Pub Date : 2023-08-25DOI: 10.21511/imfi.20(3).2023.12
Viktoriia Koilo, Antoni Vike Danielsen
The Norwegian maritime industry is at the forefront of green technology development, with shipyards playing a crucial role in testing, verification, and development. However, the industry faces challenges such as high personal costs, increasing competition from abroad, and cyclical market trends. This study aims to assess financial performance as indicator of firm-level competitiveness based on a set of 12 financial measures and test the hypothesis of the positive impact of portfolio diversification on shipyards’ competitiveness.The analysis utilizes data from four large construction yards and four medium-sized construction, repair, and maintenance yards in the Møre region. The methodology involves constructing a Shipyard Competitiveness Index with sub-indices for liquidity, profitability, solvency, and efficiency. Regression analysis is conducted to investigate the impact of ship variety, as a diversification parameter, on the competitiveness level.The obtained results reveal that during the analyzed period (2009–2020), companies in the group of large shipyards had better financial performance until 2017, while on the contrary, the second group of shipyards in the same period showed an increase in their competitiveness index. Moreover, the findings proved the presence of the positive relationship between diversification of portfolio and competitiveness index.This study contributes valuable insights for the Norwegian shipbuilding industry, highlighting the importance of financial performance assessment in measuring competitiveness. The study provides a foundation for future discussions on fostering sustainable growth and innovation within the maritime sector.
{"title":"Financial performance-based assessment of companies’ competitiveness: Evidence from the Norwegian Shipbuilding Industry","authors":"Viktoriia Koilo, Antoni Vike Danielsen","doi":"10.21511/imfi.20(3).2023.12","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.12","url":null,"abstract":"The Norwegian maritime industry is at the forefront of green technology development, with shipyards playing a crucial role in testing, verification, and development. However, the industry faces challenges such as high personal costs, increasing competition from abroad, and cyclical market trends. This study aims to assess financial performance as indicator of firm-level competitiveness based on a set of 12 financial measures and test the hypothesis of the positive impact of portfolio diversification on shipyards’ competitiveness.The analysis utilizes data from four large construction yards and four medium-sized construction, repair, and maintenance yards in the Møre region. The methodology involves constructing a Shipyard Competitiveness Index with sub-indices for liquidity, profitability, solvency, and efficiency. Regression analysis is conducted to investigate the impact of ship variety, as a diversification parameter, on the competitiveness level.The obtained results reveal that during the analyzed period (2009–2020), companies in the group of large shipyards had better financial performance until 2017, while on the contrary, the second group of shipyards in the same period showed an increase in their competitiveness index. Moreover, the findings proved the presence of the positive relationship between diversification of portfolio and competitiveness index.This study contributes valuable insights for the Norwegian shipbuilding industry, highlighting the importance of financial performance assessment in measuring competitiveness. The study provides a foundation for future discussions on fostering sustainable growth and innovation within the maritime sector.","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"50 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-08-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90621245","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper examines the impact of a firm’s financial leverage on its investment decisions in the period 2011–2019, which occurred between two financial crises (2008–2010 and 2020–2022) and was globally marked by low interest rates and high leverage. The study focuses on non-financial listed firms in world’s top 13 largest economies consisting of 11 OECD+ countries and two emerging nations. The analysis explores the relationship between firm leverage and investment decisions, considering the growth opportunities and corporate risks of the firms, as well as the type of economy they operate in. The findings indicate that, overall, there is a negative relationship between leverage and investment. In developed nations, such as the OECD+ countries, this negative effect is more pronounced for firms with limited growth opportunities. Contrary to the existing literature, emerging economies exhibit a positive relationship between firm leverage and investment. Specifically, in China and India, firms with low growth opportunities display a stronger positive correlation between leverage and investment. These results suggest that in developed countries, debt continues to have a disciplining effect on firm investment, even in a high liquidity environment. However, in high-growth emerging economies, both firm management and lending institutions show less concern regarding leverage. Lastly, the study finds that firm risk has an adverse impact on investment decisions. These empirical findings highlight the non-uniform nature of the relationship between firm leverage and investment, which depends on the type of economy and the growth opportunities of the firms. AcknowledgmentsThe infrastructural support provided by Management Development Institute, Murshidabad, India and FORE School of Management, New Delhi, India in completing this paper is gratefully acknowledged.
