Do takeover threats influence corporate social responsibility? Evidence from hostile takeover vulnerability

Wongsinhirun, Nopparat; Chatjuthamard, Pattanaporn; Jiraporn, Pornsit; Phiromswad, Piyachart

doi:10.1002/csr.2264

Cited by 9 publications

(13 citation statements)

References 79 publications

(81 reference statements)

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“…Hence, less job security exacerbates managerial myopia and fosters short-termism (Ongsakul et al , 2022) which leads managers to behave myopically despite this weakening long-term shareholder value (Lee and Chung, 2016). Our evidence on the short-termism of managers in the case of an active takeover market is supported by the findings of prior studies that a stronger takeover market results in less investment that could produce long-term value for the firm (Lee and Chung, 2016; Ongsakul et al , 2022; Wongsinhirun et al , 2022). A recent study’s finding specifically focusing on asset redeployability supports our managerial myopia evidence as they found board independence (as an internal governance mechanism) is negatively associated with asset redeployability (Padungsaksawasdi et al , 2022).…”

Section: Discussionsupporting

confidence: 86%

“…If the takeover is successful, managers who mismanage their firms and pursue their personal benefits at the expense of firm performance are replaced by efficient managers (Mavruk and Carlsson, 2015). To protect their firms from takeovers, managers are likely to perform well, adopt effective strategies (Wongsinhirun et al , 2022) and undertake activities that maximize shareholder value in the long run (Ongsakul et al , 2021). Therefore, an active takeover market functions as a disciplining mechanism that helps to align the interests of managers and shareholders (Chakraborty et al , 2014).…”

Section: Prior Research and Hypothesis Developmentmentioning

confidence: 99%

“…Moreover, when managers are under intense monitoring, they are more induced to produce results quickly as they are evaluated more stringently and thus lack a long-term perspective on asset redeployability (Padungsaksawasdi et al, 2022). In support of this view, Lee and Chung (2016), Ongsakul et al (2022) and Wongsinhirun et al (2022) show that a stronger takeover market causes managerial myopia resulting in less investment in projects that would produce value in the long run. In particular, Padungsaksawasdi et al (2022) provide evidence of the link between corporate governance and asset redeployability.…”

Section: Agency Cost Mitigation Hypothesismentioning

confidence: 99%

“…First, we contribute to the literature on corporate governance [2]. An important body of corporate governance literature specifically focuses on the market for corporate control and examines its effect on a variety of corporate policies, strategies and outcomes like financial performance (Schranz, 1993), the cost of debt (Qiu and Yu, 2009), innovation performance (Chakraborty et al , 2014; Ongsakul et al , 2022), earnings management (Ge and Kim, 2014), managerial turnover (Lel and Miller, 2015), executive risk-taking incentives (Ongsakul et al , 2020), corporate integrity (Ongsakul et al , 2021), the strength of internal corporate governance (Lee and Chung, 2016), board composition and characteristics (Brickley and James, 1987; Chatjuthamard et al , 2021) and CSR performance (Wongsinhirun et al , 2022). Although several studies investigate the association between acquisitions and asset redeployability (Anand and Singh, 1997; Capron et al , 2001; Anand, 2004), they are more related to acquisition strategies, whereas our perspective is the effect of takeover threats on asset redeployability.…”

Section: Introductionmentioning

confidence: 99%

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Hostile takeover threats, managerial myopia and asset redeployability

Chatjuthamard

Boonlert-U-Thai²,

Jiraporn³

et al. 2022

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Purpose Exploiting two novel measures of takeover vulnerability and asset redeployability, this paper aims to investigate the effect of the takeover market on redeployable assets. Redeployable assets are those with alternative uses. Asset redeployability is a crucial concept in the literature on investment irreversibility. Design/methodology/approach In addition to the standard regression analysis, the authors execute several robustness checks: propensity score matching, entropy balancing, instrumental-variable analysis and generalized method of moment dynamic panel data analysis. Findings The authors’ results reveal that more takeover threats reduce asset redeployability significantly, corroborating the managerial myopia hypothesis. Hostile takeover threats reduce managers’ job security and thus induce them to myopically focus on the current utilization of assets in the short run, rather than how they may be deployed in the long run, resulting in less asset redeployability. Originality/value To the best of the authors’ knowledge, this study is the first to investigate the effect of takeover threats on asset redeployability. Because the authors’ measure of takeover vulnerability is principally based on the staggered passage of state legislations, which are plausibly exogenous, the authors’ results likely reflect causality, rather than merely an association.

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Section: Discussionsupporting

confidence: 86%

Section: Prior Research and Hypothesis Developmentmentioning

confidence: 99%

Section: Agency Cost Mitigation Hypothesismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Hostile takeover threats, managerial myopia and asset redeployability

Chatjuthamard

Boonlert-U-Thai²,

Jiraporn³

et al. 2022

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“…(2022). Additionally, Wongsinhirun et al . (2022) report a worsening impact on corporate social responsibility (CSR), while Chatjuthamard et al.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

CSR inequality, managerial myopia and hostile takeover threats

Chatjuthamard,

Chintrakarn,

Jiraporn

et al. 2024

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PurposeExploiting a novel measure of hostile takeover exposure primarily based on the staggered adoption of state legislations, we explore a crucial, albeit largely overlooked, aspect of corporate social responsibility (CSR). In particular, we investigate CSR inequality, which is the inequality across different CSR categories. Higher inequality suggests a less balanced, more lopsided, CSR policy.Design/methodology/approachIn addition to the standard regression analysis, we perform several robustness checks including propensity score matching, entropy balancing and an instrumental-variable analysis.FindingsOur results show that more takeover exposure exacerbates CSR inequality. Specifically, a rise in takeover vulnerability by one standard deviation results in an increase in CSR inequality by 4.53–5.40%. The findings support the managerial myopia hypothesis, where myopic managers promote some CSR activities that are useful to them in the short run more than others, leading to higher CSR inequality.Originality/valueOur study is the first to exploit a unique measure of takeover vulnerability to investigate the impact of takeover threats on CSR inequality, which is an important aspect of CSR that is largely overlooked in the literature. We aptly fill this void in the literature.

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Corporate purpose and early disaster response: Providing evidence of dynamic materiality?

Arias,

Barriola,

Loza Adaui

2024

Bus Strat Env

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This paper examines the relationship between corporate purpose and disaster response. To that aim, we use a unique dataset generated by Just Capital's COVID‐19 response tracker that characterizes the early responses of 928 companies included in the Russell 1000 Index generated by the COVID‐19 pandemic. We marry this data to the Business Roundtable Statement on the Purpose of a Corporation (BRT‐CPS) signatories list, which includes 210 firms that declared “a fundamental commitment to all stakeholders” as their corporate purpose. We estimate the differential impact of BRT‐CPS signees on the rest. After controlling our results with financial indicators and environmental, social, and governance (ESG) data, we convey that BRT‐CPS signees were more likely to develop strategies that benefited their surrounding communities and other stakeholders. Moreover, corporations with high ESG were less likely to have an early response that directly benefited stakeholders other than shareholders, except for layoffs and unpaid leave. Finally, we discuss the outcomes considering the symbolic management theory, corporate purpose literature, and its relation to stakeholder management.

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Do takeover threats influence corporate social responsibility? Evidence from hostile takeover vulnerability

Cited by 9 publications

References 79 publications

Hostile takeover threats, managerial myopia and asset redeployability

Hostile takeover threats, managerial myopia and asset redeployability

CSR inequality, managerial myopia and hostile takeover threats

Corporate purpose and early disaster response: Providing evidence of dynamic materiality?

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