Pub Date : 2022-05-26DOI: 10.1108/ijmf-11-2021-0571
Sudip Datta, Trang Doan, Abhijit Guha, Mai Iskandar-Datta, Min-Jeong Kwon
PurposeThis paper examines how “strategic” chief financial officers (CFOs) with an elite MBA (i.e. elite CFOs) influence (1) stock market reaction to CFO hiring announcements (ex ante measure) and (2) post-hiring firm performance (ex-post measure).Design/methodology/approachThis paper utilizes a comprehensive, proprietary database with information about the educational qualifications and prior professional experience of 1,340 CFOs hired during the period 1994–2014. For each CFO, the authors hand-collected data on the CFO's prior experience as well as CFO's educational profile. The authors also identified the date of CFO hiring from financial press articles. To evaluate performance, the authors consider two different, yet complementary performance measures: (1) the stock market reaction, a priori measure and (2) a traditional measure of performance, which is a post-facto metric related to firm performance.FindingsThe results show that hiring CFOs with scarce and strategic human capital elicits a positive market response and leads to significant improvement in firm performance. Further, firms with greater managerial discretion benefit more from hiring elite CFOs. The results hold after controlling for chief executive officer (CEO), CFO, top managment team (TMT), and board characteristics.Originality/valueThis study shows converging and mutually consistent results about what specific types of CFO human capital create firm value and, more importantly, show that such value-creation is only in the case of small firms and high growth firms. The study also advances the stream of literature that contrasts the relative benefits of specialist versus generalist qualifications.
{"title":"CFO credentials, stock market signaling, and firm performance","authors":"Sudip Datta, Trang Doan, Abhijit Guha, Mai Iskandar-Datta, Min-Jeong Kwon","doi":"10.1108/ijmf-11-2021-0571","DOIUrl":"https://doi.org/10.1108/ijmf-11-2021-0571","url":null,"abstract":"PurposeThis paper examines how “strategic” chief financial officers (CFOs) with an elite MBA (i.e. elite CFOs) influence (1) stock market reaction to CFO hiring announcements (ex ante measure) and (2) post-hiring firm performance (ex-post measure).Design/methodology/approachThis paper utilizes a comprehensive, proprietary database with information about the educational qualifications and prior professional experience of 1,340 CFOs hired during the period 1994–2014. For each CFO, the authors hand-collected data on the CFO's prior experience as well as CFO's educational profile. The authors also identified the date of CFO hiring from financial press articles. To evaluate performance, the authors consider two different, yet complementary performance measures: (1) the stock market reaction, a priori measure and (2) a traditional measure of performance, which is a post-facto metric related to firm performance.FindingsThe results show that hiring CFOs with scarce and strategic human capital elicits a positive market response and leads to significant improvement in firm performance. Further, firms with greater managerial discretion benefit more from hiring elite CFOs. The results hold after controlling for chief executive officer (CEO), CFO, top managment team (TMT), and board characteristics.Originality/valueThis study shows converging and mutually consistent results about what specific types of CFO human capital create firm value and, more importantly, show that such value-creation is only in the case of small firms and high growth firms. The study also advances the stream of literature that contrasts the relative benefits of specialist versus generalist qualifications.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-05-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46537777","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 : 2022-05-06DOI: 10.1108/ijmf-05-2021-0237
H. Anderson, Jing Liao, Jingjing Yang, M. Young
PurposeThe authors examine the influence of powerful political corporate appointments on the usage of firm bribery channels. Party Secretaries within Chinese state-owned enterprises (SOEs) may simultaneously hold top management positions, thereby endowing powerful firm-level decision rights on those appointees, hereafter referred to as powerful dual role Party Secretaries.Design/methodology/approachThis study employs panel data analysis with industry and year fixed effects. The authors use a sample of 1,143 Chinese SOEs listed on the Shanghai and Shenzhen Stock Exchanges from 2004 to 2015.FindingsThe authors find that powerful dual role Party Secretaries are associated with greater bribery channel usage. Following the ongoing anticorruption campaign, SOEs with the powerful appointments significantly reduce their usage of both transparent (entertainment and travel costs) and opaque bribery (abnormal management expenses) channels. However, in general, Chinese SOEs respond to the anticorruption shock by switching from the more transparent to the opaquer bribery channel.Originality/valueThe authors contribute to the ongoing debate of politicians on corporate boards by examining the relatively unexplored area of government appointed top management and their influence on bribery at the firm level.
