Reinier de Adelhart Toorop, Dirk Schoenmaker, Willem Schramade
We investigate the decision rules for corporate investment by designing a company value frontier. This company value frontier allows for balancing the financial value and social and environmental impacts. This article develops novel value concepts—ranging from shareholder value to shareholder welfare and integrated value—resulting in varying preferences for social and environmental impacts or values. Next, these preferences are incorporated in investment decision rules. The traditional net present value (NPV) rule optimises only the financial value. We propose a new integrated present value (IPV) decision rule that includes a preference for social and environmental values without neglecting the financial value. By applying the new IPV rule, responsible companies are able to achieve more sustainable outcomes.
{"title":"Decision Rules for Corporate Investment","authors":"Reinier de Adelhart Toorop, Dirk Schoenmaker, Willem Schramade","doi":"10.3390/ijfs12010024","DOIUrl":"https://doi.org/10.3390/ijfs12010024","url":null,"abstract":"We investigate the decision rules for corporate investment by designing a company value frontier. This company value frontier allows for balancing the financial value and social and environmental impacts. This article develops novel value concepts—ranging from shareholder value to shareholder welfare and integrated value—resulting in varying preferences for social and environmental impacts or values. Next, these preferences are incorporated in investment decision rules. The traditional net present value (NPV) rule optimises only the financial value. We propose a new integrated present value (IPV) decision rule that includes a preference for social and environmental values without neglecting the financial value. By applying the new IPV rule, responsible companies are able to achieve more sustainable outcomes.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"26 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140032385","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}
Following the COVID-19 pandemic, the healthcare sector has emerged as a resilient and profitable domain amidst market fluctuations. Consequently, investing in healthcare securities, particularly through mutual funds, has gained traction. Existing research on predicting future prices of healthcare securities has been predominantly reliant on historical trading data, limiting predictive accuracy and scope. This study aims to overcome these constraints by integrating a diverse set of twelve external factors spanning economic, industrial, and company-specific domains to enhance predictive models. Employing Long Short-Term Memory (LSTM) and Multiple Linear Regression (MLR) techniques, the study evaluates the effectiveness of this multifaceted approach. Results indicate that incorporating various influencing factors beyond historical data significantly improves price prediction accuracy. Moreover, the utilization of LSTM alongside this comprehensive dataset yields comparable predictive outcomes to those obtained solely from historical data. Thus, this study highlights the potential of leveraging diverse external factors for more robust forecasting of mutual fund prices within the healthcare sector.
{"title":"Predicting Healthcare Mutual Fund Performance Using Deep Learning and Linear Regression","authors":"Anuwat Boonprasope, Korrakot Yaibuathet Tippayawong","doi":"10.3390/ijfs12010023","DOIUrl":"https://doi.org/10.3390/ijfs12010023","url":null,"abstract":"Following the COVID-19 pandemic, the healthcare sector has emerged as a resilient and profitable domain amidst market fluctuations. Consequently, investing in healthcare securities, particularly through mutual funds, has gained traction. Existing research on predicting future prices of healthcare securities has been predominantly reliant on historical trading data, limiting predictive accuracy and scope. This study aims to overcome these constraints by integrating a diverse set of twelve external factors spanning economic, industrial, and company-specific domains to enhance predictive models. Employing Long Short-Term Memory (LSTM) and Multiple Linear Regression (MLR) techniques, the study evaluates the effectiveness of this multifaceted approach. Results indicate that incorporating various influencing factors beyond historical data significantly improves price prediction accuracy. Moreover, the utilization of LSTM alongside this comprehensive dataset yields comparable predictive outcomes to those obtained solely from historical data. Thus, this study highlights the potential of leveraging diverse external factors for more robust forecasting of mutual fund prices within the healthcare sector.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"135 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-02-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140007144","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}
This study investigates the relationship between dividend policy, firm performance, and value within the Korean market, taking into account the unique context of Chaebol ownership structures. Utilizing a robust dataset of 5478 observations from the Korean Composite Stock Price Index, our empirical analysis employs advanced regression models, revealing distinctive effects of various dividend policy measures through the lenses of interest alignment and managerial entrenchment hypotheses. Surprisingly, while cash dividend payments exhibit a robust positive impact on Tobin’s Q and market-to-book ratios, suggesting an overall positive link with market valuations, a closer inspection reveals divergent impacts for Chaebol and non-Chaebol firms. In Chaebol entities, dividend policy proxies consistently demonstrate positive effects on performance metrics, aligning with the interest alignment hypothesis and highlighting strategic signaling efforts. Conversely, non-Chaebol firms exhibit intriguingly negative impacts, supporting the managerial entrenchment hypothesis and implying potential challenges to market value. Firms should prioritize transparent communication on dividend policies for improved investor decision making and enhanced corporate governance in the dynamic Korean market.
