Academic Research
CGS organises its research team into 3 broadly defined research units based on the interest and expertise of its researchers. The researchers are experts in their individual areas and their work appear regularly in leading and prestigious publications. Below is a selection of recent research highlights, for a complete set of publications please click go to the profiles of individual researchers here.
Innovating ESG Integration as Sustainable Strategy: ESG Transparency and Firm Valuation in the Palm Oil Sector
Tricia Chong and Lawrence Loh
Abstract
Environmental, social, and governance (ESG) integration is an increasingly popular and innovative investing strategy that requires companies to be transparent about their ESG practices to facilitate investors’ decisions. In the palm oil sector, companies are addressing ESG risks by adopting and disclosing ESG efforts to improve access to financing. This study seeks to broaden existing research on ESG transparency and firms’ financial indicators by using firm valuation as a financial indicator and investigating the moderating role of firm size in the palm oil sector. It first investigates whether ESG transparency has a direct positive or negative effect on firm valuation. Transparency is measured using the Zoological Society of London’s (ZSL) Sustainability Policy Transparency Toolkit (SPOTT) 2021 assessment, which provides scores for palm oil companies’ total, environmental, social, and governance disclosures. Firm valuation is measured by the price-to-earnings ratio (P/E), a widely used ratio calculated by dividing the share price by earnings per share. The study also explores the moderating role of firm size, using accounting-based measures such as revenue and assets, in strengthening the relationship between ESG transparency and firm valuation. The results show statistically significant negative relationships between ESG transparency and firm valuation. Companies with stronger ESG transparency are valued at a discount relative to companies with weaker ESG transparency. Additionally, the results find that firm size plays a moderating role such that larger firms strengthen the negative relationships between all transparency measures and firm valuation. These findings encourage constructive action for various stakeholders and provide implications for future research to support mainstreaming sustainable palm oil.
The Relationship Between Sustainable Innovation Efficiency and Economic Growth in China
Kai Xu, Lawrence Loh, Ran Mei & Li Liang
Abstract
China has taken sustainable development strategies seriously in recent years, aiming at reducing energy consumption and environmental pollutants emissions. This research empirically evaluates the sustainable innovation efficiency (SIE) in Chinafrom the perspective of energy and environmental constraints. Furthermore, the relationship between SIE and economic growth is tested through Granger causality test. The results indicate that SIE in China varies obviously in different regions. Granger causality runs only from economic growth to SIE and not the other way round. Economic growth is causative factor of sustainable innovation, indicating that China’s sustainable innovation has not yet achieved coordinated development with the economy. Our findings also provide useful decision-supporting insights for Chinese policymakers to promote coordinated development of regional sustainable innovation and economic growth.
Practical Insights on Philanthropy for Single Family Offices
Marta Widz and Lawrence Loh
Abstract
Business families are important players in the economic system and have contributed to the general prosperity and promotion of engaged capitalism for centuries. Philanthropy is becoming increasingly important for business families as it is also gaining visibility in broader society with the disruptive philanthropy of mega-donors. A global survey among 201 business families from 28 countries, conducted by the Rockefeller Foundation and Campden Wealth in 2020, revealed that half of the families surveyed started giving within the last 30 years, with “new” givers emerging in Europe and North America in the 1990s and in Asia-Pacific only after 2000.
As the family business matures and the business family grows in members, a shared interest like family wealth management or family philanthropy can coalesce the family around a sense of shared purpose in fulfilling its collective aims. Increasingly, both these functions – family wealth management and family philanthropy – are managed and governed by a dedicated family office or single family office (SFO).
Modern global philanthropy holds immense promise in the 21st century. But in order to continue to contribute to the contemporary global economy in a more impactful way, SFO principals and business families must carefully rethink their approaches to family philanthropy by embracing several modern and continuously evolving concepts and contexts in philanthropy.
Heterogeneous effects of influencing factors on innovation performance
Kai Xu, Lawrence Loh, Li Liang and Ran Mei
Abstract
This research evaluates and compares the status and trends of regional innovation efficiency (RIE) in 27 EU countries from 2004 to 2017. Regional analysis is further compared to investigate the performance differentials within the EU innovation system. In addition, the factors which influence the innovation efficiency in EU countries by performing the Tobit regression analysis are investigated. The results indicate that the innovation efficiency of EU changes slightly with high-efficiency values. Seven countries are the innovation leaders during the research period, whereas Northern and southern regions have relatively higher innovation efficiencies than other regions. Also, the regression results indicate that economic development, human capital investment and regional openness could enhance innovation efficiency in most EU regions, while industrial structure, urbanisation level and infrastructure level hinder the improvement of EU’s innovation efficiency. Based on these results, recommendations are provided for policymakers aiming at stimulating innovation among the EU innovation system.
