Recent Submissions

  • Market sentiment and firm investment decision-making

    Danso, A.; Lartey, T.; Amankwah-Amoah, J.; Adomako, Samuel; Lu, Q.; Uddin, M. (Elsevier, 2019)
    While research on factors driving corporate investment decisions has blossomed, knowledge related to the Chief Executive Officer’s (CEO’s) market sentiment on investment decision outcomes is lacking. In this study, we extend the existing corporate finance literature by examining the underexplored issue of how CEOs’ market sentiment drives firms’ investment decisions. Capitalising on a large sample of US firms for the period 2004-2014, we uncovered some crucial observations. First, we found empirical support for our theoretical contention that market sentiment drives corporate investment decisions. Second, we established that, while financial flexibility induces managers to overinvest, the expectation of future profitability leads firms to underinvest during high sentiment periods. In addition, we uncovered that the 2007/08 financial crisis significantly impacted firm behaviour and realigned managerial decision-making. Thus, the sentiment-investment relationship is more pronounced during the crisis and the post-crisis periods. Our results are robust after accounting for the possibility of endogeneity and using alternative measures of both CEOs’ market sentiment and firm investment.
  • Waves of Professionalization Before, During and After Management Buyouts and Buy-ins of Private Family Firms

    Howorth, Carole; Wright, M.; Westhead, P.; Allcock, D. (Enterprise Research Centre, 2015-11)
    We explore the process of professionalization pre- and post- buyout (MBO) or buyin (MBI) of former private family firms using longitudinal evidence from six UK family firms undergoing an MBO/I in 1998. Professionalization behaviour was monitored up to 2014. Previous studies have conceptualized professionalization as a threshold to be attained. We demonstrate that professionalization is a complex process occurring in waves, triggered by changes in firm ownership and management. Waves of professionalization converge during the MBO/I process. Buyouts provide a funnelling mechanism enabling diverse control systems to be standardized. Post-MBO/I, divergence in the professionalization process reoccurs contingent on firm-specific contexts. Professionalization focuses on operations when stewardship relationships predominate, but on agency control mechanisms when there is increased potential for agency costs. Buyout organizational form is an important transitory phase facilitating the professionalization process. Professionalization is not a once for all development stage.
  • Audit committees, non-audit services, and auditor reporting decisions prior to failure

    Wu, C.Y.H.; Hsu, Hwa-Hsien; Haslam, J. (2016-06)
    This study investigates the associations between audit committee characteristics and the likelihood of auditors' going-concern decisions among UK failed firms. Specifically, we examine whether the threat posed by auditor-provided non-audit services (NAS) to auditors' reporting decisions is mediated by audit committee characteristics. We find that failed firms with higher proportions of independent non-executive directors (NEDs) and financial experts on the audit committee are more likely to receive auditor going-concern modifications prior to failure, but that there is no significant relationship between NAS fees and the likelihood of receiving a going-concern modification. The evidence further suggests that the association between NAS and auditors' reporting decisions is subject to audit committee characteristics. Where the audit committee is more independent and includes a greater proportion of financial experts, auditors providing the client with NAS are less likely to issue a standard unmodified going-concern report prior to failure. Overall, the findings provide support for corporate governance regulators' concerns about the monitoring benefits of audit committee independence and the presence of financial expertise on the audit committee for auditors' reporting decisions.
  • Firm performance, corporate governance and executive compensation in Pakistan

    Sheikh, M.F.; Shah, S.Z.A.; Akbar, Saeed (2018)
    This study examines the effects of firm performance and corporate governance on chief executive officer (CEO) compensation in an emerging market, Pakistan. Using a more robust Generalized Method of Moments (GMM) estimation approach for a sample of non-financial firms listed at Karachi Stock Exchange (KSE) over the period 2005 to 2012, we find that both current and previous year accounting performance has positive influence on CEO compensation. However, stock market performance does not appear to have a positive impact on executive compensation. We further find that ownership concentration is positively related with CEO compensation, indicating some kind of collusion between management and largest shareholder to get personal benefits. Inconsistent with agency theory, CEO duality appears to have a negative influence, while board size and board independence have no convincing relationship with CEO compensation, indicating board ineffectiveness in reducing CEO entrenchment. The results of dynamic GMM model suggest that CEO pay is highly persistent and takes time to adjust to long-run equilibrium.
  • Effectiveness of performance appraisal: An integrated framework

