Concerted action agreements, corporate innovation, and financial market outcomes: A pre-registered report

Miao Li, Meng He and Aoran Wang

Pacific-Basin Finance Journal, 2024, vol. 86, issue C

Abstract: This pre-registered study aims to investigate whether and how concerted action agreements enhance corporate innovation and create financial value. Based on theoretical analysis and numerous case studies, we expect to find that concerted action agreements significantly improve corporate innovation. The channels are at least two folds. First, by shielding entrepreneurs from short-term market pressure and enhancing their job security through enhancing their control rights, concerted action agreements spur long-term projects such as innovation. Second, through transferring control rights to entrepreneurs, concerted action agreements also strengthen entrepreneurs' stewardship role, which in turn mitigates agency problems and stimulates innovation. We further test the economic consequences of concerted action agreements and we expect to document that the agreements have a positive influence on firm performance and financial market valuation through enhanced corporate innovation. We also predict that because short-term market pressure and agency costs are high for high-tech firms due to information asymmetry, and because innovation is especially important for high-tech firms, concerted action agreements are most beneficial for high-tech firms. Finally, we predict that as time passes, the positive effects of concerted action agreements may diminish.

Keywords: Corporate governance; Concerted action agreement; Corporate innovation; Firm value (search for similar items in EconPapers)
JEL-codes: G32 G34 M13 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:86:y:2024:i:c:s0927538x24002178

DOI: 10.1016/j.pacfin.2024.102465

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