{"title":"Powerful political corporate appointments and firm bribery channels","authors":"H. Anderson, Jing Liao, Jingjing Yang, M. Young","doi":"10.1108/ijmf-05-2021-0237","DOIUrl":"https://doi.org/10.1108/ijmf-05-2021-0237","url":null,"abstract":"PurposeThe authors examine the influence of powerful political corporate appointments on the usage of firm bribery channels. Party Secretaries within Chinese state-owned enterprises (SOEs) may simultaneously hold top management positions, thereby endowing powerful firm-level decision rights on those appointees, hereafter referred to as powerful dual role Party Secretaries.Design/methodology/approachThis study employs panel data analysis with industry and year fixed effects. The authors use a sample of 1,143 Chinese SOEs listed on the Shanghai and Shenzhen Stock Exchanges from 2004 to 2015.FindingsThe authors find that powerful dual role Party Secretaries are associated with greater bribery channel usage. Following the ongoing anticorruption campaign, SOEs with the powerful appointments significantly reduce their usage of both transparent (entertainment and travel costs) and opaque bribery (abnormal management expenses) channels. However, in general, Chinese SOEs respond to the anticorruption shock by switching from the more transparent to the opaquer bribery channel.Originality/valueThe authors contribute to the ongoing debate of politicians on corporate boards by examining the relatively unexplored area of government appointed top management and their influence on bribery at the firm level.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-05-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45898695","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 : 2022-05-05DOI: 10.1108/ijmf-11-2021-0554
H. A. Ahmed, M. Muttakin, Arifur Khan
PurposeThe study examines the association between firm-level political risk and corporate innovation and also this study explores how financial constraint and growth level of a firm influence this association.Design/methodology/approach A sample of 14,140 firm-year observations of the US firms from 2003 to 2020 is used. Unlike prior studies, this study uses a firm-level measure of political risk recently developed by Hassan et al. (2019) and measure innovation by patent and patent citation data and a text-based measure. A regression technique is used for empirical testing.FindingsThis study finds that firm-level political risk is negatively associated with innovation and also document that firm-level political risk has a negative impact on innovation for financially constrained and high growth firms. The overall results are robust after addressing the issue of potential endogeneity using entropy balancing and two-stage least squares regression techniques. This study also documents qualitatively consistent results after using alternative measures of innovation as well as firm-level political uncertainty.Research limitations/implicationsThe findings of this study could help the managers to make better investment decision and improve economic efficiency through understanding the effect of firm-level political risk on innovation activities.Originality/valueThe study concentrates on firm-level political risk and innovation and presents new insights that political risk at the microlevel is an important determinant for investment in innovative activities.
{"title":"Firm-level political risk and corporate innovation: evidence from US listed firms","authors":"H. A. Ahmed, M. Muttakin, Arifur Khan","doi":"10.1108/ijmf-11-2021-0554","DOIUrl":"https://doi.org/10.1108/ijmf-11-2021-0554","url":null,"abstract":"PurposeThe study examines the association between firm-level political risk and corporate innovation and also this study explores how financial constraint and growth level of a firm influence this association.Design/methodology/approach A sample of 14,140 firm-year observations of the US firms from 2003 to 2020 is used. Unlike prior studies, this study uses a firm-level measure of political risk recently developed by Hassan et al. (2019) and measure innovation by patent and patent citation data and a text-based measure. A regression technique is used for empirical testing.FindingsThis study finds that firm-level political risk is negatively associated with innovation and also document that firm-level political risk has a negative impact on innovation for financially constrained and high growth firms. The overall results are robust after addressing the issue of potential endogeneity using entropy balancing and two-stage least squares regression techniques. This study also documents qualitatively consistent results after using alternative measures of innovation as well as firm-level political uncertainty.Research limitations/implicationsThe findings of this study could help the managers to make better investment decision and improve economic efficiency through understanding the effect of firm-level political risk on innovation activities.Originality/valueThe study concentrates on firm-level political risk and innovation and presents new insights that political risk at the microlevel is an important determinant for investment in innovative activities.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-05-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45804153","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 : 2022-05-02DOI: 10.1108/ijmf-10-2021-0501
Garima Sisodia, A. Joseph, J. Dominic
PurposeThe present study examines the rationale behind the increased global presence of corporate green bonds as a green financing tool to facilitate sustainable practices and eco-friendly investing. The authors investigate the intriguing question of whether the companies that issue green bonds are valued more by investors or not, and further extend our analysis by exploring whether the green image of companies helps to minimize the value erosion during a crisis and enhance the resilience of the stocks?Design/methodology/approachTo examine the association between environmental commitments and firm value, the authors use the COVID-19 crisis as an exogenous shock and create a perfect natural setting to eliminate the endogeneity bias from our estimations. Moreover, the authors use propensity score matching to choose a one-to-one match of green bond firms with a larger pool of brown bond firms and eliminate the “size effect” arising out of the disproportionate sample size of green and brown bond firms.FindingsThe results of the study indicate that green bond firms are valued more by investors compared to brown bonds firms. Hence, green bond issuance acts as a strong signal of a firm's environmental commitment and it is well recognized by the investors. One of the possible reasons for a higher value of green bond firms may be due to their ability to arrest value erosion during environmental shocks. The authors could not find any difference in the resilience of green and brown bond firms.Originality/valueThe study contributes to the growing literature in the area of impact investing, specifically on exponentially growing innovative instrument green bond. Our study integrates two areas of research, i.e. corporate finance and impact investing by examining the impact of green bond issuance on firm value and stock market returns. The results would help environmentally sensitive investors to devise their investment portfolios more efficiently.