{"title":"Revisiting the Effect of Dividend Policy on Firm Performance and Value: Empirical Evidence from the Korean Market","authors":"Okechukwu Enyeribe Njoku, Younghwan Lee","doi":"10.3390/ijfs12010022","DOIUrl":"https://doi.org/10.3390/ijfs12010022","url":null,"abstract":"This study investigates the relationship between dividend policy, firm performance, and value within the Korean market, taking into account the unique context of Chaebol ownership structures. Utilizing a robust dataset of 5478 observations from the Korean Composite Stock Price Index, our empirical analysis employs advanced regression models, revealing distinctive effects of various dividend policy measures through the lenses of interest alignment and managerial entrenchment hypotheses. Surprisingly, while cash dividend payments exhibit a robust positive impact on Tobin’s Q and market-to-book ratios, suggesting an overall positive link with market valuations, a closer inspection reveals divergent impacts for Chaebol and non-Chaebol firms. In Chaebol entities, dividend policy proxies consistently demonstrate positive effects on performance metrics, aligning with the interest alignment hypothesis and highlighting strategic signaling efforts. Conversely, non-Chaebol firms exhibit intriguingly negative impacts, supporting the managerial entrenchment hypothesis and implying potential challenges to market value. Firms should prioritize transparent communication on dividend policies for improved investor decision making and enhanced corporate governance in the dynamic Korean market.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"17 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140007134","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}
This study investigates the risk-adjusted performance of energy equity mutual funds across a 23-year period, employing the Cumulative Wealth Index (CWI) to gauge their long-term performance relative to benchmark indices. Despite inherent volatility due to the energy sector’s cyclical nature, these funds consistently outperformed benchmarks based on monthly returns, showcasing resilience amid market fluctuations. However, challenges emerged during the COVID-19 pandemic, with notable improvements post-vaccination. Utilizing a multi-factor model, the research highlights the interconnectivity of energy equity mutual funds with broader market movements and systemic factors. Despite their primary focus on the energy sector, these funds exhibit sensitivity to larger market trends, rendering them susceptible to market dynamics. Additionally, an assessment of portfolio manager expertise reveals some proficiency in security selection post-vaccinations against COVID-19.
{"title":"Assessing Energy Mutual Funds: Performance, Risks, and Managerial Skills","authors":"Davinder Malhotra, Srinivas Nippani","doi":"10.3390/ijfs12010020","DOIUrl":"https://doi.org/10.3390/ijfs12010020","url":null,"abstract":"This study investigates the risk-adjusted performance of energy equity mutual funds across a 23-year period, employing the Cumulative Wealth Index (CWI) to gauge their long-term performance relative to benchmark indices. Despite inherent volatility due to the energy sector’s cyclical nature, these funds consistently outperformed benchmarks based on monthly returns, showcasing resilience amid market fluctuations. However, challenges emerged during the COVID-19 pandemic, with notable improvements post-vaccination. Utilizing a multi-factor model, the research highlights the interconnectivity of energy equity mutual funds with broader market movements and systemic factors. Despite their primary focus on the energy sector, these funds exhibit sensitivity to larger market trends, rendering them susceptible to market dynamics. Additionally, an assessment of portfolio manager expertise reveals some proficiency in security selection post-vaccinations against COVID-19.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"25 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139979787","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}
Tarek Eldomiaty, Islam Azzam, Mostafa Fouad, Yasmeen Said
