Government Control, Regulatory Enforcement Actions, and the Cost of Equity

Wang, Kun Tracy; Liu, Yanjun; Wang, Wanbin Walter

doi:10.1080/09638180.2020.1822196

Cited by 17 publications

(5 citation statements)

References 121 publications

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“…To assess the plausibility of the parallel trends assumption underlying the DID design, we conduct two placebo tests and a dynamic DID analysis following prior research (e.g., Ben‐Nasr et al., 2021; Chen et al., 2020; Liao et al., 2021; Ryou et al., 2022; Tsang et al., 2021; 2022; Wang et al., 2022). The first (second) placebo test restricts our sample to the pre‐CSR (post‐CSR) disclosure period and sets the pseudo CSR reporting start year as 2 years before (after) the actual first‐time CSR disclosure year.…”

Section: Results and Analysismentioning

confidence: 99%

Corporate social responsibility reporting and investment: Evidence from mergers and acquisitions

Wang,

2023

Business Fin & Account

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While corporate social responsibility (CSR) has played an increasingly important role in corporate decision‐making, the role of CSR disclosure in a firm's investment activities remains poorly understood. This study investigates the impact of CSR disclosure on mergers and acquisitions (M&As), which are pivotal investment activities. We find that firms disclosing voluntary CSR reports experience significantly stronger market reactions to M&A announcements than those that do not disclose such reports. Specifically, acquisitions by voluntary CSR disclosers achieve 1.2% higher returns upon acquisition announcements, leading to a substantial increase in shareholder value. Our findings are consistent across a series of robustness tests. Additional analyses suggest that the positive market reactions are especially tied to voluntary disclosures concerning the protection of employees and customers, and that the quality and financial materiality of voluntary CSR disclosures amplify positive market responses. We also find that voluntary CSR disclosers exhibit better long‐term post‐acquisition market and operational performance. Collectively, our findings suggest that voluntary CSR disclosures bolster acquisition returns by mitigating stakeholder resistance. Additionally, by leveraging the unique conditional CSR disclosure regulation in China and using a staggered DID design, we observe a diminished market reaction for acquirers following mandatory CSR disclosures. Overall, this research provides new insights into the contrasting effects of voluntary and mandatory CSR disclosures, emphasizing the vital role of effective stakeholder CSR communication in the success of M&As.

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Section: Results and Analysismentioning

confidence: 99%

Corporate social responsibility reporting and investment: Evidence from mergers and acquisitions

Wang,

2023

Business Fin & Account

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“…One concern with the DiD design is that the reduction in CSR reporting may precede the reduction in tariffs. To address this concern, we follow prior studies (Bourveau et al 2018; Tsang, Hu, et al 2021; Tsang, Wang, et al 2021; Wang et al 2020) and conduct a trend analysis by decomposing the occurrence of a tariff reduction into separate periods relative to the tariff reduction event in year t for each industry 32 . This dynamic DiD model allows us to examine the difference in CSR reporting between the treatment and control firms during the four years preceding the tariff reduction.…”

Section: Resultsmentioning

confidence: 99%

Product Market Competition and Voluntary Corporate Social Responsibility Disclosures†

Ryou

Tsang

Wang

2022

Contemporary Accting Res

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This study examines whether and how firms' voluntary forward‐looking nonfinancial disclosure, specifically their corporate social responsibility (CSR) disclosure, is associated with the intensity of product market competition (PMC). Despite the importance of the proprietary cost argument in explaining corporate disclosure incentives, there is little empirical evidence of the relationship between firms' proprietary cost concerns and their voluntary nonfinancial disclosure decisions. Using a reduction in industry‐level import tariffs as an exogenous shock to competition intensity, we find that the likelihood, frequency, and length of stand‐alone CSR reports decrease in response to heightened PMC. We also find that higher PMC intensity is associated with a reduced likelihood of CSR disclosure with external assurance, CSR disclosure in accordance with the Global Reporting Initiative guidelines, and CSR disclosure integrated with financial statements. Our results are robust to multiple alternative measures of PMC—namely, the level of nonprice competition, product similarity, and managers' perceptions of competition. Further analysis suggests that firms facing intense competition tend to commit more resources to advertising activities after reducing their CSR disclosure, presumably to mitigate the effect of this reduction. Overall, our findings suggest that proprietary cost concerns reduce firms' incentive to report their competition‐sensitive CSR activities.

