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This paper examines whether financial derivatives usage impacts firm value in seven developed countries from 2007 to 2016. We rely on textual analysis to identify derivatives users and address the potential reverse causality problem through propensity score matching and the difference‐in‐differences approach. Empirical findings suggest that the use of derivatives has a negative effect on firm value. Interestingly, we observe asymmetric valuation effects for specific countries when comparing firms that adopt derivatives with those that abandon them. US, UK, and Australian firms adopting derivatives experience a significant decrease in their valuation. Contrary to expectations, this adverse effect diminishes and may become insignificant at best when firms choose to abandon derivatives. Furthermore, most of the significant value effects disappear when using the industry relative valuation measure. [ABSTRACT FROM AUTHOR]

Purpose: The study investigates how firm-level governance (FL_G) affects the disclosure of voluntary risk information. Likewise, it explores the influence of FL_G on the informativeness of voluntary risk disclosure (VRD). Specifically, it examines how FL_G shapes the nexus between VRD and firm value. Design/methodology/approach: It uses a sample of non-financial firms from the FTSE350 index listed on the London Stock Exchange between 2010 and 2018. The authors utilise an automated textual analysis technique to code the VRD in the annual reports of these firms. The firm value, adjusted for the industry median, is a proxy for investor response to VRD. Findings: The results suggest that UK firms with significant board independence and larger audit committees disclose more risk information voluntarily. Nevertheless, firms with larger boards of directors and higher managerial ownership disseminate less voluntary risk information. Besides, VRD contains relevant information that enhances investors' valuation of UK firms. These results are more pronounced in firms with higher independent directors, lower managerial ownership and large audit committees. Practical implications: The study rationalises the ongoing debate on the effect of FL_G on VRD. The findings are helpful to UK policy-setters in reconsidering the guidelines that regulate UK VRD and to the UK investors in considering risk disclosure in their price decisions and thus enhancing their corporate valuations. Originality/value: It contributes to the risk reporting literature in the UK by presenting the first evidence on the effect of a comprehensive set of FL_G on VRD. Besides, it enriches the existing research by shedding light on the role of FL_G on the informativeness of discretionary risk information in the UK. [ABSTRACT FROM AUTHOR]

This study advances the literature in cash holdings in that it empirically examines the impact of corruption prevention commitment (CPC) on the cash holding strategic decisions and how such CPC might interact with cash holdings to affect firm value. We employ a sample of UK non‐financial publicly listed firms and our results are of twofold. First, we detect a significant negative relationship between CPC and cash holdings, which is consistent with the expected governance effect of CPC. Second, we find a negative interaction of CPC with cash holdings when investigating cash holdings effect on firm value, suggesting that shareholders consider CPC as an overinvestment in corporate social responsibility (CSR) activity within a strong customer protection framework, such as the UK. Our findings are robust to different econometric estimations and controlling for different explanatory variables. This study offers beneficial perceptions into the notion of sustainability and sustainability standards and their implications on firms financing decisions. Finally, we argue that while this paper investigates the UK context, our results might be applicable to other countries with similar anti‐corruption structure as in the UK. [ABSTRACT FROM AUTHOR]

Regulators in the United Kingdom recommend that 33 percent of board members of large U.K. firms be female by 2020. We use this setting to investigate whether greater female representation and any associated financial benefits can be achieved without establishing quotas. Using data between 2012 and 2018 for the Financial Times Stock Exchange (FTSE) 350 firms, we find a significant increase in female representation on boards in recent years, and the rate of increase in gender diversity is higher in these years. Our results also indicate that board gender diversity is positively associated with both financial performance and firm value. However, this association exists only in recent years. Finally, capital market participants value nonexecutive female board members more than executive female board members. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G30; G38; M41. [ABSTRACT FROM AUTHOR]

