Huajing Hu, Yili Lian and Chih-Huei Su
The purpose of this paper is to examine whether prior bank lending relationships affect firms’ liquidity management.
Abstract
Purpose
The purpose of this paper is to examine whether prior bank lending relationships affect firms’ liquidity management.
Design/methodology/approach
The authors mainly work on evaluating first, whether prior lending relationships affect corporate cash holdings? and second, whether the cash flow sensitivity of cash varies systemically with lending relationships. Three different ways are used to define lending relationships, including the lending relationship dummy, a firm’s maximum relationship intensity in terms of number of deals across all lenders and a firm’s maximum relationship intensity in terms of dollar amounts across all lenders. In addition, the paper applies two-stage least squares (2SLS) to address the concern of endogeneity between firms’ liquidity management and banking relationships.
Findings
The authors find that firms with lending relationships maintain a lower level of cash holdings and save less cash out of cash flow. Furthermore, the effect of lending relationships is more profound for firms with high cash flow. The results suggest that prior lending relations alleviate information asymmetry, lower the cost of capital and therefore affect firms’ propensity to retain cash and maintain a high level of cash holdings.
Research limitations/implications
This paper contributes to both the liquidity management literature and the literature on the value of maintaining lending relationships with banks. Researchers should take into consideration the lending relationships built over the course of the lending when assessing firms’ cash policies.
Social implications
Bank lending relationship mitigates the information asymmetry problem, one type of market friction, and facilitates firms’ future external financing, thereby affecting firms’ cash policies and giving more flexibility in liquidity management. The value of lending relationships distinguishes bank loans from public bonds. Therefore, firms, especially those facing more information asymmetry issue, should take into account the benefits from lending relationships in their future debt financing.
Originality/value
Extant literature examines how firm characteristics affect firms’ cash holdings. This paper introduces a new factor that could explain corporate cash policy.
Details
Keywords
Wencang Zhou, Huajing Hu and Xuli Shi
– The purpose of this paper is to develop a framework for studying organizational learning, firm innovation and firm financial performance.
Abstract
Purpose
The purpose of this paper is to develop a framework for studying organizational learning, firm innovation and firm financial performance.
Design/methodology/approach
This paper examines the effects of organizational learning on innovation and performance among 287 listed Chinese companies.
Findings
The results indicate a positive association between organizational learning dimensions and firm performance (both objective financial performance and perceptual innovation measure).
Research limitations/implications
The sample includes only firms for which secondary data are available. Different results might have been obtained if we include smaller, private firms into the sample. This paper only includes a limited number of measures of financial performance to assess the relationship between organization learning dimensions and firm performance. Therefore, researchers are encouraged to test the proposed propositions further with different performance measures.
Practical implications
The results showed that it is the combination of several learning characteristics and not a single dimension that influenced the variance of firm performance. The findings reinforce the notion that systemic interventions that address a variety and different combinations of learning organization characteristics will be more likely to be successful than interventions that solely focus on singular or a limited number of dimensions.
Originality/value
The integration of objective measures of firms’ financial performance with perceptual survey data represents a unique methodology that has not been widely used in the organizational learning literature. The positive correlations between the eight learning dimensions and the measures of firms’ performance lend credence to the efficacy of the organizational learning concepts.
Details
Keywords
Wencang Zhou, Huajing Hu and Michael Zey
First, using the task-relationship dichotomy as a framework, the purpose of this paper is to examine the direct effects of team personality level and team personality diversity on…
Abstract
Purpose
First, using the task-relationship dichotomy as a framework, the purpose of this paper is to examine the direct effects of team personality level and team personality diversity on new venture growth. Second, the study examines the interaction effects of team personality level and diversity on venture growth.
Design/methodology/approach
The sample consisted of 154 teams in a technology incubator in China. Data were collected through an online survey.
Findings
Results indicate that high level but low diversity of team task-oriented personality was beneficial for new venture founding teams. Diversity of team task-oriented personality would hurt the new venture growth more when the level of task-oriented personality was low. Relationship-oriented personality diversity, but not the level of relationship-oriented personality, influenced new venture growth.
Research limitations/implications
These findings advance research in entrepreneurship, groups, and teams, and provide practical policy implications as well.
Practical implications
This study provides practical implications for policy makers regarding what supports should be provided in incubators and for entrepreneurs regarding team member selection.
Originality/value
This is one of the first papers to study the personality composition of new venture founding teams.
Details
Keywords
Huajing Hu and Yili Lian
– The purpose of this paper is to investigate the impact of institutional investors on the cost of bank loans using US bank loan data from 1995 to 2012.
Abstract
Purpose
The purpose of this paper is to investigate the impact of institutional investors on the cost of bank loans using US bank loan data from 1995 to 2012.
Design/methodology/approach
The cost of bank loans is analyzed with regard to loan spreads, collateral requirements, and the number of prepayment covenants.
Findings
This paper finds that, first, holding institutional ownership constant, institutional control is positively related to the cost of bank loans, implying that strong institutional control intensifies conflicts between large shareholders and lenders. Second, institutional holdings are negatively related to the cost of bank loans. These results indicate that institutional monitoring reduces the agency problem between shareholders and managers.
Originality/value
This paper suggests that the trade-off between institutional monitoring and institutional control jointly determines the effect of institutional investors on the cost of bank loans. Moreover, lenders should consider large shareholders and their influence when making lending decisions.
