignificant, a result consistent with the high correlation between the two index returns. Most importantly, the ESG weighted-tilted index is more resilient to volatility spikes than the parent index and therefore has lower downside risks. The overall results show that stocks with high ESG ratings are less susceptible to trading pressures triggered by volatility-induced turnovers. The paper contributes to the literature by providing significant incremental information on the emerging market for ESG-related equity products in Hong Kong.
The objective of this research is to determine the risk and return of HKEX's Bull and Bear contracts (CBBCs) written on the Hang Seng Index (HSI) from a public educational perspective. HSI callable bull and bear contracts that survive until maturity are equivalent to Deep-In-The-Money DITM HSI call and put options with the same exercise price and expiry date. Due to the low time value of DITM options and the characteristic of small contract size, CBBCs become a favorite speculative tool on market direction for retail speculators.
Although the trading volume of CBBCs accounts for a considerable proportion of the Hong Kong market, according to our research, we believe that CBBCs are quite unfavorable to retail investors. Unlike options, adverse price movement prior to expiry will force the early termination of CBBCs (Mandatory Call Events, MCE) and deprive the speculators of the opportunity to benefit from subsequent favorable price reversals. Our study shows with actual cases constructed from synchronous data that the MCEs are poor substitutes for conventional option positions and can cause significant losses to investors.
High-quality accounting information lowers the cost of information to investors and improves the quality of information available to them. Sanford J. Grossman and Joseph E. Stiglitz (1980) theoretically show that the price of an asset is more efficient in reflecting its value when the cost of information is lower and when the quality of information is higher, which suggests a negative relation between accounting information quality (AIQ) and mispricing—undervaluation and overvaluation. Fischer Black (1986) observes that stock price normally deviates from equity value substantially, which suggests that realized return—the outcome of stock price movements—has a prominent mispricing-correction component. The mispricing-correction component is positive (negative) for undervalued (overvalued) firms and increases (decreases) with the degree of undervaluation (overvaluation) corrected. Collectively, all this suggests that the relation between AIQ and realized return is negative (positive) for undervalued (overvalued) firms, which is borne out by evidence from finite mixture models.
Covid-19 has led to major changes worldwide and has had a significant impact on market risk. We characterize this uncertainty as innovations extracted from the Covid Risk Index on the Wall Street Journal through a textual analysis of high-dimensional data. We hedge the risk with mimicking portfolios constructed using the ESG (environmental, social, and governance) disclosure score as a measure of firm-level exposure to Covid-19 risk. The hedge portfolios perform well both in and out of sample. We also test the role of ESG in hedging and discover that during the Covid-19 pandemic firms with greater ESG disclosure generate higher returns as well as experience lower downside risk. The further analysis suggests that the portfolio returns can be explained by Covid risk shock and investment inflow, and the hedge effect mainly comes from the social part of ESG.
Using a news-based climate policy uncertainty index, we examine the effect of macro-level climate policy uncertainty on corporate cash policies. We find that climate policy uncertainty induces high cash flow volatility, which causes firms to increase precautionary cash holdings. The relationship between climate policy uncertainty and cash is more pronounced for firms that are financially constrained, more exposed to the risk of climate disasters, and in high-emission industries. In periods of high climate policy uncertainty, firms increase cash holdings by reducing investment in capital expenditure and acquisitions. Overall, our findings highlight the important implications of climate change policy risk for corporate liquidity management.
On outsourcing during radical technological changes, the extant literature highlights the beneficial role of retaining in-house knowledge related to the outsourced core component (OCC). This study articulates boundary conditions of the role of firms' in-house OCC knowledge and suggests that the in-house OCC knowledge can negatively influence product performance before the emergence of the OCC's dominant technology, and its performance influence reverses thereafter. To mitigate such negative influence, we also propose two moderators – firms' exploratory technological area experience and suppliers' OCC knowledge. We empirically test our hypotheses in the context of U.S. Hybrid Electric Vehicles market, and our hypotheses are largely supported.