From Business Families to Complex Family Wealth Systems
Marta Widz and Lawrence Loh
Abstract
As the business family system evolves from one-family-in-one-business and transitions towards complex family wealth systems (CFWS), its family-related organisational ecosystem becomes richer. The “S” for system usually includes the legacy family business, a mixed assets portfolio of other businesses, other family assets, and a diverse portfolio of family boundary organisations, such as family foundations, family business foundations, family offices, family holdings, family academies, and family museums. Naturally, as the complexity of the business portfolio evolves, the governance of the CFWS also evolves and becomes more complex.
Exploring the Effect of Digital Economy on PM2.5 Pollution – The Role of Technological Innovation in China
Xiangxiang Sun, Zhangwang Chen and Lawrence Loh
Abstract
PM2.5 emission causes serious harm to health and hinders the sustainable development of economy and society. Among all the factors affecting PM2.5 pollution, the role of new economic forms and information technology innovation is lacking. This study aims to explore the impact of digital economy on PM2.5 pollution and its influencing mechanism using data from 281 prefecture-level cities from 2011 to 2016. The empirical results demonstrate that digital economy is conducive to reducing PM2.5 pollution. In other words, the digital economy is conducive to alleviating PM2.5 pollution. Further analysis shows that the digital economy promotes technological innovation, which is an important mediating mechanism affecting PM2.5 pollution. Additionally, the inhibitory effect of digital economy on PM2.5 pollution is more significant in the eastern and central regions. Unfortunately, the negative impact of digital economy on PM2.5 pollution is not significant in the western region. The conclusions provide a new strategy for reducing pollution emissions and improving environmental quality and technological innovation.
The Impact of Leadership Diversity on Firm Performance in Singapore
Lawrence Loh, Thi Thuy Nguyen, Annette Singh
Abstract
The intersection of sustainability and corporate governance is particularly evident in leadership diversity, which has gained increasing prominence in recent years. The central question of leadership diversity’s impact on firm performance remains open, including for Asia, which has been relatively less-studied. This paper seeks to contribute to this literature, adopting a multidimensional view of leadership diversity in Singapore’s public-listed companies. We examine diversity in boards and senior management combined, in order to better understand the impact of diversity among firm strategic leadership. Based on random effects regression analysis using data from 577 companies, our results generally provide support for a beneficial diversity impact. Gender, age, and education leadership diversity were found to have a positive influence on financial performance. We further found gender diversity and performance to have an inverted U-shaped relationship, with the inflexion point being gender parity. This suggests a potentially important role for gender parity in firm leadership governance.
An Assessment of Early Adopters of TCFD Disclosures: The Singapore Perspective
Lawrence Loh and Yvonne Yock
Opinion
Listed entities and financial institutions in Singapore may soon be mandated to make climate-related financial disclosures. Most notably, these disclosures may be aligned to a set of standards accepted globally. This was the call of the Monetary Authority of Singapore in June this year. In a related way, the Singapore Exchange (SGX) has earlier mandated that its listed companies complete a yearly sustainability report, with various specific components required for reporting on a comply-or-explain basis. It is currently examining how climate-related disclosures may be fostered amongst these companies. Indeed, the MAS may soon consult the industry on making climate-related reporting specifically in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). This is a comprehensive framework that is broadly accepted internationally
Sustainable Innovation Governance: An Analysis of Regional Innovation with a Super Efficiency Slack-Based Measure Model
Kai Xu, Lawrence Loh, Qiang Chen
Abstract
As China is undergoing economic transformation and facing increasing energy and environmental problems, it is essential to pay special attention to sustainable innovation governance.
This research took industrial waste and total energy consumption into consideration and uses a super efficiency slack-based measure (SBM) model to empirically evaluate the regional innovation efficiency of Chinese provinces. The results showed that the efficiency of China’s regional sustainable innovation has not changed significantly over recent years. In addition, the results also showed large and varying degrees of innovation efficiency across different provinces. Eastern China, in comparison to central and western China, showed higher innovation efficiency. In addition, we found a slightly increasing trend in terms of innovation efficiency disparities between the three areas. On the basis of these findings, the reasons for the innovation efficiency gap between different regions were analyzed. The impacts of influential factors on sustainable innovation efficiency were further explored.
