sustainable development and corporate performance a study based on the dow jones sustainability index the goal of this paper is to examine whether business performance is affected by the adoption of practices included under the term corporate social responsibility csr to achieve this goal we analyse the relation between csr and certain accounting indicators and examine whether there exist significant differences in performance indicators between european firms that have adopted csr and others that have not the effects of compliance with the requirements of csr were determined on the basis of firms included in the dow jones sustainability index djsi and specific accounting indicators were applied to measure performance for the purposes of this study we selected one group of firms belonging to the djsi and another comprised of firms quoted on the dow jones global index djgi but not on the djsi the sample was made up of two groups of 55 firms studied for the period 1998 2004 empirical analysis supports the conclusion that differences in performance exist between firms that belong to the djsi and to the djgi and that these differences are related to csr practices we find that a short term negative impact on performance is produced

an institution based view of international business strategy a focus on emerging economies leveraging the recent research interest in emerging economies this perspective paper argues that an institution based view of international business ib strategy has emerged it is positioned as one leg that helps sustain the strategy tripod the other two legs consisting of the industry and resource based views we then review four diverse areas of substantive research 1 antidumping as entry barriers 2 competing in and out of india 3 growing the firm in china and 4 governing the corporation in emerging economies overall we argue that an institution based view of ib strategy in combination with industry and resource based views will not only help sustain a strategy tripod but also shed significant light on the most fundamental questions confronting ib such as what drives firm strategy and performance in ib

the curious case of corporate tax avoidance is it socially irresponsible in contrast to many aspects of the social responsibility of business csr scholarship has been largely silent on the issue of the payment of corporate tax this is curious because such tax payments are often considered a fundamental and easily measured example of a company s citizenship behavior however because the payment of corporate tax can often be legally avoided this activity represents a boundary condition for csr if the law and csr suggest that a company should pay its fair share of tax yet many successful companies actively avoid this social obligation should they be considered socially irresponsible this paper explores the issue of tax avoidance and the implications it has for any credible definition and measure of csr it also highlights an aspect of corporate practice that is deliberately hidden from public view

financial intermediary coalitions abstract in this article an environment in which the investment opportunities of agents are private information is studied and it is shown that financial intermediaries arise endogenously within that environment it is established that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors private information core allocations these intermediaries which are coalitions of agents exhibit the following characteristics in equilibrium they borrow from and lend to large groups of agents they produce information about investment projects and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers

do ethics matter tax compliance and morality in this article we argue that puzzle of tax compliance can be explained at least in part by recognizing the typically neglected role of ethics in individual behavior that is individuals do not always behave as the selfish rational self interested individuals portrayed in the standard neoclassical paradigm but rather are often motivated by many other factors that have as their main foundation some aspects of ethics we argue that it is not possible to understand fully an individual s compliance decisions without considering in some form these ethical dimensions specifically we argue here that there is much direct and indirect evidence that ethics differ across individuals and that these differences matter in significant ways for their compliance decisions we then put this in the larger context of the inability of the standard neoclassical paradigm to explain compliance of at least some individuals and we suggest several possible avenues by which theory can be expanded to incorporate ethics we conclude by arguing that a full house of compliance strategies is needed to combat tax evasion strategies that include the traditional enforcement paradigm suggested by and consistent with neoclassical theory a less traditional service paradigm that recognizes the important role of a kinder and gentler tax administration in encouraging compliance and importantly a new trust paradigm that is built on the foundation of ethics in which the tax administration must recognize that it can erode the ethics of taxpayers by its own decisions

is corporate social responsibility performance associated with tax avoidance this study examines whether corporate social responsibility performance is associated with corporate tax avoidance employing a matched sample of 434 firm year observations i e 217 tax avoidant and 217 non tax avoidant firm year observations from the kinder lydenberg and domini database over the period 2003 2009 our logit regression results show that the higher the level of csr performance of a firm the lower the likelihood of tax avoidance our results indicate that more socially responsible firms are likely to display less tax avoidance finally the results from our additional analysis show that the csr categories community relations and diversity represent particularly important elements of csr performance that reduce tax avoidance

corporate social responsibility a strategic advantage or a strategic necessity for many firms a focus on corporate social responsibility csr is an indication to stakeholders that the firm is concerned about social and environmental issues however these same firms may engage in csr activities with the expectation that these activities will increase their bottom line a relevant and highly researched question is the relationship between csr and performance the findings are inconclusive indicating a need to consider other explanations several authors have drawn on the resource based view of the firm to suggest that csr can give a firm a competitive advantage in this article we draw on and further develop this research by focusing on four outcomes of csr initiatives strategic disadvantage strategic necessity temporary strategic advantage and strategic advantage we exemplify this with two cases the article contributes to the literature by developing a set of possible outcomes by recognizing several issues which result in strategic necessity and by suggesting movement between the outcomes

