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Exploiting an innovative measure of corporate integrity based on machine learning and textual analysis, this paper explores the effect of hostile takeover exposure on corporate integrity. Using a measure of takeover vulnerability principally based on state legislation, we find that a more active takeover market raises corporate integrity, corroborating the notion that the disciplinary mechanism associated with the takeover market induces managers to enhance corporate integrity. Specifically, a rise in takeover exposure by one standard deviation results in an improvement in integrity by 4.00%. Further analysis confirms the conclusion including propensity score matching, entropy balancing, and instrumental-variable analysis. Our study is among the first to employ this novel text-based measure of corporate integrity. Finally, additional analysis based on ”CEO luck” validates the conclusion.
Viput Ongsakul; Pattanaporn Chatjuthamard; Pornsit Jiraporn; Sirithida Chaivisuttangkun. Corporate integrity and hostile takeover threats: Evidence from machine learning and “CEO luck”. Journal of Behavioral and Experimental Finance 2021, 100579 .
AMA StyleViput Ongsakul, Pattanaporn Chatjuthamard, Pornsit Jiraporn, Sirithida Chaivisuttangkun. Corporate integrity and hostile takeover threats: Evidence from machine learning and “CEO luck”. Journal of Behavioral and Experimental Finance. 2021; ():100579.
Chicago/Turabian StyleViput Ongsakul; Pattanaporn Chatjuthamard; Pornsit Jiraporn; Sirithida Chaivisuttangkun. 2021. "Corporate integrity and hostile takeover threats: Evidence from machine learning and “CEO luck”." Journal of Behavioral and Experimental Finance , no. : 100579.
We explore the effect of board independence on CSR investments during a stressful time, i.e. during the Great Recession. Our results show that independent directors exhibit an unfavorable view of CSR investments during the crisis. Stronger board independence leads to a significant reduction in CSR. In particular, a rise in board independence by one standard deviation reduces CSR investments by about 8.22%. Further analysis shows that managers raised CSR investments during the crisis, consistent with the risk-mitigation view, where managers invest in CSR to reduce their risk exposure. However, managers appear to over-invest in CSR during the crisis as they are forced to cut back in the presence of a strong board, implying that part of the CSR investments during the crisis is motivated by managers’ own risk preference. Additional robustness checks corroborate the results, including fixed- and random-effects regressions, propensity score matching, and instrumental-variable analysis. Our study is the first to shed light on how independent directors view CSR during a stressful time. Finally, we show that CSR reduces firm risk substantially during the crisis, strongly confirming the risk-mitigation hypothesis.
Pandej Chintrakarn; Pornsit Jiraporn; Sirimon Treepongkaruna. How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis. International Review of Economics & Finance 2020, 71, 143 -160.
AMA StylePandej Chintrakarn, Pornsit Jiraporn, Sirimon Treepongkaruna. How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis. International Review of Economics & Finance. 2020; 71 ():143-160.
Chicago/Turabian StylePandej Chintrakarn; Pornsit Jiraporn; Sirimon Treepongkaruna. 2020. "How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis." International Review of Economics & Finance 71, no. : 143-160.
Prior research shows that board size has a significant effect on firm performance. Therefore, board size is a crucial aspect of the board of directors. Drawing on institutional theory, we investigate how firms adjust board size in response to economic policy uncertainty (EPU). We find that firms reduce board size in the presence of EPU. In particular, a rise in EPU by one standard deviation reduces board size by 21.61% on average. Our results are consistent with the notion that agency conflicts are more severe in the presence of EPU. Accordingly, firms strengthen their corporate governance by reducing board size.
Viput Ongsakul; Sirimon Treepongkaruna; Pornsit Jiraporn; Ali Uyar. Do firms adjust corporate governance in response to economic policy uncertainty? Evidence from board size. Finance Research Letters 2020, 39, 101613 .
AMA StyleViput Ongsakul, Sirimon Treepongkaruna, Pornsit Jiraporn, Ali Uyar. Do firms adjust corporate governance in response to economic policy uncertainty? Evidence from board size. Finance Research Letters. 2020; 39 ():101613.