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“…To investigate the effect of corporate governance reforms on analyst forecast accuracy, we follow the literature on the impact of regulations and reforms and use a staggered DID model (e.g., Fauver et al ., 2017; Liao et al ., 2022; Ryou et al ., 2022; Tsang et al ., 2022b; Wang et al ., 2022):

italicFERROR_italicWIN 90_{ijt} goodbreak= β_{0} goodbreak+ β_{1} {POST}_{jt} goodbreak+ β_{2} {AF}_{ijt} goodbreak+ β_{3} {SIZE}_{ijt} goodbreak+ β_{4} {LEV}_{ijt} goodbreak+ β_{5} {STDROE}_{ijt} goodbreak+ β_{6} {CORR}_{ijt} goodbreak+ β_{7} {ADR}_{ijt} goodbreak+ β_{8} {SURPRIZE}_{ijt} goodbreak+ β_{9} {INDSIZE}_{ijt} goodbreak+ β_{10} {HHI}_{ijt} goodbreak+ italicYearFE goodbreak+ italicCountryFE goodbreak+ ε_{ijt}

where i indexes firm, j indexes country, and t indexes year. The sample is restricted to firms in countries that have experienced corporate governance reforms.…”

Section: Methodsmentioning

confidence: 99%

“…Second, we examine the quantity and quality of management earnings forecasts, given that management earnings forecasts are an important input to analysts’ information set (Waymire, 1986; Zhu et al ., 2022). Specifically, we employ three measures of management earnings forecasts, in line with the literature (e.g., Guan et al ., 2020; Wang et al ., 2022; Zhu et al ., 2022): (1) forecast frequency ( MF_ISSUE ), which is an indicator variable equal to one if the firm issues a management earnings forecast in a given year, and zero otherwise; (2) management earnings forecast precision ( MF_PREC ), which takes the value one for forecasts that only provide the minimum or maximum value of the forecasted earnings, two for closed range forecasts, and three for point forecasts; and (3) management earnings forecast error ( MF_FERROR ), which is calculated as the absolute difference between management's earnings forecast and actual EPS scaled by actual EPS, where management's earnings forecasts are either point forecasts or the midpoint of range forecasts. The frequency of management earnings forecasts captures the quantity of the disclosure, and management earnings forecast precision and forecast error capture its quality.…”

Section: Additional Analysismentioning

confidence: 99%

Corporate Governance Reforms and Analyst Forecasts: International Evidence

Liu,

Wang,

2023

Abacus

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In this study, we examine the effect of worldwide corporate governance reforms on analyst forecasts using data on firms from 41 countries that have implemented such reforms. Employing a difference‐in‐differences design, we find robust evidence of a significant positive effect of these reforms, which mainly promote the independence of the audit committee and auditors, on analyst forecast accuracy. We also find significant improvements in post‐reform corporate governance structure and the quantity and quality of corporate disclosure, which validates the predicted economic mechanism of the impact of these reforms. Moreover, the reforms are effective in reducing analyst forecast bias and dispersion, suggesting an overall improvement in analyst forecast quality after reform implementation. Furthermore, we find a moderating effect of analyst general experience on the relationship of interest, which is consistent with the conjecture that improved corporate disclosures following reforms could be more beneficial for analysts with less experience. Overall, our findings shed new insights into how country‐level corporate governance reforms worldwide shape firms’ information environment.

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Government Control, Regulatory Enforcement Actions, and the Cost of Equity

Cited by 17 publications

References 121 publications

Corporate social responsibility reporting and investment: Evidence from mergers and acquisitions

Corporate social responsibility reporting and investment: Evidence from mergers and acquisitions

Product Market Competition and Voluntary Corporate Social Responsibility Disclosures†

Corporate Governance Reforms and Analyst Forecasts: International Evidence

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