The pursuit of economic opportunity has frequently put transnational manufacturing enterprises in the spotlight, accused of contributing to, if not causing, economic hardship, social deprivation, unsustainable growth, labour exploitation, resource plundering and ecological degradation in home and host countries. A substantial part of international trade now consists of intra-firm sales, or commercial transactions between units of the same business corporation, within or beyond the national borders of the parent company. Known as transfer pricing and viewed as a (...) legitimate business opportunity by transnational corporations, it is often used to misrepresent financial success and evade taxation. This has recently instigated many fiscal agencies and governments to take more draconian measures than ever before to protect national financial interests. However, while the fiscal legality of transfer pricing practices is now carefully scrutinized, the heightened interest in its tax aspects has neglected the considerable ethical issues it entails. Unethical transfer pricing behaviour consumes scarce resources, causes costs but does not create value. This paper identifies and discusses some of these ethical issues and assesses their implications for the internalisation of trade, the design of transfer pricing systems, and international tax rules. Opportunities for future research are also outlined. (shrink)

In this paper, we develop a conceptual framework of the intra-firm transfer of best practices in moral reasoning by integrating three streams of literature: internal knowledge transfer in strategic management, moral reasoning and epistemology in philosophy and business ethics, and leader–member exchange in human resource management. We propose that characteristics of moral reasoning (nature of moral knowledge, tacitness of moral reasoning and causal ambiguity), source characteristics (moral development of leaders), target characteristics (integrity capacity and moral development of subordinates), (...) leader–member exchange and internal ethical climate influence the transfer of best practices in moral reasoning. (shrink)

The present article explores the historical sections of Grotius's De iure praedae Commentarius bearing the following fundamental but very important questions in mind: What did Grotius actually know about the Portuguese Estado da Índia at the time of drafting the treatise between 1604 and 1606/8? What did he know about the Luso-Asian trading regime or Asian trading practices at large? Using the published correspondence of Grotius, archival documentation, manuscript fragments as well as unpublished reading notes and drafts, a case will (...) be made that he had in fact few sources at his fingertips. This insight serves fundamentally to refute older assumptions, expounded notably by Robert Fruin and C.H. Alexandrowicz, that the young Grotius conducted independent research in the VOC company archives, or had immersed himself with Asian maritime codes or commercial practices. (shrink)

During the last two decades, the intra-industry trade between western companies and former socialist enterprises in Central and Eastern Europe gradually shifted from the subcontracting of marginal operations such as final assembly to the outsourcing of products and intermediate inputs. To further enhance their competitiveness, firms in Central and Eastern Europe have yet to take one more step forward: integrate services with manufacturing. Developing such capabilities hinges, aside from intensive training and learning on the existence of functional interactive (...) knowledgebased innovation systems. Whereas Central and East European economies exhibit conspicuous weaknesses in this last respect, they still possess a countervailing advantage that is apt to lure foreign investors into the region: lower wage rates relative to western countries across all industries and skill levels. Offshoring therefore seems to be the most appropriate means to reconcile the two sides of the coin. (shrink)

They use the language of ethics, but is it just a game?

Various advocacy groups and primarily domestic-focused firms in developed countries have been pushing governments to include a "social clause" in trade treaties with less developed countries. Such a clause is designed to link trading access to markets in developed countries with improvements in working conditions in poor nations. The implications of such a clause for internationally-focused firms and how managers can effectively deal with human rights issues in their foreign operations are examined. Various constituencies in this debate are identified (...) and an integrated response system on the part of firms is presented. It is suggested that the best policy for firms to adopt would be to acknowledge the relevance of the social clause in today's global economy and work closely with the various advocacy groups to ensure continuing public support while avoiding overly restrictive clauses in international trading agreements. (shrink)

Various advocacy groups and primarily domestic-focused firms in developed countries have been pushing governments to include a "social clause" in trade treaties with less developed countries. Such a clause is designed to link trading access to markets in developed countries with improvements in working conditions in poor nations. The implications of such a clause for internationally-focused firms and how managers can effectively deal with human rights issues in their foreign operations are examined. Various constituencies in this debate are identified (...) and an integrated response system on the part of firms is presented. It is suggested that the best policy for firms to adopt would be to acknowledge the relevance of the social clause in today''s global economy and work closely with the various advocacy groups to ensure continuing public support while avoiding overly restrictive clauses in international trading agreements. (shrink)