{"title":"Whether corporate green bonds act as armour during crises? Evidence from a natural experiment","authors":"Garima Sisodia, A. Joseph, J. Dominic","doi":"10.1108/ijmf-10-2021-0501","DOIUrl":"https://doi.org/10.1108/ijmf-10-2021-0501","url":null,"abstract":"PurposeThe present study examines the rationale behind the increased global presence of corporate green bonds as a green financing tool to facilitate sustainable practices and eco-friendly investing. The authors investigate the intriguing question of whether the companies that issue green bonds are valued more by investors or not, and further extend our analysis by exploring whether the green image of companies helps to minimize the value erosion during a crisis and enhance the resilience of the stocks?Design/methodology/approachTo examine the association between environmental commitments and firm value, the authors use the COVID-19 crisis as an exogenous shock and create a perfect natural setting to eliminate the endogeneity bias from our estimations. Moreover, the authors use propensity score matching to choose a one-to-one match of green bond firms with a larger pool of brown bond firms and eliminate the “size effect” arising out of the disproportionate sample size of green and brown bond firms.FindingsThe results of the study indicate that green bond firms are valued more by investors compared to brown bonds firms. Hence, green bond issuance acts as a strong signal of a firm's environmental commitment and it is well recognized by the investors. One of the possible reasons for a higher value of green bond firms may be due to their ability to arrest value erosion during environmental shocks. The authors could not find any difference in the resilience of green and brown bond firms.Originality/valueThe study contributes to the growing literature in the area of impact investing, specifically on exponentially growing innovative instrument green bond. Our study integrates two areas of research, i.e. corporate finance and impact investing by examining the impact of green bond issuance on firm value and stock market returns. The results would help environmentally sensitive investors to devise their investment portfolios more efficiently.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-05-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42064254","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 study aims to identify the impact of board characteristics (BC) on a firm's environmental performance, and provides future research directions in the area of BC impact on environmental disclosures (ED) in case of India's environmentally sensitive and non-sensitive industries (SI and NSI).
Design/methodology/approach
The authors collect firm-level data from Prowess and Bloomberg, which cover 1,158 firm-year observations from National Stock Exchange of India (NSE) 500 listed companies from 2015 to 2020, and use a dynamic panel regression analysis to get deeper insights on the relationship of ED and BC.
Findings
The study found that lagged environment disclosure score is positively and significantly associated with current environmental disclosure scores. The presence of sustainability committee, board size and frequency of meetings has a positive and significant association with ED for sensitive as well as non-sensitive industry groups. Factors such as board Independence, board gender diversity and CEO duality have no significant impact on ED of both sensitive and non-sensitive industry groups.
Originality/value
Based on agency theory and stakeholder theory authors study for the first time in the context of India the effect of BC on ED using a large sample and covering an extensive period of six years. This study contributes by offering deep insights about the impact in case of “environmentally sensitive, non-sensitive and also all industries case”. The findings of this study are valuable for corporate managers and regulators who are interested in improving ED practices through a better-governed corporate mechanism.