Chicago/Turabian StyleViput Ongsakul; Sirimon Treepongkaruna; Pornsit Jiraporn; Ali Uyar. 2020. "Do firms adjust corporate governance in response to economic policy uncertainty? Evidence from board size." Finance Research Letters 39, no. : 101613.
Co-opted directors are those appointed after the incumbent CEO assumes office. Prior research shows that co-opted directors affect the quality of board monitoring. We explore how co-opted directors influence firm risk during a stressful time, focusing on the financial crisis of 2008. Firms with more co-opted directors experience significantly lower firm risk during the crisis. The results hold for total risk, idiosyncratic risk, and systematic risk. This corroborates the notion that, managers are inherently risk-averse, particularly so during the crisis. Co-opted directors allow managers to adopt corporate policies that reflect their own risk preferences, resulting in lower firm risk.
Sirithida Chaivisuttangkun; Pornsit Jiraporn. The effect of co-opted directors on firm risk during a stressful time: Evidence from the financial crisis. Finance Research Letters 2020, 39, 101538 .
AMA StyleSirithida Chaivisuttangkun, Pornsit Jiraporn. The effect of co-opted directors on firm risk during a stressful time: Evidence from the financial crisis. Finance Research Letters. 2020; 39 ():101538.
Chicago/Turabian StyleSirithida Chaivisuttangkun; Pornsit Jiraporn. 2020. "The effect of co-opted directors on firm risk during a stressful time: Evidence from the financial crisis." Finance Research Letters 39, no. : 101538.
We explore the effect of economic policy uncertainty (EPU) on managerial risk-taking incentives. Our analysis shows that EPU leads to more powerful risk-taking incentives. A rise in EPU by one standard deviation raises vega by 18.88%. Economic uncertainty, coupled with their own inherent risk aversion, motivates managers to be extra cautious during uncertain times, resulting in sub-optimal risk-taking. To offset this tendency for too little risk, firms provide more powerful risk-taking incentives to induce managers to be more aggressive. Further analysis confirms the results, including an instrumental-variable analysis, random-effects analysis, propensity score matching, and using two alternative measures of uncertainty.
Pattanaporn Chatjuthamard; Patcharawalai Wongboonsin; Kritika Kongsompong; Pornsit Jiraporn. Does economic policy uncertainty influence executive risk-taking incentives? Finance Research Letters 2019, 37, 101385 .
AMA StylePattanaporn Chatjuthamard, Patcharawalai Wongboonsin, Kritika Kongsompong, Pornsit Jiraporn. Does economic policy uncertainty influence executive risk-taking incentives? Finance Research Letters. 2019; 37 ():101385.
Chicago/Turabian StylePattanaporn Chatjuthamard; Patcharawalai Wongboonsin; Kritika Kongsompong; Pornsit Jiraporn. 2019. "Does economic policy uncertainty influence executive risk-taking incentives?" Finance Research Letters 37, no. : 101385.
Empirical evidence suggests that the effect of board gender diversity on firm performance remains inconclusive. We argue that, during the times of crisis, firms likely need more monitoring and different advice than they normally do, thereby highlighting the role of female directors, who bring new ideas and different perspectives to the table. Consistent with this argument, the results show that the presence of female directors on the board significantly improved firm performance during the Great Recession of 2008, but such benefits from board gender diversity are not found outside the crisis period. In particular, during the Great Recession, an increase in the percentage of female directors by one standard deviation is associated with a rise in the return on assets of 8.41%. Several robustness checks confirm the results, including an instrumental‐variable analysis and a dynamic panel generalized method of moments. There is also evidence that the beneficial role of female directors during the crisis is not sufficiently reflected in the stock markets.
Suwongrat Papangkorn; Pattanaporn Chatjuthamard; Pornsit Jiraporn; Sirisak Chueykamhang. Female directors and firm performance: Evidence from the Great Recession. International Review of Finance 2019, 21, 598 -610.
AMA StyleSuwongrat Papangkorn, Pattanaporn Chatjuthamard, Pornsit Jiraporn, Sirisak Chueykamhang. Female directors and firm performance: Evidence from the Great Recession. International Review of Finance. 2019; 21 (2):598-610.
