Corporate Governance Quality and a Firm's Adaptation to Competitive Threats

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F17%3A10338031" target="_blank" >RIV/00216208:11230/17:10338031 - isvavai.cz</a>
Result on the web
<a href="http://journal.fsv.cuni.cz/storage/1379_53_78_novak_final_issue_01_2017.pdf" target="_blank" >http://journal.fsv.cuni.cz/storage/1379_53_78_novak_final_issue_01_2017.pdf</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Corporate Governance Quality and a Firm's Adaptation to Competitive Threats
Original language description
This paper shows that regulatory improvements of corporate governance quality mandated by the Sarbanes-Oxley Act (SOX) are associated with a better ability of firms to adapt to product-market competitive threats. We contribute to prior research by using a novel approach of capturing the dynamic forward-looking aspect of competitive intensity based on linguistic comparison of firms' product descriptions in 10-K filings. Our measure of competitive intensity - the product market fluidity - captures the increase in verbal similarity of rival firms' product descriptions. Mandated changes to corporate governance are associated with lower future operating profitability and the profitability reductions are more pronounced in firms that experience lower competitive pressure before SOX implementation. However, firms facing competitive threats experience smaller declines in operating performance in the post-SOX period, which suggests that the improved corporate governance mechanisms make firms better able to accommodate competitive pressure. Using a novel approach to capture the dynamic aspect of competitive intensity the paper provides a new perspective on the 'substitution' hypothesis between corporate governance and product market competition.
Czech name
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Czech description
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Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50201 - Economic Theory

Project
<a href="/en/project/GA15-13040S" target="_blank" >GA15-13040S: Accounting Earnings Quality, Insider Trading Profitability and Stock Price Informativeness</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2017
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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