{"title":"Board characteristics and environmental disclosures: evidence from sensitive and non-sensitive industries of India","authors":"P.S. Raghu Kumari, Harnesh Makhija, Dipasha Sharma, Abhishek Behl","doi":"10.1108/ijmf-10-2021-0547","DOIUrl":"https://doi.org/10.1108/ijmf-10-2021-0547","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>The study aims to identify the impact of board characteristics (BC) on a firm's environmental performance, and provides future research directions in the area of BC impact on environmental disclosures (ED) in case of India's environmentally sensitive and non-sensitive industries (SI and NSI).</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>The authors collect firm-level data from Prowess and Bloomberg, which cover 1,158 firm-year observations from National Stock Exchange of India (NSE) 500 listed companies from 2015 to 2020, and use a dynamic panel regression analysis to get deeper insights on the relationship of ED and BC.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>The study found that lagged environment disclosure score is positively and significantly associated with current environmental disclosure scores. The presence of sustainability committee, board size and frequency of meetings has a positive and significant association with ED for sensitive as well as non-sensitive industry groups. Factors such as board Independence, board gender diversity and CEO duality have no significant impact on ED of both sensitive and non-sensitive industry groups.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>Based on agency theory and stakeholder theory authors study for the first time in the context of India the effect of BC on ED using a large sample and covering an extensive period of six years. This study contributes by offering deep insights about the impact in case of “environmentally sensitive, non-sensitive and also all industries case”. The findings of this study are valuable for corporate managers and regulators who are interested in improving ED practices through a better-governed corporate mechanism.</p><!--/ Abstract__block -->","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":"133 1","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-04-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139104955","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 : 2022-04-15DOI: 10.1108/ijmf-12-2021-0608
Xiaoxiao Han, Skander Lazrak, Samir Trabelsi
PurposeThe purpose of this study is to investigate whether the organizational form of an investment management firm affects the performance of the mutual funds under its operation. More explicitly, this study aims to test whether funds managed by publicly listed firms achieve different risk-adjusted performance when compared with funds operated by privately held investment firms.Design/methodology/approachThis study uses Jensen's alpha to measure funds’ performance based on the Carhart’s (1997) benchmarks and market timing factors. The researchers test the relation between fund performance and organizational form using regressions. It alleviates the reverse causality and endogeneity using propensity score matching (PSM) methodology. The study investigates the difference in performance of funds managed by public firms on the post- vs pre- initial public offering (IPO) basis. Alternatively, this study tests the performance change post-public listing of the parent firm. It computes the difference for a matched sample of funds managed by private firms that were likely to go public but did not. The researchers match funds using PSM methodology.FindingsThis paper provides robust evidence that publicly traded management companies administer relatively under-performing mutual funds in comparison to those managed by privately held firms. To the best of the authors’ knowledge, this is the first paper that confirms that organizational decision is endogenous to performance. The study finds that after a privately held company goes public, the performance of their mutual funds and the performance of the matched group funds, whose companies remained private at the same time, tends to decline, compared with companies prior to the public offering. However, the decline in mutual fund performance is larger for the companies who chose to pursue their IPO.Originality/valueThe contribution of this study to the literature is twofold. First, while there is a wealth of literature on the impact of ownership structures on corporate performance, there are very few studies focused on mutual fund markets, despite the evidence that supports a generally mixed effect. This study confirms that the performance of mutual funds managed by publicly traded investments firms is lower than that of funds managed by privately held firms. Second, the organizational decision (private vs public) is not exogenous but depends on the actual funds’ performance.
