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Article
Publication date: 25 February 2020

Dorra Ellouze

The purpose of the paper is to investigate the role of customers and employees in the buffer effect of CSR around the 2008 financial crisis in the European context.

Abstract

Purpose

The purpose of the paper is to investigate the role of customers and employees in the buffer effect of CSR around the 2008 financial crisis in the European context.

Design/methodology/approach

Using a sample of 323 European firms listed in STOXX Europe 600 Index, different models are estimated to test whether the effect of CSR ratings on firms' relationships with their customers and employees could be different during the 2008 financial crisis relative to the pre-crisis and post-crisis periods.

Findings

The paper shows that CSR rating has a significantly negative impact on firms' accounts receivable and a significantly positive effect on employee productivity during the crisis period (from 2007 to 2009). However, there is no significant effect of CSR rating during the non-crisis periods. These results suggest that during negative events, customers are willing to continue supporting high-CSR firms by paying their invoices faster. Furthermore, these firms benefit from higher productivity of their employees who are willing to work harder in periods of uncertainty.

Research limitations/implications

Firms should invest in CSR practices to maintain strong and cooperative relationships with their customers and employees. Also, investors should choose firms engaging in more social capital. Moreover, policymakers should encourage implementing CSR practices which act as an insurance-like protection in times of negative events.

Originality/value

This paper adds to the previous studies by investigating whether the cooperative role of customers and employees can explain the buffer role of CSR around the crisis. Furthermore, it considers companies located in several European countries for a long period (from 2004 to 2012) to compare periods of crisis and non-crisis.

Details

Managerial Finance, vol. 46 no. 7
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 June 2010

Eleftherios Giovanis

The purpose of this paper is to examine two different approaches in the prediction of the economic recession periods in the US economy.

Abstract

Purpose

The purpose of this paper is to examine two different approaches in the prediction of the economic recession periods in the US economy.

Design/methodology/approach

A logit regression was applied and the prediction performance in two out‐of‐sample periods, 2007‐2009 and 2010 was examined. On the other hand, feed‐forwards neural networks with Levenberg‐Marquardt error backpropagation algorithm were applied and then neural networks self‐organizing map (SOM) on the training outputs was estimated.

Findings

The paper presents the cluster results from SOM training in order to find the patterns of economic recessions and expansions. It is concluded that logit model forecasts the current financial crisis period at 75 percent accuracy, but logit model is useful as it provides a warning signal three quarters before the current financial crisis started officially. Also, it is estimated that the financial crisis, even if it reached its peak in 2009, the economic recession will be continued in 2010 too. Furthermore, the patterns generated by SOM neural networks show various possible versions with one common characteristic, that financial crisis is not over in 2009 and the economic recession will be continued in the USA even up to 2011‐2012, if government does not apply direct drastic measures.

Originality/value

Both logistic regression (logit) and SOMs procedures are useful. The first one is useful to examine the significance and the magnitude of each variable, while the second one is useful for clustering and identifying patterns in economic recessions and expansions.

Details

Journal of Financial Economic Policy, vol. 2 no. 2
Type: Research Article
ISSN: 1757-6385

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Book part
Publication date: 29 December 2016

Emawtee Bissoondoyal-Bheenick, Robert Brooks, Sirimon Treepongkaruna and Marvin Wee

This chapter investigates the determinants of the volatility of spread in the over-the-counter foreign exchange market and examines whether the relationships differ in the…

Abstract

This chapter investigates the determinants of the volatility of spread in the over-the-counter foreign exchange market and examines whether the relationships differ in the crisis periods. We compute the measures for the volatility of liquidity by using bid-ask spread data sampled at a high frequency of five minutes. By examining 11 currencies over a 13-year sample period, we utilize a balanced dynamic panel regression to investigate whether the risk associated with the currencies quoted or trading activity affects the variability of liquidity provision in the FX market and examine whether the crisis periods have any effect. We find that both the level of spread and volatility of spread increases during the crisis periods for the currencies of emerging countries. In addition, we find increases in risks associated with the currencies proxied by realized volatility during the crisis periods. We also show risks associated with the currency are the major determinants of the variability of liquidity and that these relationships strengthen during periods of uncertainty. First, we develop measures to capture the variability of liquidity. Our measures to capture the variability of liquidity are non-parametric and model-free variable. Second, we contribute to the debate of whether variability of liquidity is adverse to market participants by examining what drives the variability of liquidity. Finally, we analyze seven crisis periods, allowing us to document the effect of the crises on determinants of variability of liquidity over time.

Details

Risk Management in Emerging Markets
Type: Book
ISBN: 978-1-78635-451-8

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Article
Publication date: 17 December 2020

Haytem Troug and Matt Murray

The purpose of this paper then, is to add to the existing literature on financial contagion. While a vast amount of the debate has been made using data from the late…

Abstract

Purpose

The purpose of this paper then, is to add to the existing literature on financial contagion. While a vast amount of the debate has been made using data from the late 1990s, this paper differentiates itself by analysing more current data, centred around the most recent global financial crisis, with specific focus on the stock markets of Hong Kong and Tokyo.