We examine the unique nature of agency problems within publicly traded family firms by investigating the earnings management decision of dominant family owners relative to non-family. To do so, we draw upon literature demonstrating that family owners are loss averse with respect to the family’s socioemotional wealth, or the affective endowment derived from firm ownership and control. Our theory and findings suggest that potential reputational consequences of earnings management lead family principals to engage in less of this practice relative (...) to non-family firms, and that founder family firms are less likely than non-founder family firms to use earnings management. Moreover, the family-firm effect varies with the firm size, the degree of CEO entrenchment, and the firm’s stock structure. We provide important insights regarding differences between family and non-family principals in the use of unethical accounting practices, thereby extending agency theory and advancing an underdeveloped research area. (shrink)

This study investigates the interaction between suppliers and fraudulent customer firms from the perspective of reputation damage and reputation recovery. Specifically, reputation damage from the regulatory penalty for corporate fraud induces the trust crisis and suppliers respond to fraudulent firms by reducing the trade credit supply. To repair a damaged reputation and rebuild the trust, fraudulent firms raise the ratio of prepayment to purchase volume when purchasing from small suppliers and increase the proportion of purchase from large suppliers in (...) the next year. Channel analysis shows that the declining trust is one of potential mechanisms to reduce the trade credit. Furthermore, the negative effect is more pronounced for fraudulent firms with non-related party suppliers, higher supplier concentration, less analyst coverage, and for fraudulent firms located in regions with less-developed financial environment. Additionally, supplier sanctions have a spillover effect on non-fraudulent customer firms in the same industry. The conclusions are robust to a series of checks, including PSM–DiD, firm and year fixed effect, the alternative measure for trade credit financing, the industry-year fixed effect and the consideration of the monetary policy and financial crisis. (shrink)

ABSTRACT:Anomie is a condition in which normative guidelines for governing conduct are absent. Using survey data from a sample of U.S. manufacturing firms, we explore the impact of internal (cultural) and external (environmental) determinants of organizational anomie. We suggest that four internal organizational factors can generate or suppress organizational anomie, including strategic aggressiveness, long-term orientation, competitor orientation, and strategic flexibility. Similarly, we argue that external contextual factors, including competitive intensity and technological turbulence, can influence organizational anomie. We extend anomie and (...) ethics research by considering the impact of these firm cultural and environmental factors according to whether firms are publicly-traded or privately-held. Findings demonstrate that a number of firm cultural and environmental factors can generate or reduce anomie in firms. Moreover, strategic aggressiveness, long-term orientation, and strategic flexibility influence organizational anomie differently depending on whether the firm is publicly-traded or privately-held. Theoretical and practical implications of our findings are discussed. (shrink)

This paper addresses the impact of the unethical business conduct of a few individuals that shook the financial market in 1986. Specifically, in the study undertaken for this paper, the wealth status of the shareholders of securities firms was examined in relation to the public disclosure of the insider-trading scandals involving Dennis Levine, Ivan Boesky, and their confederates. It was hypothesized that the expected market-adjusted stock returns for the securities firms would be negative as a result of the scandals. The (...) findings of the study supported the hypothesis. (shrink)

Despite the millions of hours donated to charity each year by employees on behalf of their employers there has been relatively little research into the motives for such pro-social behavior. The current paper extends Peterson’s (2004, Journal of Business Ethics 49, 371) study by exploring a unique form of employee volunteerism identified as intra-organizational, or employer-sanctioned volunteerism, and uniting the heretofore distinct charity support and organizational citizenship behavior literatures. Results of a preliminary study revealed that employee participation in such (...) intra-organizational volunteer programs is motivated by charity, firm, and personal benefits. Managerial and research implications are presented. (shrink)

In On Trade Justice, Risse and Wollner defend an account of trade justice on which the central requirement, applying to both states and firms, is a requirement of non-exploitation. On their view, trade exploitation consists in ‘power-induced failure of reciprocity’, which generates an unfair distribution of the benefits and burdens associated with trade relationships. In this paper, I argue that while there are many appealing features of Risse and Wollner’s account, their discussion does not articulate and (...) develop the unified picture of states’ and firms’ obligations that they aim to provide as clearly as it might have. In particular, it is, I claim, unclear exactly how they understand the relationship between the fairness-based requirements that apply to states and those that apply to firms. I argue that there are two types of accounts that they might accept: a transactional account and a structural account. I offer reasons to think that there are reasons to prefer a structural account. In addition, I note some of the key implications of accepting such an account, and suggest that if Risse and Wollner accept these implications and revise other aspects of their view accordingly, the result is a plausible and unified account of what trade justice requires. (shrink)

This paper examines the influence on product innovation of factors based on a company’s transformation and exploitation of knowledge gathered from its intra-organizational relationships. Specifically, this paper analyses the influence of intra-organizational social capital on realized absorptive capacity. Moreover, it analyses the mediating role of RACAP on the relationship between internal SC and product innovation. Based on a sample of companies from the Spanish biotechnological and pharmaceutical industries, two hypotheses were tested using a structural equations model and the (...) partial least squares technique. The results support both hypotheses, suggesting that the development of strong and tightly knit links based on a common understanding and trust among company members lead the firm to develop dynamic capabilities for transforming and exploiting knowledge acquired externally, which fosters innovation based on new product development. Research limitations, implications and future research are also discussed by the authors of the paper. (shrink)