    Iqbal, M.Z.; Akbar, Saeed; Budhwar, P. (2015-10)
    Based on a robust analysis of the existing literature on performance appraisal (PA), this paper makes a case for an integrated framework of effectiveness of performance appraisal (EPA). To achieve this, it draws on the expanded view of measurement criteria of EPA, i.e. purposefulness, fairness and accuracy, and identifies their relationships with ratee reactions. The analysis reveals that the expanded view of purposefulness includes more theoretical anchors for the purposes of PA and relates to various aspects of human resource functions, e.g. feedback and goal orientation. The expansion in the PA fairness criterion suggests certain newly established nomological networks, which were ignored in the past, e.g. the relationship between distributive fairness and organization‐referenced outcomes. Further, refinements in PA accuracy reveal a more comprehensive categorization of rating biases. Coherence among measurement criteria has resulted in a ratee reactions‐based integrated framework, which should be useful for both researchers and practitioners.
  • Impact of international financial reporting standards on the profit and equity of AIM listed companies in the UK

    Ali, A.; Akbar, Saeed; Ormrod, P. (2016-03)
    This study examines the extent to which the change from UK GAAP to IFRS has affected companies listed on the Alternative Investment Market (AIM) in the UK. The results suggest that, on average, profit reported under IFRS is higher than that reported under UK GAAP; however, the difference is much smaller for AIM listed companies as compared to what existing literature suggests for firms listed on main stock markets. The Gray's partial analysis results indicate that despite the extensive programmes for improving convergence over time there is still a considerable discrepancy between IFRS and UK GAAP.
  • Market reaction to seasoned offerings in China

    Liu, J.; Akbar, Saeed; Shah, S.Z.A.; Zhang, D.; Pang, D. (2016-06)
    This study examines stock market reaction to the announcement of various forms of seasoned issues in China. Our empirical evidence demonstrates that market reactions differ in ways that suggest a difference between management's internal assessment and the market's assessment of the stock price. The market responds unfavourably to the announcement, notably in the case of rights issues and also with regard to open offers. Private placements experience an unfavourable pre‐announcement reaction, which contrasts with the favourable reaction after the event. Convertible bond issues generate positive excess returns consistent with the market's confidence that they can help to align management and shareholders’ interests. Further investigation shows that market reaction is related to factors specific to the issuer and issue by reference to the period immediately surrounding the issue. Specifically, ownership concentration, agency matters connected with equity offerings, investor protection connected with fund allocation and security pricing, and the influence of powerful moneyed interests together provide an instructive insight into market reaction. Institutional inefficiency pertaining to underwriting, auditing, analysts’ forecasts and credit ratings are found to have a weak association with market price, consistent with due public scepticism concerning management and their gatekeepers.
  • Board structure and corporate risk taking in the UK financial sector

    Akbar, Saeed; Kharabsheh, B.; Poletti-Hughes, Jannine; Shah, S.Z.A. (2017)
    This paper examines the relationship between board structure and corporate risk taking in the UK financial sector. We show how the board size, board independence and combining the role of CEO and chairperson in boards may affect corporate risk taking in financial firms. Our sample is based on a panel dataset of all publicly listed firms in the UK financial sector, which includes banks, insurance, real estate and financial services companies over a ten year period (2003-2012). After controlling for the effects of endogeneity through the application of the dynamic panel generalized method of moments estimator, the findings of this study suggest that the presence of non-executive directors and powerful CEOs in corporate boards reduces corporate risk taking practices in financial firms. The negative relationship can be explained within the agency theory context, where managers are regarded as more risk averse because of the reputational and employment risk. An increased power concentration is therefore expected to enhance the risk aversion behaviour of directors. The findings however, do not show any significant effect of board size on corporate risk taking in financial firms. As this study covers recommendations of the UK Corporate Governance Code on the role of corporate boards in managing firms’ risk, the empirical evidence could be useful for corporate governance regulation and policy making.
  • International Evidence on the Determinants of Organizational Ethical Vulnerability

    Ullah, S.; Ahmad, S.; Akbar, Saeed; Kodwani, D. (2018)
    This paper proposes a model to explain what makes organisations ethically vulnerable. Drawing upon legitimacy, institutional, agency and individual moral reasoning theories we consider three sets of explanatory factors and examine their association with organisational ethical vulnerability. The three sets comprise external institutional context, internal corporate governance mechanisms and organisational ethical infrastructure. We combine these three sets of factors and develop an analytical framework for classifying ethical issues and propose a new model of organisational ethical vulnerability. We test our model on a sample of 253 firms that were involved in ethical misconduct and compare them with a matched sample of the same number of firms from 28 different countries. The results suggest that weak regulatory environment and internal corporate governance combined with profitability warnings or losses in the preceding year increase organisational ethical vulnerability. We find counterintuitive evidence suggesting that firms’ involvement in bribery and corruption prevention training programmes is positively associated with the likelihood of ethical vulnerability. By synthesising insights about individual and corporate behaviour from multiple theories, this study extends existing analytical literature on business ethics. Our findings have implications for firms’ external regulatory settings, corporate governance mechanisms and organisational ethical infrastructure.
  • Effectiveness of Performance Appraisal: Evidence on the Utilization Criteria

