Research Question/Issue
We assess how ownership concentration influences the sensitivities of expansion investments and maintenance investments to changes in a firm's cash flow. We find the causal effect by exploiting the exogenous variation in the price of a firm's product. We also evaluate whether state versus private ownership affects the impact of ownership concentration on investment–cash flow sensitivities.
Research Findings/Insights
Using detailed data from 134 major copper mines operating in 29 countries over a 17‐year period, we show that a more concentrated ownership increases the sensitivity of expansion investments to changes in a firm's cash flow, while we do not detect a significant effect for maintenance investments. We also find that state ownership negatively moderates the effects of ownership concentration on the expansion investment–cash flow sensitivity.
Theoretical/Academic Implications
The findings improve our understanding of ownership structures and show the nuances of these structures when different ownership features are combined in the assessment of investment sensitivities.
Practitioner/Policy Implications
The asymmetric effects of ownership structures on different investment sensitivities call for a more fine‐grained analysis of incentives, benchmarking, and information disclosure policies. This issue is especially relevant in state‐owned enterprises (SOEs) and in firms with a low ownership concentration.
Implementing corporate social responsibility (CSR) in supply chains is not a trivial task. In fact, many firms in recent years have publicly proclaimed that in order to keep their CSR commitments, they had to reduce reliance on external suppliers by vertically integrating their operations. Our aim in this article is to examine whether there is truly a relationship between a firm’s CSR performance and its level of vertical integration. Drawing on a multi-industry sample of 2,715 firm-year observations, and after addressing endogeneity concerns, we demonstrate that firms with higher CSR performance tend to vertically integrate more (or, outsource less). We also demonstrate that this tendency is weaker for firms that have higher degrees of asset specificity or international diversification. Our core conclusion is that CSR performance and outsourcing are at odds, but firms can reconcile this tension by deepening their collaborations with suppliers.
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