{"title":"Leverage and corporate investment – a cross country analysis","authors":"Souvik Banerjee, Amarnath Mitra, Debaditya Mohanti","doi":"10.21511/imfi.20(3).2023.11","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.11","url":null,"abstract":"The paper examines the impact of a firm’s financial leverage on its investment decisions in the period 2011–2019, which occurred between two financial crises (2008–2010 and 2020–2022) and was globally marked by low interest rates and high leverage. The study focuses on non-financial listed firms in world’s top 13 largest economies consisting of 11 OECD+ countries and two emerging nations. The analysis explores the relationship between firm leverage and investment decisions, considering the growth opportunities and corporate risks of the firms, as well as the type of economy they operate in. The findings indicate that, overall, there is a negative relationship between leverage and investment. In developed nations, such as the OECD+ countries, this negative effect is more pronounced for firms with limited growth opportunities. Contrary to the existing literature, emerging economies exhibit a positive relationship between firm leverage and investment. Specifically, in China and India, firms with low growth opportunities display a stronger positive correlation between leverage and investment. These results suggest that in developed countries, debt continues to have a disciplining effect on firm investment, even in a high liquidity environment. However, in high-growth emerging economies, both firm management and lending institutions show less concern regarding leverage. Lastly, the study finds that firm risk has an adverse impact on investment decisions. These empirical findings highlight the non-uniform nature of the relationship between firm leverage and investment, which depends on the type of economy and the growth opportunities of the firms.\u0000AcknowledgmentsThe infrastructural support provided by Management Development Institute, Murshidabad, India and FORE School of Management, New Delhi, India in completing this paper is gratefully acknowledged.","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"37 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-08-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88460202","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-08-14DOI: 10.21511/imfi.20(3).2023.10
Lisa Kustina, Rachmat Sudarsono, N. Effendi
Market crashes pose significant risks to the stability and performance of financial markets, making the development of an early warning system crucial. This study utilizes exchange rate volatility and investor sentiment to predict market crashes. While several studies have examined factors affecting market crashes in developing countries. This study aims to develop an early warning system for investors to minimize investment risk using Exchange Rate Volatility and Investor Sentiment. The study focused on seven countries: Indonesia, Malaysia, Singapore, the Philippines, Thailand, Vietnam, and Mongolia. The stock exchanges examined included Jakarta Stock Exchange Composite, FTSE Malaysia KLCI, FTSE Singapore, SET Index, PSEi, HNX/HNXI, and MNE Top 20/MNETOP20. The analysis involved assessing early warning systems to provide valuable supplementary information for decision making and evaluating market vulnerabilities. The logistic regression equation was utilized to model market crashes, incorporating variables such as exchange rate volatility and investor sentiment while considering their interactions as moderating factors. The results indicate that exchange rate volatility and investor sentiment have a significant negative effect on market crashes, with probabilities of 0.0082 and 0.000 Furthermore, investor sentiment acts as a mediator for exchange rate volatility, amplifying its impact on market crashes. This suggests that higher exchange rate volatility and negative investor sentiment increase the likelihood of market crashes. Exchange rate volatility and investor sentiment can serve as early warning indicators, emphasizing the importance of monitoring these factors for market participants and policymakers.