Building on agency and resource-based view theories, this study investigates the level of environmental disclosure (ED) practices of family versus non-family firms and explores the moderating role of board gender diversity. We test our hypotheses on a 3-year (2018–2020) panel data sample comprising 324 observations of Italian small- and medium-sized enterprises traded on the Euronext Growth Milan. Findings show that, compared to non-family firms, companies with a family firm status are characterized by lower levels of ED. Gender diversity on (...) the board, however, moderates this relationship, reducing this gap, to the extent that the family firm status is associated with higher ED when the number of women directors is high enough to constitute a critical mass. We consequently contribute to the studies on family business, corporate governance, and corporate social responsibility. (shrink)

As multinational firms explore new and promising national markets two of the most crucial elements in the strategic decision regarding market-entry are the level of corruption and existing trade barriers. One form of corruption that is crucially important to firms is the theft of intellectual property. In particular, software piracy has become a hotly debated topic due to the deep costs and vast levels of piracy around the world. The purpose of this paper is to assess how laissez-faire (...) class='Hi'>trade policies and corruption affect national software piracy rates. Using invisible hand theory, as well as literature from the fields of international strategy and ethics, formal research hypotheses are posited and tested. Results suggest that corruption mediates the relationship between economic freedom and software piracy. Implications for multinational managers and researchers are also addressed. (shrink)

This article introduces and develops the concept of trade narrative to understand how business sectors defend against public disapproval and the threat of increased regulation or removed subsidy. Trade narrative works by accumulating lists of benefits and occluding costs, and is created by consultants for economic interests organized via trade associations. This represents an under-analysed ‘policy-based evidence machine’, the aim of which is to format the discourses of the media and political classes about the contribution of the (...) sector in ways that frame political choice about what is thinkable and doable. In doing so it supports elite power by providing a relay for intra-elite communication. Using illustrations from privatized railways, banking and pharmaceuticals in the UK and US, the argument explores how the causal arrow runs in the opposite direction from that supposed in most discussion of discourse-economy relations in the field of cultural economy. (shrink)

Corporate social irresponsibility (CSI) and other questionable business incidents that appear to harm stakeholders frequently afflict firms yet draw disparate investor reactions. We address this disparity by investigating the association between firm legal orientation and investor reactions to CSI. We hypothesize the proportion of board members and top management team (TMT) executives with law degrees affects investor perceptions of firm foresight, and in turn, their judgment of blame and consequent punishment. Based on abnormal returns to 629 announcements of (...) CSI and 308 publicly traded S&P 500 firms, we find that both too small and too large a proportion of board of directors and TMT members with law degrees lead investors to mete out harsher punishment. This inverted u‐shaped link is further affected by firm size, firm risk, and industry competition. Our investigation sheds light on the link between executive education and financial performance in the context of CSI and investor perceptions of foresight. (shrink)

Applied general equilibrium models have received considerable attention and scrutiny in the public debate over the North American Free Trade Agreement. This collection brings together the leading AGE models that have been constructed to analyse NAFTA. A variety of approaches to modelling trade liberalization are taken in these studies, including multi-country and multi-sectoral models, models that focus on institutional features of particular sectors affecting multinational firms and rules of origin, and models with some inter-temporal structure. Further, by constructing (...) stylized models, theoretical linkages have been identified that drive numerical results in the larger AGE models. The volume also assesses what can be learned about the likely economic effects of NAFTA from the collection of studies taken as a whole. Areas in need of further study have been highlighted. (shrink)

In keeping with an already entrenched paradigm, international trade in tasks exerts upward pressure upon skilled workers’ wages in both home and host countries. Yet certain empirical evidence from intra-European trade shows that sometimes things occur in reverse, that is high skilled workers’ wages in home countries may decline as a result of offshoring, an outcome that looks like an inverse “maquiladora effect”. I try to show that such deviations do not fly in the face of mainstream (...) theory but rather, they reflect the different conditions under which offshoring is performed today as compared to the ones prevailing two decades ago. (shrink)

This study revisits the relation between corporate performance and corporate social responsibility in the context of a major shift in firms’ credit risk status. Relying on corporate credit rating as a performance indicator, we examine whether firms under the scrutiny of rating agencies trade-off CSR engagement for credit quality improvement. To explore whether firms adjust their CSR engagement after a focal rating change, we focus on the investment–speculative grade threshold because of its importance in accessing the public debt market. (...) We find that firms that lose the investment grade rating subsequently increase CSR engagement. We also uncover that improving CSR engagement helps firms restore their credit ratings ex post. Our findings support the view of CSR engagement as a valuable risk management strategy. (shrink)