We found that technology market maturity affected sustainable innovation efficiency positively, while government funding had a negative impact on sustainable innovation efficiency. Industrial structure and environmental regulations had no significant effect on sustainable innovation efficiency. Finally, some implications for improving governance performance in terms of sustainable innovation were provided.
Impact of Sustainability Reporting on Brand Value: An Examination of 100 Leading Brands in Singapore
Lawrence Loh, Sharmine Tan
Abstract
The recent sustainability reporting (SR) mandate by the Singapore Exchange has heightened stakeholder awareness and propelled sustainability disclosures. Albeit encouraging, more than half of listed companies in Singapore do not produce sustainability reports. This signifies a lack of sustainability commitment, or perhaps, local companies have limited understanding on the potential value of sustainability.
Our study aims to fill this gap by examining if (1) the 100 leading brands in Singapore similarly benefit from a higher brand value when they produce sustainability reports; (2) if more disclosure leads to higher brand value; (3) if a lagged effect is
present.
The methodology of this study included the collation of sustainability information from the 100 leading brands in Singapore, scoring each company’s sustainability performance using the Global Reporting Initiative (GRI) framework. Finally, we examine the correlations using regression analysis to compare the companies’ sustainability performance with the reputed brand rankings by
Brand Finance.
Our findings revealed that one-fifth of the 100 leading brands in Singapore do not engage in sustainability, despite the positive correlation between sustainability reporting and brand value. Our results also suggest that greater disclosure leads to higher brand value, yet social and environmental indicators are undermanaged. Moreover, there is a lagged effect as public perceptions take time to shape. Internalising a company’s sustainability vision through a multi-stakeholder consultative approach is critical. Brand managers and sustainability practitioners must be aware that failures to meet stakeholder expectations today may consequently impact investors’ decisions.
Factor price distortion and ecological efficiency: the role of institutional quality
Xiangxiang Sun, Lawrence Loh, Zhangwang Chen, Xiaoliang Zhou
Abstract
Local governments restrict cross-regional flows of factors and products for achieving the purpose of profit, which lead to market fragmentation. China’s domestic market is fragmented, leading to the situation that market boundaries are demarcated. We use the relative price method to measure market fragmentation and find that market fragmentation is indeed a serious problem in China. This study evaluates the ecological efficiency using the bootstrap DEA method that takes air and water pollution into account and investigates the effect of market fragmentation on ecological efficiency based on the system GMM approach by employing data from a panel of 29 provinces in China during the period 2000-2015. The results indicate that there are differences in ecological efficiency among provinces. The market fragmentation has negative impact on ecological efficiency, which shows market fragmentation significantly inhibits the improvement of ecological efficiency. The similar findings are confirmed by a series of robustness tests, which include the alternative indicator and sub-sample regression. Based on the above findings, the central government should reduce market fragmentation, promote market integration, increase the efficiency of resource allocation, and improve environmental quality.
Effect of Market Fragmentation on Ecological Efficiency: Evidence from Environmental Pollution in China
Xiang Xiang Sun, Lawrence Loh, Zhangwang Chen
Abstract
There is a lack of studies on whether market distortions inhibit the ecological efficiency. This study introduces the ecological
efficiency based on the bootstrap-data envelopment analysis (DEA) method as the indicator of environmental performance in
China, uses the transcendental logarithmic production function to calculate factor price distortion, and further identifies whether
the factor price distortion has a negative impact on the ecological efficiency using the system generalized method of moments
(GMM) method. Meanwhile, institutional quality is considered a threshold variable to examine the relationship between factor
price distortion and ecological efficiency based on the threshold model. The result shows that factor price distortion significantly
inhibits the improvement of ecological efficiency. Moreover, institutional quality is considered to be the threshold of factor price
distortion affecting ecological efficiency. Further investigation of heterogeneity effect suggests that the inhibitory impact of factor
price distortion on ecological efficiency is more significant in the central and western regions. This study provides a supplement
to the study on environmental performance from the perspective of factor distortions and expands the framework of the influence
mechanism of factor price distortion affecting ecological efficiency.
Sustainability Governance in China: An Analysis of Regional Ecological Efficiency
Xiangxiang Sun, Lawrence Loh
Abstract
The Chinese government is committed to sustainability governance to alleviate the shortage of energy and the imbalance between ecological environment and economic development. This paper evaluates and analyses the sustainability governance performance of China.
