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Academics within CAIR undertake an extensive range of research projects which encompass all aspects of investment decision making.

Sung Hwan Chai and Brian Nicholson, Alliance MBS; Dr George Salijeni, University of Aston

This project explores auditors' changing role in the context of data-driven technologies such as machine learning, data visualisation tools, and Artificial Intelligence, exploring how financial auditors are deploying these technologies and being influenced by them. In particular it is conducting a case study of UK audit firms by interviewing audit partners, directors, and managers in order to gather primary data on changes in their organisations, newly required skills, and training in the context of data-driven technologies. The report will be used to produce a conference paper and outline for future research projects, and the academics hope to use this opportunity to gain ongoing access with at least one UK audit firm which will set a foundation for long-term collaboration between practitioners and researchers.

Viet Dang, Ning Gao, Jonatan Pinkse, and Tung Nguyen, Alliance MBS

While the scientific evidence of climate change is overwhelming, much less is known about the link between climate risk and corporate finance. This project proposes an ambitious, interdisciplinary research programme in order to fill this void and tackles important questions around whether and how firms strategically respond to climate change. Through a series of studies the authors will examine the corporate sector’s behaviour around the world, with a focus on firms in the US, the UK, and the EU.

This project is funded by the Lord Alliance Strategic Investment Fund.

Konstantinos Stathopoulos, Alexandros Kostakis, Alliance MBS; Konstantinos Gkionis, UBS

This study examined the effects of political uncertainty around US presidential elections on firm risk, expected return and trading activity. Using information embedded in short-term options it looked at firms’ political features such as their sensitivity to economic policy uncertainty, their stock returns' exposure to the presidential party, their geographical political alignment with the presidential party, and their political connectedness through campaign contributions. The study found that sensitive, exposed, and aligned firms exhibit a substantially higher degree of option-implied price and tail risk, command a higher premium, and feature an increased dispersion of investor beliefs around presidential election day.

This project is funded by the Lord Alliance Strategic Investment Fund.

Edward Lee, Konstantinos Stathopoulos, Alliance MBS; Steven Xianglong Chen, University of Liverpool Management School

This paper investigates the effect of corporate social responsibility (CSR) spending on labour unions’ propensity to initiate strikes. It found that firms with high levels of (non-employee) CSR spending are exposed to a significantly higher risk of union strikes, while firms strategically curtail CSR expenditure in response to unionisation in order to mitigate the increased strike risk. Such downward adjustment in CSR spending is however less pronounced in financially constrained firms and in firms facing high levels of product market competition, due to their strong incentives to signal quality through CSR spending.

Edward Lee, Konstantinos Stathopoulos, Alliance MBS; Steven Xianglong Chen, University of Liverpool Management School

This paper investigates the impact of employee stock options (ESO) on labor unions’ likelihood to initiate strikes. Using the unique setting of union elections in US firms, it found that firms offering higher levels of equity incentives to their employees are exposed to significantly lower post-unionisation strike risk. Furthermore, firms strategically grant more stock option incentives to employees in response to the unionisation of the labour force. The increase in option incentives is more pronounced among firms holding union elections in states with stronger union bargaining power and when the strike risk is perceived to be higher.

Professor Paolo Quattrone, Dr Robert Charnock, Dr Yasmine Chahed, Professor Martin Walker, Johnny O Rourke, Kefei Wu, Alliance MBS

This project, commissioned by the FRC (Financial Reporting Council), will explore how companies need to adapt and the business decisions they need to make to benefit strategically (or stand to lose out) from their approach to climate-related governance and reporting. At the moment, little is known about how business models and operations will be impacted by the transition to a net-zero future. Interviewing C-level executives at top FTSE 350 UK companies, the project seeks to evaluate their existing use of and approach to climate scenario analysis. In particular, understanding companies’ processes and governance that underpin current scenario analysis practices, and their outcomes.  

Professor Paolo Quattrone, Alliance MBS; Professor Ariela Caglio Bocconi University

This new CIMA (Chartered Institute of Management Accountants) project will investigate how organisations embed SDG considerations into their strategic business decisions. Entitled: Calculating sustainability: on making accounting numbers central again, this study will provide a management and reporting framework to align SDGs to accounting measures. Producing an analysis of three in-depth case studies with three different companies, it will illustrate how SDGs are being integrated through corporate governance, strategy and innovation. These examples can be practically applied by other companies to aid financial managers in playing a leading role in the understanding, communication and management of their companies’ contributions to SDGs.