The upper echelons theory posits that the values, personalities, experience and education background of the top management team (TMT) affect both executives' strategic cognition and corporate outcomes. Since TMT members differ in their cognitive structures, as also acknowledged by the presence of managerial biases and irrationalities in the behavioural finance theories, policy makers and scholars are saddled with the problem of identifying specific cognitive elements that can secure optimum organisational outcomes. Conceptual approaches or linear relationships between TMT strategic cognition (TMT-SC) and outcomes are unable to capture the complex interdependencies among TMT-SC, TMT attributes and performance. We propose and empirically test a dynamic multi-dimensional TMT-SC model. Using handpicked UK company panel data, we provide robust empirical evidence that extends our understanding of the theory. Our PLS-SEM analyses show that heterogeneity in TMT academic and professional qualifications, and work experience alone cannot provide optimal benefits to organisations. However, when they are combined with other TMT cognitive factors such as social networking, innovativeness and risk-taking levels, these aspects appear to improve firm value and financial health. [ABSTRACT FROM AUTHOR]

This study looks at how executive compensation affects firm value and the extent to which this relationship is sensitive to managerial ownership and corporate governance factors. We use data from UK FTSE 100 firms for the period 2007–2012, generating a total of 578 firm‐year observations. Consistent with optimal compensation theory, we find that the managerial compensation –firm value is more sensitive to executives' ownership levels and other corporate governance indicators. Our results remain robust to alternative econometric models. We contribute to the literature on corporate governance and firm value. While the paper builds on the executive bonus compensation literature, it also furthers our understanding on the extent to which managerial ownership, institutional ownership, board size and non‐executive ownership matter in the executive bonus compensation—corporate value relationship with specific emphasis on UK FTSE 100 firms. Our second contribution is related to the moderating role of managerial (executive) ownership. We show that as executives residual interests go up, managers become more conscious of the firm's idiosyncratic risk, and hence lessen their aggressive investment and financing strategies culminating in lower firm value. [ABSTRACT FROM AUTHOR]

This paper investigates whether the presence of CSR committees has a mitigating effect on firm value (measured by Tobin's Q) during the COVID-19 pandemic. Analyzing UK listed firm data, we find that although the pandemic results in lower firm value, the presence of CSR committees helps to mitigate the negative impact of COVID-19 on firm value. The results suggest that the formation of CSR committees is not a symbolic impression management tool but an effective sustainability governance mechanism during the crisis. Our results should be helpful for regulators and companies in making decisions related to CSR committees. [ABSTRACT FROM AUTHOR]

Although the literature on carbon accounting is growing, studies on the valuation impact of firms' carbon abatement investment (CAI) are scarce, and the influence of country-specific climate policies is largely underexplored. Drawing on both the benefit and cost perspectives of the resource-based view, we predict that investors' perceptions of the net benefits of CAI are contingent on national climate policies. Based on a comparative analysis of data from the US, the UK, and Australia, we find that CAI is viewed as value-destroying by investors in countries that do not have a stringent climate change policy. In contrast, CAI enhances firm value in jurisdictions that implement such policies. Additional analyses show that investors also consider the characteristics of CAI (i.e., the size and payback period) and the act and extensiveness of voluntary CAI disclosure when evaluating firm value. Our findings fill important gaps in the literature and have critical implications for policymakers, investors, managers, and other stakeholders who are responsible for the transition to a carbon-neutral economy. [ABSTRACT FROM AUTHOR]

Purpose: The relationship between interlocking directorates and firm performance has been increasingly debated, with a focus on whether firm's centrality in interlock networks is associated with performance. The purpose of this study is to examine not only how a firm's position in this network is associated with performance but also how the performance of network partners can impact a firm's performance. This study examines how firms effectively utilise the interlock network to achieve the goal of higher market capitalisation – termed market capitalisation rank (MCR). Design/methodology/approach: The premise of the study is the UK FTSE 350 firms from 2014 to 2018. The paper makes use of a temporal network autocorrelation model to examine how firm characteristics, the structural position in the interlock network and the performance of network partners affect MCR over time. Findings: The analysis indicates that firms with ties (via the interlock network) to firms with high market capitalisation are more likely to enhance their own MCR, highlighting network partners have the opportunity to play a critical role in a firm's dominance strategy to optimise firm value. Originality/value: The value of this research is that it does not only look at the impact of a firm's position in the network on performance, but the impact of the performance of network partners on a firm's market performance as well. [ABSTRACT FROM AUTHOR]

