Tag Archives: academic research

Climate, News

Shareholders more likely to support eco-initiatives if they have experienced climate disasters

Shareholders in locations recently hit by climate-related disasters such as hurricanes are far more likely to support environmental proposals, by as much as 38%, even when such proposals risk decreasing firm value, according to new research from the Rotterdam School of Management Erasmus University (RSM).

The study, undertaken by Dr Guosong Xu at RSM alongside Dr Eliezer Fich at Drexel University, sought to bring greater understanding to two key questions at the crux of encouraging corporations to better support environmental protection efforts; whether shareholder beliefs about climate change alter their support for environmental proposals, and whether those proposals affect firm value.

Dr Xu says;

“Climate change related proposals have increased steadily in recent years, reflecting growing investor demand for corporate accountability. However, despite their popularity, these proposals commonly receive insufficient support. According to a report by the UN, just 2.8% received enough votes to pass during stockholder meetings held from 2006 to 2020.

“Our study seeks to better understand why these initiatives receive such little support, and what it takes to pass them successfully.”

The researchers speculate that such a lack of voting support is driven by stockholders’ perception that climate-change is not an immediate concern. Belief, they say, plays an important role in investor behaviour.

The researchers analysed mutual funds’ voting records of US firms according to the Institutional Shareholder Services (ISS) Voting Analytics database, between 2006 and 2020. They then mapped each funds headquarters to the Census 2010 county Federal Information Processing Standards (FIPS) code, to identify hurricane locations.

By doing this, the researchers were able to base their findings on more than 357,000 voting observations made by shareholders of US-based firms.

Dr Xu and Dr Fich made several key discoveries.

Firstly, funds in areas hit by a hurricane were significantly more likely to vote for an environmental proposal in the immediate aftermath of the event, as were funds located in other hurricane-prone locations. The difference in investor support was as much as 38% higher in such locations.

However, the effect was, for many, temporary, with most investors returning to their previous stances and reversing their support for such schemes within three years.

Notably, the researchers say that fund characteristics such as size, performance, flows, attitudes towards environmental, social and corporate governance (ESG) issues had little impact on their research findings. Those instances where unconditional support was found for climate proposals did not differ among funds located either inside or outside of hurricane-prone locations in the years without a hurricane strike.

Therefore, shareholders’ changed perceptions about climate risks were the most likely reason for their increased support for pro-environmental initiatives after a hurricane strike.

Lastly, once climate-related proposals were passed, firm performance typically weakens. In analysing whether ESG-related proposals created value for firms, the researchers discovered that companies that approved environmental proposals also typically exhibited lower long-term stock returns and accounting underperformance.

The researchers say their work adds important information to the ongoing debate on the role of corporations in global environmental protection, by highlighting the role of investor psychology in altering shareholders’ perceptions about climate risks and, consequently, their support for corporate environmental policies.

News

Managers and employees argue more over fair wages when economic conditions are uncertain

Workplace disagreements between managers and employees over the fair pay of staff wages drastically increase when wider economic conditions are more uncertain, according to new research from emlyon business school.

These increased disagreements between managers and employees were mainly caused by both uncertainty or a lack of productivity caused by wage slashes, state the researchers, who say that often firms reduced wages or considered doing so, which led to employees actively reducing their productivity output as they believed their time and work was worth more.

However, the economy booming can have just as much of an impact on workplace disagreements over wages, say the researchers, who state that conflicts can arise because employers want to keep wages in check whereas workers demand higher wages to reflect increased productivity levels.

This research was conducted by Brice Corgnet, Professor of Finance at emlyon business school, alongside colleagues from Lafayette College and Centro de Investigación y Docencia Económicas (CIDE), who were keen to understand the impact of economic conditions on gift-exchange.

Gift-exchange can be described as a model which showcases the productivity and effort of employees in relation to their wages. If there is a strong gift-exchange between employers and employees, then staff will put in the correct amount of effort for their wages would determine, and increase their effort if their pay is increased and vice versa.

In order to determine the impact of economic conditions over gift-exchange, the researchers created a controlled experiment where employees were given work tasks for a specific wage per hour.

This wage per hour was then either increased or decreased in the next round of the study, to see the impact on workers productivity and effort in the tasks when doing so.

When employers utilised the excuse of economic conditions for a potential and actual drop in workers’ wages, productivity decreased massively, and disagreements began to increase between employers and employees.

Professor Corgnet says,

“Employees always want to know what the specific reference wage would be for the work they do, and value being paid a fair and decent wage for the work they do. Therefore, when their wages increase, so does their effort. However, when their wage is threatened whether it be through them being undervalued or external economic conditions, naturally workers begin to exert less effort and productivity into their roles.”

The researchers state that the findings clearly show the turbulence that external factors, such as economic conditions, can have on the productivity of employees, tensions in an organisation, and the wider economic output.

The tension caused discussions over reference wage can be dealt with says the researchers, who state that for many employees, receiving a strong, real-wage is enough to keep them satisfied and productive.

