Search Results (8)

The determination of the capital structure is a critical component of a company’s financial decision-making process. The question of how to optimize a firm’s capital structure to increase its value has been a significant topic of interest within the financial community. The employee stock ownership plan (ESOP) has developed rapidly in China’s capital market over the past decade, providing a suitable context for studying the impact of employee equity incentives on capital structure decisions. This paper employs cross-sectional ordinary least squares regression models and unbalanced panel fixed effect models to investigate the impact of employee stock ownership plans (ESOPs) on firms’ capital structure decisions. The analysis is conducted on a sample of Chinese A-share listed companies on the Shanghai and Shenzhen Stock Exchanges. The research considers both static capital structure choice and dynamic capital structure adjustment. We find that the implementation of an ESOP reduces the level of corporate debt and accelerates the dynamic adjustment of capital structure, suggesting that employee equity incentives play a role in optimizing firms’ capital structure decisions. We also find that the impact of ESOPs on the dynamic adjustment of capital structure is asymmetric. Specifically, the implementation of ESOPs markedly accelerates the downward adjustment of capital structure, yet has no impact on the upward adjustment of capital structure. Further analysis demonstrates that the impact of ESOPs on capital structure decisions is contingent upon the macroeconomic environment, industry characteristics, corporate governance, and ESOP contract designs. First, the optimization of ESOPs on capital structure decisions is more pronounced in an economic boom environment, in a poor market climate, or in competitive industries. Second, the reduction effect of ESOPs on corporate debt is more pronounced in non-state-owned companies, high-tech companies and those with lower ownership concentration. In contrast, the acceleration effect of ESOPs on capital structure adjustment is more pronounced in state-owned companies, non-high-tech companies and those with higher ownership concentration. Ultimately, ESOPs financed by loans from a firm’s major shareholders—or with a longer lock-up period, smaller shareholding size or executive subscription ratio—demonstrate a more pronounced optimization effect on capital structure decisions. This paper not only contributes to the existing literature on the relationship between equity incentives and capital structure decisions, but also provides guidance for listed companies on the reasonable design of their ESOPs and the optimization of their capital structure decisions. Full article

As important methods of ecofriendly transportation, the supply chain coordination of new energy vehicles (NEVs) is an important issue in the field of sustainability. This study constructs a Stackelberg game composed of a power battery supplier and an NEV manufacturer. To better describe the coordination relationship in the NEV supply chain, we introduce the Nash bargaining framework into the fairness concern preference utility function. Through a comprehensive discussion of shareholding ratios and external environment factors, we discover that the traditional shareholding strategy fails to coordinate the NEV supply chain effectively, as enterprises seek to avoid losing management control, which occurs when excessive shares are held by others. In this context, this study proposes a novel industry–university–research (IUR) shareholding strategy, which can more easily achieve supply chain coordination and improve social welfare. In particular, this study reveals the superiority of the novel strategy in eliminating the double-marginal effect caused by high fairness concern preference among NEV enterprises. Based on these facts, we provide enterprises with optimal strategies under different conditions and offer a government-optimal subsidy to maximize the social welfare function. Full article

In recent years, ESG (environmental, social, and governance) has emerged as a critical investment concept. Its goal is to create value for both shareholders and society, encouraging companies to optimize social value. However, the exploration and research into “the proportion of firms exporting and the pathways through which the environmental, social, and governance activities of carbon-intensive firms influence firms’ financial performance” remains largely unexplored. This study establishes a research framework within this context, utilizing listed Chinese manufacturing companies as the research subjects. Taking agency theory rationale and signaling theory as the theoretical framework, this study thoroughly investigates the relationship between ESG ratings, corporate export ratios, and corporate financial performance through panel regression models using fixed-time, fixed-industry, and bi-directional fixed-effects models. The results of this study show that (1) ESG ratings have a positive impact on corporate financial performance; (2) firms’ export ratios play a mediating role in the relationship between ESG ratings and corporate financial performance; and (3) carbon-intensive firms have a positive moderating effect on the relationship between ESG ratings and corporate financial performance. Based on these findings, we propose policy recommendations at the firm and government levels to increase the importance of ESG, strengthen corporate governance, and promote continuous progress in ESG. This study provides micro evidence of the interactions between ESG ratings, export ratios, carbon-intensive firms, and firm performance to enable investors to make informed decisions. Full article

Financial signaling and stock return synchronicity may not be at crossroads. This paper optimizes the signaling effect of firms’ financial indicators on stock return synchronicity. The ultimate objective is to align firms’ financial signaling and stock return synchronicity, which implies a benefit of hedging against fluctuations in the stock market index. The data cover quarterly periods from June 1992 to March 2022 for the non-financial firms listed in the DJIA30 and NASDAQ100. This paper examines the observed return synchronicity as the dependent variable. The independent variables are classified into six groups namely, Solvency (or Liquidity) ratios, Assets Efficiency ratios, Expense Control ratios, Debt (or Leverage) ratios, Profitability ratios, and Dividend ratios. The analysis is conducted on two different groups. The first group examines the observed firms’ financials that affect observed stock return synchronicity. The second group examines optimal firms’ financials that help optimize stock return synchronicity. The final results show that (a) current stock return synchronicity is affected positively by cash ratio, and negatively by receivables and historical growth of earnings; (b) optimal stock return synchronicity can be elevated using significant financial indicators namely, Inventory/Current Assets, Net Working Capital/Total Assets, Net worth/Fixed Assets, and Sales Annual Growth; (c) agency conflicts between managers and shareholders can be mitigated by the aforementioned financial indicators, which do not include debt financing being the common source of agency conflicts; and (d) dividends are still insignificant to stock return synchronization. Full article

