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    Long-tenured CEOs and firm performance: too much of a good thing? Evidence from New Zealand
    (Emerald Publishing Limited, 2025-04-11) Chikunda P; Bhuiyan MBU; Houqe MN; Nguyen LTM
    Purpose: This study aims to investigate the association between chief executive officer (CEO) tenure and firm performance. Extended CEO tenure offers the potential for organizational stability, sustained operational coherence and heightened insights into business intricacies. However, longer tenure concurrently fosters complacency and impedes innovation by engendering resistance to change and a deficiency in novel perspectives. The authors’ inquiry seeks to discern the prevailing influence between these contrasting perspectives. Design/methodology/approach: This study uses unbalanced panel data for a unique hand-collected dataset from listed firms in New Zealand (2000–2020) – a country that adopts the principles-based corporate governance regime. The authors perform ordinary least squares, two-stage least squares and propensity score matching tests to examine the relationship between CEO tenure and firm performance. Findings: The authors document a significant positive impact of CEO tenure on firm performance, implying the benefits of long tenure. However, this study further reveals a significant inverted U-shaped relationship between CEO tenure and firm performance, suggesting that such a positive impact can hold up to a certain threshold; after that, long CEO tenure can hinder firm performance. The finding is robust to alternative measures and endogeneity tests and offers important implications for corporate governance policies and practices. Practical implications: The findings highlight the importance of balancing the benefits of long CEO tenure. Practically, firms should prioritize regular evaluation of CEO performance and tenure, emphasize succession planning and foster a culture of innovation to sustain organizational success in the long term. Originality/value: This research offers valuable insights by examining the intricate relationship between CEO tenure and firm performance within the distinct setting of New Zealand. By uncovering both the benefits and drawbacks of long CEO tenure, this study contributes to a nuanced understanding of corporate governance dynamics.
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    A leap of faith that echoes well? The value impact of Chinese firms starting up business overseas
    (Elsevier Inc, 2023-08) Lu B; Hao W; Liao J; Wongchoti U
    We investigate the impact of greenfield outward foreign direct investment (GODI) by Chinese firms on their subsequent Tobin's Q. Our findings indicate that Chinese listed companies from 2003 to 2019 generally experience a significantly positive boost in perceived firm value (or growth prospects) when engaging in overseas business start-ups (i.e., with no foreign partners) when compared to their inactive peers. The positive GODI effect is more prominent among privately owned enterprises vs. state-owned enterprises (SOEs). Our mechanism tests indicate that lowered effective tax rates and reduced illiquidity due to conducting greenfield ODI serve as the value-enhancing channels. Possibly driven by political objectives, SOEs tend to prioritize developing and Belt-Road countries as the destination for their greenfield overseas endeavors.
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    Meta-analysis of the impact of financial constraints on firm performance
    (John Wiley and Sons Australia, Ltd on behalf of Accounting and Finance Association of Australia and New Zealand, 2023-06-17) Ahamed FT; Houqe MN; van Zijl T
    A large number of studies have investigated the relationship between financial constraints and firm performance. However, due to heterogeneity in study design factors, such as choice of measures for constraints and performance, control variables, estimation methods and study sample, the empirical results have been mixed. To mitigate this issue, this paper reports a meta-analysis of the association between financial constraints and firm performance. To assess the overall direction of the relationship and the sources of heterogeneity, we apply meta-analytic methods to 26 studies (providing 189 effect sizes) on the association between financial constraints and financial performance in listed companies. Our result shows that, overall, there is a positive relationship between financial constraints and firm performance. In addition, meta-regression results suggest that return on assets (ROA) and return on equity (ROE) as measures of financial performance, and external finance and size as measures of financial constraints, have a significant negative impact on the relationship between financial constraints and firm performance relative to the mean impact on effect size. Similarly, all of North America and Asia as regional differences, control of size and corporate governance as control variables, and journal quality as strength of results, also have a significant negative impact. On the other hand, market value as a measure of financial performance, and the Whited & Wu index as a measure of financial constraints, have significant positive impact relative to the mean impact. Similarly, cross-country and Europe as regional differences, and publication status as strength of results, all have significant positive impact. Given that firm performance is of fundamental importance to investors, this study therefore helps researchers and policymakers to understand the variation in the empirical results on the impact of financial constraints.