Whilst in unstable economic conditions, the researchers suggest that though reducing workers’ wages may appear attractive, this is only likely to lead to a huge lack of productive or even strikes from workers who are heavily unionised, which will only likely lead to lack of productive, and bargaining impasses until real wages are referred back to.

The researchers state that a strong gift-exchange is a win-win, with employees ensuring their staff are productive and hard-working, which is of course ideal for the organisation, while employees are happy and feel valued within their work.

This research was published in the Journal of Economic Behaviour and Organisation.

News, Research

Government COVID Response did not effectively support UK migrants, new study suggests

The Government’s response to curbing the spread of Covid-19 did not do enough to support the challenges or needs of migrants living in the UK, new research suggests.

The study, conducted by Professor Benedetta Cappellini at Durham University Business School, alongside colleagues Dorothy Ai-wan Yen on of Brunel Business School, Hsiao-Pei Yang of Coventry University and Suraksha Gupta of Newcastle University London, sought to better understand why migrants living in the UK experienced additional mental strains and anxieties during Covid-19 and the subsequent lockdown measures imposed by the Government, in order to help facilitate justice for overlooked parts of society.

Professor Cappellini said;

“The Government employed a variety of interventions to minimise the transmission and impact of Covid-19. These included communication campaigns through media, healthcare support, social distancing, national and regional lockdowns, and financial support schemes for businesses. Nevertheless, Covid-19 does not affect all groups of people equally. Our study shows that migrants struggle to cope more than non-migrants during global pandemics because of cultural barriers, reduced access to healthcare and welfare support, and limited social and often economic capital.”

Globally, the researchers say, policymakers have overlooked the challenges faced by international migrants in their host countries during the pandemic. However, the UK in particular received controversial global reviews and scrutiny due to the Government’s initial pandemic response and high death toll.

The researchers conducted 60 interviews with Chinese, Italian and Iranian migrants living in the UK. These nationalities were specifically chosen due to the high number of deaths within their countries at the time the study took place, and because of the stricter prevention measures enforced within their own borders, at a time before such restrictions came into place in the UK.

The interviewees were asked general questions about their personal backgrounds, professions and their motivations to move to the UK, as well as more exploratory questions designed to gauge their understanding of the lockdown and government measures both in their home countries and in the UK. Researchers also asked interviewees about their daily experiences of mandatory confinement and their different coping practices.

The results showed that, similarly to UK nationals, migrants adapted their living and working habits during the lockdown to best comply with government guidance and to stay safe. However, the research shows that, in the early stages of the pandemic, many migrants experienced unexpected and significant new worries if they adopted additional health and safety practices in line with the guidance distributed by their home countries that had not yet been advised or adopted by UK Government.

For example, interviewees expressed mask wearing to be a common source of worry in the early months of the pandemic. Migrants whose home countries were advocating mask use were eager to protect themselves from infection but remained wary of a negative or hostile public response.

Professor Cappellini says,

“At the time of the fieldwork, the UK Government was still advising against the benefits of wearing face masks to the general public, but participants offered counterarguments in favour of mask use, citing sources from their home countries, including newspaper articles and information received through networks of friends and family. Some were also actively involved in convincing sceptical British colleagues and friends via social media of the benefits of mask wearing. Nevertheless, many participants said they were at times reluctant to wear a mask so as not to seem different from UK friends and colleagues.”

According to the researchers, the unexpected and negative reactions migrant interviewees had received from those around them triggered additional emotional stress and anxieties. As a result, migrants were faced with adopting “multi-layered integrated coping strategies”, developing individual, household-based and community-based protective strategies, in order to stay safe and not provoke additional anxieties.

Families which encompassed mixed nationalities were placed under further strain when migrants’ families overseas implored their UK-based relatives to adopt more cautious behaviour such as mask wearing and social distancing, particularly when British members of the family chose not to do so.

Other concerns highlighted by the study was the limited effectiveness of Government messaging to penetrate some migrant communities where English was not a first language and, consequently, communities did not engage with British media or news and were unable to both fully follow lockdown rules or use support services.

Professor Cappellini says,

“Our paper illustrates how coping became paradoxical, because alongside the need to cope with the pandemic, migrants also had to cope with the hostile reactions that their initial coping strategies provoked from those around them. Migrants had to learn to cope with coping.”

By highlighting this concept, the researchers believe their study leads to several managerial implications for governments and policymakers to consider in the event of future pandemics or Covid-19 lockdowns, to best ensure public health, safety and wellbeing are protected. Action should be taken, they say, to support migrant families and communities and to promote societal understanding and inclusion.

Business Research, News

Claiming to be patriotic can improve a company’s performance

Companies that operate on a national level can boost their success by stressing their contribution to national interests, according to new research by Vienna University of Economics and Business.

The research, conducted by Professors Alexander Mohr and Christian Schumacker, found that companies which emphasized their commitment to act in line with the national interest perform better under certain conditions.

This is because nationalist sentiment can affect the employee’s identification and motivation to work for the firm, as well as consumers’ willingness to buy a firm’s products and services.
The researchers analysed corporate communications using statements made by the CEOs of US firms during 20,458 conference calls with investors and analysts, and looked at 12,260 press releases issued by these companies in the period from 2002 to 2015.

