Megumi Suto and Hitoshi Takehara
The purpose of this paper is to investigate investors’ perception of corporate social responsibility (CSR) and its risk-mitigating effects on firm-level innovation in Japan from…
Abstract
Purpose
The purpose of this paper is to investigate investors’ perception of corporate social responsibility (CSR) and its risk-mitigating effects on firm-level innovation in Japan from 2006 to 2017. The authors examine the influence of CSR intensity on firm-specific risks, focusing on the risk-moderating effect of CSR on innovation.
Design/methodology/approach
The authors conducted a simple slope analysis and panel data regressions with input and output innovation measures and idiosyncratic risk based on an asset-pricing model.
Findings
The results demonstrate that CSR intensity not only reduces firm-specific risk directly but also indirectly by negatively moderating the relationship between firm-level innovation and idiosyncratic risk.
Research limitations/implications
Signaling trust to capital markets, CSR engagements in the manufacturing industry are clearly important for innovative firms with active research and development undertakings.
Practical implications
Corporate managers should further expand their efforts to make non-financial disclosures available, considering the interactions between CSR intensity and research and development financial risk.
Originality/value
In the context of Japanese firms, this study demonstrates the interaction between CSR practices and innovation activities from the perspective of long-term management of corporate sustainability.
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Megumi Suto and Hitoshi Takehara
Managers sometimes hide their level of corporate social performance (CSP) from investors, intentionally or unintentionally. The purpose of this study is to estimate such “hidden…
Abstract
Purpose
Managers sometimes hide their level of corporate social performance (CSP) from investors, intentionally or unintentionally. The purpose of this study is to estimate such “hidden CSP” of firms.
Design/methodology/approach
In this study, it is assumed that Japanese public firms can be classified into two groups based on the difference in corporate social responsibility (CSR) awareness. Thus, the respondents to the CSR questionnaire survey are classified as the CSR-aware group, and the non-respondents are treated as the CSR-unaware group. It is further assumed that a significant relationship exists between CSP and a firm’s attributes, including financial performance and stock ownership. Under these assumptions, a model to estimate the CSP of non-respondents is constructed using the relationship between CSP and a firm’s observable attributes.
Findings
There is a significant latent gap between the CSP of respondents and the hidden CSP of non-respondents because of differences in firm size, foreign dependency of business and reputation and trust in the financial markets, rather than because of differences in financial performance. Insider-oriented ownership structures are negatively associated with CSP.
Research limitations/implications
The estimation model developed in this study depends on a set of assumptions. In particular, a stable relationship between CSP and firm-specific variables, i.e. there is no structural change during the observation period, is assumed. Despite these limitations, this study extends the CSR research perspective, as it makes it possible to estimate the hidden CSP of public firms.
Practical implications
In practice, the findings of this study surface a part of the missing CSR that investors need and that could alert non-respondent firms to the importance of CSR strategy and related disclosures to adapt to rapidly changing social and environmental business settings.
Originality/value
This study is the result of academic interest in examining the missing information related to CSR activities to obtain an overall picture of the CSP distribution of Japanese listed firms as a whole.
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Megumi Suto and Hitoshi Takehara
This study aims to examine the link between corporate social performance (CSP) and the cost of capital of Japanese firms in 2008-2013, considering the influences of banking…
Abstract
Purpose
This study aims to examine the link between corporate social performance (CSP) and the cost of capital of Japanese firms in 2008-2013, considering the influences of banking relationships and ownership structure.
Design/methodology/approach
It examines the relation between CSP and the cost of capital in terms of the cost of debt, cost of equity and weighted average cost of capital, using a composite CSP measure based on stakeholder relationships. A regression model is adopted, controlling for bank dependency, ownership structure and firm-specific attributes.
Findings
Institutional ownership influences the CSP–cost of equity relation and reduces the cost of equity, while CSP is perceived by debtors as not information-mitigating for the observed period. For 2008-2010, the relation between CSP and bank dependency increases the cost of debt; however, the positive influence of bank dependency on the cost of debt dilutes during 2010-2013 as the shift to a more market-oriented financial market in Japan occurs.
Practical implications
Although bank borrowing is important, especially for small firms, non-financial disclosure makes external financing more flexible. Institutional investors concerned about the non-financial aspects of business, therefore, play an important role in mitigating the information asymmetry that exists in the capital market.
