Economic Policy Uncertainty and Board Monitoring: Evidence From Ceo Turnovers

Frye, Melissa B.; Pham, Duong T.

doi:10.1111/jfir.12222

Cited by 18 publications

(6 citation statements)

References 48 publications

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“…Corporate charitable donation is used as the proxy variable of CP, which is calculated by the ratio of enterprise’s total amount of donations to the main business revenue. With reference to the approach of Frye and Pham (2020) , the discretionary accruals estimated by the modified Jones model are used as the indicator of the monitoring function (Monitor). The larger the value, the more obvious the monitoring function.…”

Section: Methodsmentioning

confidence: 99%

The Functions of the Board of Directors in Corporate Philanthropy: An Empirical Study From China

Pan

Huang

2022

Front. Psychol.

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As an important way for enterprises to fulfill social responsibility, corporate philanthropy (CP) has attracted much attention from the academic community. But there are still few well-targeted theoretical and empirical studies on what functions the board of directors (BOD) should perform to better fulfill philanthropic responsibilities. Taking this deficiency as a breakthrough, this study focuses on Chinese state-owned and private enterprises to analyze and test the functions performed by the BOD in CP. Based on the sample of Chinese A-share listed companies from 2008 to 2019, the empirical results show that the BOD of state-owned enterprises mainly performs a monitoring function in CP while that of private enterprises mainly performs a consulting function. The above findings remain valid when potential biases in the quantitative analysis are considered. Further research shows that environmental dynamism and board fault lines inhibit the performance of the above two functions. The contributions of the study include clarifying the functional characteristics of the BOD in CP and its influencing factors, revealing new theories to the formation mechanism of CP, which provide references for enterprises to optimize philanthropic decision-making. The limitation should also be emphasized that our findings are based only on Chinese contexts.

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Section: Methodsmentioning

confidence: 99%

The Functions of the Board of Directors in Corporate Philanthropy: An Empirical Study From China

Pan

Huang

2022

Front. Psychol.

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“…Because the information disclosed by managers is often more accurate than that obtained by investors, EPU may also reduce information asymmetry, thereby reducing the demand for the governance functions of insurance companies. In addition, EPU reduces executive turnover (Frye and Pham 2020 ). High EPU complicates business environments, so to improve the stability of their internal business environments and enhance their abilities to mitigate external risks, firms tend to reduce executive turnover.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Economic policy uncertainty and directors and officers liability insurance: a perspective on capital market pressures

Xie

Lin

2023

Geneva Pap Risk Insur Issues Pract

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This study investigates the effects of economic policy uncertainty (EPU) on corporate purchases of directors and officers liability insurance from the perspective of capital market pressures. Using data on A-share Chinese listed firms from 2010 to 2021, our theoretical analysis and empirical tests reveal that higher levels of EPU increase purchases. The theoretical analysis and mediating tests reveal that capital market pressures play a mediating role in the relationship between EPU and purchases. This study also finds that the indirect ways in which EPU increases purchases consider the need for firms to mitigate litigation risks and take advantage of insurance governance. The heterogeneous analysis and tests reveal that EPU increases purchases more significantly in firms that have higher managerial agency costs, have lower corporate transparency, and are in industries with higher competition. The findings are significant for improving the risk management system in China’s capital markets.

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“…(2018) show that uncertainty makes forecasting earnings more difficult. The evidence presented by Frye and Pham (2020) also highlights that performance assessment becomes more difficult when EPU is high and boards of directors may want to avoid making mistakes, suggesting that firms may be reluctant to divest. Thus, we posit hypothesis 1A: Hypothesis 1A : EPU is inversely related to the likelihood of divestitures. …”

Section: Hypothesesmentioning

confidence: 99%

Economic policy uncertainty and corporate divestitures

Frye,

Pham,

Whyte

2023

Business Fin & Account

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We examine the impact of economic policy uncertainty (EPU) on the propensity of firms to engage in divestitures. We find that EPU is positively related to the likelihood of divestitures in general and cashflow‐generating divestitures in particular. Consistent with the desire for cash being a driving force behind divestitures, we find that underperforming firms are more likely to engage in cashflow‐increasing divestitures. Firms that do not pay dividends and are relatively more reliant on government funding are also more likely to pursue sell‐offs and carve‐outs when economic uncertainty is elevated. We find no evidence that firms prefer staged divestitures (spin‐offs and carve‐outs) over non‐staged (sell‐offs) when EPU is high. Instead, EPU is positively related to the likelihood of non‐staged divestitures suggesting that firms do not wait until uncertainty is resolved to pursue deals with a high degree of irreversibility. Our findings point to EPU as a motivator for poor‐performing firms to shore up cash during times of EPU.

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Economic Policy Uncertainty and Board Monitoring: Evidence From Ceo Turnovers

Cited by 18 publications

References 48 publications

The Functions of the Board of Directors in Corporate Philanthropy: An Empirical Study From China

The Functions of the Board of Directors in Corporate Philanthropy: An Empirical Study From China

Economic policy uncertainty and directors and officers liability insurance: a perspective on capital market pressures

Economic policy uncertainty and corporate divestitures

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