The progress of financial markets depends on the way world investors foresee the market potential of the country of choice. Countries that are associated with favorable economic incentives are able to motivate investments in their respective stock markets. The objective of this paper is to examine the role of the many economic components which constitute the Market Potential Index in enhancing stock market progress. The methodology goes through testing and estimation. The tests include linearity versus nonlinearity (RESET), normality, and cointegration. The estimation includes cointegration regression and discriminant analysis to distinguish between high and low stock market progress. This study examines unbalanced panel data that covers the years 1996–2022 for 54 countries where a stock market exists. The results show the following: (a) increases in people’s expenditure result in decreases in consumption of investment in financial securities; (b) the investments in infrastructure technology is positively associated with stock market progress; (c) the positive effect of economic freedom indicates that further adaptive trading regulations are beneficial to stock market progress; (d) increases in imports consume large proportions of people’s income, coming at the expense of investment in financial securities; (e) stock markets that are associated with high country risk are characterized by a positive risk–return tradeoff, i.e., a high risk premium; (f) the stock markets listed in the MPI can reach high progress by improving three indicators, namely commercial infrastructure, market receptivity, and country risk. This paper offers a thorough and unique examination of the institutional arrangements and stock market progress. The paper offers a guide to policy makers about how economic institutional arrangements can be promoted in order to reach high stock market progress.
{"title":"The Use of Economic Indicators as Early Signals of Stock Market Progress: Perspectives from Market Potential Index","authors":"Tarek Eldomiaty, Islam Azzam, Mostafa Fouad, Yasmeen Said","doi":"10.3390/ijfs12010021","DOIUrl":"https://doi.org/10.3390/ijfs12010021","url":null,"abstract":"The progress of financial markets depends on the way world investors foresee the market potential of the country of choice. Countries that are associated with favorable economic incentives are able to motivate investments in their respective stock markets. The objective of this paper is to examine the role of the many economic components which constitute the Market Potential Index in enhancing stock market progress. The methodology goes through testing and estimation. The tests include linearity versus nonlinearity (RESET), normality, and cointegration. The estimation includes cointegration regression and discriminant analysis to distinguish between high and low stock market progress. This study examines unbalanced panel data that covers the years 1996–2022 for 54 countries where a stock market exists. The results show the following: (a) increases in people’s expenditure result in decreases in consumption of investment in financial securities; (b) the investments in infrastructure technology is positively associated with stock market progress; (c) the positive effect of economic freedom indicates that further adaptive trading regulations are beneficial to stock market progress; (d) increases in imports consume large proportions of people’s income, coming at the expense of investment in financial securities; (e) stock markets that are associated with high country risk are characterized by a positive risk–return tradeoff, i.e., a high risk premium; (f) the stock markets listed in the MPI can reach high progress by improving three indicators, namely commercial infrastructure, market receptivity, and country risk. This paper offers a thorough and unique examination of the institutional arrangements and stock market progress. The paper offers a guide to policy makers about how economic institutional arrangements can be promoted in order to reach high stock market progress.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"10 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139979773","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 failure of major banks in 2023, such as Silicon Valley Bank (SVB), Signature Bank, First Republic Bank, and Credit Suisse, points to the continuing need for financial institutions to price liquidity risk properly and for financial systems to find alternative sources of liquidity in times of dire need. Central bank digital currencies (CBDCs), fiat-backed stablecoins (fsCOINs), and synthetic central bank digital currencies (sCBDCs) could offer improvements, but each comes with its own set of problems and conditions. Prior research reaches conflicting conclusions about the effect that each of these three financial assets has on systemic bank liquidity and fails to adequately address their net benefits relative to each other. This paper addresses these issues, including those connected to financial disintermediation, bank runs, outsourcing central bank activities, financial interoperability, cash equivalents, maturity transformation, required reserves, and changes in nations’ monetary bases. After addressing the strengths and weaknesses of fsCOINs and CBDCs, we conclude that sCBDCs provide the most significant net liquidity benefits when risks and returns are considered.
