Does corporate social responsibility mediate the influence of national culture on investment inefficiency? <scp>Firm‐level</scp> evidence from Asia Pacific

Rehman, Ijaz Ur; Shahzad, Faisal; Latif, Khawaja Fawad; Nawab, Noman; Rashid, Abdul; Hyder, Shabir

doi:10.1002/ijfe.1972

Cited by 18 publications

(7 citation statements)

References 94 publications

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“…It refers to the firm’s failure to undertake all projects with positive NPV (Gomariz and Ballesta, 2014). Following prior research works (Benlemlih and Bitar, 2018; Rehman et al , 2021), our study measures investment inefficiency using Biddle et al ’s (2009) model. In the model, the investment level is estimated as a function of sale growth as follows: …”

Section: Methodsmentioning

confidence: 99%

“…Specifically, we proxy investment inefficiency (absINV_INEFF) as the absolute value of residuals obtained from equation (1). Higher values of absolute residuals indicate high investment inefficiency (Rehman et al , 2021). We also group sample firms based on the residuals computed into over- and underinvestment groups, following Benlemlih and Bitar (2018).…”

Section: Methodsmentioning

confidence: 99%

“…ICs) that can mitigate the risk of default and add value to firms. Fourthly, a growing body of research works relates investment efficiency to corporate social responsibility (Benlemlih and Bitar, 2018), national culture (Rehman et al , 2021), boardroom gender diversity (Farooq et al , 2022) or ICs (Eulaiwi et al , 2020). Our research is expected to contribute to this line of literature by suggesting investment inefficiency as a potential moderating and/or mediating factor that affects the ability of an effectively performing IC to reduce FDR.…”

Section: Introductionmentioning

confidence: 99%

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Does investment committee mitigate the risk of financial distress in GCC? The role of investment inefficiency

Al‐Dhamari

Al-Wesabi²,

Farooque

et al. 2023

IJAIM

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Purpose The purpose of this study is to empirically examine how the voluntary formation of a specialised investment committee (IC) and IC characteristics affect financial distress risk (FDR) and whether such impact is influenced by the level of investment inefficiency. Design/methodology/approach The authors use a large sample of Gulf Cooperation Council (GCC) non-financial companies during 2006–2016. A principal component analysis is done to aggregate and derive a factor score for IC characteristics (i.e. independence, size and meeting) as a proxy for the effectiveness of IC. This study also uses three measurements of FDR to corroborate the findings and partitions sample firms into overinvesting and underinvesting companies to examine the potential impact of investment inefficiency on the IC–FDR nexus. Findings Using feasible generalised least square estimation method, the authors document that the likelihood of financial distress occurrence decreases for firms with separate ICs. The authors also find that firms with effective ICs enjoy lower FDR. In other words, the probability of financial distress minimises if the IC is large, meets frequently and has a high number of independent directors. However, the authors find neither any moderation nor any mediation effect of investment inefficiency for the impact of IC and IC attributes on FDR. The additional analysis indicates the expected benefits of an actively performing IC are amplified for firms with risk of both over- and underinvestment. These findings are robust to alternative measures of FDR and investment inefficiency, sub-sample analysis and endogeneity concerns. Originality/value This study, to the best of researchers’ knowledge, is the first to provide evidence in GCC firms’ perspective, suggesting that the existence of an effective IC is associated with a lower risk of financial distress, and to some extent, the economic benefits of IC are aggrandised for companies with a high probability of over- and underinvestment problems. These results are unique and contribute to a small but growing body of literature documenting the need for effective ICs and their economic consequences on investment efficiency in the FDR environment. The findings of this study carry valuable practical implications for regulatory bodies, policymakers, investors and other interested parties in the GCC region.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Does investment committee mitigate the risk of financial distress in GCC? The role of investment inefficiency

Al‐Dhamari

Al-Wesabi²,

Farooque

et al. 2023

IJAIM

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“…Comprehensive CSR index is used for measuring CSRP by combining the environmental performance, social performance and corporate governance performance (ESG) scores (Naseem et al 2020, Rehman et al 2020; Samet & Jarboui, 2017) retrieved from Thomson Reuters Data Stream. As there is no theoretical background on how to calculate each measure, thus the principles recognized by Sharfman (1996); Waddock and Graves (1997) are used.…”