Chicago/Turabian StyleSuwongrat Papangkorn; Pattanaporn Chatjuthamard; Pornsit Jiraporn; Sirisak Chueykamhang. 2019. "Female directors and firm performance: Evidence from the Great Recession." International Review of Finance 21, no. 2: 598-610.
We exploit the Great Recession of 2008 to study how firms view corporate social responsibility (CSR). When confronted with an adverse exogenous shock, firms are forced to prioritize. Our results show that, during the Great Recession, firms do not lessen their overall CSR investments, suggesting that they recognize the importance of CSR. However, further analysis shows that firms substantially reduce investments in five CSR activities (Community, Employee, Environment, Human Rights, and Product), while increasing investments in two CSR activities (Corporate Governance and Diversity). Firms appear to view some CSR activities as more essential to the strategic direction of the firm than others. Firms appear to view some CSR activities as more essential to the strategic direction of the firm than others.
Benjalux Sakunasingha; Pornsit Jiraporn; Ali Uyar. Which CSR activities are more consequential? Evidence from the Great Recession. Finance Research Letters 2018, 27, 161 -168.
AMA StyleBenjalux Sakunasingha, Pornsit Jiraporn, Ali Uyar. Which CSR activities are more consequential? Evidence from the Great Recession. Finance Research Letters. 2018; 27 ():161-168.
Chicago/Turabian StyleBenjalux Sakunasingha; Pornsit Jiraporn; Ali Uyar. 2018. "Which CSR activities are more consequential? Evidence from the Great Recession." Finance Research Letters 27, no. : 161-168.
This paper investigates how deposit insurance and capital adequacy affect bank risk for five developed and nine emerging markets over the period of 1992–2015. Although full coverage of deposit insurance induces moral hazard by banks, deposit insurance is still an effective tool, especially during the time of crisis. On the contrary, capital adequacy by itself does not effectively perform the monitoring role and leads to the asset substitution problem. Implementing the safety nets of both deposit insurance and capital adequacy together could be a sustainable financial architecture. Immediate-effect analysis reveals that the interplay between deposit insurance and capital adequacy is indispensable for banking system stability.
Seksak Jumreornvong; Chanakarn Chakreyavanich; Sirimon Treepongkaruna; Pornsit Jiraporn. Capital Adequacy, Deposit Insurance, and the Effect of Their Interaction on Bank Risk. Journal of Risk and Financial Management 2018, 11, 79 .
AMA StyleSeksak Jumreornvong, Chanakarn Chakreyavanich, Sirimon Treepongkaruna, Pornsit Jiraporn. Capital Adequacy, Deposit Insurance, and the Effect of Their Interaction on Bank Risk. Journal of Risk and Financial Management. 2018; 11 (4):79.
Chicago/Turabian StyleSeksak Jumreornvong; Chanakarn Chakreyavanich; Sirimon Treepongkaruna; Pornsit Jiraporn. 2018. "Capital Adequacy, Deposit Insurance, and the Effect of Their Interaction on Bank Risk." Journal of Risk and Financial Management 11, no. 4: 79.
We contribute to the debate on the costs and benefits of busy directors by investigating the effect of busy directors on firm value during a stressful time, i. e. during the Great Recession. Our results show that busy directors improve firm value significantly during the financial crisis. In particular, a rise in directors’ busyness by one standard deviation results in an improvement in Tobin’s q by 6.41 %. Directors with multiple board seats appear to help firms navigate the crisis more successfully, supporting the notion that multiple board seats signal higher quality. Outside the crisis period, however, we find that busy directors reduce firm value, consistent with many prior studies. Our results are crucial as they show that governance mechanisms function differently during stressful times than they do during normal times. Firms should exercise great caution before imposing limits on outside board seats on their directors.
Pradit Withisuphakorn; Pornsit Jiraporn. Are Busy Directors Harmful or Helpful? Evidence from the Great Recession. The B.E. Journal of Economic Analysis & Policy 2018, 18, 1 .
AMA StylePradit Withisuphakorn, Pornsit Jiraporn. Are Busy Directors Harmful or Helpful? Evidence from the Great Recession. The B.E. Journal of Economic Analysis & Policy. 2018; 18 (2):1.