{"title":"Synthetic Central Bank Digital Currencies and Systemic Liquidity Risks","authors":"John E. Marthinsen, Steven R. Gordon","doi":"10.3390/ijfs12010019","DOIUrl":"https://doi.org/10.3390/ijfs12010019","url":null,"abstract":"The failure of major banks in 2023, such as Silicon Valley Bank (SVB), Signature Bank, First Republic Bank, and Credit Suisse, points to the continuing need for financial institutions to price liquidity risk properly and for financial systems to find alternative sources of liquidity in times of dire need. Central bank digital currencies (CBDCs), fiat-backed stablecoins (fsCOINs), and synthetic central bank digital currencies (sCBDCs) could offer improvements, but each comes with its own set of problems and conditions. Prior research reaches conflicting conclusions about the effect that each of these three financial assets has on systemic bank liquidity and fails to adequately address their net benefits relative to each other. This paper addresses these issues, including those connected to financial disintermediation, bank runs, outsourcing central bank activities, financial interoperability, cash equivalents, maturity transformation, required reserves, and changes in nations’ monetary bases. After addressing the strengths and weaknesses of fsCOINs and CBDCs, we conclude that sCBDCs provide the most significant net liquidity benefits when risks and returns are considered.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"8 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139904074","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}
Piotr Ratajczak, Dawid Szutowski, Jarosław Nowicki
The aim of this study is to verify the stability of the profitability–liquidity relationship over time, as well as to determine this relationship in terms of its level and structure. In this context, three main research questions were formulated. First, is the profitability–liquidity relationship stable in times of crisis? Second, what is the profitability of companies with high and low liquidity? Third, what is the liquidity of companies with high and low profitability? This study uses a self-organizing map (SOM), a data visualization technique that is a type of artificial neural network trained in an unsupervised manner. A dataset covering the period from 2019 to 2021, consisting of 300 Polish companies from the wholesale and retail sectors, was used. The main results of this study indicate that: (1) companies with a balanced profitability–liquidity relationship in the pre-crisis period (2019) maintained this relationship in the crisis (2020) and post-crisis periods (2021); (2) companies in the clusters with the relatively highest and lowest profitability have the relatively lowest and moderate liquidity both before and after the crisis period; (3) the majority of companies during non-crisis periods demonstrate that profitability is not reliant on liquidity, suggesting an absence of a clear relationship; (4) in the post-crisis period, companies with the relatively lowest operating cash flow margin (OCFM) exhibited the relatively highest net profit margin (NPM) and other profitability ratios, as opposed to the pre-crisis and crisis periods. This study fills the gap resulting from the incomplete—most of all static—understanding of the relationship between profitability and liquidity. Moreover, this study employs a self-organizing map (SOM) which has not been used in the literature regarding the research area undertaken.
{"title":"Exploring the Dynamics of Profitability–Liquidity Relations in Crisis, Pre-Crisis and Post-Crisis","authors":"Piotr Ratajczak, Dawid Szutowski, Jarosław Nowicki","doi":"10.3390/ijfs12010016","DOIUrl":"https://doi.org/10.3390/ijfs12010016","url":null,"abstract":"The aim of this study is to verify the stability of the profitability–liquidity relationship over time, as well as to determine this relationship in terms of its level and structure. In this context, three main research questions were formulated. First, is the profitability–liquidity relationship stable in times of crisis? Second, what is the profitability of companies with high and low liquidity? Third, what is the liquidity of companies with high and low profitability? This study uses a self-organizing map (SOM), a data visualization technique that is a type of artificial neural network trained in an unsupervised manner. A dataset covering the period from 2019 to 2021, consisting of 300 Polish companies from the wholesale and retail sectors, was used. The main results of this study indicate that: (1) companies with a balanced profitability–liquidity relationship in the pre-crisis period (2019) maintained this relationship in the crisis (2020) and post-crisis periods (2021); (2) companies in the clusters with the relatively highest and lowest profitability have the relatively lowest and moderate liquidity both before and after the crisis period; (3) the majority of companies during non-crisis periods demonstrate that profitability is not reliant on liquidity, suggesting an absence of a clear relationship; (4) in the post-crisis period, companies with the relatively lowest operating cash flow margin (OCFM) exhibited the relatively highest net profit margin (NPM) and other profitability ratios, as opposed to the pre-crisis and crisis periods. This study fills the gap resulting from the incomplete—most of all static—understanding of the relationship between profitability and liquidity. Moreover, this study employs a self-organizing map (SOM) which has not been used in the literature regarding the research area undertaken.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"171 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139762150","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}
This article provides a macro-foundation for why the specific value of 2% is a valid inflation target. The approach postulates that innovations generate transactional cost savings by comparison to barter. The optimal velocity of money is derived as a function of productivity growth and of long-term and short-term interest rates, with coefficients reflecting the leverage ratio of depository institutions and the degree of bias in technical progress in the transaction technology. The model is tested for the U.S. (for aggregates M1, M1RS, and M1S) over the period 1959–2007. Setting the inflation target rate equal to the growth rate of velocity leads to an inflation rate near 2% and is akin to pursuing the Friedman k-% rule. This rule provides flexibility to prevent deflation. A long-term Taylor-type rule is derived. A robustness test is also conducted by extending the sample period up to 2023, covering sustained episodes of unconventional U.S. monetary policy.