{"title":"Market crash factors and developing an early warning system: Evidence from Asia","authors":"Lisa Kustina, Rachmat Sudarsono, N. Effendi","doi":"10.21511/imfi.20(3).2023.10","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.10","url":null,"abstract":"Market crashes pose significant risks to the stability and performance of financial markets, making the development of an early warning system crucial. This study utilizes exchange rate volatility and investor sentiment to predict market crashes. While several studies have examined factors affecting market crashes in developing countries. This study aims to develop an early warning system for investors to minimize investment risk using Exchange Rate Volatility and Investor Sentiment. The study focused on seven countries: Indonesia, Malaysia, Singapore, the Philippines, Thailand, Vietnam, and Mongolia. The stock exchanges examined included Jakarta Stock Exchange Composite, FTSE Malaysia KLCI, FTSE Singapore, SET Index, PSEi, HNX/HNXI, and MNE Top 20/MNETOP20. The analysis involved assessing early warning systems to provide valuable supplementary information for decision making and evaluating market vulnerabilities. The logistic regression equation was utilized to model market crashes, incorporating variables such as exchange rate volatility and investor sentiment while considering their interactions as moderating factors. The results indicate that exchange rate volatility and investor sentiment have a significant negative effect on market crashes, with probabilities of 0.0082 and 0.000 Furthermore, investor sentiment acts as a mediator for exchange rate volatility, amplifying its impact on market crashes. This suggests that higher exchange rate volatility and negative investor sentiment increase the likelihood of market crashes. Exchange rate volatility and investor sentiment can serve as early warning indicators, emphasizing the importance of monitoring these factors for market participants and policymakers.","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"48 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-08-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82599770","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-08-09DOI: 10.21511/imfi.20(3).2023.09
A. Bekbossinova, A. Kireyeva, G. Kenzhegulova, M. Bekturganova, Zh. G. Imangali
In the current social conditions, pension systems have become the most important topic on the agenda for many countries. Therefore, governments have started paying attention and should reform their pension systems to guarantee an adequate contribution to pensions. Thus, this study analyzes the impact of investments and social factors on pension savings using Kazakhstan as an example. The paper is based on secondary data from the annual reports of the Unified Accumulative Pension Fund and annual statistical reports of the Bureau of National Statistics of the Republic of Kazakhstan from 2014 to 2022. SPSS software was used to analyze the collected data, specifically through correlation and regression analysis, to determine the impact and relationships between selected indicators (i.e., inflation rate, number of contributors, pension contribution, investment income and average wage). To check the reliability of the models, Fisher’s F-test and Student’s t-test were conducted. Therefore, a VIF diagnosis was conducted. The correlation analysis results showed that in the group of investment factors, pension savings are more dependent on pension contributions (,900**), and in social factors, on average wages (1,000**). Based on the results obtained, all factors have a positive impact on pension savings, except inflation. Inflation growth by 1% on average reduces the amount of pension savings by 23% over the nine-year period between 2014 to 2022, which is reflected in the results of Model 2. The study’s results can be applied to managing pension funds and reforms related to the pension system. AcknowledgmentsThis research was funded by the Science Committee of the Ministry of Science and Higher Education of the Republic of Kazakhstan (Grant “Exploring the impact of economic, social, and environmental factors on the relationship between urbanization and greenhouse gas emissions” No. AP19576071).
{"title":"The impact of investment and social factors on pension savings in Kazakhstan","authors":"A. Bekbossinova, A. Kireyeva, G. Kenzhegulova, M. Bekturganova, Zh. G. Imangali","doi":"10.21511/imfi.20(3).2023.09","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.09","url":null,"abstract":"In the current social conditions, pension systems have become the most important topic on the agenda for many countries. Therefore, governments have started paying attention and should reform their pension systems to guarantee an adequate contribution to pensions. Thus, this study analyzes the impact of investments and social factors on pension savings using Kazakhstan as an example. The paper is based on secondary data from the annual reports of the Unified Accumulative Pension Fund and annual statistical reports of the Bureau of National Statistics of the Republic of Kazakhstan from 2014 to 2022. SPSS software was used to analyze the collected data, specifically through correlation and regression analysis, to determine the impact and relationships between selected indicators (i.e., inflation rate, number of contributors, pension contribution, investment income and average wage). To check the reliability of the models, Fisher’s F-test and Student’s t-test were conducted. Therefore, a VIF diagnosis was conducted. The correlation analysis results showed that in the group of investment factors, pension savings are more dependent on pension contributions (,900**), and in social factors, on average wages (1,000**). Based on the results obtained, all factors have a positive impact on pension savings, except inflation. Inflation growth by 1% on average reduces the amount of pension savings by 23% over the nine-year period between 2014 to 2022, which is reflected in the results of Model 2. The study’s results can be applied to managing pension funds and reforms related to the pension system.\u0000AcknowledgmentsThis research was funded by the Science Committee of the Ministry of Science and Higher Education of the Republic of Kazakhstan (Grant “Exploring the impact of economic, social, and environmental factors on the relationship between urbanization and greenhouse gas emissions” No. AP19576071).","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"53 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-08-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73760836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-08-03DOI: 10.21511/imfi.20(3).2023.08
Richard Cloutier, Alan C. Mikkelson
Absolute return strategies attempt to generate positive returns that are uncorrelated with equity or bond markets and can be used to increase diversification and performance within multi-asset class portfolios. The current paper compared diversification and portfolio performance between traditional multi-asset class portfolios and multi-asset class portfolios with the addition of absolute return strategies. Using closing prices from January 1, 2000 – June 30, 2018, this paper back-tested two multi-asset class portfolios, one composed of equities, fixed income securities, and real return strategies, and the other portfolio composed of the same asset classes but with the addition of absolute return strategies. In particular, the absolute return strategies that this paper added were equity market neutral strategies, managed futures, and global macro strategies. Results indicated that the use of absolute return strategies improved diversification by increasing the portfolio’s effective number of bets (ENB) and enhanced risk adjusted returns as measured by improved Sharpe ratios, Treynor ratios, Jensen’s Alphas, and Sortino ratios. In addition, results showed that the benefits of adding absolute return strategies accrued throughout a full market cycle, which included declines and advances. These results support previous research on the individual absolute return strategies and demonstrate that the portfolio performance and investor wealth can be improved with the addition of these absolute return strategies to multi-asset class portfolios.