Chicago/Turabian StylePradit Withisuphakorn; Pornsit Jiraporn. 2018. "Are Busy Directors Harmful or Helpful? Evidence from the Great Recession." The B.E. Journal of Economic Analysis & Policy 18, no. 2: 1.
The literature offers no clear evidence on the effect of independent directors on firm value. We argue that, during stressful times, firms may need more and better expert advice to navigate a crisis. Outside independent directors can provide such advice. So, the role of independent directors may be more pronounced during a stressful time. Consistent with this notion, we find that independent directors significantly improved firm value during the Great Recession of 2008. Specifically, a rise in the percentage of independent directors by one standard deviation would have improved firm value by 4.29% during the Great Recession. Outside the crisis period, however, our results do not show that independent directors increase firm value. Further analysis confirms the results, including random-effects regressions, propensity score matching, instrumental-variable regressions, as well as falsification tests. Our results are crucial as they demonstrate that the role of independent directors is different during stressful times than it is during normal times.
Nattawut Jenwittayaroje; Pornsit Jiraporn. Do Independent Directors Improve Firm Value? Evidence from the Great Recession. International Review of Finance 2017, 19, 207 -222.
AMA StyleNattawut Jenwittayaroje, Pornsit Jiraporn. Do Independent Directors Improve Firm Value? Evidence from the Great Recession. International Review of Finance. 2017; 19 (1):207-222.
Chicago/Turabian StyleNattawut Jenwittayaroje; Pornsit Jiraporn. 2017. "Do Independent Directors Improve Firm Value? Evidence from the Great Recession." International Review of Finance 19, no. 1: 207-222.
Motivated by agency theory, we explore the effect of independent directors on corporate risk taking. To minimize endogeneity, we exploit the passage of the Sarbanes–Oxley Act as an exogenous shock that raises board independence. Our difference-in-difference estimates show that board independence diminishes risk-taking significantly, as evidenced by the substantially lower volatility in the stock returns. In particular, board independence reduces total risk and idiosyncratic risk by 24.87% and 12.60%, respectively. The evidence is consistent with the notion that board independence represents an effective governance mechanism that prevents managers from taking excessive risk. Additional analysis based on propensity score matching also confirms our results. Our research design is based on a natural experiment and is far more likely to show causality, rather than merely an association.
Pornsit Jiraporn; Sang Mook Lee. How do Independent Directors Influence Corporate Risk-Taking? Evidence from a Quasi-Natural Experiment. International Review of Finance 2017, 18, 507 -519.
AMA StylePornsit Jiraporn, Sang Mook Lee. How do Independent Directors Influence Corporate Risk-Taking? Evidence from a Quasi-Natural Experiment. International Review of Finance. 2017; 18 (3):507-519.
Chicago/Turabian StylePornsit Jiraporn; Sang Mook Lee. 2017. "How do Independent Directors Influence Corporate Risk-Taking? Evidence from a Quasi-Natural Experiment." International Review of Finance 18, no. 3: 507-519.
Due to managerial myopia, managers may be reluctant to make long-term investment decisions that do not produce immediate results. Effective corporate governance can align managers’ short-term-oriented incentives with shareholders’ long-term interests. Because the board of directors is the paramount governance mechanism, we explore the role of board governance on managerial myopia. In particular, we investigate the effect of independent directors on corporate innovation. To minimize endogeneity, we exploit the passage of the Sarbanes–Oxley Act as an exogenous shock that raises board independence. Our difference-in-difference estimates show that board independence leads to significantly higher investments in innovation as well as higher innovation productivity. Our results are consequential as they show that board governance has a palpable effect on important corporate outcomes such as innovation productivity.
Pornsit Jiraporn; Sang Mook Lee; Kuen Jae Park; Hakjoon Song. How do independent directors influence innovation productivity? A quasi-natural experiment. Applied Economics Letters 2017, 25, 435 -441.
AMA StylePornsit Jiraporn, Sang Mook Lee, Kuen Jae Park, Hakjoon Song. How do independent directors influence innovation productivity? A quasi-natural experiment. Applied Economics Letters. 2017; 25 (7):435-441.
Chicago/Turabian StylePornsit Jiraporn; Sang Mook Lee; Kuen Jae Park; Hakjoon Song. 2017. "How do independent directors influence innovation productivity? A quasi-natural experiment." Applied Economics Letters 25, no. 7: 435-441.
