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1 – 7 of 7Abdullah Al Masud and Burhan Uluyol
Initial Public Offering (IPO) is a major milestone for a company. It allows a private company to issue shares to a much broader group of investors and become public. But…
Abstract
Purpose
Initial Public Offering (IPO) is a major milestone for a company. It allows a private company to issue shares to a much broader group of investors and become public. But conclusive evidence of the driving forces behind investors’ demand is yet to be identified. Therefore, the major purpose of this study is to assess the level of investors’ demand in IPO and how investors’ demand in IPOs is affected.
Design/methodology/approach
The study will employ 80 IPO companies of a Muslim-majority country, Bangladesh, starting from 2013 to 2021 with application of linear and quantile regressions. Apart from that, t-test will be used to compare means of groups of Shariah-compliant and non-Shariah-compliant firms and IPOs under fixed-price and book-building mechanism.
Findings
Oversubscription is higher for IPOs issued through fixed-price method compared to book-building method, but no significant difference is found in oversubscription for Shariah firms compared to non-Shariah firms based on t-tests. The authors found IPO size, firm size, IPO risk, proportion of shares offered to public, and bank interest rate to have significant impact on the IPO demand. Some models found non-Shariah compliance status of IPO companies to be a significant factor for the investors to demand IPO. Quantile regression results found board independence to have a positive association with larger, less-subscribed firms and board size to have a negative relation with IPO demand, for smaller firms with high demand.
Research limitations/implications
Future studies may apply the findings to other settings, especially into the reasons behind preference for non-Shariah-compliant firms and higher demand for IPOs during higher interest rate. Equity issuing firms and issue managers can benefit from this study by wisely deciding on the proportion of shares for public, issue size and board of director composition. Shariah considerations cannot be ignored given that more information on Shariah compliance is disseminated among investors despite current non-preference for Shariah-compliant IPOs. On the other hand, institutional investors and general investors should consider firm-specific, governance and macroeconomic factors in IPO investment. Likewise, regulators would do well to bring in quality IPOs with characteristics mentioned in this study for ensuring stability of the market.
Originality/value
The main contribution of the study is identifying determinants of IPO demand: faith, governance, macro issues – understanding whether one or many of the above factors drive investor demand in IPOs of a Muslim-majority country will be the main contribution.
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King Carl Tornam Duho, Emmanuel Tetteh Asare, Abraham Glover and Divine Mensah Duho
This study aims to examine the prevalence of transfer pricing and earnings management activities, and how they are impacted by corporate governance mechanisms.
Abstract
Purpose
This study aims to examine the prevalence of transfer pricing and earnings management activities, and how they are impacted by corporate governance mechanisms.
Design/methodology/approach
Using the political cost theory, the study provides insights into how opportunistic managerial behaviours which have a strong link to profit shifting and tax evasion are driven by corporate governance using data from 16 listed firms for the period 2008–2020.
Findings
The results reveal that the transaction-based transfer pricing model is better than the index-based model and the accrual-based earnings management model suits the political cost theory more than the real earnings management metric. Board size and female CEO increase transfer pricing aggressiveness but board independence, CEO tenure, CEO nationality and female Board Chairwomanship reduce transfer pricing aggressiveness. The findings also reveal the role of multinational enterprise status, private ownership, industry type, firm size, financial leverage, asset tangibility and firm age. For accrual-based earnings management, board independence, CEO tenure, and female Board Chairwomanship significantly decrease earnings management. Other factors include private ownership, firm size, and firm age.
Practical implications
The findings of the study are relevant for shaping industry-level policies on earning management, transfer pricing and related-party transactions. Since these opportunistic managerial behaviours are the foremost drivers of tax avoidance and profit shifting, the findings of this study provide relevant insights for practitioners, tax and other regulatory authorities, policymakers and the academic community alike.
Originality/value
This is among the premier studies on the transfer pricing and earnings management nexus with corporate governance factors using the political cost theory, especially in the developing country context. It also reveals the significant impact of gender and suggests the need for gender diversity in corporate management.
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The accurate valuation of second-hand vessels has become a prominent subject of interest among investors, necessitating regular impairment tests. Previous literature has…
Abstract
Purpose
The accurate valuation of second-hand vessels has become a prominent subject of interest among investors, necessitating regular impairment tests. Previous literature has predominantly concentrated on inferring a vessel's price through parameter estimation but has overlooked the prediction accuracy. With the increasing adoption of machine learning for pricing physical assets, this paper aims to quantify potential factors in a non-parametric manner. Furthermore, it seeks to evaluate whether the devised method can serve as an efficient means of valuation.
Design/methodology/approach
This paper proposes a stacking ensemble approach with add-on feedforward neural networks, taking four tree-driven models as base learners. The proposed method is applied to a training dataset collected from public sources. Then, the performance is assessed on the test dataset and compared with a benchmark model, commonly used in previous studies.
Findings
The results on the test dataset indicate that the designed method not only outperforms base learners under statistical metrics but also surpasses the benchmark GAM in terms of accuracy. Notably, 73% of the testing points fall within the less-than-10% error range. The designed method can leverage the predictive power of base learners by incrementally adding a small amount of target value through residuals and harnessing feature engineering capability from neural networks.
Originality/value
This paper marks the pioneering use of the stacking ensemble in vessel pricing within the literature. The impressive performance positions it as an efficient desktop valuation tool for market users.
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Sharneet Singh Jagirdar and Pradeep Kumar Gupta
The present study reviews the literature on the history and evolution of investment strategies in the stock market for the period from 1900 to 2022. Conflicts and relationships…
Abstract
Purpose
The present study reviews the literature on the history and evolution of investment strategies in the stock market for the period from 1900 to 2022. Conflicts and relationships arising from such diverse seminal studies have been identified to address the research gaps.