The COVID-19 outbreak severely disrupted businesses worldwide. There were contractions in sales and production due to stalled supply chains, travel restrictions, and curtailment of economic activities arising from social distancing and other anti-epidemic measures. This paper analyzes the principles and practices of responsible leadership adopted by eight Asia based firms in response to the COVID-19 crisis. The focal firms comprised a mixture of multinational corporations (MNCs), large-sized enterprises, and small & medium enterprises (SMEs). The main principles and practices comprised: equity based justice for employees; meeting employees' basic financial needs; caring for employees' well-being; leaders' duty to care and followers' obligation to reciprocate; duty to serve the public; and maintaining communication and providing reassurance.
Most studies on firm growth have concentrated on the outcomes of growth actions, assuming that firms would rationally opt for the growth action with the most significant growth potential. This study, however, explores how newly public firms’ growth actions are influenced by the second largest shareholder’s monitoring role. By doing so, it sheds light on how growth action decisions represent a compromise resulting from the interactions of major shareholders. The research focuses on Chinese firms that went public between 2009 and 2018. The study reveals that, even though acquisitions can result in stronger growth due to high agency risks, the second largest shareholder is more likely to discourage this option. Instead, the second largest shareholder tends to encourage organic growth actions, even though they may lead to a slower growth rate. These findings demonstrate the dual monitoring role of the second largest shareholder in the largest shareholder’s firm growth decisions.
This project compares different methodological approaches used in lexicon and aspect-based sentiment analysis performed on online reviews. Particularly, two questions are investigated, i) how to treat missing attributes in online reviews? and ii) how to extract sentiment scores for better model performance. Aspect scores obtained with the usage of different methods are regressed against review star rating. For each model, adjusted r square values are compared to assess model performance. Overall, there are 6 studies in this project based on big data, 3 in restaurant and 3 in hotel context, each using a specific dictionary based on a well-established theoretical construct. Theoretical constructs used in this project are sensory experiences, restaurant attributes, lodging quality index and ServPerf. Findings show that i) model performances depend on how missing attributes are treated; ii) extracting both positivity and negativity scores for each aspect produces higher model performance compared to extracting one compound score; iii) including review count and average restaurant rating as control variables proves useful in all scenarios. This has implications for future sentiment analysis research. Researchers may consider i) keeping observation with at least one available attribute, ii) using both positivity and negativity scores, iii) including control variables.
Researchers have traditionally attributed rating inaccuracy to rating errors. However, it is found that raters' characteristics, such as personalities and cognitive styles, can also play a role in evaluating performance. The current research shows that exposure to interparental conflict as children makes adults more likely to exhibit aggressive behavior, and thus tend to deflate the ratings of the low performer in the group.
The current study examines the impact of a professional sport team's philanthropic initiative on its fans' CSR participation intention. Furthermore, the study explores how building consumer trust would enhance CSR participation intention among fans with varying psychological connection level to the team. A scenario-based experimental design was used to test the study hypotheses. The results indicate that CSR participation intention significantly differed based on sport fans' perception toward their supporting teams CSR program. Additionally, fans' trust mediates perceived CSR and CSR participation intention association, and the effect is stronger among lower psychologically connected fans. The study provides theoretical contributions, as it examined the impact of perceived CSR on consumers' behavioral intention while considering the potential differences in the result based on consumers' levels of psychological connection to an organization. The study also provides practical implications for sport professionals who aim to build consumer relationships through strategic CSR practices.
A social business is a non-loss, market-based organization with a social objective, in which social entrepreneurial activities take place and social value is created. Social businesses are a heterogeneous and highly context-dependent group of organizations. Scholars have differentiated social businesses by their various social motivations, organizational forms, or governance, but they have rarely differentiated the social impacts created by these businesses. Many scholars believe it is “a great, if not impossible, challenge” to compare and categorize the different, unrelated, heterogeneous social impacts created by social businesses.
Unlike other types of hybrid organizations, social businesses adopt market-based strategies and use the generated profit to address social objectives for their owners/stakeholders. Thus, social businesses also face fierce market pressure and competition, similar to most private-sector organizations. The vast majority of social businesses are small- or medium-sized and must learn to cope with limited resources, like most SMEs do.