Under the increasing environmental pressure, remanufacturing has increasingly become a new mode of recycling economy and upgrading and transforming the equipment manufacturing industry. Some enterprises include remanufacturing businesses in the original production system by holding or controlling shares in other remanufacturing enterprises. This paper builds a two-echelon supply chain model composed of a supplier, a manufacturer, and a remanufacturer, considering the different ownership structures (i.e., shareholding and share-controlling) between them, in which the supplier sells non-remanufacturable parts to the manufacturer and the remanufacturer. At the same time, the optimal decisions of each firm are considered. The results show that for the manufacturer, a higher shareholding ratio means that it can obtain more profits. For the supplier, the impact of the shareholding ratio depends on the manufacturing cost. When the manufacturing cost is relatively low, the stock sharing relationship between the manufacturer and the remanufacturer will decrease the supplier’s profit. When the manufacturing cost is relatively high, it will depend on the shareholding ratio. In the case of shareholding between the manufacturer and the remanufacturer, a higher shareholding ratio will decrease the supplier’s profit. From the perspective of the supply chain, when the production cost is high enough, the supply chain’s profit decreases first and then increases with the shareholding ratio. Furthermore, the increase in the manufacturer’s shareholding in remanufacturing does not always improve the remanufacturing proportion of products. Full article

In the construction of ecological civilization, green innovation has become an important driving force for the sustainable development of state-owned enterprises (SOEs). This paper uses panel data of state-owned listed enterprises from 2008 to 2019 to explore mixed-ownership reform’s influence on the green transformation of SOEs and its specific mechanisms. The results show that the diversity of mixed shareholders, the depth of mixed equity, and the restriction of mixed equity significantly promote the SOEs’ green innovation. Moreover, there are distinctions in the impact of the shareholding ratio of heterogeneous shareholders on green innovation. Only the increase in the shareholding ratio of foreign shareholders has a positive correlation with green innovation. The mechanism tests indicate that the mixed-ownership reform plays a governance role in the green transformation of SOEs by optimizing the reasonable allocation of environmental protection subsidies and propelling environmental social responsibility’s active performance. Our study further subdivides the significant promotion effect of mixed-ownership reform on green innovation, finding that it only exists in the SOEs in heavily polluting industries and regions with a high degree of marketization. Finally, we find that the ownership structure adjustment caused by the mixed-ownership reform has improved SOEs’ environmental management system and facilitated its sustainable development capabilities. Full article

This research is carried out in the backdrop of increasing product quality and environmental degradation scandals associated with Chinese Pharmaceuticals in recent years. We examined the data of 125 Chinese Pharmaceuticals between 2010–2016 to investigate the impact of overall corporate social responsibility (CSR) performance as well as the performance on five unique aspects of CSR such as shareholders, employees, customers and suppliers, environmental practices, and the society to gauge the impact of these individual dimensions on the firm’s financial performance. The Hexun rating system is used to gauge a firm’s CSR performance on various stakeholder dimensions as it is one of the widely accepted CSR measurement criteria in China. The firm performance is measured by Tobin’s Q, return on assets (ROA), return on equity (ROE), and earnings per share (EPS) ratios. The outcome of the panel-based regression models reveals that the overall CSR score has a positive and significant influence on a firm’s financial indicators. Moreover, although all the CSR dimensions relate positively to firm performance, the environmental aspect of CSR has the most profound impact on firm performance followed by customers and suppliers, and employees. However, the shareholders and social dimensions have a relatively lesser influence on firm performance. These results imply that Chinese Pharmaceuticals shall further optimize each aspect of CSR performance as it can not only create a favorable brand image for various stakeholders but also results in sustainable financial performance. Full article

In order to improve the banking sustainability in China, China’s government has announced that the restrictions on foreign shareholding ratio in domestic banks will be canceled. However, the effectiveness of foreign strategic investment needs checking. In addition, under the new policy, the method by which banks formulate appropriate internal decisions about introducing foreign strategic investment is an important issue for bank managers. Continuous productivity growth will bring sustainable development; therefore, the aims of this paper are: (1) to find the relationship between foreign strategic investment and productivity change of China’s banks, and to verify the effectiveness of introducing foreign strategic investment; (2) to find the optimal foreign shareholding ratio; (3) to show how foreign strategic investment affects the productivity of China’s banks, i.e. the transmission mechanism between them, and to provide bank managers with evidence and support for making decisions on introduction of foreign strategic investment. This paper employs the Malmquist-Luenberger index and combines it with Epsilon-based-measure to derive a new index, i.e. the EBM-Malmquist-Luenberger index, to measure the dynamic productivity change of China’s banks. In addition, the dynamic panel data and system GMM estimator are used to analyze the transmission mechanism as well as the impact of foreign strategic investment on the productivity of China’s banks. The results revealed three facts. First, when the foreign shareholding ratio increases within a given range, foreign strategic investment continuously improves the productivity and sustainability of China’s banks. Second, an inverse N-shaped relation between foreign strategic investment and productivity growth of China’s banks is supported, and the optimal foreign shareholding ratio is 20.16%. Last but not least, foreign strategic investment improves the productivity and sustainability of China’s banks, mainly through changing scale efficiency. The results of this paper may provide support for policy formulation of China’s banks. Full article