    Iqbal, M.Z.; Akbar, Saeed; Budhwar, P.; Shah, S.Z.A. (2019-08)
    This study examines the relationships between performance appraisal (PA) purposes and immediate and ultimate outcomes. Drawing upon expectancy theory and Greenberg's taxonomy, we explore the roles of multiple mediators as sets of person- and organization-referenced ratee reactions and reveal the multiple why-related aspects of the relationships between PA purposes and PA effectiveness. Our research is based on a questionnaire survey of 563 employees from the telecommunications sector of Pakistan. The results of structural equation modeling analysis suggest that individual-focused PA better serves the employee perspective, whereas position- and organization-focused PA better serves the organizational perspective. These findings indicate that inclusion of role definition and strategic purposes in the PA system is likely to render PA more effective and practical. The findings also corroborate that ratee reactions mediate the relationship between PA purposes and PA effectiveness, albeit to varying degrees. Our findings have theoretical and practical implications.
  • More on the relationship between corporate governance and firm performance in the UK: Evidence from the application of generalized method of moments estimation

    Akbar, Saeed; Poletti-Hughes, J.; El-Faitouri, R.; Shah, S.Z.A. (2016-09)
    This study examines the relationship between corporate governance compliance and firm performance in the UK. We develop a Governance Index and investigate its impact on corporate performance after controlling for potential endogeneity through the use of a more robust methodology, Generalized Method of Moments (GMM) Estimation. Our evidence is based on a sample of 435 non-financial publicly listed firms over the period 1999–2009. In contrast to earlier findings in the UK literature, our results suggest that compliance with corporate governance regulations is not a determinant of corporate performance in the UK. We argue that results from prior studies showing a positive impact of corporate governance on firms’ performance may be biased as they fail to control for potential endogeneity. There may be a possibility of reverse causality in the results of prior studies due to which changes in the internal characteristics of firms may be responsible for the corporate governance compliance and performance relationship. Our findings are based on GMM, which controls for the effects of unobservable heterogeneity, simultaneity and dynamic endogeneity and thus present more robust conclusions as compared to the findings of previously published studies in this area.
  • The effect of electronic word of mouth communications on intention to buy: A meta-analysis

    Ismagilova, Elvira; Slade, E.L.; Rana, N.P.; Dwivedi, Y.K. (2019)
    The aim of this research is to synthesise findings from previous studies by employing weight and meta-analysis to reconcile conflicting evidence and draw a “big picture” of eWOM factors influencing consumers’ intention to buy. By using the findings from 69 studies, this research identified best (e.g. argument quality, valence, eWOM usefulness, trust in message), promising (e.g. eWOM credibility, emotional trust, attitude towards website) and least effective (e.g. volume, existing eWOM, source credibility) predictors of intention to buy in eWOM research. Additionally, the effect size of each predictor was calculated by performing meta-analysis. For academics, understanding what influences consumers’ intention to buy will help set the agenda for future research directions; for practitioners, it will provide benefit in terms of practical guidance based on detailed analysis of specific factors influencing consumers’ intention to buy, which could enhance their marketing activities.
  • Mapping hotel brand positioning and competitive landscapes by text-mining user-generated content

    Hu, F.; Trivedi, Rohitkumar (2019)
    This study uncovers hotel brand positioning and competitive landscape mapping by text-mining user-generated content (UGC). Rather than relying on a single dimension of consumer evaluation, the current study detects brand attributes by using both customer preferences as well as perceptual performance to develop meaningful insights. For this, the study combines content analysis and repertory grid analysis (RGA) to answer three key research issues. 111,986 hotel reviews from two biggest Chinese cities are used to explore and visualize the competitive landscape of six selected hotel brands across three hotel categories. Findings from the study will not only advance the existing literature on brand positioning and competitive landscape mapping but also help practitioners in developing brand positioning strategies to fight competitors within and across hotel categories.
  • Investment decisions with finite-lived collars