{"title":"Velocity of Money and Productivity Growth: Explaining the 2% Inflation Target in the U.S. (1959–2007)","authors":"Christophe Faugere","doi":"10.3390/ijfs12010015","DOIUrl":"https://doi.org/10.3390/ijfs12010015","url":null,"abstract":"This article provides a macro-foundation for why the specific value of 2% is a valid inflation target. The approach postulates that innovations generate transactional cost savings by comparison to barter. The optimal velocity of money is derived as a function of productivity growth and of long-term and short-term interest rates, with coefficients reflecting the leverage ratio of depository institutions and the degree of bias in technical progress in the transaction technology. The model is tested for the U.S. (for aggregates M1, M1RS, and M1S) over the period 1959–2007. Setting the inflation target rate equal to the growth rate of velocity leads to an inflation rate near 2% and is akin to pursuing the Friedman k-% rule. This rule provides flexibility to prevent deflation. A long-term Taylor-type rule is derived. A robustness test is also conducted by extending the sample period up to 2023, covering sustained episodes of unconventional U.S. monetary policy.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"9 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139762153","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}
Assuming that investors can be foreign or local, do high-frequency trading (HFT) or not, and submit orders through a bank-owned or non-bank-owned broker, we associated trades to various investors. Then, building a panel vector autoregressive model, we analyzed the dynamic relation of these investors with returns and among each other before and during the COVID-19 market crash. Results show that investor groups have influence on each other. Their net purchases also interact with returns. Moreover, during the turmoil caused by the pandemic, except foreign investors not involved in HFT, the response of any investor group (retail/institutional, domestic investors doing HFT and those not doing HFT, and foreign investors doing HFT) significantly altered. This shows that the interrelation among investor groups is dynamic and sensitive to market conditions.
{"title":"Impact of the COVID-19 Market Turmoil on Investor Behavior: A Panel VAR Study of Bank Stocks in Borsa Istanbul","authors":"Cumhur Ekinci, Oğuz Ersan","doi":"10.3390/ijfs12010014","DOIUrl":"https://doi.org/10.3390/ijfs12010014","url":null,"abstract":"Assuming that investors can be foreign or local, do high-frequency trading (HFT) or not, and submit orders through a bank-owned or non-bank-owned broker, we associated trades to various investors. Then, building a panel vector autoregressive model, we analyzed the dynamic relation of these investors with returns and among each other before and during the COVID-19 market crash. Results show that investor groups have influence on each other. Their net purchases also interact with returns. Moreover, during the turmoil caused by the pandemic, except foreign investors not involved in HFT, the response of any investor group (retail/institutional, domestic investors doing HFT and those not doing HFT, and foreign investors doing HFT) significantly altered. This shows that the interrelation among investor groups is dynamic and sensitive to market conditions.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"19 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139679526","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}
Abdullah A. Aljughaiman, Abdulateif A. Almulhim, Abdulaziz S. Al Naim
This paper investigates the association between board of director (BOD) structures and CEO equity-based compensation (long-term incentive) for commercial banks (conventional and Islamic banks) in MENA countries. Specifically, we take board size and board independence to measure the board structure. Furthermore, we investigate the influence of board structure on the association between CEO equity-based compensation and financial performance. Moreover, we compare conventional and Islamic banks in testing these relationships. Using a sample of 65 banks in MENA countries for the period between 2009 and 2020, we show a significant positive association between board size and CEO compensation. However, we find the same association between these variables for IBs, but the effect of board size on CEO compensation is less. We also show that board independence is negatively correlated with CEO compensation. Nevertheless, the relationship between board independence and CEO ownership is positive for IBs. For the moderating test, we find that effective board structure provides more incentives to the CEO, leading them to achieve higher financial performance. The Islamic bank’s business model (based on Shari’ah principles) contributes to the different influences of board structure on CEO compensation. Our results provide the insight that a strong and effective board is important for managing the executive’s compensation system. The findings of this study have implications for financial firms, policymakers, and regulators. Specifically, the study may help in understanding the benefits of different compensation structures relative to different types of financial firms.