We propose that local corruption distorts the allocation of government-controlled resources and impairs the contract environment, thereby reducing firms’ use or suppliers’ provision of trade credit. We use a sample of Chinese-listed firms from 2007 to 2020 to examine the role of local corruption in firms’ access to trade credit and find that the level of local corruption is negatively related to firms’ trade credit use. This effect is more pronounced in firms with weak (vs. strong) internal (...) governance, slack (tight) external monitoring and high (low) supplier concentration. The results of path analysis show that local corruption extends short-term bank loans as well as government subsidies and impairs firms’ accounting quality, thereby inhibiting firms’ demand for or suppliers’ provision of trade credit. Moreover, the post-2012 anti-corruption campaign in China plays a significant role in correcting the misallocation of trade credit caused by corruption. The results of this study illuminate the negative external effects of local corruption on trade credit. (shrink)

This book examines transaction cost economics, the influential theoretical perspective on organizations and industry that was the subject of Oliver Williamson's seminal book,Markets and Hierarchies. Written by leading economists, sociologists, and political scientists, the essays collected here reflect the fruitful intellectual exchange that is occurring across the major social science disciplines. They examine transaction cost economics' general conceptual orientation, its specific theoretical propositions, its applications to policy, and its use in systematic empirical research. The chapters include classic texts, broad review (...) essays, reflective commentaries, and several new contributions to a wide range of topics, including organizations, regulations and law, institutions, strategic management, game theory, entrepreneurship, innovation, finance, and technical information. The book begins with an overview of theory and research on transaction cost economics, highlighting the specific accomplishments of scholars working within the perspective and emphasizing the enormous influence that transaction cost reasoning exerts on the social sciences. The following section covers conceptual uses for the transaction cost framework and major theoretical or methodological elements within it, such as bounded rationality. While advancing some interesting theoretical propositions, these chapters are in fact more ambitious: each examines a specific field, area, or research program and attempts to fashion a new way of thinking about research questions. In the section on industrial applications, contributors study the application of transaction cost theory to a range of problems in utilities, telecommunications, laser printing, and early international trade. The book closes with four microanalytical chapters that delve into the structures and behaviors of specific aspects of firms and organizations: boards of directors, equity structures, employment models, human resource policies and practices, technology strategies, and innovation events. Firms, Markets, and Hierarchies collects excellent social science work on transaction cost economics, taking stock of its status, charting its future development, and fostering its renewal and evolution. (shrink)

Economic openness, both in terms of increased international trade exposure and enhanced inter-firm networking, has been a key element of China’s economic emergence since the implementation of market reforms and the “opening-up policy” over 30 years ago. Unfortunately, these changes have also coincided with the increased incidence of bribery and corruption. Both in general, and in the specific context of China, research on the relationship between a firm’s tendency toward openness and its propensity to engage in bribery (...) is scarce. This study seeks to fill this gap based on empirical evidence provided by a large sample of Chinese firms. The findings of the study reveal that firms’ increased networking and openness tend to occur contemporaneously with greater bribery and corruption. We suggest that this may be due to the misuse of guanxi-based networks that coincide with the presence of firms’ open network strategies, heightened by the potential loss of resource and capability heterogeneity (and hence reduced competitive advantages) in the context of openness. We further find that firms paying bribes do so as an attempt to overcome unnecessary bureaucratic processes and ineffective institutional support that might tend to hinder their development. (shrink)

Workplace democracy is often defined, and has recently been defended, as a form of intra-firm governance in which workers have control rights over management with no ownership requirement on their part. Using the normative tools of republican political theory, the paper examines bargaining power disparities and moral hazard problems resulting from the allocation of control rights and ownership to different groups within democratic firms, with a particular reference to the European codetermination system. With various qualifications related to potentially (...) mitigating factors, such as workforce and shareholder composition or risk aversion and reallocation, the paper contends that forms of workplace democracy in which workers control and own the firm, such as cooperativism, are preferable to other forms, such as codetermination, in which ownership and control rights are formally separated. (shrink)

This paper addresses the relationship between corporate political activities (CPA) and a firm’s customer orientation (CO) from a strategy perspective. Focussing on the potential negative implications of CPA, the paper argues that CPA over time may result in path-dependency for the focal strategic system and lead to a low level of customer orientation and strategic rigidity to readdress an appropriate level of CO.

