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Open Access
Article
Publication date: 12 June 2019

Silvio John Camilleri and Francelle Galea

The purpose of this paper is to obtain new empirical evidence about the connections between equity trading activity and five possible liquidity determinants: market…

2857

Abstract

Purpose

The purpose of this paper is to obtain new empirical evidence about the connections between equity trading activity and five possible liquidity determinants: market capitalisation, dividend yield, earnings yield, company growth and the distinction between recently listed firms as opposed to more established ones.

Design/methodology/approach

The authors use a sample of 172 stocks from four European markets and estimate models using the entire sample data and different sub-samples to check the relative importance of the above determinants. The authors also conduct a factor analysis to re-classify the variables into a more succinct framework.

Findings

The evidence suggests that market capitalisation is the most important trading activity determinant, and the number of years listed ranks thereafter.

Research limitations/implications

The positive relation between trading activity and market capitalisation is in line with prior literature, while the findings relating to the other determinants offer further empirical evidence which is a worthy addition in view of the contradictory results in prior research.

Practical implications

This study is of relevance to practitioners who would like to understand the cross-sectional variation in stock liquidity at a more detailed level.

Originality/value

The originality of the paper rests on two important grounds: the authors focus on trading turnover rather than on other liquidity proxies, since the former is accepted as an important determinant of the liquidity-generation process, and the authors adopt a rigorous approach towards checking the robustness of the results by considering various sub-sample configurations.

Open Access
Article
Publication date: 16 February 2022

Amir Saadaoui, Anis Elammari and Mohamed Kriaa

This study examines the effect of the informational content of local credit rating announcements in emerging markets on the liquidity of their bond markets. This study analyses…

2351

Abstract

Purpose

This study examines the effect of the informational content of local credit rating announcements in emerging markets on the liquidity of their bond markets. This study analyses the liquidity of bonds in various emerging bond markets using a sample of nine countries: Argentina, Mexico, Peru, Hungary, Poland, Spain, Turkey, Hong Kong and Greece. The sample includes daily data on sovereign bonds that go from July 2009 to July 2017. The main focus is on the period before and after the sovereign debt crisis. This study notes that the bond liquidity is affected due to the sign of the rating granted by the rating agencies for each country.

Design/methodology/approach

This study aims to question the sources of liquidity problem of sovereign bonds issued by the emerging countries. The study’s database consists of daily data of all nine emerging countries for the period from July 2009 to July 2017. Panel data were collected from the Datastream database.

Findings

This study first directly tests the information content of bond ratings announcements and their effect on bond market liquidity. Next, the impact of rating changes on sovereign bond liquidity around the rating announcements is studied. Rating changes can affect sovereign bond's price, trading and liquidity around the announcement date. In particular the rating changes that move the bonds out of the investment grade category can elicit selling pressure or even fire sale of the fallen angels.

Originality/value

This research aims to present data on the prices of sovereign bonds that react to changes in credit rating by studying the price movements around the announcement of changes in credit rating. The literature is very rich in studies on credit rating changes on stocks and corporate bonds, but this study is perhaps the first attempt on sovereign bonds.

Details

Journal of Economics, Finance and Administrative Science, vol. 27 no. 53
Type: Research Article
ISSN: 2218-0648

Keywords

Open Access
Article
Publication date: 13 October 2017

Ali N. Akansu

The purpose of this paper is to present an overview of the flash crash, and explain why and how it happened.

8977

Abstract

Purpose

The purpose of this paper is to present an overview of the flash crash, and explain why and how it happened.

Design/methodology/approach

The author summarizes several studies suggesting various perspectives on the flash crash and its causes. Furthermore, the author highlights recently proposed and introduced improvements and regulations to reduce the risk of having similar market collapses in the future.

Findings

It is an overview paper that highlights the state of the art on the subject.

Research limitations/implications

Paper does not report any research findings of the author.

Practical implications

High-frequency trading (HFT) along with its pros and cons is the new normal for most of the current electronic trading activity in the markets. It is well recognized by the experts that HFT may have its important shortcomings whenever the rules and regulations are not up to date to match the technological progress offering faster computational and execution capabilities.