Design/methodology/approach
The studies for this review were identified and screened from electronic databases to compile a comprehensive list of 200 relevant studies for inclusion in this review and summarized for the cognizance of researchers.
Findings
The study finds a coherence to complex theoretical documentation of more than a century of evolution on investment strategy in stock markets, capturing the characteristics of time with a chronological study of events.
Research limitations/implications
There were complications in locating unpublished studies leading to biases like publication bias, the reluctance of editors to publish studies, which do not reveal statistically significant differences, and English language bias.
Practical implications
Practitioners can refine investment strategies by incorporating behavioral finance insights and recognizing the influence of psychological biases. Strategies span value, growth, contrarian, or momentum indicators. Mitigating overconfidence bias supports effective risk management. Social media sentiment analysis facilitates real-time decision-making. Adapting to evolving market liquidity curbs volatility risks. Identifying biases guides investor education initiatives.
Originality/value
This paper is an original attempt to pictorially depict the seminal works in stock market investment strategies of more than a hundred years.
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Mohamed Hessian, Alaa Mansour Zalata and Khaled Hussainey
This study examines the effect of non-audit fees (NAF) provisions on interest payments classification shifting. In addition, we investigate to what extent the NAF economic bonding…
Abstract
Purpose
This study examines the effect of non-audit fees (NAF) provisions on interest payments classification shifting. In addition, we investigate to what extent the NAF economic bonding and interest payments classification shifting is contingent on internal governance and firm financial well-being.
Design/methodology/approach
This study employed probit regression using a sample of UK non-financial firms indexed in FT UK (500) over the period from 2009 to 2017.
Findings
We find evidence that the economic bonding of NAF between external auditors and their clients is more likely to encourage managers in UK firms to manipulate operating cash flows through interest payment classification shifting. In addition, and interestingly, our results evince that classification-shifting may be the less costly and soft choice of managers in firms with strong governance and charging higher NAF. Furthermore, we show that financially distressed firms associated with their auditors in purchasing non-audit services are more prone to attempting to manipulate and engage in interest payments classification-shifting. Our result did not provide a significant effect of external auditor tenure on the interest payments classification shifting.
Research limitations/implications
Our findings are subject to the following limitations: First, this study uses a composite index to measure the quality of internal corporate governance. It focuses only on the board of directors, but this index does not reflect other internal governance mechanisms. Second, this study is subject to limited study time due to the implementation of key IFRS standards (IFRS 9 Financial Instruments and IFRS 15 Revenue from Contract with Customers) from 2018–2019.
Practical implications
This study was motivated by the UK’s Financial Reporting Council regulators' pressure on the Big 4 audit firms to move more audit time into main auditing activities, reduce cross-selling to audit clients and separate their audit practices by 2024. Overall, we provide new evidence that directs a close spotlight on the threats of NAF that are potentially useful to regulators, shareholders and investors.
Originality/value
It is motivated by the UK’s Financial Reporting Council regulators' pressure on the Big 4 to move more audit firm time into main auditing activities, reduce cross-selling to audit clients and separate their audit practices by 2024. Overall, we provide new evidence that directs a close spotlight on the threats of NAS that are potentially useful to regulators, shareholders and investors.
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Ameet Kumar Banerjee, Md Akhtaruzzaman and Soumen Chatterjee
Our study investigates the influence of peer performance on the earnings management decisions within publicly traded Indian companies. There is mixed evidence in the literature…
Abstract
Purpose
Our study investigates the influence of peer performance on the earnings management decisions within publicly traded Indian companies. There is mixed evidence in the literature, with the impact of peer performance on earnings management in emerging markets being notably underexplored. Additionally, the study explores whether robust corporate governance mechanisms can mitigate earnings management practices. Our study offers policy insights into these areas.
Design/methodology/approach
Our study used a longitudinal panel dataset from 2011 to 2020, utilising idiosyncratic returns of peer firms as an external measure of peer performance. This approach is further enhanced by the usage of alternative discretionary accrual metrics, which could be a robust measure for both market leaders and followers.
Findings
Our study employs two distinct methods, accrual and real earnings management, to assess earnings management. The findings indicate that peer performance triggers earnings management within peer groups, showcasing managerial opportunism in financial reporting to align with peer achievements. Furthermore, the evidence suggests that robust corporate governance effectively curtails earnings management, especially in industries where peer influence is significant.
Practical implications
Our study offers valuable insights for regulators, highlighting that enhancing the institutional framework with stringent corporate governance mechanisms can effectively reduce earnings management in companies within emerging markets.
Originality/value
The paper is a novel attempt in emerging markets to show that managers engage in opportunistic reporting to align with the performance of their peers and that governance strategies effectively mitigate these practices in such markets.
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This study aims to examine the impact of digital transformation on firms’ value and explore the mediating impact of ESG performance and moderating impact of information…
Abstract
Purpose
This study aims to examine the impact of digital transformation on firms’ value and explore the mediating impact of ESG performance and moderating impact of information interaction.
Design/methodology/approach
Data was collected from companies listed on the Shanghai and Shenzhen stock exchange between 2012 and 2020 with 21,488 observational samples, featuring a selection of 3,348 companies. Panel data regression techniques were used to test the mediating role of ESG performance and the moderating role of information interaction.
Findings
The study found that digital transformation can improve firms’ ESG performance, which in turn positively affects their value. The firms that engage in more interaction with outsiders benefit more from digital transformation and have a higher value.
Originality/value
This study provides new theoretical insight into improving firms’ value through digital transformation and ESG performance. It is the first to discuss and study the moderating role of information interaction in the relationship between digital transformation and firms’ value.
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