{"title":"The effect of absolute return strategies on risk-factor diversification and portfolio performance","authors":"Richard Cloutier, Alan C. Mikkelson","doi":"10.21511/imfi.20(3).2023.08","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.08","url":null,"abstract":"Absolute return strategies attempt to generate positive returns that are uncorrelated with equity or bond markets and can be used to increase diversification and performance within multi-asset class portfolios. The current paper compared diversification and portfolio performance between traditional multi-asset class portfolios and multi-asset class portfolios with the addition of absolute return strategies. Using closing prices from January 1, 2000 – June 30, 2018, this paper back-tested two multi-asset class portfolios, one composed of equities, fixed income securities, and real return strategies, and the other portfolio composed of the same asset classes but with the addition of absolute return strategies. In particular, the absolute return strategies that this paper added were equity market neutral strategies, managed futures, and global macro strategies. Results indicated that the use of absolute return strategies improved diversification by increasing the portfolio’s effective number of bets (ENB) and enhanced risk adjusted returns as measured by improved Sharpe ratios, Treynor ratios, Jensen’s Alphas, and Sortino ratios. In addition, results showed that the benefits of adding absolute return strategies accrued throughout a full market cycle, which included declines and advances. These results support previous research on the individual absolute return strategies and demonstrate that the portfolio performance and investor wealth can be improved with the addition of these absolute return strategies to multi-asset class portfolios.","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"205207 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78054662","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-31DOI: 10.21511/imfi.20(3).2023.07
Deba R. Mohanty, Amiya Kumar Mohapatra, Sasikanta Tripathy, Rahul Matta
This study examines the impact of foreign exchange rate fluctuations on various NSE capitalized indices of India. Five exchange rates were chosen based on trading contracts in the currency derivative segment of NSE. These exchange rates are US Dollar-Indian Rupee (USD/INR), Euro-Indian Rupee (EUR/INR), Great Britain Pound-Indian Rupee (GBP/INR), Chinese Yuan-Indian Rupee (CNY/INR) and Japanese Yen-Indian Rupee (JPY/INR), which are used as a regressor in this study. The data of NSE Nifty large-cap 100, Nifty mid-cap 100 and Nifty small-cap from December 1, 2012 to December 1, 2022 was considered for the study. GARCH (1, 1) model was used to analyze the nexus between exchange rate fluctuations and capitalized indices, and it was further validated by DCC GARCH to evaluate the volatility spillover. The result shows that exchange rate fluctuations have a positive effect on stock market volatility along with a varying degree of incidence on small-cap, mid-cap, and large-cap. DCC α has been found to be significant in USD & GBP for small-cap, and GBP & CNY for mid-cap. On the other hand, USD, Euro, CNY and JPY have a significant impact on the large-cap index in the short-run. Further, it is found that there is long-run spillover effect (DCC β) of exchange rates on all capitalized indices of the Indian stock market, and it is highest in in the large-cap case.