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    Pattern recognition techniques and financial analysis : a thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Palmerston North, New Zealand
    (Massey University, 2014) Rajput, Suresh Kumar Oad
    The balance sheet statement is an essential feature of financial reporting, and is expected to convey complete information on firms’ operating business decisions. Since these decisions are based on the manager’s perception of the existing and future investment opportunities, they cannot be directly observed. This results in two major data analysis issues. First, it is difficult to observe directly the most common operating business decisions; secondly, these decisions may not have a same linear relation to all firms and all firm’s performance measures. This thesis attempts to address these issues in three interconnected essays. The first essay examines an outcome of the double-entry bookkeeping system when financial transactions simultaneously shift a firm’s financial position, providing the special information to interpret the meaning of a transaction. Using the factor analysis model, this essay makes use of this information, and identifies the five fundamental factors (decisions) that can capture a firm’s time-varying operating business status in a given year. These factors include: financial flexibility, short-term credit, long-term investment, convertible debt usage, and preferred stock usage. The method of extracting these factors controls for missing variable bias, account for limited attention, and provide true decomposition of accounting aggregates such as total asset growth. These factors subsist in predicting future stock returns, forecasting a firm’s value (Tobin’s Q), cash flows, and earnings beyond their well-known determinants. The second essay explores the sources of return predictability contained in financial flexibility, which is the first factor identified in essay one. The horse races of the asset pricing versus mispricing tests find a significant positive premium on financial flexibility based return factor, and make it a candidate for a new priced factor. The evidence suggests that covariances dominate the characteristics, and it is non-redundant to well-established risk factors. This factor meets the new conservative minimum of t-statistics value of above 3.0 and is constructed using unobserved information. The final essay addresses the second issue in the data analysis by employing the nonlinear firm grouping technique – the K-means clustering analysis method. Firms are grouped in their 12 natural groups using the five fundamental factors identified in the first essay, and firm size as the clustering criteria. This essay shows how firms differ on priority and the composition of their common operating decisions. This type of firm grouping suggests that operating business decisions are related to firm-specific health and structure instead of industry. This essay recommends the nonlinear firm grouping prior to employing the linear regression models in predicting future performance measures to improve the precision of business analysis.
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    The mispricing of real earnings management in the post-Sarbanes-Oxley era : a dissertation presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Accountancy at Massey University, Auckland, New Zealand
    (Massey University, 2013) Cai, Lei
    Recent studies document that there has been a shift towards real activities earnings management (REM) because accrual-based earnings management (AEM) is under enhanced scrutiny since the enactment of Sarbanes-Oxley Act of 2002 (SOX). The prior literature contends that for REM, firms reduce certain real activities to cut costs, and that such reductions can lead to adverse effects on future performance. This study examines whether investors efficiently price or misprice REM in the post-SOX environment. I conduct a two-stage analysis. First, I estimate the REM of firms using the methods adopted in the extant literature. Since the corporate governance literature suggests that the level of earnings management of firms is influenced by the corporate governance features of firms and managerial incentives arising from certain firm features, I moderate the REM indicators to take into account the effects of these features on investors’ perceptions of earnings management practices of firms. Since AEM coexists and competes with REM, I make similar estimations for accruals management. Second, I evaluate the effects of REM on both current-year stock returns and future performance. Since REM is expected to have adverse effects on future firm performance, REM is likely to be negatively associated with future firm performance, and in an efficient market it would be priced negatively in the year in which it is reported. However, I find a positive association between REM and current-year stock returns, and a negative association between REM and future firm performance. This result indicates that the market places a positive connotation on income-increasing REM, but the actual effects of REM on future performance are negative. The inference is that the market misprices reported earnings in the year when REM is conducted.