In 2015, all 193 UN members agreed to the 2030 Agenda, which consists of a set of common strategies to achieve 17 goals and 169 targets by the year 2030. As the sustainable development of society requires the efforts of all social actors, private-sector organizations also share the responsibility for sustainable development. Consequently, private-sector organizations, especially MNEs, have embraced the UN SDGs as guidance for their contributions to sustainable development. Simultaneously, the UN SDGs can also be seen as a powerful tool to map and measure the contributions of private-sector organizations to the SDGs.
This study aims to align the social impacts created by social businesses under the established framework of the UN SDGs and categorize these social impacts. Two surveys were carried out with the owners or stakeholders of 215 social businesses in the Nordic-Baltic countries (Denmark, Estonia, Finland, Germany, Iceland, Latvia, Lithuania, Norway, Poland, Russia, and Sweden). In the first survey, the owners or stakeholders identified one or two of the most significant SDG goals to which their social businesses have contributed. In the second survey, the author consolidated the 169 UN SDG targets by merging and summarizing them when possible, and excluding those that are not relevant to the activities of social businesses (such as targets related to government actions). The author then obtained a list of 59 SDG targets that are relevant to social businesses. In the second survey, the owners or stakeholders identified the most relevant SDG targets (up to five) that their social businesses are pursuing. The sequential analyses also explore the impacts of home country institutions on social businesses’ contributions to SDG goals and targets.
Becoming an entrepreneur is a goal that may take a long time to achieve. One of the first hurdles for aspiring entrepreneurs to cross is to identify business opportunities. Drawing on the social cognitive theory of self-regulation, we hypothesize that the two dimensions of dispositional grit (consistency of interests and perseverance of effort) may enhance aspiring entrepreneurs' entrepreneurial self-efficacy and subsequently make them recognize more business opportunities. The effect of entrepreneurial self-efficacy on opportunity recognition may be strengthened by entrepreneur identity aspiration. Furthermore, the indirect effects of consistency of interests and perseverance of effort on opportunity recognition via entrepreneurial self-efficacy is stronger when entrepreneur identity aspiration is high. The results across two quasi-experimental studies provide consistent and strong support for our hypothesized model. Theoretical and practical implications of our findings are discussed.
Foreign direct investment (FDI) has gained international prominence since the late 1990s. Human capital attracts FDI. To attract new investment, countries compete in advantages, with tax agreements being one of the most attractive incentives. To combat tax malpractices, the OECD has adopted a 15-point plan known as the BEPS (Action Plan on Base Erosion and Profit Shifting). The purpose of this paper has been to examine the impact of human capital in the form of education on FDI inflows to countries classified as tax havens by the EU. The study has been carried out on a total of 47 countries during a time period of 21 years, 2000-2021, estimating a robustly positive and significant influence of FDI in host countries regardless of the variable used as an estimator of human capital accounting for different control variables. This result has been contrasted by quartiles between groups of countries with higher and lower tax burden rates, concluding that the transfer of knowledge loses relevance when these investments occur in countries with low tax rates. From this relationship we can infer certain conclusions which are likely to inspire new policy recommendations by interested parties, combining educational and fiscal actions. Given the immediate reform of the international tax framework, recent studies have estimated that, within the competition for FDI, investments in infrastructure are especially efficient in attracting offshore investments, as tax havens lack infrastructure and a strong regulatory framework. This paper suggests new alternative perspectives regarding the attraction of FDI that can be beneficial for both the host countries and the MNCs, with a particular focus on the availability of human capital, and specifically tertiary education as an investment incentive.
The COVID-19 pandemic has presented unprecedented challenges to the service industry, particularly the restaurant sector, which attempts to provide a safe environment for its customers. Ensuring the safety of customers is crucial for service providers to maintain their businesses and uphold their social responsibility. However, customers faced incomplete and asymmetrically distributed information regarding the safety measures implemented by service providers during the pandemic and beyond, making it difficult for them to make informed decisions.
