Confucianism, openness to the West, and corporate investment efficiency

Chen, Lei; Jin, Zhi; Ma, Yuanfang; Xu, Hui

doi:10.1111/eufm.12173

Cited by 63 publications

(47 citation statements)

References 108 publications

(156 reference statements)

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“…Our results show that shifting away from shareholder orientation may enhance the firm's social responsibility by engaging in less aggressive tax avoidance strategies. This finding contributes to a broader literature on the impact of culture on accounting conservativism and corporate financial decisions (Cen & Doukas, 2017;Chen et al, 2018;Kanagaretnam et al, 2014;Ucar, 2019;Damsta et al, 2022;Zhang, 2022) and on the impact of stakeholder orientation on corporate valuation (Cornell & Shapiro, 2021;Fama, 2020).…”

Section: Introductionsupporting

confidence: 61%

For whom (and for when) is the firm governed? The effect of changes in corporate fiduciary duties on tax strategies and earnings management

Cumming

Tingle

Zhan

2021

Euro Fin Management

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The proper object of the fiduciary duties of corporate directors and officers is frequently described as the central question in all corporate law. We use the adoption of constituency statutes, which shift the loci of corporate managers' duties from shareholders to a wide range of stakeholders, as a quasi-natural experiment to determine the actual impact of fiduciary duties. We find that though the adoption of constituency statutes has no significant effect on measures of earnings management, it has a robust effect on firms' effective tax rate, which increases in a range between 0.570% and 1.903%. These results are robust in terms of various measures of the firm's effective tax rate. We provide explanations for why fiduciary duties apparently do not influence manager behaviours in relation to shareholders but do affect their behaviours in relation to the taxing authority. We argue that a change to fiduciary duties does not appear to alter the motivation of managers to maximize shareholder welfare EUROPEAN FINANCIAL MANAGEMENTWe owe special thanks to the Editor-in-Chief Professor John Doukas and two anonymous reviewers for their very timely and helpful feedback that substantially improved the paper. Also, we owe thanks to Hong Fan, Sofia Johan, and the seminar participants at the

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Section: Introductionsupporting

confidence: 61%

For whom (and for when) is the firm governed? The effect of changes in corporate fiduciary duties on tax strategies and earnings management

Cumming

Tingle

Zhan

2021

Euro Fin Management

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“…Bryan, Nash, and Patel (2015) find that culture is a significant determinant of compensation contracts. Supporting this view, other studies find that culture is linked to attitudes toward risk, firm risk taking (Cen & Doukas, 2017;Li, Griffin, Yue, & Zhao, 2013;Shao, Kwok, & Zhang, 2013;Ucar, 2019), and investment efficiency (Chen, Jin, Ma, & Xu, 2018). For example, Doukas and Zhang (2016) demonstrate that top managerial executive envy, a psychological trait, increases merger waves motivated by so-called envy-pay.…”

mentioning

confidence: 89%

Trust, regulation, and contracting institutions

Cline

Williamson

2020

Euro Fin Management

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This paper demonstrates that trust directly influences contracting efficiency. We document that trust reduces demand for contract regulation and positively relates to a high‐quality contracting environment, supporting a substitution hypothesis. Furthermore, contract regulation no longer leads to poor contracting outcomes. These findings suggest that lack of trust significantly explains inefficient contracting institutions. Based on interaction effects, we note that trust could complement formal enforcement in countries with weak regulation. As regulation increases, trust substitutes for contract regulation. Overall, trust positively promotes efficient contracting by reducing burdensome regulation and providing an alternative to formal contract enforcement.

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“…The results show that Confucianism can significantly reduce auditor changes and maintain contract stability. Woods and Lamond (2011) stress that the concepts of justice, selfdiscipline and self-cultivation in Confucianism can improve managers' moral self-discipline, reduce improper behavior, improve moral credit and accounting information Chen et al, 2019a) and raise moral standards. Moreover, loyalty in Confucianism can enhance both parties' trust in the contract (Wu and Wokutch, 2015) and increase social credit .…”

Section: Introductionmentioning

confidence: 99%

Confucianism and auditor changes: evidence from China

Wang

et al. 2022

MAJ

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Purpose The purpose of this study is to examine the impact of Confucianism on auditor changes by highlighting the role of the cultural embeddedness mechanism in audit contracts from the perspective of credit governance. Design/methodology/approach Using a unique sample of Chinese A-share listed firms from 2008 to 2018, this study uses logit regression as the baseline methodology while controlling for macro-level factors and firm-level characteristics, as well as industry and year fixed effects. This study also conducts different mediation/channel analyses, endogeneity tests (using two-stage least squares and difference-in-differences techniques) and robustness checks. Findings The findings show that the embeddedness of Confucianism in a corporation reduces auditor changes. Furthermore, the channel analyses (using moral self-discipline, social trust, professional ethics and the quality of accounting information as four potential channels) reveal that Confucianism can improve moral credit and consolidate the cultural foundation of credit governance. Specifically, the stronger the embeddedness of Confucianism, the more stable the auditing contract. Finally, Confucianism in formal and informal systems can be mutually substituted. Originality/value There is limited research on how culture affects auditing contracts. This study offers new contributions and extends the literature on the connection between cultural embeddedness and contract stability. Confucianism has the potential to strengthen the efficiency of credit governance and maintain the stability of contracts. This study offers a thoughtful orientation toward duly using Confucianism vis-à-vis credit governance.

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Confucianism, openness to the West, and corporate investment efficiency

Cited by 63 publications

References 108 publications

For whom (and for when) is the firm governed? The effect of changes in corporate fiduciary duties on tax strategies and earnings management

For whom (and for when) is the firm governed? The effect of changes in corporate fiduciary duties on tax strategies and earnings management

Trust, regulation, and contracting institutions

Confucianism and auditor changes: evidence from China

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