Corporate Legitimacy and Investment–Cash Flow Sensitivity

Attig, Najah; Cleary, Seán; Ghoul, Sadok El; Guedhami, Omrane

doi:10.1007/s10551-013-1693-3

Cited by 29 publications

(24 citation statements)

References 59 publications

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“…which are socially required and influenced in a large part by legal and regulatory compliance (Attig, Cleary, El Ghoul, & Guedhami, 2014), act as significant drivers in reducing crash risk. In contrast, we find strong evidence supporting the fact that socially desired dimensions such as community, human rights, and diversity & opportunity show significant negative impact on crash risk in the U.S. sample.…”

Section: Duvolmentioning

confidence: 99%

Over‐investment or risk mitigation? Corporate social responsibility in Asia‐Pacific, Europe, Japan, and the United States

Utz

2018

Rev Financ Econ

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We study the relationship of corporate social responsibility (CSR) and the distribution of stock returns for an international sample. Firms with a high level of CSR generally exhibit superior stock price synchronicity in the markets of Europe, Japan, and the United States. In particular, we identify optimal levels of CSR to minimize idiosyncratic risk for each region. Moreover, CSR has a mitigating effect on crash risk in Europe and the United States. In contrast, firms from the Asia‐Pacific region display CSR over‐investment followed by a higher crash risk. This appears to be a consequence of globalization, which forces firms from Asia‐Pacific to overinvest in CSR to adapt western standards.

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Section: Duvolmentioning

confidence: 99%

Over‐investment or risk mitigation? Corporate social responsibility in Asia‐Pacific, Europe, Japan, and the United States

Utz

2018

Rev Financ Econ

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“…Our approach is also similar to that used in studies on investigations of investment-cash flow sensitivities conducted by Attig, Cleary, El Ghoul, and Guedhami (2014) and La Rocca, Stigliano, La Rocca, and Cariola (2015), who include a lag of investments as a control to make their models dynamic.…”

Section: T I I T I T I T I T I T Asset Salesmentioning

confidence: 99%

Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market

Erdogan¹

2018

Prague Economic Papers

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This study investigates the sensitivity of financing, investment, and distribution decisions to changes in operating cash flow, and whether these sensitivities depend on whether or not firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period 1996 to 2013, we find that an increase in the short-term cash flows is associated with an increase in cash balances, irrespective of whether or not firms are financially constrained. However, unconstrained firms hold a larger cash balance than constrained firms. Dividends are positively related to the short-term cash flows of both types of firms. Investments are not sensitive to cash flow for either type of firms. An increase in their short-term cash flow induces the financially constrained firms to reduce debt financing, but makes the unconstrained firms increase their debt financing and reduce equity financing. Although firms in general prefer to use part of the saved cash in the long term, they do not deplete their cash savings. Constrained firms resort to debt financing in response to an increase in their long-term cash flow.

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“…Therefore, we correct for potential endogeneity biases using the instrumental variable technique. Pursuant to earlier studies, we use the initial firm-level CSR score (denoted First_CSR) and the industry average CSR value (denoted Ind_CSR) as instruments (see Attig, Cleary, El Ghoul, & Guedhami, 2014;Attig, El Ghoul, Guedhami, & Suh, 2013;El Ghoul, Guedhami, Kim, & Park, 2016;El Ghoul et al, 2011). The rationale is that these instruments are highly correlated with contemporaneous CSR investment because CSR is path-dependent, and are likely to be exogenous given that they are predetermined.…”

Section: Endogeneitymentioning

confidence: 99%

Corporate social responsibility and the wealth gains from dividend increases

2018

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This study examines whether corporate social responsibility (CSR) influences the stock price response to dividend increase announcements and changes in subsequent operating performance. We find that dividend increasing firms with lower CSR scores elicit higher abnormal announcement returns and greater improvements in industry‐adjusted operating performance. These findings support the argument in the literature that socially responsible firms are more transparent and commit to higher ethical standards than other firms, suggesting that they suffer fewer agency and informational problems (Kim, Park, & Wier, 2012). Consequently, larger dividend payouts reduce agency costs in firms with lower CSR commitments, thereby generating higher wealth gains for shareholders.

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Corporate Legitimacy and Investment–Cash Flow Sensitivity

Cited by 29 publications

References 59 publications

Over‐investment or risk mitigation? Corporate social responsibility in Asia‐Pacific, Europe, Japan, and the United States

Over‐investment or risk mitigation? Corporate social responsibility in Asia‐Pacific, Europe, Japan, and the United States

Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market

Corporate social responsibility and the wealth gains from dividend increases

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