本文研究了中东和北非国家商业银行（传统银行和伊斯兰银行）的董事会（BOD）结构与首席执行官股权薪酬（长期激励）之间的关联。具体而言，我们采用董事会规模和董事会独立性来衡量董事会结构。此外，我们还研究了董事会结构对首席执行官股权薪酬与财务业绩之间关系的影响。此外，我们还对传统银行和伊斯兰银行进行了比较，以检验这些关系。通过对 2009 年至 2020 年期间中东和北非国家 65 家银行的抽样调查，我们发现董事会规模与首席执行官薪酬之间存在显著的正相关关系。然而，我们发现伊斯兰银行的这些变量之间存在相同的关联，但董事会规模对首席执行官薪酬的影响较小。我们还发现，董事会独立性与 CEO 薪酬呈负相关。然而，对于国际银行而言，董事会独立性与首席执行官所有权之间的关系是正相关的。在调节性检验中，我们发现有效的董事会结构为首席执行官提供了更多的激励，从而使他们取得更高的财务业绩。伊斯兰银行的业务模式（基于伊斯兰教法原则）导致了董事会结构对首席执行官薪酬的不同影响。我们的研究结果使我们深刻认识到，一个强大而有效的董事会对于管理高管的薪酬体系非常重要。本研究的结果对金融公司、政策制定者和监管者都有借鉴意义。具体而言，本研究可能有助于理解不同薪酬结构对不同类型金融公司的益处。
{"title":"Board Structure, CEO Equity-Based Compensation, and Financial Performance: Evidence from MENA Countries","authors":"Abdullah A. Aljughaiman, Abdulateif A. Almulhim, Abdulaziz S. Al Naim","doi":"10.3390/ijfs12010013","DOIUrl":"https://doi.org/10.3390/ijfs12010013","url":null,"abstract":"This paper investigates the association between board of director (BOD) structures and CEO equity-based compensation (long-term incentive) for commercial banks (conventional and Islamic banks) in MENA countries. Specifically, we take board size and board independence to measure the board structure. Furthermore, we investigate the influence of board structure on the association between CEO equity-based compensation and financial performance. Moreover, we compare conventional and Islamic banks in testing these relationships. Using a sample of 65 banks in MENA countries for the period between 2009 and 2020, we show a significant positive association between board size and CEO compensation. However, we find the same association between these variables for IBs, but the effect of board size on CEO compensation is less. We also show that board independence is negatively correlated with CEO compensation. Nevertheless, the relationship between board independence and CEO ownership is positive for IBs. For the moderating test, we find that effective board structure provides more incentives to the CEO, leading them to achieve higher financial performance. The Islamic bank’s business model (based on Shari’ah principles) contributes to the different influences of board structure on CEO compensation. Our results provide the insight that a strong and effective board is important for managing the executive’s compensation system. The findings of this study have implications for financial firms, policymakers, and regulators. Specifically, the study may help in understanding the benefits of different compensation structures relative to different types of financial firms.","PeriodicalId":45794,"journal":{"name":"International Journal of Financial Studies","volume":"31 1","pages":""},"PeriodicalIF":2.3,"publicationDate":"2024-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139644639","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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