Design/methodology/approach

Employing Pearson and Spearman correlation measures, the dynamic relationship of the two markets is determined over tranquil and crisis periods, as specified by an Markov-Switching Bayesian Vector AutoRegression (MSBVAR) model.

Findings

The authors find evidence in support of the existence of financial contagion (defined as an increase in correlation during a crisis period) for all frequencies of data analysed. This contagion is greatest when examining lower-frequency data. Additionally, there is also weaker evidence in some data sub-samples to support “herding” behaviour, whereby higher market correlations persist, following a crisis period.

Research limitations/implications

The intention of this paper was not to analyse the cause or transmission mechanism of contagion between financial markets. Therefore future studies could extend the methodology used in this paper by including exogenous macroeconomic factors in the MSBVAR model.

Originality/value

The results of this paper serve to explain why the debate of the persistence and in fact existence of financial contagion remains alive. The authors have shown that the frequency of a time series dataset has a significant impact on the level of observed correlation and thus observation of financial contagion.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

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Abstract

Details

Dynamics of Financial Stress and Economic Performance
Type: Book
ISBN: 978-1-78754-783-4

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Article
Publication date: 11 February 2020

Abdelkader Derbali and Ali Lamouchi

The purpose of this paper is to understand and compare the extent and nature of the impact of foreign portfolio investment (FPI) on the stock market volatility…

Abstract

Purpose

The purpose of this paper is to understand and compare the extent and nature of the impact of foreign portfolio investment (FPI) on the stock market volatility, particularly in the Southeast Asian emerging markets, and compare that against the corresponding experience of Indian economy, in the context of a global financial crisis of the recent past.

Design/methodology/approach

The Asian emerging markets are now being perceived as becoming financially more and more vulnerable to international events because of their growing exposure to unstable foreign investment flows. The daily net FPI inflow and the daily leading stock market composite index of four countries, namely, Thailand, the Philippines, Indonesia and India, have been analyzed using autoregressive conditional heteroscedasticity (ARCH)-generalized ARCH group of models dividing the study period from 2000 to 2014 among pre-crisis, crisis and post-crisis period separately.

Findings

The study reveals that the net inflow of FPI has been a significant determinant of stock market returns in all countries. The impact of volatility spillover from the FPI market to the stock market in the sample countries has been found to be different under different market conditions. The past information and volatility clustering have been significantly influencing the stock market return volatilities of all these Southeast Asian countries on average.

Originality/value

However, there are significant country-wise differences in the relative importance and direction of the relationship of each of these effects with the volatility of the FPI and the stock markets. These effects have been different in these four different markets and they have significantly altered in strength and significance during the global financial crisis and in the post-financial crisis period.

Details

Pacific Accounting Review, vol. 32 no. 2
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 13 May 2020

Umm E. Habiba, Shen Peilong, Wenlong Zhang and Kashif Hamid

The purpose of this paper is to investigate the cointegration and volatility spillover dynamics between the USA and South Asian stock markets, namely, India, Pakistan and…

Abstract

Purpose

The purpose of this paper is to investigate the cointegration and volatility spillover dynamics between the USA and South Asian stock markets, namely, India, Pakistan and Sri Lanka. The main objective of this study is to provide the knowledge about integration of financial market and volatility spillovers before, during and after global financial crisis to investors, fund managers and policy-makers.

Design/methodology/approach

The Johansen and Juselius cointegration test, Granger Causality test and bivaraite EGARCH model have been applied in this study to examine integration and volatility spillovers between selected stock markets.

Findings

The findings show that long-term integration between the USA market and South Asian emerging stock markets. It is found that USA stock market has causal relationship with emerging stock markets in short-term. The findings of EGARCH model reveal that asymmetric volatility spillover effects significant in all selected stock markets in pre, during and post-crisis periods. Furthermore, significant volatility spillover is found from stock markets of USA to all selected South Asian markets during and post-crisis periods. However, volatility spillovers from USA to India and Sri-Lanka markets are significant, while insignificant in case of Pakistani market in pre-crisis period. Overall, we find that returns and volatility spillover effects are higher in financial crisis period as compared to non-financial crisis period.

Practical implications

The findings of this paper have important implications for investors, portfolio managers and policy-makers. They can take potential benefits from international portfolio diversification by considering all these facts. The understanding and knowledge of across volatility transmission help them to maximize the gains from diversification and minimize the risk. Policy-makers can develop such strategies which protect the markets of these economies from future financial crisis.

Originality/value

Although in finance literature numerous studies have been conducted on integration between different stock markets, most of the studies investigated the integration and volatility spillovers between developed stock markets. However, many studies also analyzed the integration among emerging stock markets in literature review but it is hard to find studies in the context of South Asian stock markets on the effect of global financial crisis on stock markets. The main contribution of this study is to investigate the stock markets integration and volatility transmission between the USA and South Asia by considering the effect of recent 2007 US subprime financial crisis.

Details

Journal of Asia Business Studies, vol. 14 no. 5
Type: Research Article
ISSN: 1558-7894

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Article
Publication date: 4 May 2020

Rahul Roy and Santhakumar Shijin

The purpose of the study is to examine the dynamics in the troika of asset pricing, volatility, and the business cycle in the US and Japan.