capital markets and firm organization how financial development shapes european corporate groups we investigate the effect of financial development on the formation of european corporate groups because cross country regressions are hard to interpret in a causal sense we exploit exogenous industry measures to investigate a specific channel through which financial development may affect group affiliation internal capital markets using a comprehensive firm level data set on european corporate groups in 15 countries we find that countries with less developed financial markets have a higher percentage of group affiliates in more capital intensive industries this relationship is more pronounced for young and small firms and for affiliates of large and diversified groups our findings are consistent with the view that internal capital markets may under some conditions be more efficient than prevailing external markets and that this may drive group affiliation even in developed economies this paper was accepted by bruno cassiman business strategy

the effect of friendly persuasion and gender on tax comliance behavior friendly persuasion in contrast to deterrent measures like tax audits and penalties on underreported taxes is a positive and possibly a cost effective method of increasing taxpayer compliance however prior studies have failed to show that friendly persuasion has a significant impact on compliance blumenthal et al 2001 mcgraw and scholz 1991 in our study in contrast to prior studies we examine the impact of generating and reading reasons supporting compliance as friendly persuasion on individuals income reporting behavior as well as control for gender effects specifically we predict an interaction effect between friendly persuasion and gender on compliance behavior we carried out a 2 friendly persuasion and control 2 men and women full factorial experiment where participants earned 30 by completing two questionnaires participants in the friendly persuasion group were required first to generate and second to read a list of reasons why they should comply fully afterwards participants in both groups were asked to report the income they earned and pay tax on the reported income the results show a significant main effect for gender as well as a significant interaction effect between gender and friendly persuasion on income reported women in the friendly persuasion group reported significantly higher income compared to men in that group other comparisons were not significant policy implications for increasing taxpayers ethics and compliance are highlighted

business groups in a market economy abstract the purpose of this paper is to examine the nature and significance of the interfirm relationship called the business group first the nature of the japanese business group is discussed it is then pointed out that the business group is not a phenomenon unique to japan and an effort is made to explain the significance of the business group in the context of a market economy using the williamsonian approach to questions of internal organization and the market finally the relationship between the input output relationship of the firms and their group affiliation is tested

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

the changing face and strategies of big business in south africa more than a decade of political democracy under the apartheid regime south african business was marked by a high degree of concentration both in terms of ownership and activities indeed it could be argued that this concentration was both created by and reinforced the exclusions linked to apartheid in this paper we identify the main changes that have characterized south africa s big business since democracy in 1994 unbundling of traditional conglomerates transfer of primary listing to overseas stock exchanges and slow emergence of black owned economic groups these changes are related to key policy actions taken by government including liberalization black economic empowerment bee policies and competition policies we demonstrate that south africa still maintains its own distinctive features including the very large although reduced weight of a few conglomerates while evolving toward structures more similar to organization for economic cooperation and development oecd norms finally we argue that the policy emphasis on ownership transfers combined with limits in the enforcement of competition policies has restricted the capacity to generate additional jobs and meet the ultimate objectives of bee copyright 2006 oxford university press

impact of personal and situational factors on taxpayer compliance an experimental analysis this study used a laboratory experiment with monetary incentives to test the impact of three personal factors moral reasoning value orientation and risk preference and three situational factors the presence absence of audits tax inequity and peer reporting behavior while controlling for the impact of other demographic characteristics on tax compliance analysis of covariance ancova reveals that all the main effects analyzed are statistically significant and robustly influence tax compliance behavior these results highlight the importance of obtaining a proper understanding of these factors for developing effective policies for increasing the level of compliance and indicate that standard enforcement polices based on punishment alone should be supplemented by an information system that would acquaint tax payers with the compliance level of other tax payers reinforce the concept of fairness of the tax system among tax payers and develop programs that enhance and appeal to a taxpayer s moral conscience and reinforce social cohesion