Section: Research Methodology and Modelmentioning

confidence: 99%

Corporate social responsibility performance and information asymmetry: The moderating role of analyst coverage

Naqvi

Shahzad

Rehman³

et al. 2021

Corp Soc Responsibility Env

Self Cite

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The study investigates the moderating effect of analyst coverage on the relationship between corporate social responsibility performance and information asymmetry.Data for the period 2008-2018 encompass 208 listed firms from nine different sectors in China. The study employs the fixed effect regression to identify dynamic relationships. The findings suggest that firms engaged in corporate social responsibility activities confront a lower level of information asymmetry. The results also indicate that analyst coverage moderates the relationship between corporate social responsibility performance and information asymmetry and that analyst coverage may play an imperative role in reducing the level of information asymmetry for the firm. Our findings advance the understanding of the association between corporate social responsibility performance and information asymmetry with the moderating effect of analyst coverage. The study investigates the moderating effect of analyst coverage on the relationship between corporate social responsibility performance and information asymmetry. Data for the period 2008-2018 encompass 208 listed firms from nine different sectors in China. The study employs the fixed effect regression to identify dynamic relationships. The findings suggest that firms engaged in corporate social responsibility activities confront a lower level of information asymmetry. The results also indicate that analyst coverage moderates the relationship between corporate social responsibility performance and information asymmetry and that analyst coverage may play an imperative role in reducing the level of information asymmetry for the firm. Our findings advance the understanding of the association between corporate social responsibility performance and information asymmetry with the moderating effect of analyst coverage. Moreover, present study contributes to the corporate social responsibility practices in China, it provides a sound base for policymakers for adopting corporate social responsibility performance activities.

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“…Comprehensive CSRP index is used for measuring CSRP, as (Attig et al , 2016; Cheng et al , 2014; Naseem et al , 2020; Rehman et al , 2020; Samet and Jarboui, 2017) combines the environmental, social and corporate governance scores retrieved from Thomson Reuter’s data stream. As there is no theoretical background on how to calculate each measure, thus the principles recognized by Sharfman (1996), Waddock and Graves (1997) is used.…”

Section: Research Methodology and Modelmentioning

confidence: 99%

Corporate social responsibility performance and information asymmetry: the moderating role of ownership concentration

Rehman¹,

Naqvi

Shahzad

et al. 2021

SRJ

Self Cite

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Purpose This paper aims to examine the moderating effect of ownership concentration on the relationship between corporate social responsibility performance (CSRP) and information asymmetry using a sample of Chinese firms. Design/methodology/approach The authors use a sample of 208 listed firms from nine different sectors in China over the period of 2008–2018. They use the generalized method of moment approach to examine the dynamic relationship between CSRP, information asymmetry and ownership concentration. CSRP index is constructed using environmental performance, social performance and corporate governance performance measures. Findings The results indicate that CSRP positively affects the information asymmetry. Moreover, by taking ownership concentration as a moderating variable, the results indicate that ownership concentration negatively moderates the association between CSRP and information asymmetry. Research limitations/implications The findings of the study advance the understanding of CSR practices in China. The findings have important implications for the regulators and managers in China for adopting socially responsible activities for the improvement of firm performance and protecting shareholder rights. Originality/value The study extends the existing research on the association between CSRP and information asymmetry by including the ownership concentration as a moderating variable. The research showed that CSR plays an important role in reducing the informational gap between managers and outside stakeholders. However, the relationship between CSR and information asymmetry is not studied yet with the moderating role of ownership concentration.

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Does corporate social responsibility mediate the influence of national culture on investment inefficiency? Firm‐level evidence from Asia Pacific

Cited by 18 publications

References 94 publications

Does investment committee mitigate the risk of financial distress in GCC? The role of investment inefficiency

Does investment committee mitigate the risk of financial distress in GCC? The role of investment inefficiency

Corporate social responsibility performance and information asymmetry: The moderating role of analyst coverage

Corporate social responsibility performance and information asymmetry: the moderating role of ownership concentration

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