Details
Keywords
This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies.
Abstract
Purpose
This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies.
Design/methodology/approach
This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context.
Findings
The results indicate a positive association between organizational learning dimensions and firm performance. It is the combination of several learning characteristics and not a single dimension that influenced the variance of firm performance. The findings reinforce the notion that systemic interventions that address a variety and different combinations of learning organization characteristics will be more likely to be successful than interventions that solely focus on singular or a limited number of dimensions.
Practical implications
The paper provides strategic insights and practical thinking that have influenced some of the world’s leading organizations.
Originality/value
The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.
Details
Keywords
This paper aims to examine the relation between managerial ability and stock price crash risk, conditional on managerial overconfidence. In addition, conditional on managerial…
Abstract
Purpose
This paper aims to examine the relation between managerial ability and stock price crash risk, conditional on managerial overconfidence. In addition, conditional on managerial overconfidence, the authors investigate the effect of managerial ability on firms’ choice of bad news hoarding channels, which result in a stock price crash.
Design/methodology/approach
Using a sample of 24,289 firm-years from companies listed on Compustat and CRSP from 1994 to 2018, the authors conduct panel regression analysis.
Findings
The authors find that managerial ability is positively associated with stock price crash risk only when managerial overconfidence is high. Furthermore, the authors find that managerial ability seems to exacerbate (attenuate) the bad news withholding by the overconfident managers using the earnings guidance (earnings management) channel. The authors find limited evidence that high-ability managers are likely to withhold bad news through the overinvestment channel and “other channels” when managers are overconfident. Finally, the authors find that the joint effect of managerial overconfidence and managerial ability on firms’ crash risk is more pronounced when there is a material weakness in firms’ internal controls, high investor belief heterogeneity and high information asymmetry. However, this effect appears to dissipate during the recent financial crisis in 2008.
Originality/value
This research reveals that managerial ability is costly to firms by engendering bad news hoardings and stock price crash risk when managers are overconfident. It also sheds light on how managerial overconfidence and managerial ability affect managers’ choice of bad news withholding channels and stock price crash risk. Finally, the paper is of practical value to the board of directors in selecting the prospective executives.
Details
Keywords
Meng Fanjing, Minghua Pang and Lijie Ma
Carbon steel has a high application rate in modern industry, but this type of steel has the defect of high wear. This study aims to improve the surface friction and wear…
Abstract
Purpose
Carbon steel has a high application rate in modern industry, but this type of steel has the defect of high wear. This study aims to improve the surface friction and wear performance of carbon steel under such working conditions.
Design/methodology/approach
In this study, a dry film lubricant based on graphite powder was prepared by the ultrasonic dispersion method, and deposited on the surface of carbon steel specimens by the simple pressure spraying technology. At the same time, molybdenum disulfide and polytetrafluoroethylene dry film lubricants were developed by the same method, and the comparative experimental study on friction and wear was carried out in the end-face friction tester.
Findings
The results show that the deposition effect of graphite and molybdenum disulfide dry film lubricants on the surface of carbon steel is obviously better than that of polytetrafluoroethylene dry film lubricant. Compared with molybdenum disulfide and polytetrafluoroethylene dry film lubricant, graphite dry film lubricant has the best friction and wear performance on the surface of carbon steel. The working life of carbon steel specimens sprayed with graphite dry film lubricant decreases with the increase of pressure load and rotation speed. The combination of load and sliding speed will accelerate the transition of the coating to a stable direction. In addition, the micro lubricant particles formed in the wear process will form particle flow lubrication, and the appropriate addition of particle powder of the same material will also prolong the normal antifriction time of the lubricant.
Originality/value
These findings developed a dry film lubricant that can effectively improve the friction and wear properties of carbon steel surface.
Details
Keywords
Kathryn Pavlovich, Paresha N Sinha and Mark Rodrigues
An international joint venture (IJV) helps multinational enterprises (MNEs) overcome the “liability of foreignness.” However, in the presence of institutional voids, MNE’s…
Abstract
Purpose
An international joint venture (IJV) helps multinational enterprises (MNEs) overcome the “liability of foreignness.” However, in the presence of institutional voids, MNE’s overreliance on the local partner can result in the MNE unwittingly becoming involved in a corporate scandal. The purpose of this paper is to discuss the causes, impacts and outcomes on the MNE’s legitimacy following a corporate scandal.
Design/methodology/approach
Using secondary data, this paper presents a qualitative case study of the Fonterra-Sanlu milk-powder scandal in China.
Findings
The paper identifies the institutional voids that contributed to the scandal. It also examines the effects of the scandal on the MNE’s legitimacies and evaluates the appropriateness of its actions in China during the formation, erosion and repair stages of its legitimacy.
Research limitations/implications
It contributes to legitimacy literature by discussing the importance of MNE’s active commitment when entering the emerging market. It argues that the building of pragmatic legitimacy is not sufficient, and explains why attendance to moral obligations is part of building moral and cognitive legitimacy.
Originality/value
This unique case study of a corporate scandal offers deep insights into how, what and why questions regarding how the three forms of legitimacy are necessary for improving IJV performance by MNEs operating in emerging economies. It particularly highlights the importance of moral legitimacy as a mechanism for overcoming institutional voids.