    Adkins, Roger; Paxson, D.; Pereira, P.J.; Rodrigues, A. (2019-06)
    The duration of most collar arrangements provided by governments to encourage early investment in infrastructure, renewable energy facilities, or other projects with social objectives are finite, not perpetual. We extend the previous literature on collar-style arrangements by providing an analytical solution for the idle and active values, as well as the investment triggers, for projects where collars are either finite-lived or retractable. What is the difference between these types of arrangements with their perpetual counterpart? Lots, including different vega signs, and substantially different values for different current price levels. Often, finite and retractable collars justify earlier investment timing than perpetual collars. In general, we demonstrate that the finite-lived and retractable versions have a significant impact on optimal behavior, relative to the perpetual case. An important consideration when negotiating the floors, ceilings, and duration (or signalling the expected duration) of a finite or a retractable collar is the current price level of the output and its expected volatility over the life of the contract.
  • Machine learning approach to auto-tagging online content for content marketing efficiency: A comparative analysis between methods and content type

    Salminen, J.; Yoganathan, Vignesh; Corporan, J.; Jansen, B.J.; Jung, S.-G. (2019-08)
    As complex data becomes the norm, greater understanding of machine learning (ML) applications is needed for content marketers. Unstructured data, scattered across platforms in multiple forms, impedes performance and user experience. Automated classification offers a solution to this. We compare three state-of-the-art ML techniques for multilabel classification - Random Forest, K-Nearest Neighbor, and Neural Network - to automatically tag and classify online news articles. Neural Network performs the best, yielding an F1 Score of 70% and provides satisfactory cross-platform applicability on the same organisation's YouTube content. The developed model can automatically label 99.6% of the unlabelled website and 96.1% of the unlabelled YouTube content. Thus, we contribute to marketing literature via comparative evaluation of ML models for multilabel content classification, and cross-channel validation for a different type of content. Results suggest that organisations may optimise ML to auto-tag content across various platforms, opening avenues for aggregated analyses of content performance.
  • How detailed product information strengthens eco-friendly consumption

    Osburg, V.-S.; Yoganathan, Vignesh; Brueckner, S.; Toporowski, W. (2019)
    Purpose: Whilst many studies consider labelling as means of aggregated communication of environmental product features, the presentation of detailed product information seems a promising alternative. However, the mechanisms through which detailed product information takes effect on consumers requires better understanding. This study empirically develops a framework that focuses on consumers’ perceived usefulness of, and trust in, detailed product information, whilst also considering the role of environmental self-identity. This understanding will help businesses to further stimulate eco-friendly consumption. Methodology: Structural equation modelling and conditional process analysis are utilised to test hypotheses based on a sample of 279 respondents to a German online survey. Findings: Results show that the perceived usefulness of product information has a positive effect on purchase intention, and this effect is intensified by an individual’s environmental self-identity. Furthermore, for consumers with high environmental self-identity, the effect of perceived usefulness of product information on purchase intention is mediated in turn by trust in detailed product information and resistance to negative information. Originality/Value: This study contributes to the debate on the role of product information in ethical consumption by showing how detailed product information gives rise to favourable behavioural outcomes. When detailed information is perceived as being useful, it can affect purchase intention through greater trust and an increased resistance to negative information. Further, detailed product information appears beneficial for both, the mass market and specific segments with high environmental self-identity. Hence, this study empirically establishes the effects of detailed product information on consumer decision-making, thus informing sustainability-related marketing theory and practice.
  • Animal and Human Models in Advertising: How can we influence the consumer decision making journey?

    Trivedi, Rohitkumar; Teichert, T. (2019)
    For decades, animals have been widely used in advertisements, and yet little is known about the effects on consumer reactions along the entire purchase decision process. This study disentangles the effects of using animal stimuli in isolation or jointly with a human model in print advertisements. Empirical evidence is derived from 126,220 consumer evaluations of 302 actual print advertisements across 18 product categories. Animals do not only support a positive attitude change, they also influence how products integrate into consumers´ relevant set and the purchase intention by itself. By comparison, female consumers react more pronounced than their male counterparts on animal stimuli. However, it should be avoided to combine an animal stimulus with a human model to preserve a better influence over consumer reaction.
  • Going green, going clean: Lean-green sustainability strategy and firm growth

    Lartey, T.; Yirenkyi, D.O.; Adomako, Samuel; Danso, A.; Amankwah-Amoah, J.; Alam, A. (Wiley, 2019)
    Despite the widespread recognition of the paybacks of “going green” and “going clean”, limited research has focused on the impact of lean-green strategy on firm growth. In this study, we contribute to strategy and environmental sustainability literatures by investigating the possibility that the influence on lean-green strategy and firm growth is driven by different levels of industry competition, managerial power and family ties. Using panel data from 732 firms in four major industrialised economies (the US, Germany, France and the UK), we found that lean-green strategy positively relates to firm growth and this relationship is amplified at higher levels of competition, managerial power and family ties. Theoretical and practical implications of the study are also discussed.

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