{"title":"Nexus between foreign exchange rate and stock market: evidence from India","authors":"Deba R. Mohanty, Amiya Kumar Mohapatra, Sasikanta Tripathy, Rahul Matta","doi":"10.21511/imfi.20(3).2023.07","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.07","url":null,"abstract":"This study examines the impact of foreign exchange rate fluctuations on various NSE capitalized indices of India. Five exchange rates were chosen based on trading contracts in the currency derivative segment of NSE. These exchange rates are US Dollar-Indian Rupee (USD/INR), Euro-Indian Rupee (EUR/INR), Great Britain Pound-Indian Rupee (GBP/INR), Chinese Yuan-Indian Rupee (CNY/INR) and Japanese Yen-Indian Rupee (JPY/INR), which are used as a regressor in this study. The data of NSE Nifty large-cap 100, Nifty mid-cap 100 and Nifty small-cap from December 1, 2012 to December 1, 2022 was considered for the study. GARCH (1, 1) model was used to analyze the nexus between exchange rate fluctuations and capitalized indices, and it was further validated by DCC GARCH to evaluate the volatility spillover. The result shows that exchange rate fluctuations have a positive effect on stock market volatility along with a varying degree of incidence on small-cap, mid-cap, and large-cap. DCC α has been found to be significant in USD & GBP for small-cap, and GBP & CNY for mid-cap. On the other hand, USD, Euro, CNY and JPY have a significant impact on the large-cap index in the short-run. Further, it is found that there is long-run spillover effect (DCC β) of exchange rates on all capitalized indices of the Indian stock market, and it is highest in in the large-cap case.","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"67 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82583624","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-28DOI: 10.21511/imfi.20(3).2023.06
Gizela Eleonora Hermando, Felizia Arni Rudiawarni, D. Sulistiawan, E. Bukalska
Intellectual capital is widely recognized as one of the most important assets in modern businesses, but it is only reported in the financial statement in certain conditions. This study aims to evaluate the role of value-added intellectual capital (VAIC) in moderating the relationship between earnings management and financial performance. This research uses data from non-financial companies listed on the Singapore Exchange and Indonesia Stock Exchange covering the period of 2016–2021, with a total of 3,303 firm-year observations. VAIC is measured using Pulic’s intellectual capital model and earnings management using the Kasznik Model (1999). This study uses multiple linear regressions to examine the relationship between variables. The findings indicate that earnings management has no significant effect on the financial performance of Singapore, but it has a significant positive effect on the financial performance of Indonesia. Furthermore, this study discovers that intellectual capital moderates the relationship between earnings management and financial performance in both countries differently, that intellectual capital moderation is positive (negative) for the Singapore (Indonesia) sample. These findings suggest that the role of intellectual capital varies depending on stock exchanges; Singapore is considered a developed country in Southeast Asia, whilst Indonesia is considered a developing one. This study concludes that the role of intellectual capital in the relationship between earnings management and financial performance varies between market characteristics and across industries.
{"title":"Impact of intellectual capital on earnings management and financial performance","authors":"Gizela Eleonora Hermando, Felizia Arni Rudiawarni, D. Sulistiawan, E. Bukalska","doi":"10.21511/imfi.20(3).2023.06","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.06","url":null,"abstract":"Intellectual capital is widely recognized as one of the most important assets in modern businesses, but it is only reported in the financial statement in certain conditions. This study aims to evaluate the role of value-added intellectual capital (VAIC) in moderating the relationship between earnings management and financial performance. This research uses data from non-financial companies listed on the Singapore Exchange and Indonesia Stock Exchange covering the period of 2016–2021, with a total of 3,303 firm-year observations. VAIC is measured using Pulic’s intellectual capital model and earnings management using the Kasznik Model (1999). This study uses multiple linear regressions to examine the relationship between variables. The findings indicate that earnings management has no significant effect on the financial performance of Singapore, but it has a significant positive effect on the financial performance of Indonesia. Furthermore, this study discovers that intellectual capital moderates the relationship between earnings management and financial performance in both countries differently, that intellectual capital moderation is positive (negative) for the Singapore (Indonesia) sample. These findings suggest that the role of intellectual capital varies depending on stock exchanges; Singapore is considered a developed country in Southeast Asia, whilst Indonesia is considered a developing one. This study concludes that the role of intellectual capital in the relationship between earnings management and financial performance varies between market characteristics and across industries.","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"170 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79384777","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-18DOI: 10.21511/imfi.20(3).2023.05
Dong Meng Ren, Yunmin Chen, Alex Maynard, Sergiy Pysarenko
Can higher uncertainty increase the valuation (market-to-book value) of young firms compared to more established ones? As the current market shows higher levels of uncertainty about companies’ expected cash flows and changes in firm value, the question of the fundamental convex relationship between the two becomes more relevant. This paper aims to study how cash flow uncertainty affects the capital structure/leverage of a firm over time. A simple Bayesian learning framework is employed to assess leverage ratios in the presence of parameter uncertainty about expected cash flow. This study provides an analytical solution for leverage as a function of firm age and explores the implications using numerical results. The model links market leverage with expected cash flow volatility and firm age. Young firms face uncertainty about their expected cash flows and hence their firm value. Managers continuously update their evaluation of leverage ratios when they observe realized cash flow until firms reach maturity. Therefore, the paper provides a novel explanation of why the leverage ratio for many start-ups increases over time: the resolution of uncertainty decreases upside shock expectations as the firm ages. This result is useful both for academics, who can test the formulas derived in this paper for various industries, countries, and conditions, and for practitioners, who can use them to calibrate algorithmic trading models when linking uncertainty and firm valuation.
