Does managerial ability transform organization from the inside out? Evidence from sustainability performance of financially constrained firms in an emerging economy

Khan, Muhammad Kaleem; Naeem, Kashif; Xie, Mingyi

doi:10.1016/j.bir.2022.06.006

Cited by 18 publications

(15 citation statements)

References 102 publications

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“…Following Li (2011), Bae et al (2021) and Khan et al (2022), the KZ index presented by Kaplan and Zingales (1997) is used as our main indicator of financial constraints and is described as follows: where, CF indicate cash flows, computed as the sum of amortization and depreciation plus net income, TA represent total assets, Div represents the dividend payments, C represent cash and short-term investments, Lev represent the leverage, which is total liabilities divided by TA and Q is the Tobin Q, which is the assets market to book value. A higher KZ index indicates that a company is under more financial pressure.…”

Section: Methodsmentioning

confidence: 99%

“…3.2.3 Financial constraints. Following Li (2011), Bae et al (2021) and Khan et al (2022), the KZ index presented by Kaplan and Zingales (1997) is used as our main indicator of financial constraints and is described as follows:…”

Section: Datamentioning

confidence: 99%

“…Second, Choo et al (2021) reveal that executives’ capability is positively linked to equity financing only for financially flexible firms. However, there is compelling evidence that financial obstacles limit competent managers from raising external finance and obtaining favorable credit terms for future projects because outsiders are concerned about the firm’s future ability to repay debts (Khan et al , 2022). Accordingly, raising capital through equity financing might induce managers to hide adverse information and provide an overly optimistic view of the firm before equity issuance to attract investors (Reichmann et al , 2022); as a result, aggravating the chance of stock price plummet.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…2.1.2 Managerial ability. Managerial ability is referred to as the ability of executives to efficiently allocate corporate resources in generating high revenues and achieving firm success (Demerjian et al, 2012), to understand the economies of the company and to make appropriate economic decisions (Demerjian et al, 2012;Khan et al, 2022;Xu et al, 2021). In other words, it measures how managers can efficiently convert human and financial capital Moderating effect of financial constraints assets into high profit and investor value as compared to their peers in the same industry sector (Khan et al, 2022).…”

Section: Introductionmentioning

confidence: 99%

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The moderating effect of financial constraints on the relationship between stock price crash risk and managerial ability

Shelih,

Wang

2023

IJAIM

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Purpose This study aims to empirically explore the influence of managerial ability on crash risk and the moderating effect of financial constraints on this interrelationship. Design/methodology/approach Using a sample of listed corporations in the Egyptian Stock Exchange during 2018–2021, the authors test the hypotheses by using the measures and methods well established in prior literature. The authors also conduct multiple robustness analyses to ensure the validity of the empirical results. Findings The findings suggest that managerial ability can effectively inhibit crash risk. In addition, the authors report that financial constraints significantly dampen this relationship. Thus, financial restrictions play a striking role in hampering the managerial ability to prevent stock crashes. Furthermore, the authors document that the moderating role of severe financing constraints is more prominent during the Covid-19 pandemic period. Originality/value The originality of this study stems from the following considerations. First, this study enriches relevant studies on crash risk by providing evidence from one of the emerging markets in the Middle East; thereby, contrasting with those in developed economies. Second, to the best of the authors’ knowledge, this is the first study investigating the moderating impact of financing constraints on the managerial ability and crash risk nexus. Therefore, this work adds value to the extant knowledge by scrutinizing this important issue and providing novel empirical evidence.

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Section: Methodsmentioning

confidence: 99%

Section: Datamentioning

confidence: 99%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The moderating effect of financial constraints on the relationship between stock price crash risk and managerial ability

Shelih,

Wang

2023

IJAIM

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“…Most of the advanced nations have transformed their economy from a labor-based economic structure to a knowledge-based economic structure. Various studies elaborated on the significance of human capital in diverse perspectives such as human capital that leads to economic development (Bottone and Sena, 2011 ; Asghar et al, 2012 ; Sohail et al, 2021a ; Adebayo, 2022a ; Adebayo et al, 2022a ; Khan et al, 2022a , c ; Mustafa et al, 2022a , c ). Benos and Zotou ( 2014 ) infer that human capital is affecting the environment via the green growth process.…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%

Environmental concern in the era of digital fiscal inclusion: The evolving role of human capital and ICT in China

Sohail

Yang²

2022

Front. Psychol.

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To achieve environmental sustainability, the role of human capital and financial inclusion has been debated in limited empirical studies. Employing a reliable ARDL model approach, this study examines the dynamic link between human capital and ICT, financial inclusion, and CO2 emissions using the China economy dataset over the period 1998–2020. The vivacious side of human capital shows that literacy rate and average year of schooling curb CO2 emissions in long run. The results of human capital are also based on facts in magnitude as well as in direction. Also, empirics unfold that digital financial inclusion significantly increases CO2 emissions. Based on these novel findings, a wide set of economic policies are repaired for environmental quality. Environmental education should be considered at early levels of education. The authorities and policymakers should fix energy-related issues through education. The China government should stimulate the educational sector to conduct a clean and green revolution that acts as a mechanism for a green and clean economy. This study's finding is more effective than the previous unlike empirical studies for policy-making because of the advanced econometric method.

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The automated sustainability auditor: Does artificial intelligence curtail greenwashing behavior in Chinese firms?

Khan,

Huo,

Zahid

et al. 2024

Bus Strat Env

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Corporate stakeholders are intrigued by the potential collaboration between AI and environmental reporting to maintain competitiveness in the digital and sustainable economy. This exploration is crucial given the persistent pressures driving companies to engage in greenwashing practices for legitimacy. Aiming to shed light on the function of AI in reducing the prevalence of greenwashing by Chinese businesses, the findings, derived from panel data estimation of Chinese A‐share firms, suggest that the implementation of AI has a positive impact on the fight against greenwashing. The investigation presents compelling evidence that greenwashing mechanism control can be accelerated by AI technologies. Organizations that invest strategically in artificial intelligence exhibit a diminished propensity to obfuscate environmental performance by means of AI‐enabled automation and enhanced data‐driven decision‐making. Intriguingly, the study demonstrates that the substantial disparate greenwashing impact of AI depends on ownership structure. In comparison to non‐SOEs, state‐owned enterprises (SOEs) demonstrate diminished AI control over greenwashing. Significantly, the research utilizes a variety of validation methods, such as instrumental variable approach, propensity score matching, and two‐stage least squares, to ensure the validity of the primary findings.

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Does managerial ability transform organization from the inside out? Evidence from sustainability performance of financially constrained firms in an emerging economy

Cited by 18 publications

References 102 publications

The moderating effect of financial constraints on the relationship between stock price crash risk and managerial ability

The moderating effect of financial constraints on the relationship between stock price crash risk and managerial ability

Environmental concern in the era of digital fiscal inclusion: The evolving role of human capital and ICT in China

The automated sustainability auditor: Does artificial intelligence curtail greenwashing behavior in Chinese firms?

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