We investigate the extent of earnings management during the financial crisis of 2008 (The Great Recession). Based on a large sample of 14,000 observations across 15 years, our results show that firms managed earnings less aggressively during the crisis. We also show a severe decline in firm value and profitability during the crisis. Our results are consistent with the notion that, during the crisis, firm performance was so far below the target that no amount of earnings management would have been sufficient to reverse the poor earnings picture. As a result, managers were less motivated to manage earnings. Furthermore, the crisis serves as a convenient excuse for poor performance, lessening the motivation and necessity for managers to manage earnings. Additional analysis including fixed-effects regressions, propensity score matching, and GMM dynamic panel data estimation shows that our results are robust and are not driven by unobserved heterogeneity. Further analysis documents similar findings for the Dot-com crisis in 2001 and the Asian Financial Crisis in 1997–1998.
Pandej Chintrakarn; Pornsit Jiraporn; Young S. Kim. Did Firms Manage Earnings more Aggressively during the Financial Crisis? International Review of Finance 2017, 18, 477 -494.
AMA StylePandej Chintrakarn, Pornsit Jiraporn, Young S. Kim. Did Firms Manage Earnings more Aggressively during the Financial Crisis? International Review of Finance. 2017; 18 (3):477-494.
Chicago/Turabian StylePandej Chintrakarn; Pornsit Jiraporn; Young S. Kim. 2017. "Did Firms Manage Earnings more Aggressively during the Financial Crisis?" International Review of Finance 18, no. 3: 477-494.
We explore the effect of co-opted directors on R&D investments. Co-opted directors are those appointed after the incumbent CEO assumes office. Because a co-opted board represents a weakened governance mechanism that diminishes the probability of executive removal, managers are less likely to be removed and are more motivated to make long-term investments. Our evidence shows that board co-option leads to significantly higher R&D investments. To draw a causal inference, we execute a quasi-natural experiment using an exogenous regulatory shock from the Sarbanes-Oxley Act (SOX). Our results reveal that the effect of board co-option on R&D is more likely causal.
Pandej Chintrakarn; Pornsit Jiraporn; Sameh Sakr; Sang Mook Lee. Do co-opted directors mitigate managerial myopia? Evidence from R&D investments. Finance Research Letters 2016, 17, 285 -289.
AMA StylePandej Chintrakarn, Pornsit Jiraporn, Sameh Sakr, Sang Mook Lee. Do co-opted directors mitigate managerial myopia? Evidence from R&D investments. Finance Research Letters. 2016; 17 ():285-289.
Chicago/Turabian StylePandej Chintrakarn; Pornsit Jiraporn; Sameh Sakr; Sang Mook Lee. 2016. "Do co-opted directors mitigate managerial myopia? Evidence from R&D investments." Finance Research Letters 17, no. : 285-289.
Prior research shows that powerful CEOs can exacerbate the agency conflict, resulting in adverse corporate outcomes. Exploiting an exogenous shock introduced by the passage of the Sarbanes-Oxley Act, we explore whether board independence mitigates CEO power. Based on difference-in-difference estimation, our evidence shows that independent directors view powerful CEOs unfavorably. Board independence diminishes CEO power by more than a quarter. Based on a quasi-natural experiment, our research design is less vulnerable to the omitted-variable bias and reverse causality and therefore suggests that the effect of board independence on CEO power is likely causal.
Pornsit Jiraporn; Seksak Jumreornvong; Napatsorn Jiraporn; Simran Singh. How do independent directors view powerful CEOs? Evidence from a quasi-natural experiment. Finance Research Letters 2016, 16, 268 -274.
AMA StylePornsit Jiraporn, Seksak Jumreornvong, Napatsorn Jiraporn, Simran Singh. How do independent directors view powerful CEOs? Evidence from a quasi-natural experiment. Finance Research Letters. 2016; 16 ():268-274.
Chicago/Turabian StylePornsit Jiraporn; Seksak Jumreornvong; Napatsorn Jiraporn; Simran Singh. 2016. "How do independent directors view powerful CEOs? Evidence from a quasi-natural experiment." Finance Research Letters 16, no. : 268-274.