{"title":"Valuating the capital structure under incomplete information","authors":"Dong Meng Ren, Yunmin Chen, Alex Maynard, Sergiy Pysarenko","doi":"10.21511/imfi.20(3).2023.05","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.05","url":null,"abstract":"Can higher uncertainty increase the valuation (market-to-book value) of young firms compared to more established ones? As the current market shows higher levels of uncertainty about companies’ expected cash flows and changes in firm value, the question of the fundamental convex relationship between the two becomes more relevant. This paper aims to study how cash flow uncertainty affects the capital structure/leverage of a firm over time. A simple Bayesian learning framework is employed to assess leverage ratios in the presence of parameter uncertainty about expected cash flow. This study provides an analytical solution for leverage as a function of firm age and explores the implications using numerical results. The model links market leverage with expected cash flow volatility and firm age. Young firms face uncertainty about their expected cash flows and hence their firm value. Managers continuously update their evaluation of leverage ratios when they observe realized cash flow until firms reach maturity. Therefore, the paper provides a novel explanation of why the leverage ratio for many start-ups increases over time: the resolution of uncertainty decreases upside shock expectations as the firm ages. This result is useful both for academics, who can test the formulas derived in this paper for various industries, countries, and conditions, and for practitioners, who can use them to calibrate algorithmic trading models when linking uncertainty and firm valuation.","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"9 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75327869","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-05DOI: 10.21511/imfi.20(3).2023.03
Vandana Gupta, A. Banerjee
Identifying and managing credit risk is vital for all lending institutions. Historically, credit risk is assessed using financial data from published financial statements. However, research indicates that the ability to detect financial hardship may be improved by textual analysis of firms’ disclosed records. This study aims to establish an association between themes and words from Management Discussion and Analysis (MDA) reports of firms and corporate failures. The study took a sample of 57 Indian listed firms declared bankrupt under the Insolvency and Bankruptcy Code (IBC) along with a matched sample of 55 solvent firms (matched by industry and size) for the period of FY2011–2019. The first part of analysis identifies negative words from the published reports and compares them with the negative words of the Loughran-McDonald dictionary. Then a thematic analysis is done to identify the key themes from the MDA reports and the significant themes are validated with their corresponding financial ratios in the third step using a panel logistic regression. Word analysis results show that IBC firms have significantly greater negative tone (2.21 percent) as against 1.30 percent of solvent firms. Thematic analysis results show that manageability, activity and performance are significant themes for predicting financial distress. Financial variables such as ownership pattern, promoters’ shares pledged, return on capital employed, asset utilization are some of the ratios in sync with the key themes. The study recommends that lenders and other stakeholders should look beyond financial statements which may be ‘window dressed’ by firms to qualitative disclosures in annual reports which may forewarn against impending financial distress. Acknowledgments The infrastructural support provided by FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.