{"title":"Does organizational form really matter to investment firms?","authors":"Xiaoxiao Han, Skander Lazrak, Samir Trabelsi","doi":"10.1108/ijmf-12-2021-0608","DOIUrl":"https://doi.org/10.1108/ijmf-12-2021-0608","url":null,"abstract":"PurposeThe purpose of this study is to investigate whether the organizational form of an investment management firm affects the performance of the mutual funds under its operation. More explicitly, this study aims to test whether funds managed by publicly listed firms achieve different risk-adjusted performance when compared with funds operated by privately held investment firms.Design/methodology/approachThis study uses Jensen's alpha to measure funds’ performance based on the Carhart’s (1997) benchmarks and market timing factors. The researchers test the relation between fund performance and organizational form using regressions. It alleviates the reverse causality and endogeneity using propensity score matching (PSM) methodology. The study investigates the difference in performance of funds managed by public firms on the post- vs pre- initial public offering (IPO) basis. Alternatively, this study tests the performance change post-public listing of the parent firm. It computes the difference for a matched sample of funds managed by private firms that were likely to go public but did not. The researchers match funds using PSM methodology.FindingsThis paper provides robust evidence that publicly traded management companies administer relatively under-performing mutual funds in comparison to those managed by privately held firms. To the best of the authors’ knowledge, this is the first paper that confirms that organizational decision is endogenous to performance. The study finds that after a privately held company goes public, the performance of their mutual funds and the performance of the matched group funds, whose companies remained private at the same time, tends to decline, compared with companies prior to the public offering. However, the decline in mutual fund performance is larger for the companies who chose to pursue their IPO.Originality/valueThe contribution of this study to the literature is twofold. First, while there is a wealth of literature on the impact of ownership structures on corporate performance, there are very few studies focused on mutual fund markets, despite the evidence that supports a generally mixed effect. This study confirms that the performance of mutual funds managed by publicly traded investments firms is lower than that of funds managed by privately held firms. Second, the organizational decision (private vs public) is not exogenous but depends on the actual funds’ performance.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49447344","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 : 2022-04-12DOI: 10.1108/ijmf-08-2021-0378
Anthony K. Kyiu, E. Jones, Hao Li
PurposeThis study investigates the level of stock return synchronicity in African markets with the aim of establishing whether, contrary to conventional wisdom, stock return synchronicity can be low in countries with relatively weak information environments.Design/methodology/approachThe authors use a sample of five African countries (Botswana, Ghana, Kenya, Nigeria and South Africa) and a total of 616 firms over the period 2005–2015. This study's main measure of synchronicity is the R2 from a regression of stock returns on index returns. The authors also carry out regression analysis to investigate the main firm-level drivers of synchronicity.FindingsOn average, firms in African markets do not exhibit high levels of stock return synchronicity, providing support for the view that stock return synchronicity can be low in markets with relatively weak transparency. The authors, however, observe an increase in the level of synchronicity during the global financial crisis, notably for Ghana and Kenya. In the regression analysis, the main firm-level driver of synchronicity is firm size, while contrary to some previous studies, ownership structure has no impact. The authors also find evidence of the impact of changes in accounting regulation, notably the mandatory adoption of IFRS, on the level stock synchronicity.Originality/valueThis study contributes to the understanding of stock return synchronicity and how price discovery can vary between different information environments. The authors argue that stock returns in African countries may not always fit the stereotypical view that they are synchronous. The level of synchronicity among firms suggests that corporate events may carry some stock price implications.
{"title":"Stock return synchronicity in a weak information environment: evidence from African markets","authors":"Anthony K. Kyiu, E. Jones, Hao Li","doi":"10.1108/ijmf-08-2021-0378","DOIUrl":"https://doi.org/10.1108/ijmf-08-2021-0378","url":null,"abstract":"PurposeThis study investigates the level of stock return synchronicity in African markets with the aim of establishing whether, contrary to conventional wisdom, stock return synchronicity can be low in countries with relatively weak information environments.Design/methodology/approachThe authors use a sample of five African countries (Botswana, Ghana, Kenya, Nigeria and South Africa) and a total of 616 firms over the period 2005–2015. This study's main measure of synchronicity is the R2 from a regression of stock returns on index returns. The authors also carry out regression analysis to investigate the main firm-level drivers of synchronicity.FindingsOn average, firms in African markets do not exhibit high levels of stock return synchronicity, providing support for the view that stock return synchronicity can be low in markets with relatively weak transparency. The authors, however, observe an increase in the level of synchronicity during the global financial crisis, notably for Ghana and Kenya. In the regression analysis, the main firm-level driver of synchronicity is firm size, while contrary to some previous studies, ownership structure has no impact. The authors also find evidence of the impact of changes in accounting regulation, notably the mandatory adoption of IFRS, on the level stock synchronicity.Originality/valueThis study contributes to the understanding of stock return synchronicity and how price discovery can vary between different information environments. The authors argue that stock returns in African countries may not always fit the stereotypical view that they are synchronous. The level of synchronicity among firms suggests that corporate events may carry some stock price implications.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":"1 1","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-04-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"62737848","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 : 2022-04-05DOI: 10.1108/ijmf-06-2021-0305
Nemiraja Jadiyappa, Raveesh Krishnankutty
PurposeThis study aims to examine the impact of green operation (measured using the energy intensity of its operations) on the value of corporate firms in stock markets. The authors also examine the channel of such an impact and its implication on a firm's financing choices.Design/methodology/approachThe authors conduct various univariate and multivariate regression analyses on a panel of all non-financial Indian firms listed on the National Stock Exchange from 2010 through 2018. The authors use the sensitivity of investments to the cash flows model to test the financial constraints hypothesis.FindingsThe authors’ analysis shows a positive relationship between energy efficiency (firms that consume a lesser amount of energy per unit of sale) and the value of firms in the stock market. The authors empirically attribute this greater valuation to the lesser volatility of stock returns, measured by the standard deviation of daily stock returns. Finally, the authors observe that investments in energy-efficient firms are less sensitive to their internal cash flows.Practical implicationsThe results suggest that less green firms face greater constraints in accessing finance from external sources and, therefore, depend more on internal than external capital to finance their investments. Hence, managers of such firms can ease their financing pressures by making their operations greener.Originality/valueIn this study, the authors examine the implications of green operations on the financing choices of firms. This aspect of going green is important because managers will have enough incentives to invest in green technologies as that would increase their access to external finance and, hence, decrease their financial constraints.