This paper addresses the issue of the influence of global governance institutions, particularly international sustainability standards, on a firm’s intra-organizational practices. More precisely, we provide an exploratory empirical view of the impact of the Global Reporting Initiative on a multinational corporation’s corporate social responsibility management practices. We investigate standard compliance by comparing the stated intention of the use of the GRI with its actual use and the consequent effects within the firm. Based on an in-depth case study, (...) our findings illustrate the processes and consequences of the translation of the GRI within the organization. We show that substantive standard adoption can lead to unintended consequences on CSR management practices; specifically it can influence the management structure and CSR committee function; the choice of CSR activities, the relationships between subsidiaries, the temporal dimension of CSR management and the interpretation of CSR performance. We also highlight the need to look at the relationship dynamics between standards. Finally, we illustrate and discuss the role of reporting and its influence on management in order to better understand the internal issues arising from compliance with standards. (shrink)

Due to several recent scandals, Business Ethics is now firmly embraced. Whereas in the 1980s and early 1990s there were serious doubts expressed about combining ethics and business, the link now seems to have become self-evident. Fundamental questions about the tensions between business and ethics however continue to receive little attention. In this paper, based upon a debate concerning the Fair Trade company, the strains between business and ethics are analyzed. The article shows how several great thinkers have already (...) considered this tension. Three ways to conceptualize the tension between business and ethics have been distinguished, and these are outlined in the paper. In one approach, ethical entrepreneurship, value tensions are perceived as a source for entrepreneurship. However, this approach presupposes pluralistic ethics. Thinking only in terms of black and white is seen as blocking the ability to adequately handle the tension between business and ethics. Opting for ‘‘ethical entrepreneurship’’, as by Fair Trade, has fundamental and important consequences for the company’s communication policy. (shrink)

Fair Trade companies have pulled off an astonishing tour de force. Despite their relatively small size and lack of resources, they have managed to achieve considerable commercial success and, in so doing, have put the fair trade issue firmly onto industry agendas. We analyse the critical role played by social capital in this success and demonstrate the importance of values as an exploitable competitive asset. Our research raises some uncomfortable questions about whether fair trade has 'sold out' (...) to the mainstream and whether these companies have any independent future or whether their ultimate success lies in the impact they have had on day-to-day trading behaviour. (shrink)

This study tests an integrative model of corporate political action, the filter model, based on the behavioral theory of the firm. The filter model posits that external political, economic, and industry environments are mediated by organizational structures and resources to affect a firm’s political actions. The authors rate the filter model’s predictive power against that of an economic-based direct-effects model by examining the efforts of about 1,100 U.S.-domiciled manufacturing firms to influence trade policy. LISREL analysis demonstrates that (...) the integrative filter model provides a superior explanation of corporate political action. (shrink)

Recent history reveals a series of rogue traders, jeopardizing their employers’ assets and reputation. There have been instances of unauthorized acting in concert between traders, their supervisors and/or firms’ decision makers and executives, resulting in collusive rogue trading. We explore organizational misbehaviour theory and explain three major collusive rogue trading events at National Australia Bank, JPMorgan with its London Whale and the interest reference rate manipulation/LIBOR scandal through a descriptive model of organizational/structural, individual and group forces. Our model draws conclusions (...) on how banks can set up behavioural risk management and internal control frameworks to mitigate potential collusive rogue trading. (shrink)

Recent years have seen a substantial increase in alternative agrifood initiatives that attempt to use the market to curtail the negative social and environmental effects of production and trade in a globalized food system. These alternatives pose a challenge to capital accumulation and the externalization of environmental costs by large agribusiness, trading and retail firms. Yet the success of these alternatives also makes them an inviting target for corporate participation. This article examines these dynamics through a case study of (...) the two most significant such food system alternatives—organics and fair trade—focusing on corporate involvement in establishing and renegotiating the standards undergirding these initiatives. We compare the development of and contestation over the standards for both certified organic and certified fair trade, with particular attention to the U.S. context. We provide a brief history of their parallel processes of rapid growth and market mainstreaming. We examine claims of cooptation by movement participants, as well as the divergences and similarities between the organic and fair trade cases. Analyzing these two cases provides useful insights into the strategic approaches that corporate firms have deployed to further capital accumulation and to defuse threats to their profit margins and to status quo production, pricing, labor, trading and retailing practices. It can also offer valuable lessons regarding the most effective means of responding to such counter-reforms and of protecting or reasserting the more transformative elements at the heart of these alternative systems. (shrink)

The measure proposed here, the ratio of the price reported in a given trade to the average world price for that commodity, is based on the average world price for a given commodity reported for all trades between the U.S. and all other countries for a given period. This new measure can be used to enable government agencies to identify trades between U.S. firms or individuals and their counterparts in other countries which are designed to further prohibited activities such (...) as money laundering or tax avoidance. This measure would also enable the U.S. government to monitor trade flows more accurately, facilitating more analysis of trade imbalances between countries and tracking trade in strategie materials, for example, weapons. Use of this new measure could enable naive buyers and seIlers of goods, for example, those situated in remote or underdeveloped markets, to know what their counterparts in more central and informed countries are paying or being paid for comparable goods, and hence to become more informed as trading partners. (shrink)

