Journal of Corporate Accounting & Finance, Aug 17, 2020
In this article, we examine the effect of mandatory disclosure of corporate social responsibility... more In this article, we examine the effect of mandatory disclosure of corporate social responsibility on firm's investment behavior. Our analysis exploits China's 2008 mandatory requirement that firms disclose their corporate social responsibility activities. Using difference‐in‐difference design, the study finds that firms that were made to report their corporate social responsibility experience a decrease in the level of investment, but the firm investment efficiency improved, especially on alleviating over‐investments. These findings suggest that mandatory CSR disclosure alters firm investment behavior and the implementation of such a disclosure requirement may need the government support.
International Journal of Finance & Economics, Jan 3, 2021
We hypothesize that tax planning behaviour mitigates a firm's financial constraints, and this eff... more We hypothesize that tax planning behaviour mitigates a firm's financial constraints, and this effect is more pronounced in non-state-owned enterprises and big firms compared to their counterparts. We use data for Chinese listed firms during the period 2010-2018 to test the hypotheses, based on both ordinary least squares and fixed-effect models. The regression results show that tax planning is positively and significantly associated with mitigation of financial constraints, suggesting that cash tax savings are likely to improve firms' financial slack. This effect is stronger for non-state-owned enterprises, big firms, non-political firms and firms in the eastern region of China. Further analyses reveal that, in the long run, tax planning increases firms' financial constraints, supporting Scholes-Wolfson's point of view of tax planning, that minimizing taxes is not the same as effective tax planning. These results are robust to various tests. Overall, our results suggest that minimizing tax generally produces immediate cash flow benefits and mitigates financial constraints in the short run; however, in the long run, firms should adopt sustainable financing strategies.
This paper examines the impact of economic policy uncertainty on economic growth due to its effec... more This paper examines the impact of economic policy uncertainty on economic growth due to its effects on firms' investment decisions, which subsequently justify firms' financial constraints. Using a sample of Chinese listed firms, the study documents that economic policy uncertainty reduce firms' financial constraints. The reduction in financial constraints stems mainly from the decrease in investments which increases the firm’s cash holding. Additional tests reveal that the reduction in firms’ financial constraints is pronounced more among non-politically connected firms compared to their counterparts. Further tests reveal that a reduction in a firms' financial constraints is of a short-term nature. In the long run, economic policy uncertainty increase firms' financial constraints. The study recommends that changes in policies must be done carefully to avoid turbulence and friction in firms’ investment decisions.
This paper examines the impact of economic policy uncertainty on economic growth due to its effec... more This paper examines the impact of economic policy uncertainty on economic growth due to its effects on firms' investment decisions, which subsequently justify firms' financial constraints. Using a sample of Chinese listed firms, the study documents that economic policy uncertainty reduce firms' financial constraints. The reduction in financial constraints stems mainly from the decrease in investments which increases the firm’s cash holding. Additional tests reveal that the reduction in firms’ financial constraints is pronounced more among non-politically connected firms compared to their counterparts. Further tests reveal that a reduction in a firms' financial constraints is of a short-term nature. In the long run, economic policy uncertainty increase firms' financial constraints. The study recommends that changes in policies must be done carefully to avoid turbulence and friction in firms’ investment decisions.
This paper investigates the effect of targeted economic sanctions, henceforth referred to as &... more This paper investigates the effect of targeted economic sanctions, henceforth referred to as "smart-sanctions" in developing countries by examining whether targeted economic sanctions affect the performance of intraindustry non-sanctioned firms (IINS) in the context of Zimbabwe. As explained in past literature (see, e.g. Wang et al., 2019), there are different types of economic sanctions, ranging from unilateral sanctions (sanctions imposed by a single country) to plurilateral sanctions (sanctions imposed by a group of countries, such as a regional bloc). Zimbabwe has been under both unilateral and plurilateral sanctions, that is from the United States (US) and the European Union (EU).
International Journal of Finance & Economics, 2021
We hypothesize that tax planning behaviour mitigates a firm's financial constraints, and this eff... more We hypothesize that tax planning behaviour mitigates a firm's financial constraints, and this effect is more pronounced in non-state-owned enterprises and big firms compared to their counterparts. We use data for Chinese listed firms during the period 2010-2018 to test the hypotheses, based on both ordinary least squares and fixed-effect models. The regression results show that tax planning is positively and significantly associated with mitigation of financial constraints, suggesting that cash tax savings are likely to improve firms' financial slack. This effect is stronger for non-state-owned enterprises, big firms, non-political firms and firms in the eastern region of China. Further analyses reveal that, in the long run, tax planning increases firms' financial constraints, supporting Scholes-Wolfson's point of view of tax planning, that minimizing taxes is not the same as effective tax planning. These results are robust to various tests. Overall, our results suggest that minimizing tax generally produces immediate cash flow benefits and mitigates financial constraints in the short run; however, in the long run, firms should adopt sustainable financing strategies.