{"title":"Do stock markets value green operations? Evidence from India","authors":"Nemiraja Jadiyappa, Raveesh Krishnankutty","doi":"10.1108/ijmf-06-2021-0305","DOIUrl":"https://doi.org/10.1108/ijmf-06-2021-0305","url":null,"abstract":"PurposeThis study aims to examine the impact of green operation (measured using the energy intensity of its operations) on the value of corporate firms in stock markets. The authors also examine the channel of such an impact and its implication on a firm's financing choices.Design/methodology/approachThe authors conduct various univariate and multivariate regression analyses on a panel of all non-financial Indian firms listed on the National Stock Exchange from 2010 through 2018. The authors use the sensitivity of investments to the cash flows model to test the financial constraints hypothesis.FindingsThe authors’ analysis shows a positive relationship between energy efficiency (firms that consume a lesser amount of energy per unit of sale) and the value of firms in the stock market. The authors empirically attribute this greater valuation to the lesser volatility of stock returns, measured by the standard deviation of daily stock returns. Finally, the authors observe that investments in energy-efficient firms are less sensitive to their internal cash flows.Practical implicationsThe results suggest that less green firms face greater constraints in accessing finance from external sources and, therefore, depend more on internal than external capital to finance their investments. Hence, managers of such firms can ease their financing pressures by making their operations greener.Originality/valueIn this study, the authors examine the implications of green operations on the financing choices of firms. This aspect of going green is important because managers will have enough incentives to invest in green technologies as that would increase their access to external finance and, hence, decrease their financial constraints.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-04-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45609742","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 : 2022-03-11DOI: 10.1108/ijmf-08-2021-0375
Fang-Yi Shen, Quantong Guo, Hongyan Liang, Zilong Liu
PurposeThe purpose of this paper is to investigate the relationship between investors' divergence of opinions and the asset prices of foreign stocks and also examine the effect of home market country-level factors on the influence of divergency of opinions on stock price.Design/methodology/approachThe authors employ panel data estimation with fixed effects to examine the host market response in divergent opinions to the earnings announcements. The paper uses the American Depositary Receipts (ADRs) of 42 countries from 1985 to 2011.FindingsThe authors find a negative relationship between differences of opinions and excess quarterly earnings announcement returns, and investors do process information asymmetrically based on good and bad earnings shocks. In addition, the authors find the negative relationship between divergent opinions and excess earnings announcement returns in ADRs is more pronounced in countries with short-sales restrictions, while other home-market country-level factors – the enforcement of insider trading law, legal origin, investor protection and rating on accounting standard – do not influence the relationship between investors' divergency of opinion and stock returns.Originality/valueThis paper is among the first to bring asymmetric effects on convergence in Miller framework and enhance the understanding of price convergence documented in Miller (1977). In addition, this study incorporates home-market country-level factors in explaining the relationship between investors' divergency of opinions and stock returns.