Social implications

HFT has created a societal discussion about its benefits and potential deficiencies as the common practice for trading due to potentially unequal access to market data by various categories of participants. Such arguments help the regulators to develop improvements to reduce the market risk and nurture more robust and fair markets for all.

Originality/value

The paper has a tutorial value and summarizes the current state of HFT. The readers of more interest are guided to the most relevant literature for further reading.

Open Access
Article
Publication date: 8 December 2022

Minna Martikainen, Antti Miihkinen and Luke Watson

Negative disclosure tone in 10-K annual reports has economic consequences, yet relatively little is known about how it is generated. Boards of directors play an important…

3266

Abstract

Purpose

Negative disclosure tone in 10-K annual reports has economic consequences, yet relatively little is known about how it is generated. Boards of directors play an important governance role with respect to mandatory disclosures and personally sign off on Form 10-K, leading us to expect directors to influence financial reporting narratives. This study investigates whether the negative tone of firms' narrative annual report disclosures is associated with the human and social capital of its board of directors.

Design/methodology/approach

Multivariate regression analyses of negative disclosure tone (Loughran and McDonald, 2011) on board members' average age, gender, education, financial expertise and turnover is performed. A host of supplemental tests to corroborate our primary analysis, including using Sarbanes-Oxley's financial expert mandate as an exogenous shock to board composition, impact threshold for a confounding variable, placebo analysis, portfolio tests of more and less negative disclosing firms and portfolio tests of “loud” versus “quiet” boards are conducted.

Findings

Evidence that directors' gender, education, financial expertise and board turnover are associated with more negative disclosure tone, while directors' age is associated with less negative disclosure tone is found. The study also looked within the board to differentiate whether these findings are driven by characteristics of inside directors or outside directors serving on the audit committee, or both, as these are the specific groups of directors we would expect to play a role in disclosure. It was found that negative disclosure tone is associated with a lower bid-ask spread, so this study interpreted more negative tone as containing more descriptive information.

Originality/value

This study helps decode the “black box” of annual report disclosure tone, which Loughran and McDonald (2011) show has important economic implications. The results help inform stakeholders such as policymakers, executives and capital market participants as to how board member traits are associated with disclosure. The findings are particularly important as this study bears witness to the increasing prominence of gender/diversity mandates (e.g. Israel, Norway, California) and financial expertise mandates (e.g. Sarbanes-Oxley).

Details

Journal of Accounting Literature, vol. 45 no. 1
Type: Research Article
ISSN: 0737-4607

Keywords

Open Access
Article
Publication date: 19 October 2022

Ismail Juma Ismail and Ismail Abdi Changalima

Over time, the concept of word of mouth (WOM) has spread beyond marketing into other disciplines. This is because WOM is important in decision-making…

1186

Abstract

Purpose

Over time, the concept of word of mouth (WOM) has spread beyond marketing into other disciplines. This is because WOM is important in decision-making at both the individual and organisational levels. Also, people are more likely to trust recommendations from their peers than those from companies. Therefore, the purpose of this study is to investigate the perceived usefulness of WOM messages for small and medium-sized enterprise (SME) suppliers in participating in Tanzanian public procurement opportunities.

Design/methodology/approach

The study collected cross-sectional data from 214 SME suppliers who supply common use items to public procuring organisations in Dodoma City, Tanzania. Structural equation modelling was used to test the direct relationships between study variables, and Hayes' PROCESS macro was used to test for the indirect effect of WOM message delivery on WOM attributes and the perceived usefulness of WOM.

Findings

WOM attributes that include expertise differential, perceptual homophily, and trustworthiness are related to the perceived usefulness of WOM. Also, WOM message delivery mediates the relationship between the WOM attributes and the perceived usefulness of WOM in enhancing public procurement participation. Therefore, the study's findings revealed that WOM is applicable in the public procurement context, under which public buyers act as senders and suppliers act as receivers. The latter finds out about public procurement opportunities and responds to them, while the former gives suppliers whatever information they need to respond to public procurement tenders that have been advertised.

Research limitations/implications

Because the study was cross-sectional, it was difficult to determine whether the opinions gathered over time remained consistent. Furthermore, only suppliers who are parties to framework contracts under Government Procurement Services Agency were included in the study. Therefore, the sample was limited to only suppliers supplying common use items to various public organisations in Dodoma City, Tanzania.

