Do liquid assets lure managers? Evidence from corporate misconduct

Abstract

We examine the effect of asset redeployability on corporate misconduct and find a significant positive relationship.Utilizing a large sample of public US firms for the period of 2001 to 2015, we find that a one standard deviation (SD) increase in the proportion of redeployable assets leads to a 7.2% increase in corporate fines. We also find that the positive association between asset redeployability and corporate misconduct varies across types of misconduct and industrial heterogeneity. In our channel analysis, we find that managerial risk-taking is a potential mechanism through which asset redeployability is associated with misconduct.Additional tests reveal that corporate misconduct associated with asset redeployability leads to lower firm value. Our results remained robust in a series of sensitivity tests and continue to hold after accounting for potential endogeneity concerns. Our paper contributes to the ongoing discourse on the costs and benefits of asset redeployability.

Toxic chemical releases and idiosyncratic return volatility: A prospect theory perspective

“…Environmentally irresponsible events impede firm cash flows and market value (Lin et al, 2016; Zaman et al, 2022a) and investors, especially the buy‐and‐hold investors, react to higher TCR reporting, considering it detrimental to their investment, by causing a DOWN trend in the market and thus increasing IRV; whereas the lower TCR reporting results in an UP market trend and results in lower IRV of the firm. According to our results, as reported in Table 8, the relation between TCR and IRV is more pronounced in the DOWN market state (β = 0.015, p < 0.05 and β = 0.015, p < 0.05, respectively).…”

Towards theorising corporate social irresponsibility: The Déjà Vu cases of collapsed forestry ventures

“…The literature has utilised a deductive approach using archival data and quantitative methods to identify factors that influence firms to engage in CSIR (Jain & Zaman, 2020; Shao et al, 2021; Zaman et al, 2021; Zaman et al, 2022). However, given limited archival data on CSIR, a growing number of studies have adopted qualitative approaches to examine CSIR (Herzig & Moon, 2013; Küberling‐Jost, 2019; Riera & Iborra, 2017).…”

“…Therefore, the behavioural aspect could provide further explanations for why individual agents, organisations, and institutions follow certain paths. The literature has shown that behavioural aspects play important roles in determining how and why organisations engage in CSIR (Campbell, 2007, 2018; Cohen et al, 2011; Jain & Zaman, 2020; Zaman et al, 2021; Zaman et al, 2022). Hence, we extend Küberling‐Jost (2019) by integrating three behavioural theories that correspond to the micro, meso, and macro levels into the path dependence theory.…”

“…At the meso (organisational) level, the literature shows that a more complex organisational structure (Strike et al, 2006), the board structure (Beasley, 1996; Jain & Zaman, 2020), and the relationship among top managers and the boards within an organisation (Zaman et al, 2022) also play important roles in corporate misconduct. The meso‐level theories of CSIR are dominated by stakeholder theory (Freeman, 1984) and agency theory (Jensen & Meckling, 1976).…”

“…At the micro (individual) level, the literature on corporate frauds and misconducts demonstrates that the behaviours of individual agents (top managers and board members) based on their selfinterests (Karpoff et al, 2008(Karpoff et al, , 2017Zaman et al, 2022), leadership and power (Pearce & Manz, 2011), and opportunities (Cohen et al, 2011) play important roles in how and why firms engage in CSIR. Therefore, to explain individual agents' motivation to engage in CSIR, we need to utilise a micro theory.…”