This study examines the influence of Confucianism on corporate poverty alleviation (PA) participation. We argue that firms in regions with more Confucian temples are more likely to participate in government-initiated PA programs because Confucianism emphasizes common social welfare. This positive relationship is stronger for firms with chief executive officers born in Confucian regions and for firms that are under high media pressure, as the trade-off between social welfare and firm interest is in favor of Confucianism. Using a sample (...) of Chinese-listed firms, we find evidence supporting our arguments. Moreover, we find consistent evidence that firms influenced by Confucianism are motivated to pay long-term attention to PA activities and improve corporate PA efficiency, highlighting the substantive role of Confucianism in a PA campaign. Our study contributes to the business ethics literature by introducing Confucianism into research on corporate social activities and provides practical implications. (shrink)

This paper reports on a study of ethical decision-making in a fair trade company. This can be seen to be a crucial arena for investigation since fair trade firms not only have a specific ethical mission in terms of helping growers out of poverty, but they tend to be perceived as (and are often marketed on the basis of) having an "ethical" image. Eschewing a straightforward test of extant ethical decision models, we adopt Thompson''s proposal for a more (...) contextualist understanding rooted in ethnographic data. Our findings suggest that the fair trade mission of the firm is experienced as an over-riding ethical claim, which is often invoked to justify potentially ethically questionable decisions. Moreover, decision precedents emerge which can mean that the decision process is bypassed or hurried through. Finally we provide evidence that the significance of these precedents, and indeed, even moral intensity itself, could be actively shaped and constructed by organization members to support different, even shifting, conceptions of what is a morally acceptable decision for a fair trade company to make. (shrink)

We attempt to understand the personal incentives that motivate corporate insiders to engage in unethical behavior such as delayed trade disclosure. Delayed disclosure affects corporate transparency and other shareholders in the firm potentially suffer investment losses because they are unaware of insiders’ activities. Using archival data from the 300 largest Australian firms between 2007 and 2011, the results show that risk factors such as insider age and tenure and wealth effects in the form of insider shareholdings affect the (...) likelihood of delayed reporting. Governance positions such as committee membership mitigate this behavior. Our study highlights the importance of considering individual insider’s wealth and risk factors. The self-monitoring role of governance positions is also indicative of the effectiveness of internal corporate governance in the prevention of illegal insider behavior. (shrink)

Trade associations operate under the premise of advancing the shared interests of their member firms. How well do they fulfill this role? This article measures the activity of 148 major industry trade associations over time and relates this activity to the performance of the relevant industries and dominant firms within them. Findings suggest that trade association spending increases when the profitability of the four largest firms in an industry decreases, but spending is unrelated to the profitability of (...) the industry overall. This implies that large firms exert control over trade association agendas and may use these communal organizations to advance their own interests rather than the shared interests of the entire industry. Moreover, it points to the need for further development of the currently anemic management literature on the activities of trade associations. (shrink)

In recent studies, numerous anomalies against the weak and semi-strong-forms of efficient market hypothesis have been found insignificant after controlling the small-firm effect. We investigate whether the insider trading anomaly, a major anomaly against the strong-form of EMH, can survive after excluding small firms with a novel data set and document several new findings. We find a substantially larger number of insider purchases than sales, while the average volume of insider sales is much higher than the average volume of (...) insider purchases. Echoing recent US studies, we find that insider sales generate more abnormal returns than insider purchases do. We find much lower abnormal returns from insider trading than documented in the literature and the associated trading costs, which suggests that the market efficiency of individual stocks may depend on their sizes, and even the strong-form of EMH holds to a larger extent than previously recognized. (shrink)

Developing countries often rely on consumption taxes, because these are broad, easy to administer, and harder to evade. However, the taxation system becomes inherently regressive. To counter this problem of the regressive nature of consumption taxes, there is a temptation among policymakers to address equity concerns through a multiplicity of rates, making the consumption tax system complex. Here, complexity is considered the by-product, or companion, to pursuing goals of equity. Complex tax systems, however, pose a different problem relating to equity. (...) Assuming a minimum fixed cost of compliance imposed by a complex tax system, smaller firms and individuals face a much higher cost of compliance relative to larger firms and richer individuals. Oligarchic sectors dominated by a few large firms also find it easier to organize and lobby to get favorable rates compared to competitive sectors with small firms. Though complexity is considered a by-product of several equity-enhancing measures, the Indian experience with its Goods and Services Tax reform serves demonstrates the opposite, that there is a trade-off between equity and complexity. (shrink)