Abstract

Purpose

The purpose of the study is to examine the dynamics in the troika of asset pricing, volatility, and the business cycle in the US and Japan.

Design/methodology/approach

The study uses a six-factor asset pricing model to derive the realized volatility measure for the GARCH-type models.

Findings

The comprehensive empirical investigation led to the following conclusion. First, the results infer that the market portfolio and human capital are the primary discounting factors in asset return predictability during various phases of the subprime crisis phenomenon for the US and Japan. Second, the empirical estimates neither show any significant impact of past conditional volatility on the current conditional volatility nor any significant effect of subprime crisis episodes on the current conditional volatility in the US and Japan. Third, there is no asymmetric volatility effect during the subprime crisis phenomenon in the US and Japan except the asymmetric volatility effect during the post-subprime crisis period in the US and full period in Japan. Fourth, the volatility persistence is relatively higher during the subprime crisis period in the US, whereas during the subprime crisis transition period in Japan than the rest of the phases of the subprime crisis phenomenon.

Originality/value

The study argues that the empirical investigations that employed the autoregressive method to derive the realized volatility measure for the parameter estimation of GARCH-type models may result in incurring spurious estimates. Further, the empirical results of the study show that using the six-factor asset pricing model in an intertemporal framework to derive the realized volatility measure yields better estimation results while estimating the parameters of GARCH-type models.

Details

Journal of Economic Studies, vol. 48 no. 1
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 9 July 2018

Ziyaad Mahomed, Shamsher Ramadilli and Mohamed Ariff

The effects of capital-raising announcements have long been used as an indicator of increased shareholder wealth (Brown and Warner, 1985). Studies on bond announcements…

Abstract

Purpose

The effects of capital-raising announcements have long been used as an indicator of increased shareholder wealth (Brown and Warner, 1985). Studies on bond announcements, for example, have been largely inconclusive. However, when effects are measured based on bond underlying structure, “straight and convertible bonds”, then the results are more conclusive (Abdul Rahim, 2012). Furthermore, issuances around crisis period are expected to result in negative market reaction as investors prefer liquidity (Fenn, 2000).

Design/methodology/approach

Sukuk are bond-like instruments that are issued based on the Sharia guidelines and perceived to be less risky due to their risk sharing attribute. Sukuk are issued by the governments and also corporations. Sukuk can either be debt-based or equity-based. The former resembles the conventional bond, and equity-based Sukuk resembles the convertible bonds. It is interesting to ascertain the market reaction to issuance of both type of Sukuk. This study determines the wealth effects of debt-based Sukuk issuances in Indonesia, around crisis period. Sukuk issues have steadily increased in Indonesia, and it is the second largest issuer in 2015 (Zawya, 2015a, 2015b).

Findings

The market reaction to corporate Sukuk issuance by Indonesian firms is yet to be documented, and the findings of this study address this issue, especially during the crisis period when the risk aversion is high and investors prefer liquidity. The Bai and Perron’s (2003) multiple breakpoint analysis was applied to determine the crisis period, which was between 2007 and 2010.

Originality/value

The findings suggest that the market reacts positively and significantly to debt-based Sukuk issuance during the crisis period, contrary to the theory that postulates a negative market reaction. Though these findings seem to be unique, it is possible that it is a behavioral effect of investors requiring less liquidity premium during crisis, contrary to expectations (Chen et al., 2007; Amihud and Mendelson, 1986).

Details

Journal of Islamic Accounting and Business Research, vol. 9 no. 4
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 12 March 2019

Ranajee Ranajee and Rajesh Pathak

The purpose of this paper is to examine the cash holding of firms during a crisis and test the widely accepted determinants of corporate cash holding (CCH) for their…

Abstract

Purpose

The purpose of this paper is to examine the cash holding of firms during a crisis and test the widely accepted determinants of corporate cash holding (CCH) for their consistency across periods of crisis, stability and recovery, and across firm categories, in the emerging market context of India.

Design/methodology/approach

The study employs panel data and Fama–Macbeth regression techniques on publicly listed firms during 2001–2015, amid controls for idiosyncratic factors. Further empirical analysis is carried out through the disaggregation of firms based on group affiliation, controlling stake of promoters, financial constraints and firm size.

Findings

The study reports that cash levels are significantly higher during crisis periods for Indian firms. Moreover, promoter holding is observed to be a strong predictor of CCH, which is an addition to the list of predictors in existing literature. Additionally, most of the predictors of cash holding turn out to be consistent through periods of financial crisis, stability and recovery. A firm’s age and growth prospects do not determine cash levels for Indian firms; however, cash-flow volatility, firm size, leverage and non-cash working capital requirements help to determine the cash levels of the firm consistently through different periods. Group-affiliated firms are less likely to engage in cash accumulation as opposed to firms that are large and financially constrained and have high promoter stakes.

Originality/value

The study is unique because it examines the consistency of determinants of cash holding across good and turbulent times and across firm classifications. Moreover, the study uses a broad sample of firms and investigates the topic for a relatively long period in an emerging market setup.

Details

International Journal of Managerial Finance, vol. 15 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

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