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Article
Publication date: 27 September 2022

Changyuan Xia, Xieen Mao, Haizong Yu and Kam C. Chan

This paper aims to investigate the impact of a firm’s pension insurance contributions (PIC) on its financialization (investment in risky assets) using a sample of Chinese firms.

184

Abstract

Purpose

This paper aims to investigate the impact of a firm’s pension insurance contributions (PIC) on its financialization (investment in risky assets) using a sample of Chinese firms.

Design/methodology/approach

The authors use a multiple regression model to conduct the analysis.

Findings

The findings suggest that a firm’s PIC increases its financialization. Additional analysis suggests that firms with higher PIC are more likely to have lower operating profit and higher financial risk. In addition, the impact of PIC on financialization is more salient when a firm faces high industry competitiveness, holds more cash, has high labor costs and labor intensity or is non-state owned.

Practical implications

The paper adds to the growing literature on the effect of social insurance on corporate policies. The findings complement those related to the relationship between defined contributions and defined benefits retirement plans and corporate policies.

Social implications

The study contributes to the debate on the merits of financialization. The literature is mixed on the pros and cons of financialization. The results suggest that financialization has an adverse effect on a firm’s performance and risk in the lens of increased PIC.

Originality/value

China has seen a trend of financialization arising from the rapid economic development in the past decade. Moreover, the PIC premiums in China are not trivial. Thus, the significant cost of PIC and the financialization trend suggest that the answer to the research question is timely and meaningful.

Details

Nankai Business Review International, vol. 14 no. 3
Type: Research Article
ISSN: 2040-8749

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Article
Publication date: 27 September 2023

Honghui Zou, En Xie and Nan Mei

Trade credit is an important business-to-business marketing tool for building firms’ competitive advantage. Many studies explore the determinants of trade credits from a…

347

Abstract

Purpose

Trade credit is an important business-to-business marketing tool for building firms’ competitive advantage. Many studies explore the determinants of trade credits from a trust-based view, but the role of political connections is largely overlooked, despite their potential influence in assessing firms’ trustworthiness in the context of emerging economies. This study aims to fill this gap by examining how political connections affect the capacity of emerging economy firms (EEFs) to grant and receive trade credit.

Design/methodology/approach

This study tests a conceptual model using secondary data collected from 1,149 Chinese privately owned listed manufacturing firms between 2008 and 2016.

Findings

This study finds that political connections reduce EEFs’ accounts receivable and payable; their philanthropic activities alleviate this negative effect for accounts payable, while patent applications reduce it for accounts receivable. These findings suggest the effect of political connections can spillover to EEFs’ relationship with their up- and down-stream partners.

Practical implications

This study has implications EEF managers, particularly in pointing to the detrimental effect of political connections on relationships with buyers and suppliers, and highlights the need to adopt suitable approaches to offset this effect.

Originality/value

This study sheds new light on the negative effect of political connections on EEFs’ capacity to grant and receive trade credit in their exchanges with up-stream and down-stream partners. It enriches the trust-based view of trade credit by revealing the significant influence of EEFs’ political connections, while also advancing a contingency view by testing the moderating role of corporate philanthropic activities and patent applications.

Details

Journal of Business & Industrial Marketing, vol. 39 no. 3
Type: Research Article
ISSN: 0885-8624

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