{"title":"Using textual analysis in bankruptcy prediction: Evidence from Indian firms under IBC","authors":"Vandana Gupta, A. Banerjee","doi":"10.21511/imfi.20(3).2023.03","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.03","url":null,"abstract":"Identifying and managing credit risk is vital for all lending institutions. Historically, credit risk is assessed using financial data from published financial statements. However, research indicates that the ability to detect financial hardship may be improved by textual analysis of firms’ disclosed records. This study aims to establish an association between themes and words from Management Discussion and Analysis (MDA) reports of firms and corporate failures. The study took a sample of 57 Indian listed firms declared bankrupt under the Insolvency and Bankruptcy Code (IBC) along with a matched sample of 55 solvent firms (matched by industry and size) for the period of FY2011–2019. The first part of analysis identifies negative words from the published reports and compares them with the negative words of the Loughran-McDonald dictionary. Then a thematic analysis is done to identify the key themes from the MDA reports and the significant themes are validated with their corresponding financial ratios in the third step using a panel logistic regression. Word analysis results show that IBC firms have significantly greater negative tone (2.21 percent) as against 1.30 percent of solvent firms. Thematic analysis results show that manageability, activity and performance are significant themes for predicting financial distress. Financial variables such as ownership pattern, promoters’ shares pledged, return on capital employed, asset utilization are some of the ratios in sync with the key themes. The study recommends that lenders and other stakeholders should look beyond financial statements which may be ‘window dressed’ by firms to qualitative disclosures in annual reports which may forewarn against impending financial distress.\u0000 Acknowledgments The infrastructural support provided by FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90840886","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-05DOI: 10.21511/imfi.20(3).2023.04
Nur Rizqi Febriandika, Fifi Hakimi, Maratul Awalliyah, Yayuli
This study aims to examine the spillover and contagion effects of global financial markets on the Indonesian Sharia Stock Index (ISSI) post-COVID-19. The study uses the Vector Error Correction Model method to explore the short-term and long-term relationships between ISSI and global financial markets. The data used in this study are time series data, namely the ISSI and several other countries that have a significant influence on the global economy, which were observed from May to July 2022. The results of the study show that the USD has a positive influence on ISSI in the short and long term. At the same time, the JPY and HKD have a negative influence on ISSI. The GBP and SGD do not have a significant influence on ISSI developments. The economic, business and financial sectors began to adjust after the COVID-19 pandemic ended, including the Indonesian Sharia Stock Index. Contagion occurs from one country’s financial system to another, which is influenced by aspects of volatility, exchange rates, the global crisis, the stock market, and stock indices. It is considered that this study can help the government to adjust better conditions of Islamic stocks in Indonesia. Acknowledgment The authors would like to thank the Research and Innovation Institute (LRI), Universitas Muhammadiyah Surakarta, for the enormous financial support in writing this study through the HIT funding scheme with number 02/A.6-II/FAI/1/2022.
{"title":"Contagion and spillover effects of global financial markets on the Indonesian Sharia Stock Index post-COVID-19","authors":"Nur Rizqi Febriandika, Fifi Hakimi, Maratul Awalliyah, Yayuli","doi":"10.21511/imfi.20(3).2023.04","DOIUrl":"https://doi.org/10.21511/imfi.20(3).2023.04","url":null,"abstract":"This study aims to examine the spillover and contagion effects of global financial markets on the Indonesian Sharia Stock Index (ISSI) post-COVID-19. The study uses the Vector Error Correction Model method to explore the short-term and long-term relationships between ISSI and global financial markets. The data used in this study are time series data, namely the ISSI and several other countries that have a significant influence on the global economy, which were observed from May to July 2022. The results of the study show that the USD has a positive influence on ISSI in the short and long term. At the same time, the JPY and HKD have a negative influence on ISSI. The GBP and SGD do not have a significant influence on ISSI developments. The economic, business and financial sectors began to adjust after the COVID-19 pandemic ended, including the Indonesian Sharia Stock Index. Contagion occurs from one country’s financial system to another, which is influenced by aspects of volatility, exchange rates, the global crisis, the stock market, and stock indices. It is considered that this study can help the government to adjust better conditions of Islamic stocks in Indonesia.\u0000Acknowledgment The authors would like to thank the Research and Innovation Institute (LRI), Universitas Muhammadiyah Surakarta, for the enormous financial support in writing this study through the HIT funding scheme with number 02/A.6-II/FAI/1/2022.","PeriodicalId":39060,"journal":{"name":"Investment Management and Financial Innovations","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72991705","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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