This article examines the relationship between gender diversity, selected female attributes, and financial performance of FTSE 100 firms in the UK. Drawing on critical mass theory by measuring gender diversity as levels of female representation in the boardroom, this study finds a positive and significant relationship between gender diversity and firm performance. However, the results become highly significant and unequivocal when three or more females are appointed to the board compared to the appointment of two or less females. Further analysis reveals that post‐appointment financial performance is positively related to female age, level of education and where female board members also hold executive director positions. The results remain unchanged after accounting for endogeneity concerns and employing alternative measures of firm performance, namely, return on assets and Tobin's Q. [ABSTRACT FROM AUTHOR]

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Purpose – The purpose of this paper is to examine the impact of a firm’s corporate governance (CG) mechanisms on the number of financial analysts following UK firms. The potential effect of the number of analysts following firms in the UK on the association between CG mechanisms and firm value was also examined. Design/methodology/approach – Multiple regression models were used to examine the association between CG, analyst coverage and firm value for a large sample of UK firms listed in London Stock Exchange with financial year ends between January 2003 and December 2008. Findings – It was found that the aggregate level of CG quality is positively associated with the number of analysts following UK firms. In addition, the compensation score is the main component that affects the number of analysts following UK firms. The results suggest that financial analysts are particularly concerned with how much compensation executives and directors receive. This is consistent with Jensen and Meckling (1976) who argue that chief executive officer (CEO) compensation can be used as effective mechanisms for mitigating agency costs. Hence, higher levels of CEO compensation attract more financial analysts to follow the firm. Surprisingly, when the joint effect of both CG quality and the number of analysts following on firm value was examined, no significant effect was found for both variables on firm value. Originality/value – This paper contributes to prior research by providing the first empirical evidence on the impact of disaggregated levels of CG on analyst following and firm value for a large sample of UK firms. [ABSTRACT FROM AUTHOR]

Purpose – With boards of directors playing both monitoring and guidance roles, the purpose of this paper is to examine the impact of board structure on firm value in large US and UK firms using the lenses of agency and resource dependence theories. Design/methodology/approach – Using a sample of firms in the USA and the UK from 2000 to 2007, the paper conducts a panel data analysis of the impact of board structure on firm value and examine the nuances of different governance environments. Findings – The paper finds distinct differences in the impact of board independence, board size, and outside director busyness on firm value between UK and US firms. Specifically, the paper finds that board independence, board size, and board busyness all have a significant positive impact on firm value in the UK. However, the paper finds no significant relationship between board independence and firm value among US firms. Both board size and board busyness are found to be positively associated with firm value in the USA. Social implications – The paper finds strong support for resource dependence theory in the UK but limited support for agency theory in the USA. Originality/value – This paper takes a multi-country approach to examining the impact of board structure on firm value. [ABSTRACT FROM AUTHOR]

This study analyses the relationship between ownership concentration and firm value. Our findings, based on a dynamic panel data analysis, show that there is a quadratic relationship between the company's value and its ownership concentration. Additionally, our evidence suggests that for countries where investor protection is low, the relationship follows an inverted ‘UÂ’ shape, while for countries where investor protection is high, the relationship is positive and nearly linear. Moreover, the influence of blockholders depends on their identity. This paper highlights the superior performance of family firms in controlling agency problems, a situation which contrasts vis-à-vis institutional shareholders. Finally, we report that the family effect is nonlinear. Indeed the positive effect starts to taper off at around 30% of ownership being somewhat smaller and less statistically significant between 30% and 50% of ownership. Moreover, in contrast to recent studies, the family effect is more pronounced in majority-controlled firms. [ABSTRACT FROM AUTHOR]