Originality/value

This paper integrates the concept of WOM from the marketing discipline and public procurement. As a result, the study adds to the understanding of the use of information transmission in terms of the contribution of WOM messages from public buyers to suppliers to enhance small and medium enterprises' participation in public procurement opportunities.

Open Access
Article
Publication date: 28 October 2022

Szymon Stereńczak

The positive illiquidity–return relationship (so-called liquidity premium) is a well-established pattern in international developed stock markets. The magnitude of liquidity…

Abstract

Purpose

The positive illiquidity–return relationship (so-called liquidity premium) is a well-established pattern in international developed stock markets. The magnitude of liquidity premium should increase with market illiquidity. Existing studies, however, do not confirm this conjecture with regard to frontier markets. This may result from applying different approaches to the investors' holding period. The paper aims to identify the role of the holding period in shaping the illiquidity–return relationship in emerging and frontier stock markets, which are arguably considered illiquid.

Design/methodology/approach

The authors utilise the data on stocks listed on fourteen exchanges in Central and Eastern Europe. The authors regress stock returns on liquidity measures variously transformed to reflect the clientele effect in a liquidity–return relationship.

Findings

The authors show that the investors' holding period moderates the illiquidity–return relationship in CEE markets and also show that the liquidity premium in these markets is statistically and economically relevant.

Practical implications

The findings may be of great interest to investors, companies and regulators. Investors and companies should take liquidity into account when making decisions; regulators should employ liquidity-enhancing actions to decrease companies' cost of capital and expand firms' investment opportunities, which will improve growth perspectives for the entire economy.

Originality/value

These findings enrich the understanding of the role that the investors' holding period plays in the illiquidity–return relationship in CEE markets. To the best knowledge, this is the first study which investigates the effect of holding period on liquidity premium in emerging and frontier markets.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Open Access
Article
Publication date: 23 March 2023

Olusegun Emmanuel Akinwale, Uche C. Onokala and Olayombo Elizabeth Akinwale

This study explored how the Singaporean government responded to the Covid-19 pandemic crisis from early January 2020 to the end of May of the same year. It evaluated the…

Abstract

Purpose

This study explored how the Singaporean government responded to the Covid-19 pandemic crisis from early January 2020 to the end of May of the same year. It evaluated the capability of Singapore's leadership management in a crisis during the peak and ravaging period of the Covid-19 pandemic.

Design/methodology/approach

The study utilised a systematic design analysis approach, analysing Singaporean cases on the Covid-19 crisis using a systematic and narrative approach to underscore the country's response to the pandemic attack from January 2020 to May 2020.

Findings

Against the backdrop of Singapore's peculiar political system of government dominated by the ruling People's Action Party (PAP) and culture of bureaucracy, the government has increasingly executed several control measures, including strict travel bans, contact tracing, the circuit breaker–lockdown, mask-wearing, social distancing orders as well as financial support to businesses and employees from top to the bottom in the country. However, the treatment and health issues of the migrant workers in the dormitories continue to be the major concern among academics and scholars. At the same time, policy inadequacies truncate the excellent measure of Singapore's response to Covid-19. The case point review concluded that the mortality rate in Singapore remains low compared to other nations of the world. Singapore's case points unveil fundamental learning that an excellent leadership-driven harmonised strategic model is essential for crisis management in any society. The finding of the analysis demonstrated that Singapore adopted a contingency and value-based leadership model to advance good governance and tackle the spread of the deadly coronavirus in its country.

Originality/value

The study has demonstrated a profound analysis that has not been conducted hitherto. Investigation of the Singapore case point is not a popular analysis among Nigerian scholars. Therefore, from Nigeria's perspective, the study has showcased the good and the wrong sides of a coin in Singapore's leadership and power dynamic in crisis management.

Details

LBS Journal of Management & Research, vol. 21 no. 1
Type: Research Article
ISSN: 0972-8031

Keywords

Open Access
Article
Publication date: 10 June 2020

Pierre Rostan, Alexandra Rostan and Mohammad Nurunnabi

The purpose of this paper is to illustrate a profitable and original index options trading strategy.

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Abstract

Purpose

The purpose of this paper is to illustrate a profitable and original index options trading strategy.