In this paper, we explore a popular flexible work arrangement, home-based telework, in the Indian IT industry. We show how IT managers used the dominant meanings of telework to portray telework as an employee benefit that outweighed the attendant cost—intensified work. While using their discretion to grant telework, the managers drew on this portrayal to orchestrate a negotiated exchange with their subordinates. Consequently, the employees consented to accomplish the intensified work at home in exchange of telework despite their opposition to (...) the intensified work in the office. Thus, whereas the extant studies consider work intensification as an unanticipated outcome of using FWAs, we show how firms may use FWAs strategically to get office-based intensified work accomplished at home. While the dominant argument is that employees reciprocate the opportunity to telework with intensified work, we show a discursively orchestrated negotiation that favors management. A corrective policy measure is to frame telework as an employee right. (shrink)

Prior research suggests that the presence of high-quality auditors constrains accrual-based earnings management, but it inadvertently leads to higher real activities manipulation. We investigate whether such trade-off exists between accrual-based and real earnings management activities in the presence of female or male auditors. We use a sample of UK firms for the period 2009 to 2016 and find that firms audited by female auditors do not resort to a higher-level real activities manipulation when their ability to engage in accruals (...) management is constrained. Overall, our results suggest that the benefits of hiring female auditors are overwhelmingly higher than the costs they might bring to the client firms. (shrink)

The measure proposed here, the ratio of the price reported in a given trade to the average world price for that commodity, is based on the average world price for a given commodity reported for all trades between the U.S. and all other countries for a given period. This new measure can be used to enable government agencies to identify trades between U.S. firms or individuals and their counterparts in other countries which are designed to further prohibited activities such (...) as money laundering or tax avoidance. This measure would also enable the U.S. government to monitor trade flows more accurately, facilitating more analysis of trade imbalances between countries and tracking trade in strategie materials, for example, weapons. Use of this new measure could enable naive buyers and seIlers of goods, for example, those situated in remote or underdeveloped markets, to know what their counterparts in more central and informed countries are paying or being paid for comparable goods, and hence to become more informed as trading partners. (shrink)

This paper investigates the determinants of regulatory compliance in corporate organizations. Exploiting a unique enforcement and reporting framework for insider trading in Italy, we present three main findings. First, board governance, such as chief executive–chairman duality and the proportion of non-executive directors, does not increase the propensity of firms to comply with regulation. Second, family firms and firms with a high degree of separation of ownership from control are most likely to comply with regulation. Third, corporate ethos is more important (...) in predicting regulatory compliance than explicit corporate governance structures. (shrink)

This paper aims to integrate recent research on collective agency, corporate moral personhood, and corporate citizenship to answer the question of how corporations and corporate officers should respond to greater social expectations about the role of business in society. The central thesis advanced in this paper is twofold. First, the right answers to questions about corporate purpose and social responsibility depend on what the right conception of the firm is. Different conceptions of the firm will yield conflicting accounts (...) of corporate purpose and responsibilities. Second, a normative theory of the firm can serve as a moral framework to make trade-offs and adjudicate competing stakeholder demands when decisions cannot be redescribed as win–win situations. By integrating the literature on the ontological status of collectives, the morality of corporate agents, and the responsibilities of business, this paper contributes a unique approach to defining what a person is, what the firm is, and, consequently, who has responsibilities (and what sort of responsibilities) to whom. (shrink)

In this study, I seek to contribute to the existing literature on corporate political activity by providing insights into how the content of corporate political strategy evolves over time within a single firm. A basic premise of the study is that the evolution of corporate political strategy is embedded within a broader social context that influences its pace and direction. Empirical evidence is based on a historical single case study of a large scale Finnish industrial conglomerate, Tampella Ltd., covering (...) the time period of 1944–1991. The results of the study show how the contextual forces shape the patterns of corporate political strategy. Moreover, an evolutionary model of intra-firm political strategies is introduced. (shrink)

In this paper, we examine the information content of insider transactions in China and analyze how ownership structures shape market reaction to these transactions. We find that the cumulative abnormal return to insider purchases is a convex function of the percentage of shares owned by the largest shareholder. Further, the CAR to insider purchases is lower when the largest shareholder is government-related, or when the control rights of the largest shareholder exceed its cash flow rights. We also find that the (...) market reaction to insider purchases is more positive for firms audited by Big4 auditors. However, we do not find a significant relationship between an ownership structure and the market reaction to insider sales. Our results are remarkably robust to alternative model specifications, corporate insider identities, and recent corporate news releases on price-sensitive events. Finally, we show that market reaction to insider purchases is larger for firms with less severe expropriations, as captured by the use of other receivables. (shrink)

