Iordanis Eleftheriadis and Evgenia Anagnostopoulou
This study aims to examine the various climate change practices adopted by firms and develop a set of corporate indexes that measure the level of climate change corporate…
Abstract
Purpose
This study aims to examine the various climate change practices adopted by firms and develop a set of corporate indexes that measure the level of climate change corporate commitment, climate change risk management integration and climate change strategies adoption. Moreover, this study examines the relationship between the aforementioned indexes. The authors claim that there is a positive relationship between the adoption of climate change strategies, corporate commitment and risk management integration. The aforementioned indexes have been used to assess the largest companies in the oil and gas sectors.
Design/methodology/approach
To assess this study’s sample companies, a content analysis of their carbon disclosure project (CDP) reports for the years 2012-2015 was conducted. Finally, weights were assigned to the content analysis data based on the results of a survey regarding the difficulty of implementing each climate change practice included in the respective index. The survey sample included climate change experts who are either currently employed in companies that are included in the Financial Times Global 500 (FT 500) list, or work as external partners with these companies.
Findings
The present study results highlight the need for developing elaborate corporate indexes, as the various climate change practices have different degrees of difficulty regarding their implementation. Additionally, a general trend in adopting climate change strategies is observed, especially in the field of carbon reduction strategies, which mainly involve the implementation of low carbon technologies. Finally, a positive and significant relationship was found between carbon reduction targets, risk management integration and climate change strategies.
Practical implications
Although international research has extensively examined the importance of managers’ perceptions on environmental issues as an enabling factor in developing environmental strategies, according to the results of our survey, corporations must go beyond top management commitment towards climate change to be able to successfully implement climate change strategies. Incorporation of climate change risk management procedures into a company’s core business activities as well as the establishment of precise carbon reduction targets can provide the basis on which successful climate change strategies are implemented.
Originality/value
Most studies address the issue of climate change management in terms of environmental or sustainability management. Furthermore, research on climate change and its relationship with business management is mainly theoretical, and climate change corporate performance is measured with aggregate indexes. This study focuses on climate change which is examined from a five-dimensional perspective: top management commitment, carbon reduction targets, risk management integration, carbon reduction and carbon compensation strategies. This allows us to conduct an in-depth analysis of the various climate change practices of firms.
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Stelios Bekiros, Nikolaos Loukeris, Iordanis Eleftheriadis and Gazi Uddin
The authors construct asset portfolios comprising small-sized companies and value stocks that provide with higher returns for the UK market based on a three-factor model with…
Abstract
Purpose
The authors construct asset portfolios comprising small-sized companies and value stocks that provide with higher returns for the UK market based on a three-factor model with incorporated behavioural features. The authors were able to demonstrate that value factor model is vulnerable to behavioural patterns, especially corporate fraud. In all of the above, the authors utilised a new proportional sorting methodology against the value ranking approach, commonly employed in empirical studies. Strong evidence is observed that portfolio performance based on various syntheses of allocated assets reveals counter-intuitive results related to the BE/ME, namely, that expected returns based on size and BE/ME produce significant errors and small firms retain consistently better returns. The reason might be the unusual accounting techniques many firms follow to receive extended capital after management decisions. The paper aims to discuss these issues.
Design/methodology/approach
The authors were able to demonstrate that value factor model is vulnerable to behavioural patterns, especially corporate fraud. In all of the above, authors utilised a new proportional sorting methodology against the value ranking approach, commonly employed in empirical studies. Strong evidence is observed that portfolio performance based on various syntheses of allocated assets reveals counter-intuitive results related to the BE/ME, namely, that expected returns based on size and BE/ME produce significant errors and small firms retain consistently better returns. The reason might be the unusual accounting techniques many firms follow to receive extended capital after management decisions.
Findings
Value factor model is vulnerable to behavioural patterns, especially corporate fraud. In all of the above, the authors utilised a new proportional sorting methodology against the value ranking approach, commonly employed in empirical studies. Strong evidence is observed that portfolio performance based on various syntheses of allocated assets reveals counter-intuitive results related to the BE/ME, namely, that expected returns based on size and BE/ME produce significant errors and small firms retain consistently better returns. The reason might be the unusual accounting techniques many firms follow to receive extended capital after management decisions. Overall, asset pricing models with embedded risk factors which entail either shares or dividends are logically circular behavioural simultaneities, thus invalid when tested and estimated by statistical methods as an outcome of the EMH.
Originality/value
In distinctive contrast to the recent literature, the authors show that the returns from a size factor model of small stocks tend to outperform big stocks especially in crisis periods. Moreover, the authors were able to demonstrate that value factor model is vulnerable to behavioural patterns, especially corporate fraud. In all of the above, the authors utilised a new proportional sorting methodology against the value ranking approach, commonly employed in empirical studies. Strong evidence is observed that portfolio performance based on various syntheses of allocated assets reveals counter-intuitive results related to the BE/ME, namely, that expected returns based on size and BE/ME produce significant errors and small firms retain consistently better returns. The reason might be the unusual accounting techniques many firms follow to receive extended capital after management decisions. Overall, asset pricing models with embedded risk factors which entail either shares or dividends are logically circular behavioural simultaneities, thus invalid when tested and estimated by statistical methods as an outcome of the EMH.