{"title":"Responses in divergence of opinion to earnings announcements: evidence from American depository receipts","authors":"Fang-Yi Shen, Quantong Guo, Hongyan Liang, Zilong Liu","doi":"10.1108/ijmf-08-2021-0375","DOIUrl":"https://doi.org/10.1108/ijmf-08-2021-0375","url":null,"abstract":"PurposeThe purpose of this paper is to investigate the relationship between investors' divergence of opinions and the asset prices of foreign stocks and also examine the effect of home market country-level factors on the influence of divergency of opinions on stock price.Design/methodology/approachThe authors employ panel data estimation with fixed effects to examine the host market response in divergent opinions to the earnings announcements. The paper uses the American Depositary Receipts (ADRs) of 42 countries from 1985 to 2011.FindingsThe authors find a negative relationship between differences of opinions and excess quarterly earnings announcement returns, and investors do process information asymmetrically based on good and bad earnings shocks. In addition, the authors find the negative relationship between divergent opinions and excess earnings announcement returns in ADRs is more pronounced in countries with short-sales restrictions, while other home-market country-level factors – the enforcement of insider trading law, legal origin, investor protection and rating on accounting standard – do not influence the relationship between investors' divergency of opinion and stock returns.Originality/valueThis paper is among the first to bring asymmetric effects on convergence in Miller framework and enhance the understanding of price convergence documented in Miller (1977). In addition, this study incorporates home-market country-level factors in explaining the relationship between investors' divergency of opinions and stock returns.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46563050","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 : 2022-03-09DOI: 10.1108/ijmf-04-2021-0209
Hamed Khadivar, Frederick Davis, Thomas Walker
Purpose In this paper, the authors examine options trading in firms that soon become rumored takeover targets. This study also examines whether measures of informed trading can predict target returns (upon rumor announcement and over the post-rumor period) and/or predict which rumors lead to bids. The authors further assess whether the informed trading they observe is more prevalent in the options market or the equity market.Design/methodology/approach This study calculates abnormal options volume using a market-model approach that accounts for different attributes of options trading. The authors construct a control sample and compare equity options trading of firms in their sample with that of the control sample. In addition, the authors fit a series of regressions to examine whether pre-rumor abnormal options trading can predict rumor accuracy in a multivariate setting.Findings The authors find that the volume of options traded is abnormally high over the pre-rumor period while the direction of option trades (abnormal call volume minus abnormal put volume) prior to takeover rumors predicts forthcoming takeover announcements, rumor date target firm returns and post-rumor target firm returns. The results are robust when controlling for publicly available information, when using a control sample, and when using alternative measures of informed trading.Originality/value This study is the first to provide evidence of informed options trading prior to a broad sample of takeover rumors. In addition, this study contributes to the literature on takeover predictability and profitability by showing that various pre-rumor measures of informed options trading significantly predict bid announcements. The authors also contributes to the literature on price discovery by providing evidence that informed investors are more likely to trade in the options market than in the equity market during the pre-event period.
{"title":"Options trading prior to takeover rumors","authors":"Hamed Khadivar, Frederick Davis, Thomas Walker","doi":"10.1108/ijmf-04-2021-0209","DOIUrl":"https://doi.org/10.1108/ijmf-04-2021-0209","url":null,"abstract":"Purpose In this paper, the authors examine options trading in firms that soon become rumored takeover targets. This study also examines whether measures of informed trading can predict target returns (upon rumor announcement and over the post-rumor period) and/or predict which rumors lead to bids. The authors further assess whether the informed trading they observe is more prevalent in the options market or the equity market.Design/methodology/approach This study calculates abnormal options volume using a market-model approach that accounts for different attributes of options trading. The authors construct a control sample and compare equity options trading of firms in their sample with that of the control sample. In addition, the authors fit a series of regressions to examine whether pre-rumor abnormal options trading can predict rumor accuracy in a multivariate setting.Findings The authors find that the volume of options traded is abnormally high over the pre-rumor period while the direction of option trades (abnormal call volume minus abnormal put volume) prior to takeover rumors predicts forthcoming takeover announcements, rumor date target firm returns and post-rumor target firm returns. The results are robust when controlling for publicly available information, when using a control sample, and when using alternative measures of informed trading.Originality/value This study is the first to provide evidence of informed options trading prior to a broad sample of takeover rumors. In addition, this study contributes to the literature on takeover predictability and profitability by showing that various pre-rumor measures of informed options trading significantly predict bid announcements. The authors also contributes to the literature on price discovery by providing evidence that informed investors are more likely to trade in the options market than in the equity market during the pre-event period.","PeriodicalId":51698,"journal":{"name":"International Journal of Managerial Finance","volume":" ","pages":""},"PeriodicalIF":1.7,"publicationDate":"2022-03-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46520777","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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