A bootstrap data envelopment analysis (DEA) is proposed to evaluate sustainability governance performance of 30 provinces based on ecological efficiency in China from 1998 to 2015. The results indicate that the ecological efficiency of China significantly improved as a whole, which is related to the decline in sulphur dioxide emissions. Among these provinces, Jiangsu, Liaoning, and Inner Mongolia exhibited the highest values, while Gansu, Chongqing, and Sichuan had the lowest values. The 30 provinces were divided into four sub-areas.
The average ecological efficiency of the eastern area was the highest, followed by the northeast area. Compared to the east area, northeast area, and central area, we find that west area obviously falls behind. As such, the results provide helpful guidance to improve ecological governance performance.
Board Diversity and Business Performance In Singapore-Listed Companies The Role Of Corporate Governance
Lawrence Loh, Mai Huong Nguyen
Abstract
This study examined the relationship between board gender diversity and corporate governance and the implications for a company’s financial performance. It used a combination of a publicly available data of director profiles, company corporate governance scores from the Singapore Governance and Transparency Index (SGTI), and company financial performance indicators obtained from Bloomberg.
For the financial performance indicators, both return on equity (book measure) and
Tobin’s Q (hybrid measure) were considered. The relationship between board gender diversity and corporate governance score was analysed, and that between these variables and financial performance was investigated as well. Both relationships were tested empirically with ordinary least squares (OLS) regression models.
Board gender diversity was found to have a positive and statistically significant impact on corporate governance score. Corporate governance score was found to have a positive and statistically significant impact on company financial performance, whereas no such effect by board gender diversity on company financial performance was found.
This appears to suggest that board gender diversity has an indirect effect on financial performance, acting through its intermediate effect on corporate governance scores. The exception to this is the effect of the fraction of female independent directors on Tobin’s Q, which was positive and statistically significant, which seems to suggest that companies should pay more attention to the number of female independent directors on their boards.
Board Governance and Sustainability Disclosure: A Cross-Sectional Study of Singapore-Listed Companies
Meibo Hu, Lawrence Loh
Abstract
This paper aims to investigate the relationship between board governance and sustainability disclosure in Singapore. Regression analysis is performed using cross-sectional data of Singapore-listed companies to examine the relationship between sustainability disclosure and various board governance factors, including board capacity, board independence, and board incentive.
The findings show the presence of significant associations between board governance and sustainability disclosure. In terms of board capacity, companies with larger board sizes and a higher number of board meetings are more likely to practice sustainability reporting, and their reporting qualities are higher.
For board independence, the percentage of independent directors positively impacts the firm’s reporting probability and quality on sustainability in Singapore. For board incentives, the practice of long-term incentives for executive directors can significantly improve both the probability and quality of sustainability reporting.
The study adds to the literature on corporate governance and sustainability disclosure. It provides empirical evidence and guidance for firms and policy-makers in Singapore and beyond on how sustainability disclosure can be improved through robust board governance.
Sustainability Reporting and Firm Value: Evidence from Singapore-Listed Companies
Lawrence Loh, Thomas Thomas, Wang Yu
Abstract
As sustainability reporting has emerged as one of the most critical issues in the business world, this research aims to investigate the relationship between sustainability reporting and firm value based on listed companies in Singapore. We use an established sustainability reporting assessment framework and test how both the adoption and quality of sustainability reporting are related to a firm’s market value. Empirical results suggest that sustainability reporting is positively related to firm’s market value and this relationship is independent of sector or firm status such as Government-linked companies and family businesses.
Independent Directors in Singapore: Puzzling Compliance Requiring Explanation
Dan W, Puchniak, Lan Luh Luh
Abstract
At first blush, the rise of independent directors in Singapore provides a straightforward example of a successful legal transplant from the West to Asia. In 2001, Singapore implemented a UK-inspired Code of Corporate Governance, which required the adoption of American-style independent directors on a “comply or explain” basis. Shortly thereafter, an overwhelming 98% of Singapore-listed companies reported full compliance. This, combined with Singapore’s world-leading economic success, ostensibly confirmed the Anglo-American-cum-global conventional wisdom that American-style independent directors are required for good corporate governance.
Using hand-collected data from 245 codes of corporate governance from 87 jurisdictions, this article reveals, however, that Singapore’s supposedly conventional legal transplant of American-style independent directors was, in fact, highly unconventional. We empirically demonstrate that the widely held belief that the American concept of the independent director has been transplanted around the world is a myth. We argue, however, that Singapore’s highly unconventional and seemingly illogical decision to transplant American-style independent directors into its concentrated controlling-block shareholder environment was the product of strategic regulatory design (not ignorance) and was surprisingly effective.
