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Productivity, return and prediction
Article Type: Guest editorial From: Managerial Finance, Volume 37, Issue 5
About the Guest EditorMonzurul Hoque is Professor of Finance and Chair, Economics and Finance at Graham School of Management, Saint Xavier University, Chicago, Illinois, USA
Dear readers, the third special issue of Managerial Finance showcases some of the papers presented at the 24th Annual Meeting of the Academy of Finance, Chicago, Illinois, USA in March, 2010.
The Academy of Finance was formed in 1987 under the administrative umbrella of the Midwest Business Administration Association. Over the years, the academy has grown and prospered, attracting authors from 43 states and over ten different countries. The Journal of the Academy of Finance (JAF) is the peer-reviewed Cabell listed journal of the Academy of Finance. The 2010 Academy of Finance Program contained 94 papers and a number of panels and special sessions.
The papers in this special issue of Managerial Finance underwent a standard double-blind, peer-review process where two or more reviews were completed for each paper. With inputs from eight members of JAF Editorial Board, the Guest Editor made the final selections.
All the articles in this issue are empirical in nature and offer timely and practical recommendations. The collection provides policy implications in terms of productivity, investments and risk management. We begin with the contribution from Monzurul Hoque, Muhammad Chishty and Rashid Halloway that deals with capital structure changes in microfinance institutions (MFIs) due to commercialization. The authors find that leverage adversely affects all three performance variables, namely, the relative outreach, risk and productivity. In view of these findings, Hoque et al. recommend that MFIs follow a non-commercial approach to financing which will secure independence from donor assistance yet make them financially self-sufficient. Omid Sabbaghi studies another nontraditional sector and provides the first investigation of green exchange-traded funds (ETFs) in the US financial market. Specifically, he finds strong evidence in favor of volatility persistence for the 15 green ETFs. He examines the proposed green volatility factor and concludes that eco-efficient measures undertaken by firms lead to a decrease in subsequent volatility and increase in future earnings and cash flows. The volatility is also studied by Ingyu Chiou who investigates the lead-lag relationships between three major stock markets over the period 1997-2007. Using the return-volatility variable, he shows significant interdependence among the three markets. The findings imply that a profitable trading strategy may exist and the regulators need to closely watch both primary and derivative markets in home and abroad. Moving away from equity market, C. Edward Chang and Thomas M. Krueger present the study on the bond market and establish the advantage of investment in bond index mutual funds (BIMFs) and bond exchange traded funds (BETFs). They show that returns on BIMFs and BETFs are significantly higher than bond category averages. Given significantly better returns and slightly lower standard deviations, the BIMFs and BETFs have significantly higher risk-adjusted returns.
The next three papers deal with agency problem, global industry shocks and prediction of dividends, respectively. Aiwu Zhao and Alexander J. Brehm study the agency conflicts between the board and minority shareholders. Their empirical paper shows that cumulative voting can be an efficient choice to help ease the tension between dissenting shareholders and the board of directors. Chu-Sheng Tai and Zahid Iqbal study the impact of exchange rate and global industry shocks on the relative performance of global industries. Using industry data from Japan and the USA, they find that both exchange rate and global industry shocks are statistically and economically significant in explaining the performance of these industries relative to their domestic markets. To improve the relative performance, the global industry shock and its associated risk should be managed. John Consler, Greg M. Lepak and Susan F. Havranek complete our collection. The authors explore the relative power of operating cash flow and earnings in the prediction of dividends. Both earnings per share and cash flow per share are found to be reasonable dividend predictors. Based on the selected model fit criteria, the authors show that cash flow per share is superior to earnings per share.
I hope you enjoy the practical contributions in this issue of Managerial Finance.
Monzurul HoqueGuest Editor