Because religious piety induces individuals to be more honest and risk averse, it makes managers less likely to exploit shareholders, thereby mitigating the agency conflict and potentially influencing governance arrangements. We exploit the variation in religious piety across the U.S. counties and investigate the effect of religious piety on anti-takeover provisions. Our results show that religious piety substitutes for corporate governance in alleviating the agency conflict. Effective governance is less necessary for firm with strong religious piety. As a result, religious piety leads to weaker governance, as indicated by more anti-takeover defenses. We exploit historical religious piety as far back as 1952 as our instrumental variable. Religious piety from the distant past is unlikely correlated with current corporate governance directly, except through contemporaneous religious piety. Our instrumental variable analysis, which is far less vulnerable to endogeneity, corroborates the conclusion.
Pandej Chintrakarn; Pornsit Jiraporn; Shenghui Tong; Pattanaporn Chatjuthamard. Exploring the Effect of Religious Piety on Corporate Governance: Evidence from Anti-takeover Defenses and Historical Religious Identification. Journal of Business Ethics 2015, 141, 469 -476.
AMA StylePandej Chintrakarn, Pornsit Jiraporn, Shenghui Tong, Pattanaporn Chatjuthamard. Exploring the Effect of Religious Piety on Corporate Governance: Evidence from Anti-takeover Defenses and Historical Religious Identification. Journal of Business Ethics. 2015; 141 (3):469-476.
Chicago/Turabian StylePandej Chintrakarn; Pornsit Jiraporn; Shenghui Tong; Pattanaporn Chatjuthamard. 2015. "Exploring the Effect of Religious Piety on Corporate Governance: Evidence from Anti-takeover Defenses and Historical Religious Identification." Journal of Business Ethics 141, no. 3: 469-476.
We explore how powerful CEOs view investments in corporate social responsibility (CSR). The agency view suggests that CEOs invest in CSR to enhance their own private benefits. On the contrary, the conflict resolution view argues that CSR investments are made to resolve the conflicts among various stakeholders. Using Bebchuk et al. (2011) CEO Pay Slice (CPS) to measure CEO power, we show that the association between CEO power and CSR is non-monotonic. When the CEO is relatively less powerful, an increase in CEO power leads to more CSR engagement. However, as the CEO becomes substantially more powerful, he is more entrenched and no longer invests more in CSR. In fact, when CEO power goes beyond a certain threshold, more powerful CEOs significantly reduce CSR investments.
P. Jiraporn; P. Chintrakarn. How do powerful CEOs view corporate social responsibility (CSR)? An empirical note. Economics Letters 2013, 119, 344 -347.
AMA StyleP. Jiraporn, P. Chintrakarn. How do powerful CEOs view corporate social responsibility (CSR)? An empirical note. Economics Letters. 2013; 119 (3):344-347.
Chicago/Turabian StyleP. Jiraporn; P. Chintrakarn. 2013. "How do powerful CEOs view corporate social responsibility (CSR)? An empirical note." Economics Letters 119, no. 3: 344-347.
‘Lucky’ CEOs are given stock option grants on days when the stock price is the lowest in the month of the grant, implying opportunistic timing, severe agency problems and poor corporate governance. We find that lucky (opportunistic) CEOs invest significantly less in CSR. The evidence thus does not support the notion that CSR is primarily used to enhance managers’ private benefits at the expense of shareholders. Rather, lucky CEOs appear to view CSR investments as depriving them of the free cash flow they could otherwise exploit.
P. Jiraporn; P. Chintrakarn. Corporate social responsibility (CSR) and CEO luck: are lucky CEOs socially responsible? Applied Economics Letters 2013, 20, 1036 -1039.
AMA StyleP. Jiraporn, P. Chintrakarn. Corporate social responsibility (CSR) and CEO luck: are lucky CEOs socially responsible? Applied Economics Letters. 2013; 20 (11):1036-1039.
Chicago/Turabian StyleP. Jiraporn; P. Chintrakarn. 2013. "Corporate social responsibility (CSR) and CEO luck: are lucky CEOs socially responsible?" Applied Economics Letters 20, no. 11: 1036-1039.