Journal of Corporate Accounting & Finance, Aug 17, 2020
In this article, we examine the effect of mandatory disclosure of corporate social responsibility... more In this article, we examine the effect of mandatory disclosure of corporate social responsibility on firm's investment behavior. Our analysis exploits China's 2008 mandatory requirement that firms disclose their corporate social responsibility activities. Using difference‐in‐difference design, the study finds that firms that were made to report their corporate social responsibility experience a decrease in the level of investment, but the firm investment efficiency improved, especially on alleviating over‐investments. These findings suggest that mandatory CSR disclosure alters firm investment behavior and the implementation of such a disclosure requirement may need the government support.
International Journal of Finance & Economics, Jan 3, 2021
We hypothesize that tax planning behaviour mitigates a firm's financial constraints, and this eff... more We hypothesize that tax planning behaviour mitigates a firm's financial constraints, and this effect is more pronounced in non-state-owned enterprises and big firms compared to their counterparts. We use data for Chinese listed firms during the period 2010-2018 to test the hypotheses, based on both ordinary least squares and fixed-effect models. The regression results show that tax planning is positively and significantly associated with mitigation of financial constraints, suggesting that cash tax savings are likely to improve firms' financial slack. This effect is stronger for non-state-owned enterprises, big firms, non-political firms and firms in the eastern region of China. Further analyses reveal that, in the long run, tax planning increases firms' financial constraints, supporting Scholes-Wolfson's point of view of tax planning, that minimizing taxes is not the same as effective tax planning. These results are robust to various tests. Overall, our results suggest that minimizing tax generally produces immediate cash flow benefits and mitigates financial constraints in the short run; however, in the long run, firms should adopt sustainable financing strategies.
This paper examines the impact of economic policy uncertainty on economic growth due to its effec... more This paper examines the impact of economic policy uncertainty on economic growth due to its effects on firms' investment decisions, which subsequently justify firms' financial constraints. Using a sample of Chinese listed firms, the study documents that economic policy uncertainty reduce firms' financial constraints. The reduction in financial constraints stems mainly from the decrease in investments which increases the firm’s cash holding. Additional tests reveal that the reduction in firms’ financial constraints is pronounced more among non-politically connected firms compared to their counterparts. Further tests reveal that a reduction in a firms' financial constraints is of a short-term nature. In the long run, economic policy uncertainty increase firms' financial constraints. The study recommends that changes in policies must be done carefully to avoid turbulence and friction in firms’ investment decisions.
This paper examines the impact of economic policy uncertainty on economic growth due to its effec... more This paper examines the impact of economic policy uncertainty on economic growth due to its effects on firms' investment decisions, which subsequently justify firms' financial constraints. Using a sample of Chinese listed firms, the study documents that economic policy uncertainty reduce firms' financial constraints. The reduction in financial constraints stems mainly from the decrease in investments which increases the firm’s cash holding. Additional tests reveal that the reduction in firms’ financial constraints is pronounced more among non-politically connected firms compared to their counterparts. Further tests reveal that a reduction in a firms' financial constraints is of a short-term nature. In the long run, economic policy uncertainty increase firms' financial constraints. The study recommends that changes in policies must be done carefully to avoid turbulence and friction in firms’ investment decisions.
This paper investigates the effect of targeted economic sanctions, henceforth referred to as &... more This paper investigates the effect of targeted economic sanctions, henceforth referred to as "smart-sanctions" in developing countries by examining whether targeted economic sanctions affect the performance of intraindustry non-sanctioned firms (IINS) in the context of Zimbabwe. As explained in past literature (see, e.g. Wang et al., 2019), there are different types of economic sanctions, ranging from unilateral sanctions (sanctions imposed by a single country) to plurilateral sanctions (sanctions imposed by a group of countries, such as a regional bloc). Zimbabwe has been under both unilateral and plurilateral sanctions, that is from the United States (US) and the European Union (EU).
International Journal of Finance & Economics, 2021
We hypothesize that tax planning behaviour mitigates a firm's financial constraints, and this eff... more We hypothesize that tax planning behaviour mitigates a firm's financial constraints, and this effect is more pronounced in non-state-owned enterprises and big firms compared to their counterparts. We use data for Chinese listed firms during the period 2010-2018 to test the hypotheses, based on both ordinary least squares and fixed-effect models. The regression results show that tax planning is positively and significantly associated with mitigation of financial constraints, suggesting that cash tax savings are likely to improve firms' financial slack. This effect is stronger for non-state-owned enterprises, big firms, non-political firms and firms in the eastern region of China. Further analyses reveal that, in the long run, tax planning increases firms' financial constraints, supporting Scholes-Wolfson's point of view of tax planning, that minimizing taxes is not the same as effective tax planning. These results are robust to various tests. Overall, our results suggest that minimizing tax generally produces immediate cash flow benefits and mitigates financial constraints in the short run; however, in the long run, firms should adopt sustainable financing strategies.
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Papers by Lewis Makosa