Search results

Exploiting an exogenous regulatory shock and a novel measure of asset redeployability, this paper aims to explore the effect of independent directors on asset redeployability. In particular, the authors use an innovative measure of asset redeployability recently developed by Kim and Kung (2016). This novel index has been rapidly adopted in recent literature.

Relying on a quasi-natural experiment, the authors execute a difference-in-difference analysis based on an exogenous regulatory shock to board independence. To mitigate endogeneity and demonstrate causation, the authors also perform propensity score matching, instrumental-variable analysis and Oster’s (2019) approach for testing coefficient stability.

The difference-in-difference estimates show that firms forced to raise board independence have significantly fewer redeployable assets after the shock than those not required to change board composition. This is consistent with the managerial myopia hypothesis. Subject to more intense monitoring, managers behave more myopically, focusing more on assets that are currently useful to the firm and less on redeployability in the future.

The study makes key contributions to the literature. First, the study is the first to examine the effect of board governance on asset redeployability. Second, the authors exploit an innovative index of asset redeployability that has been recently constructed in the literature. Third, by using a natural experiment, the results are much more likely to reflect causality than merely an association.

The main purpose of this study is to use a new broad board effectiveness index, which has been created from several internal attributes of board of directors and to investigate the association of the overall index regarding stock price crash risk.

The authors create a new board effectiveness index from a comprehensive set of board attributes, including the number of board meetings, the number of board attendances, the expertise of the directors, the size of the board and the number of independent directors, in order to test with the stock price crash risk by using panel regression models with fixed effects. The two-stage least squared regression ensures endogeneity issues.

An increase in board effectiveness index lowers firm-specific crash risk. Moreover, female directors enhance the board effectiveness.

With a new broad board effectiveness index, this paper is unique from other studies as the authors focus on the overall index rather than on a single dimension of board attributes.

This paper examines whether short sellers aggravate volatility in the Australian stock market by using five different realized volatility (RV) measures during a more stable period.

The authors develop a measure to capture the abnormal level of short selling for each stock and examine the bivariate and trivariate dynamic relationships between abnormal short selling and five volatility measures: the RV, continuous and jump components of RV, upside and downside volatilities.

Overall, the findings indicate a weak association between abnormal short selling and volatility. Where the relationships are significant, the authors generally find that lagged abnormal short selling is negatively associated with both upside and downside volatilities. In general, short selling does not drive or amplify the decline in stock prices.

This paper contributes to existing literature in various aspects. First, the authors offer evidence on the relationship between abnormal short selling and volatility in a general market condition while existing studies often found mixed results of the effects of short selling on volatility around extreme events. Second, the authors add to the literature on the volume-volatility relation by introducing abnormal short selling. Although abnormal short volume does not supplant the number of trades in the volume-volatility relation, it has some incremental, albeit negative, effect on volatility. Finally, the study provides further evidence for the debate on the desirability of short sellers in financial markets.

The paper aims to investigate the effect of uncertain times on LGBT-supportive corporate policies, exploiting a novel text-based measure of economic policy uncertainty (EPU) that was recently constructed by Baker et al. (2016). LGBT-supportive policies have attracted a great deal of attention in the media lately. There is also a rapidly growing area of the literature that addresses LGBT-supportive policies specifically.

The authors execute a regression analysis and several other robustness checks including propensity score matching (PSM) and an instrumental-variable analysis to mitigate endogeneity.

The authors' results show that companies significantly raise their investments in LGBT-supportive policies in times of greater uncertainty, reinforcing the risk mitigation view where LGBT-supportive policies create moral capital with an insurance-like effect that mitigates adverse consequences during uncertain times. The effect of EPU on LGBT-supportive policies is above and beyond its effect on corporate social responsibility (CSR) in general.

The authors' study is the first to explore the effect of uncertain times on LGBT-supportive corporate policies. The authors contribute to a crucial area of the literature that examines how firms respond to EPU. In addition, the authors enrich the literature on LGBT-friendly policies by showing that EPU is one of the significant determinants of LGBT-friendly policies.

Considering the unique data of the gold investor sentiment index in Thailand, the purpose of this paper is to investigate the bivariate dynamic relationship between the gold investor sentiment index and stock market return, as well as that between the gold investor sentiment index and stock market volatility, using the panel vector autoregression (PVAR) methodology. The author presents and discusses the findings both for the full sample and at the industry level. The results support prior literature that stocks in different industries do not react similarly to investor sentiment.

The PVAR methodology with the GMM estimation is found to be superior to other static panel methodologies due to considering both unobservable time-invariant and time-variant factors, as well as being suitable for relatively short time periods. The panel data approach improves the statistical power of the tests and ensures more reliable results.

In general, a negative and unidirectional association from gold investor sentiment to stock returns is observed. However, the gold sentiment-stock realized volatility relationship is negative and bidirectional, and there exists a greater impact of a stock’s realized volatility on gold investor sentiment. Importantly, evidence at the industry level is stronger than that at the aggregate level in both return and volatility cases, confirming the role of gold investor sentiment in the Thai stock market. The capital flow effect and the contagion effect explain the gold sentiment-stock return relationship and the gold sentiment-stock volatility relationship, respectively.

The gold price sentiment index can be used as a factor for stock return predictability and stock realized volatility predictability in the Thai equity market.

Practitioners and traders can employ the gold price sentiment index to make a profit in the stock market in Thailand.

This is the first paper to use panel data to investigate the relationships between the gold investor sentiment and stock returns and between the gold investor sentiment and stocks’ realized volatility, respectively.