When Does Transitioning From Family To Professional Management Improve Firm Performance?
Sea-Jin Chang, Jungwook Shim
Abstract
Using long-term data on Japanese family firms, this study explores when the transition from family to professional management leads to better performance. In order to avoid endogeneity bias, we employ propensity score matching and difference-in-differences techniques. We find evidence that firms that transition from family to professional CEOs outperform those that maintain family leadership. This performance improvement is more pronounced when families maintain high ownership control but leave no family legacy behind, when the transition moves from non-founder family managers to professionals, and when professional managers graduated from elite universities.
Portfolios of Political Ties and Business Group Strategy in Emerging Economies: Evidence from Taiwan
Chung Chi-Nien, Hongjin Zhu
Abstract
This study examines how political ties with rival political parties can affect a firm’s strategic decisions. Focusing on a firm’s portfolio of ties in addition to dyadic ties, we offer a novel contingency model that specifies how the influence of political ties on strategy varies across different forms of government in democratic emerging economies. We propose that when political parties differ substantially in competitive status (i.e., under united government), a diverse portfolio could induce the dominant political party to use punitive tactics toward the focal firm and make it difficult to achieve strategic goals. However, when political parties have a similar competitive status (i.e., under divided government), a diverse portfolio could benefit the firm by producing tertius gaudens advantages and political flexibility. Such a portfolio effect of political ties tends to be mitigated by the firm’s internal resources and capabilities. An investigation of how the political ties maintained by Taiwanese business groups affected unrelated diversification from 1998 through 2006 offers an initial attempt to reveal the role of ties to competing political parties in shaping firm strategy and highlights the trade-offs that politically connected firms confront when they exploit opportunities and mitigate risks arising from underdeveloped political and market institutions.
Sheng Siong Supermarket: Building and Sustaining Competitive Advantage
Marleen Dieleman, Yi Rong Loh, Ye Jun Lee
Abstract
Sheng Siong was the third-largest supermarket chain in Singapore. Its chief executive officer co-founded it with his two brothers in 1985. Sheng Siong’s business model was well suited to cater to the price-sensitive and more traditional customer segment in Singapore, with a dominant presence in suburban areas called “heartlands.” It also had a unique corporate philosophy, which was influenced by the personal values of its founding family. However, the market became increasingly saturated, competitors were aggressive and costs were rising. The key question was whether Sheng Siong’s original competitive advantage was sustainable and how it could grow.
Corporate Governance and Investors’ Perceptions of Foreign IPO Value: An Institutional Perspective
R.Greg Bell, Igor Filatotchev, Ruth V. Aguilera
Abstract
This article investigates stock market responses to different constellations of firm-level corporate governance mechanisms by focusing on foreign initial public offerings (IPOs) in the United States. We build on sociology-grounded research on financial market behaviour and use a “nested” legitimacy framework to explore US investor perceptions of foreign IPO value. Using a fuzzy set theoretic methodology, we demonstrate how different combinations of monitoring and incentive-based corporate governance mechanisms lead to the same level of investor valuation of firms. Moreover, institutional factors related to the strength of minority shareholder protection in a foreign IPO’s home country represent a boundary condition that affects the number of governance mechanisms required to achieve high value perceptions among US investors. Our findings contribute to the sociological perspective on comparative corporate governance and the dependencies between organizations and institutions.
Balancing Stakeholder Interests at the Indonesian Railways
Marleen Dieleman
Abstract
The chief executive responsible for the Indonesian railways, a state-owned enterprise, is under pressure to show profits, but he also needs to balance widely diverging stakeholder expectations that include inexpensive transportation and excellent customer service. The government subsidizes the railway’s passenger travel segment and has capped its fare prices, which has turned the railway’s mainstay into a loss-making business. The chief executive wonders how to best trade off the different stakeholder expectations. He needs to develop a plan to present to the minister for State-Owned Enterprises.
Initial Public Offerings of State-Owned Enterprises: An International Study of Policy Risk
Swee Sum Lam, Ruth Seow Kuan Tan, Glenn Wee
Abstract
Policy risk, and not information asymmetry, explains the cross-sectional underpricing of privatized initial public offerings. The issuer governments of high policy-risk issues tend to retain a large equity stake and underprice more, with underpricing increasing in retained equity. While the issuer government’s retained equity is an observable signal for policy risk, we find that the quality of a country’s bureaucratic machinery is a more intuitive and practical measure of policy risk. Policy risk also explains the absence of a systematic relation between the initial returns on privatized and private initial public offerings.