Originality/value
This study extends research on the CSP–cost of capital link by considering structural changes in financial systems (e.g. capital market perception of CSP and banks as delegated monitors).
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Keiichi Kubota and Hitoshi Takehara
The purpose of this paper is to determine the best conditional asset pricing model for the Tokyo Stock Exchange sample by utilizing long‐run daily data. It aims to investigate…
Abstract
Purpose
The purpose of this paper is to determine the best conditional asset pricing model for the Tokyo Stock Exchange sample by utilizing long‐run daily data. It aims to investigate whether there are any other firm‐specific variables that can explain abnormal returns of the estimated asset pricing model.
Design/methodology/approach
The individual firm sample was used to conduct various cross‐sectional tests of conditional asset pricing models, at the same time as using test portfolios in order to confirm the mean variance efficiency of basic unconditional models.
Findings
The paper's multifactor models in unconditional forms are rejected, with the exception of the five‐factor model. Further, the five‐factor model is better overall than the Fama and French model and other alternative models, according to both the Gibbons, Ross, and Shanken test and the Hansen and Jagannathan distance measure test. Next, using the final conditional five‐factor model as the de facto model, it was determined that the turnover ratio and the size can consistently predict Jensen's alphas. The book‐to‐market ratio (BM) and the past one‐year returns can also significantly predict the alpha, albeit to a lesser extent.
Originality/value
In the literature related to Japanese data, there has never been a comprehensive test of conditional asset pricing models using the long‐run data of individual firms. The conditional asset pricing model derived for this study has led to new findings about the predictability of past one‐year returns and the turnover ratio.
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Michikazu Aoi, Shigeru Asaba, Keiichi Kubota and Hitoshi Takehara
The purpose of this paper is to explore corporate social performance attained by listed family and non-family firms in Japan. They are measured by the composite CSP index and five…
Abstract
Purpose
The purpose of this paper is to explore corporate social performance attained by listed family and non-family firms in Japan. They are measured by the composite CSP index and five attributes composed of employ relations, social contributions (SCs), firm security and product safety, internal governance and risk control, and environment concern.
Design/methodology/approach
The authors employ univariate and regression analyses on the quantitatively aggregated CSP score data of Japanese firms from 2007 to 2009.
Findings
Japan non-family firms tend to perform better than family firms in terms of attaining corporate social performance overall. Family CEOs positively affect CSP in the foods, textiles and apparels, and pharmaceutical industries as well as in retail trade, wholesale, and services industries, but negatively affect CSP in the heavy manufacturing industry. In these industries the joint effect of the percentage of family shareholdings and the fraction of family members on the board also augments the positive role played by family CEO. The findings are robust when the sample is ranked by Tobin’s q.
Research limitations/implications
The observation period is short due to the data availability of CSP by Toyo Keizai Inc. This data covers all the listed firms which answered the questionnaire, which may also contain sample selection problems.
Practical implications
Positive role of CEO and negative effects of shareholdings among listed family firms in Japan call for attention and corrective measures for top management and family shareholders.
Social implications
While family firms in Japan may accumulate socioemotional wealth, they should exert more efforts to advance CSP and create social capital.
Originality/value
This is the first comprehensive quantitative study in the field, which explored CSP of all the listed family firms vs non-family firms in Japan with large sample.
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The purpose of this study is to examine the performances of liquidity factors in the stock market cycle. It aims to investigate whether the contribution of liquidity factors…
Abstract
Purpose
The purpose of this study is to examine the performances of liquidity factors in the stock market cycle. It aims to investigate whether the contribution of liquidity factors changes with stock market trends.
Design/methodology/approach
Six liquidity proxies and two-factor construction methods are compared in this study. The spanning regression method was applied to examine the contribution of liquidity factors to the asset pricing model, while the Fama and MacBeth regression method was used for examining the pricing power of liquidity factors.
Findings
The result shows that liquidity factors are accretive to models explaining returns in bull markets but not accretive to models in bear markets. The most appropriate method of constructing liquidity factors in the Japanese stock market has also been clarified.
Originality/value
In the Japanese stock market, there has never been a comprehensive test of the role of the liquidity risk factor in different market trends using the long-run data. This study helps with identifying the importance of liquidity pricing risk in different market trends. It also fills the gaps by comparing liquidity factors that are constructed through different methods and proxies and provides evidence for further confirming the correct asset pricing model in the future.