estimating the performance effects of business groups in emerging markets business groups confederations of legally independent firms are ubiquitous in emerging economies yet very little is known about their effects on the performance of affiliated firms we conceive of business groups as responses to market failures and high transaction costs in doing so we develop hypotheses about the effects of group affiliation on firm profitability affiliation could either boost or depress firm profitability and members of a group are likely to earn rates of return similar to other members of the same group using a unique data set compiled largely from local sources we test for these effects in 14 emerging markets argentina brazil chile india indonesia israel mexico peru the philippines south africa south korea taiwan thailand and turkey we find evidence that business groups indeed affect the broad patterns of economic performance in 12 of the markets we examine group affiliation appears to have as profound an effect on profitability as does industry membership yet strategy scholars have a much clearer grasp of industries than of groups moreover membership in a group raises the profitability of the average group member in several of the markets we examine this runs contrary to the wisdom conventional in advanced economies that unrelated diversification depresses profitability overall our findings suggest that the roots of sustained differences in profitability may vary across institutional contexts conclusions drawn in one context may well not apply to another copyright 2001 john wiley sons ltd

filling institutional voids in emerging economies the impact of capital market development and business groups on m a deal abandonment business groups may fill institutional voids in emerging economies but empirical research is lacking as to when and how institutional voids affect economic behavior of individual firms we examine the effect of institutional voids in capital markets on individual transactions in emerging economies focusing on m a deals that were abandoned after being publicly announced m a deals may fall through when unexpected information is brought to light or financing difficulties arise at the country level capital market development can lower the probability of m a deal abandonment by facilitating the flow of information and capital at the firm level when acquirers are affiliated with business groups development of internal capital markets can also lower this probability facilitating completion of the transaction and the flow of information this effect of business groups however decreases as the external capital market the institution replaced by their internal markets develops and its benefits become widely available to non business groups the results of our empirical analyses on m a transactions in nine emerging economies over 21 years support our arguments

a note on countertrade contractual uncertainty and transaction governance in emerging economies this paper develops a conceptual framework for analyzing organizational responses to contractual uncertainty in the context of emerging economies elaborating on hennart s 1989 transaction cost rationale for countertrade we develop a typology of exchange and transaction governance pertinent to the study of emerging economies contract trust and hostage notwithstanding the traditional explanation based on foreign exchange shortage we argue that the persistence of international countertrade illustrates organizational remedies to institutional deficiency in transaction governance

consumer reactions to corporate tax strategies effects on corporate reputation and purchasing behavior on the basis of an interdisciplinary approach linking taxation marketing and corporate social responsibility the present research investigates the effects of media reports on aggressive and responsible corporate tax strategies ctss on corporate success with consumers by means of two laboratory experiments n 150 360 we analyze the effects of the ctss on corporate reputation consumer purchase intention and the consumer s willingness to pay our results suggest that aggressive ctss diminish corporate success with consumers whereas responsible ctss enhance it nevertheless consumers are not willing to pay a price premium for products sold by responsible tax planning companies but rather punish aggressive tax planning companies through a slightly lower willingness to pay finally consumers tax morale and their attitude toward tax avoidance are important moderating variables given the growing level of media interest in taxation our findings are crucial for assessing consumer related non tax costs and the benefits of different ctss

exchange structures in transition lending and trade relations in chinese business groups the networks of interfirm relations that developed in business groups during economic transition are central to china s reform and are becoming an important part of the country s emergent economic structure using a recent and original data set that includes direct observations of economic choices made by firms the process by which these interfirm lending and trade ties emerged and evolved in the early stages of reform is explored initially information from sources external to the network dominated the formation and direction of exchange relations firms turned to their prior connections took advantage of market position and drew on bureaucratic power to develop alliances over time internal influences gained importance and managers increasingly drew on internal nontrade relations and other indicators inside the business group to identify lending and trade partners the results demonstrate the central but changing role that social relations and environmental cues played in the creation of economic structure during china s transition this study also contributes to an understanding of the processes of organizational adaptation to a major economic transition and interfirm alliance formation more generally the findings reveal that firms select exchange partners of known reputation and solicit relations that reduce uncertainty even when there is a cost involved

financial structure and bankruptcy risk in japanese companies financial structure and the nature of financial risk in japanese companies differ substantially from those of u s firms as a result the application of u s standards is likely to produce misleading conclusions for creditors investors and competitors this article examines the unique institutional relationships and the nature of debt and equity claims that are central to understanding financial risk in japan it reports the results of empirical testing of the types of measures that more accurately reflect bankruptcy risk in large japanese firms the findings indicate that measures of a company s social importance and the strength of its bank relationship may be more important at financially crucial moments than accounting information the results are of practical value to foreign creditors and analysts as well as to researchers