To overcome this challenge and gain a comprehensive understanding of customer preferences toward service attributes, sophisticated approaches are needed. Our research adopts a novel methodological approach by combining data from two stated choice experiments and utilizing multiple-preference elicitation techniques. Through this approach, we provide valuable insights into how service attributes are evaluated by consumers, offering both conceptual and methodological contributions to existing literature.
This research draws on network theory to examine the prevalent but understudied phenomenon of multi-unit franchising (MUF). Each regional franchise network has its own level of global clustering. Furthermore, each MUF functions as a cohesive subgroup within its regional franchise network in which members are bonded with relatively strong ties. We investigate the effects of global clustering, individually and jointly with its subgroup configuration properties (i.e., subgroup number and subgroup size imbalance), on outlet survival.
Since 2015, China has embarked on a new round of reform of state-owned enterprises (SOEs) aiming to enhance the efficiency and improve the performance of Chinese SOEs. One of the key reforms is the mixed-ownership reform, in which private capital and strategic investors are introduced to Chinese SOEs through investment. Even though privatization in former Soviet Union countries has greatly improved SOE performance, scholars have cast doubt on the effectiveness of the mixed-ownership reform in the Chinese context due to the unique institutional environment and persistent state control and party intervention in the Chinese economy. This paper investigates the valuation effect of partial privatization, i.e., introducing strategic investors, under the mixed-ownership reform in China. Using the time-varying difference-in-differences approach, analysis was conducted on SOEs that introduced strategic investors during 2014–2020. The findings suggested that the mixed-ownership reform had either no significant or even negative impact on firm performance. While existing literature primarily relies on institutional accounts of the reasons for the failure of the reform, this paper offers an economic and empirical explanation from the corporate governance perspectives.
Research shows that some, but not all, firms in stakeholder-oriented contexts engage in governance reform toward the Anglo-American model. We have limited understanding of what leads to the variety of governance reform at firm level in stakeholder-oriented contexts. Building on the behavioral theory of the firm, the researcher contends that governance reform may result from change-inducing problemistic search. By using Japanese listed firms to test the theoretical model, this study contributes to the governance literature by incorporating a new perspective to explain the variation of governance reforms at firm level. It also contributes to the behavioral theory of the firm by identifying governance reform as a possible solution for problemistic search.
This study investigates whether local personal income taxes impact small business lending. It uses the staggered statutory changes of state tax rates as identification and compare loans granted in geographically adjacent counties across state borders using matched tax-bank-firm data from the U.S. during 2001-2018. The study finds higher personal income taxes cause negative loan outcomes, including smaller loan size, shorter maturity, higher default probability and charge-off ratio. It also finds higher taxes lead to smaller aggregate number, amount and growth rate of small business loans granted. These findings suggest the tax-induced deterioration in borrower creditworthiness constrains local banks' lending to small businesses.
Based on a sample of CEOs of S&P 500 firms between 2008 and 2020, this study examines whether there is a positive relationship between openness to experience and extraversion and firm innovation. CEOs' personality traits are measured by a linguistic tool to analyze CEOs' spoken words during earnings calls. To reflect both willingness and ability to innovate, the study uses R&D intensity, the number of patents, and patent citations. CEOs high in openness to experience are more likely to pursue high-risk innovation projects and challenge status quo and underlying assumptions. CEOs high in extraversion are prone to the excitement and uncertainty associated with risky projects.
We investigate whether firm-specific information is disseminated through real-time comment letters in an emerging market. We find that comment letters transmit information to the capital market and that institutional investors and financial analysts are the two channels through which firm-specific information is incorporated into stock prices. The results are robust to an instrumental variable analysis and the propensity score matching difference-in-differences method. We also observe that the effect of comment letters on the dissemination of firm-specific information is more pronounced for small firms, newly listed firms, firms with few analysts following and firms that are not audited by a Big 4 firm. Furthermore, comment letter heterogeneity affects firm-specific information dissemination. Finally, we exclude the alternative explanations of noise trading and industry-specific information. The results help us understand the effect of comment letters, as a regulatory tool, on the information environment of the emerging capital market.