Trading on non-public material information is fertile ground for a discussion of ethical behavior. The long-running legal tug-of-war over what constitutes illegal insider trading delivers challenges to regulatory authorities charged with detecting and enforcing the law, and is likely one of the reasons that prosecution of insider trading events remains rather uncommon. One can observe both increased volume in the equity and option markets and run-ups in the stock price prior to the announcement of the acquisitions; however, the detection of (...) illegal or unethical insider trading can be difficult. Given the legal uncertainty around insider trading and the circumstantial evidence from the trading activity, it is almost impossible to identify unethical insider trades unless there is a whistleblower or trades are large in size and impeccable in timing. Using call option trading around two merger announcements with similar firms that resulted in different ultimate treatment from the SEC, we illustrate the struggle regulators and prosecutors have with identifying and enforcing unethical insider trades. (shrink)

This paper aims to clarify the impact of destructive leadership on team innovation performance. It also explores the relevant conditions that maximize the above relationship. Specifically we examine how intra-team conflict organizational diversity moderate the relationship between destructive leadership team innovation performance. Finally the three-way interaction between destructive leadership intra-team conflict organizational diversity is analyzed for the worst conditions to maximize the negative effect of destructive leadership on team innovation performance. This paper used a cross-sectional design with questionnaires (...) administered to 87 teams with 479 team members working in Korean manufacturing service firms. It applied a hierarchical regression analysis to test the hypothesized relationships including three-way interaction effect among destructive leadership intra-team conflict organizational diversity on team innovation performance. This paper provided empirical insights about how destructive behaviors of team leader hindered team innovation performance. The three-way interaction effects also revealed that the higher the levels of both intra-team conflict organizational diversity the greater the negative effect of destructive leadership on team innovation performance. This paper demonstrates how team leaders’ behavior team organizational conditions result in discouraging overall innovation outcomes. This paper contributes to the innovation leadership literatures by identifying possible leadership type hindering innovation performance at team level the specific conditions their dynamic interaction strengthening the negative effect of destructive leadership on team innovation performance. (shrink)

Corporate social responsibility (CSR) is a dramatically expanding area of activity for managers and academics. Consumer demand for responsibly produced and fair trade goods is swelling, resulting in increased demands for CSR activity and information. Assets under professional management and invested with a social responsibility focus have also grown dramatically over the last 10 years. Investors choosing social responsibility investment strategies require access to information not provided through traditional financial statements and analyses. At the same time, a group of (...) mainstream institutional investors has encouraged a movement to incorporate environmental, social, and governance information into equity analysis, and multi-stakeholder groups have supported enhanced business reporting on these issues. The majority of research in this area has been performed on European and Australian firms. We expand on this literature by exploring the CSR disclosure practices of a size- and industry-stratified sample of 50 publicly traded U.S. firms, performing a content analysis on the complete identifiable public information portfolio provided by these firms during 2004. CSR activity was disclosed by most firms in the sample, and was included in nearly half of public disclosures made during that year by the sample firms. Areas of particular emphasis are community matters, health and safety, diversity and human resources (HR) matters, and environmental programs. The primary venues of disclosure are mass media releases such as corporate websites and press releases, followed closely by disclosures contained in mandatory filings. Consistent with prior research, we identify industry effects in terms of content, emphasis, and reporting format choices. Unlike prior research, we can offer only mixed evidence on the existence of a size effect. The disclosure frequency and emphasis is significantly different for the largest one-fifth of the firms, but no identifiable trends are present within the rest of the sample. There are, however, identifiable size effects with respect to reporting format choice. Use of websites is positively related to firm size, while the use of mandatory filings is negatively related to firm size. Finally, and also consistent with prior literature, we document a generally self-laudatory tone in the content of CSR disclosures for the sample firms. (shrink)

Can mandated adoption of corporate social responsibility (CSR) improve firm value? Most CSR adoption is purely voluntary. However, governments regularly encourage CSR adoption with soft regulations that vary from simply endorsing and symbolically supporting CSR to requiring the adoption of specific practices. Governments have resisted fully mandating CSR because there is some concern universally that mandated CSR may reduce firm value. There is, however, no empirical clarity as to whether mandated CSR impedes or improves firm value. We (...) address this uncertainty by analyzing the effects of the mandated adoption of CSR that the government of India legislated in 2014. Drawing on a sample of 1,526 publicly traded firms and deploying a combinative analytical framework comprising an event study, regression discontinuity design, and a difference-in-differences technique, we conclude that India’s CSR mandate did, in fact, increase value for all firms bound by the mandate. This value-enhancing effect was greater for foreign firms relative to domestic firms. Our results refute previous research showing that India’s CSR mandate diminished firm value. (shrink)