Design/methodology/approach

The methodology is based on auto regressive integrated moving average (ARIMA) forecasting of the S&P 500 index and the strategy is tested on a large database of S&P 500 Composite index options and benchmarked to the generalized auto regressive conditional heteroscedastic (GARCH) model. The forecasts validate a set of criteria as follows: the first criterion checks if the forecasted index is greater or lower than the option strike price and the second criterion if the option premium is underpriced or overpriced. A buy or sell and hold strategy is finally implemented.

Findings

The paper demonstrates the valuable contribution of this option trading strategy when trading call and put index options. It especially demonstrates that the ARIMA forecasting method is a valid method for forecasting the S&P 500 Composite index and is superior to the GARCH model in the context of an application to index options trading.

Originality/value

The strategy was applied in the aftermath of the 2008 credit crisis over 60 months when the volatility index (VIX) was experiencing a downtrend. The strategy was successful with puts and calls traded on the USA market. The strategy may have a different outcome in a different economic and regional context.

Details

PSU Research Review, vol. 4 no. 2
Type: Research Article
ISSN: 2399-1747

Keywords

Open Access
Article
Publication date: 31 May 2018

Wenzhou Qu, Udomsak Wongchoti, Fei Wu and Yanming Chen

The purpose of this paper is to test an implication of the pecking order theory to explain capital structure decisions among Chinese listed companies during the 2005-2007 NTS…

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Abstract

Purpose

The purpose of this paper is to test an implication of the pecking order theory to explain capital structure decisions among Chinese listed companies during the 2005-2007 NTS Reform transition period.

Design/methodology/approach

The authors utilize direct proxies for information asymmetry based on microstructure models including Probability of the arrival of informed trades (PIN), Adverse selection component of the bid-ask spread (λ), Illiquidity ratio (ILLIQ) and liquidity ratio, and Information asymmetry index (InfoAsy) to examine their relation with firms’ debt financing.

Findings

Consistent with the prediction of Pecking Order Theory, the authors find that companies for which stock investors are challenged with more severe informational disadvantages are associated with higher degree of leverage use.

Originality/value

The study provides a more direct test on the positive relation between information asymmetry and financial leverage of Chinese firms. In contrast to previous findings by Chen (2004), the results suggest that capital structure choices among Chinese firms progressively conform to conventional finance theories (e.g. Pecking Order Theory) with the decline of non-tradable shares.

Details

Journal of Asian Business and Economic Studies, vol. 25 no. 1
Type: Research Article
ISSN: 2515-964X

Keywords

Open Access
Article
Publication date: 16 July 2019

Glyn Everett and Jessica Lamond

The purpose of this paper is to explore perceptions of the advantages and disadvantages of green roofs for commercial real estate building owners/occupiers in a UK city and…

2584

Abstract

Purpose

The purpose of this paper is to explore perceptions of the advantages and disadvantages of green roofs for commercial real estate building owners/occupiers in a UK city and consider how these might affect the chances of their adoption.

Design/methodology/approach

Two sets of semi-structured interviews were conducted with purposively selected respondents, 10 with and 25 without green roofs, to compare and contrast differing perspectives. A grounded theory approach was taken to data analysis, allowing themes to emerge directly from the data.

Findings

Low awareness and understanding were observed amongst those without green roofs, which positively affected perceived costs whilst negatively affecting perceived benefits. Green roof owners gave weight to wider societal and ecosystem services benefits, whilst those without focussed much more upon building-level benefits and costs.

Research limitations/implications

Because of the restricted sample size, the findings in themselves are not generalizable; rather, themes are drawn from the research for reflection.

Practical implications

Findings point to steps that might be required of regional and national government to increase green roof uptake. This could involve initiating conversations to raise awareness, shift discourse and perceived norms and best practice; offering incentives, education and training; and presenting high-profile exemplar projects of green roofing to begin to mainstream the technology and get it onto the radar of building owners.

Originality/value

Bringing together social research around cohorts with and without green roofs, the paper throws into sharp relief discussions around costs and benefits and points towards potentially more productive directions for action to encourage consideration and take-up of green roofs by building owners.

Details

Journal of Corporate Real Estate , vol. 21 no. 2
Type: Research Article
ISSN: 1463-001X

Keywords

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