“From what we can see, strong populist sentiment in a firm’s home country can lead governments, consumers, and employees to expect a stronger commitment to national interests on the part of the company. Companies are rewarded by these groups if they claim to live up to this commitment. In contrast, a lack of patriotism might be sanctioned, governments might cancel tax discounts, employees might quit their jobs, and consumers might boycott companies’ products and services,” says Professor Mohr.

However, the results also show that the use of patriotic rhetoric has negative effects on performance for companies that depend strongly on foreign markets.
These firms are rewarded in their home markets but, at the same time, might be sanctioned by governments, consumers, and employees in other countries.

“Under certain circumstances, catering to nationalism and populism may be beneficial for firm’s operation mainly in the domestic market, but we see that this strategy backfires for companies with significant operations abroad, for instance export activities or international branch locations,” Professor Mohr adds.

The research was published in the journal Strategy Science.

Business Research, News

Finance employees are the least trustworthy

Employees in the financial sector are 30 per cent less trustworthy than other industries, according to new research by the University of Cologne.

The study, conducted by Professors Matthias Heinz and Matthias Sutter, measured the trustworthiness of students and found that those who were less trustworthy ended up in the financial sector after graduation.

In order to show this, the researchers identified the degree of trustworthiness of business and economics students several years before they entered the job market by analysing their career aspirations, social preferences and personality traits.

They then followed up on the students’ professional specialisation as well as their job placement after graduation and found that most of those who were considered untrustworthy, had entered the financial industry.

“A well-functioning financial market is of the utmost importance for social welfare, however, the industry struggles with widespread misconduct and corporate scandals which compromises its benefits for society. Our paper argues that this is as a result of the companies selecting candidates with little trustworthiness,” says Professor Heinz.

The research also highlights that that companies within the financial industry do not screen out less trustworthy individuals, in fact, it seems that the opposite is the case.

The researchers suggest that policy interventions might be needed to change incentive structures in the financial industry to ensure that they attract more trustworthy and pro-social candidates in the future.

Professor Matthias Heinz and Matthias Sutter are scientists at the University of Cologne and the Cluster of Excellence ECONtribute: Markets & Public Policy.

Business Research, News

It’s harder to progress at work in prestigious companies, but promotion comes with a greater reward – new research into football reveals why

Highly talented workers join prestigious firms, according to new research by the University of Cologne, Bielefeld, Braunschweig and the California State University, East Bay.
The study, conducted by Professor Oliver Gurtler, confirms that it is harder to advance in a competitive firm, but the promotion is higher valued by the labour market.

This leads the most talented workers to join prestigious firms in an attempt to receive promotion, while less talented workers join less competitive companies where their promotion is more likely but less rewarded by the labour market.

The researchers used data from players who were newly transferred to the German Bundesliga between 2010 and 2017. They examine how the decision of players to join a specific club affects their chances of promotion and the development of their market values.

“We used football data in our analysis because the availability of detailed information regarding players’ characteristics and their performance allowed us to test the implications of out model in a very clean and direct way,” says Professor Gurtler.

Being promoted and receiving playing time is shown to be harder on talented rosters. Those players who still get promoted despite facing strong intra-club competition see their market value to increase the most. The positive signal of job promotion is the biggest for the youngest workers, as their talent is relatively unknown.

“Workers face different challenges in different firms – in some, workers may find it relatively easy to progress since the level of competition is low and while at first this seems beneficial, other potential employees would not be overly impressed due to the lack of competition,” says Professor Gurtler.

Deutscher, C., Gürtler, M., Gürtler, O., & DeVaro, J. (2020). Firm choice and career success-theory and evidence. European Economic Review, 103470.

Education, News

Giving money to citizens will not fix economy, researchers find

Governments should hold off on giving their citizens money until after the lockdown is over, finds new insights by the University of Cologne.

In an attempt to counteract an economic crash, governments in Hong Kong and the US are giving their citizens equivalent to 1,200 euros to help stimulate their economies. However, Dr Michael Thoene, CEO of FiFo Institute for Public Economics at the University of Cologne, says that governments should not expect quick results from this.

“There is no point in passing money to consumers when they are not allowed to go shopping, or are very unlikely to book a holiday. People may be shopping online, but the idea of everything flowing into online shopping is not the point of an economic recovery,” says Dr Thoene.

He suggests that governments should wait until restrictions on everyday life and economies can be eased before implementing such measures.

Dr Thoene adds that in the meantime, governments are better off combating the supply shortage and channelling more money directly into industries, small freelancers and tradespeople who seriously need it.

“Governments need to think about the smaller companies in the most affected industries. For example, it’s not just the airlines that are struggling, but also the airport bakery and the shops. These companies can find themselves very quickly in existential distress and will need liquidity and relief to keep them afloat during this crisis,” says Dr Thoene.

Big companies may also be struggling, but they have employee compensation schemes, ability to borrow money and generally very good communication, whereas other smaller companies do not therefore are less likely to survive this crisis.#

These insights come from the discussion paper: The difficulty of investing sustainably in the future. And how it can be done. – featuring a postscript about investments in the future in times of the corona pandemic.