engineering growth business group structure and firm performance in china s transition economy business groups have received increasing attention from academics interested in interorganizational relations and their impact on firms as part of industrial reform the chinese government began in the mid 1980s to encourage firms to form business groups with structural characteristics that promised to enhance financial performance and productivity using 1988 90 panel data on china s 40 largest business groups and their 535 member firms the study finds that the presence and predominance of interlocking directorates and finance companies in business groups improved the financial performance and productivity of the groups member firms in addition firms in groups with nonhierarchical organizational structures performed better than firms in hierarchical groups suggesting that complete integration into a hierarchical organization is not an optimal strategy

is there a better commitment mechanism than cross listings for emerging economy firms evidence from mexico the last decade of work in corporate governance has shown that weak legal institutions at the country level hinder firms in emerging economies from accessing finance and technology affordably to attract outside resources these firms must often use external commitments for repayment research suggests that a common commitment mechanism is to borrow us securities laws which involves listing the emerging economy firm s shares on a us exchange this paper uses a quasi natural experiment from mexico to examine the conditions under which forming a strategic alliance with a foreign multinational firm is actually a superior mechanism for ensuring good corporate governance

tax avoidance as a sustainability problem this manuscript proposes that tax avoidance can be better understood and mitigated as a sustainability problem tax avoidance is not just a financial problem for tax authorities but one that erodes critical common spaces necessary for the smooth functioning of regulatory compliance organizational integrity and society defining tax avoidance as a sustainability problem offers a broader and more holistic understanding of the organizational and societal consequences of tax avoidance behavior sustainability is also a mature and legitimized concept that can readily incorporate taxation a variety of established sustainability metrics have the capacity to incorporate anti tax avoidance measures or publicize firms that engage in fair tax practices this manuscript concludes that integrating sustainability principles in conjunction with important extant work on corporate social responsibility and taxation can advance the goals of decreasing the occurrence and acceptability of tax avoidance

heterogeneous policies heterogeneous technologies the case of renewable energy this paper investigates empirically the effect of market regulation and renewable energy policies on innovation activity in different renewable energy technologies for the eu countries and the years 1980 to 2007 we built a unique dataset containing information on patent production in eight different technologies proxies of market regulation and technology specific renewable energy policies our main finding is that compared to privatisation and unbundling reducing entry barriers is a more significant driver of renewable energy innovation but that its effect varies across technologies and is stronger in technologies characterised by potential entry of small independent power producers in addition the inducement effect of renewable energy policies is heterogeneous and more pronounced for wind which is the only technology that is mature and has high technological potential finally ratification of the kyoto protocol which determined a more stable and less uncertain policy framework amplifies the inducement effect of both energy policy and market liberalisation

aggressive tax avoidance by managers of multinational companies as a violation of their moral duty to obey the law a kantian rationale managers of multinational companies often favour an aggressive tax avoidance strategy that pushes the legal limits onto the advantage of shareholders and the disadvantage of the spirit of democratically legitimized tax laws the public and media debate whether such aggressive behaviour is immoral aggressive tax avoidance is a subset of the aggressive legal interpretations potentially observable in all fields which places little weight on the will of a democratically legitimized legislation a thorough ethical analysis based on the deontological approach of kant demonstrates that aggressive tax avoidance as a special case of operating on the edge of legal boundaries is potentially immoral applying the kantian contradiction of conception or will test shows that this maxim might not be conceived or willed as a general law of nature if all natural or legal persons aggressively interpret laws on all subjects and in every imaginable situation then central principles of the system of law we all rely upon would be severely compromised therefore aggressive tax avoidance by managers of multinational companies may violate the managers moral duty to obey not only the letter but also the intention or spirit of the law the validity of the argumentation depends critically on the formulation and interpretation of the respective maxims and on assumptions about the legal system preserving central elements of kantian philosophy the article demonstrates the complexity of a philosophical argumentation which tries to justify the moral intuitions that underpin the common negative evaluation of aggressive legal strategies in business

tax morale affects tax compliance evidence from surveys and an artefactual field experiment our working hypothesis is that cross cultural differences in tax compliance behavior have foundations in the institutions of tax administration and citizen assessment of the quality of governance tax compliance being a complex behavioral issue its investigation requires use of a variety of methods and data sources results from artefactual field experiments conducted in countries with substantially different political histories and records of governance quality demonstrate that observed differences in tax compliance levels persist over alternative levels of enforcement the experimental results are shown to be robust by replicating them for the same countries using survey response measures of tax compliance