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This paper surveys the literature on economic research in banking. Two streams of empirical research were reviewed. The first stream of empirical research focus on research examining the effect of bank behaviour on economic performance. The second stream of empirical research focus on research on the effect of economic events on bank behaviour and performance. We provide our views about what we have learned from this research and about what else we would like to know.

Purpose: The purpose of this study is to analyze whether information asymmetry (ASYM) plays a mediating role in the relationship between corporate disclosure and cost of equity capital (COEC) in emerging markets such as Indonesia.

Design/Methodology/Approach: This study is a quantitative study using secondary data obtained from listed manufacturing firms from 2015 to 2017. Purposive sampling was used to select 105 firms. The design of this study was causality research, and the analysis was performed through ordinary least squares (OLS) regression and path analysis.

Findings: The results show that the level of disclosure for corporate social responsibility (CSR), intellectual capital, and enterprise risk management (ERM) reduces the COEC by suppressing ASYM. This finding confirms the argument that managers can reduce their companies’ COEC by reducing ASYM through increased disclosure. These results are controlled by earnings quality (EQL) because that is most relevant to the COEC, as well as corporate size, leverage, and differences in institutional factors.

Originality/Value: This research is based on the central assumption that disclosure enhances the level of information while EQL remains the focus for investors. This research is also the first to study CSR disclosure, intellectual capital disclosure, and ERM disclosure together as a proxy for disclosure. The findings confirm that managers can reduce their companies’ agency conflict by increasing their level of disclosure. Managers can also reduce the COEC by reducing ASYM through increased disclosure. This also implies that increasing the level of disclosure will be effective in reducing the COEC for companies in emerging markets, such as Indonesia.

This study investigates the impact of insider-ownership of publicly traded firms on their performance, cost of debt (COD) and cost of equity. We use a sample of 104 non-finance listed companies of Pakistan for the period from 2006 to 2016. Our study is conducted in Pakistan as a developing country in which insider-ownership is dominant, and a weak external corporate governance mechanism increases the payoffs from insider-ownership. We use feasible generalized least square (FGLS) regression methods to examine these hypotheses. Based on agency theory, we find that insider-ownership enhances firm performance. Furthermore, our results show that insider-ownership reduced the COD and equity. Higher ownership decreases the opportunistic behavior of insiders. It also reduces the creditor’s perception of the likelihood of default on loan payments and reduces agency issues among shareholders. The insider will invest in positive NPV projects which will help maximize shareholders’ wealth and minimize the COD. Similarly, the relationship between insider-ownership and cost of equity is significant but negative. Supporting the convergence of interest increase in ownership helps in aligning the goals of managers and stakeholders whereby the insider will focus on value creation by minimizing equity cost.

Business group affiliation seems to make a firm more opaque. The benefits of group affiliation (internal market transactions) and the negative aspects of group affiliation (agency problems of group control) both may make group firms more opaque than non-group firms. Using the opacity index developed by Anderson, Duru, and Reeb (2009), this paper reports that Korean group firms are more transparent than non-group firms after the Asian financial crisis (1997–1998) and this leads to better performance of group firms. The improved transparency results from disappeared internal market benefits and diminished agency problems. These results are robust after controlling for the size of internal markets of groups, industry diversification, the existence of group inside financial institutions, and endogeneity.

This paper reviews the theory and evidence on the effects of globalization of financial transactions on businesses. Two important benefits are identified. First, globalization reduces a company’s cost of capital. Second, globalization improves corporate governance so that manager actions are better aligned with shareholder interests. This improvement in corporate governance further contributes to a reduction in a firm’s cost of capital.

Corruption is a phenomenon that is ubiquitous, but the extent and the form differ across countries. According to Transparency International, the Corruption Perception Index (CPI) in year 2001 varied from 0.4 to 9.9 (10 is completely corruption free). The average score for the 91 countries surveyed was 4.76 (with a standard deviation of 2.39). Why is there so much cross-country difference? Why are some countries virtually corruption free, but are others fraught with corruption?

Governance and opacity issues have increased since the early 1990s and several governance indicators are introduced by international organizations and NGOs. The governance indicators have been used in various sectors, directly affecting a nation's political reputation. This study analyzes the context of governance and opacity in Argentina and Chile and assesses the relationship between the cultural pattern and the functioning of institutions. A first approximation to the analysis of Argentina and Chile seems to lead to the conclusion of the existence of homogeneity between them as a result of a similar background. However, differences in geography and history generate different societal norms, and functioning of institutions within them. Chile's geographical isolation and limited natural resources leads the country toward economic growth and political stability. By contrast, in Argentina, populist regimes undermine the foundations of its economy while its middle class struggles and loses public trust. The various factors interactively affect quality of public policies and governance and, consequently, are conducive to differences in the perceived and real levels of opacity between both countries. Is corruption a culture-specific issue? If yes, then, is governance a consequence of culture too? Therefore, it is important to interpret a context behind governance in order to establish appropriate anticorruption reform in practice. This chapter seeks to address some of these issues by means of a case study comparison between Argentina and Chile and contribute to the understanding of the context in which negotiations may occur when FDI and M&A deals take place.

Purpose: The chapter’s objective is to develop a new model or approach to earnings management for sustainability. The challenges posed by climate change and environmental degradation have stimulated interest in sustainability. However, such interest has not led to the development of new models demonstrating how firms’ earnings management can contribute to sustainability and sustainable development.

Methodology: The chapter develops a model demonstrating how earnings management can contribute to sustainability. The surplus income model uses income targeting as a channel through which the surplus income generated by a firm is allocated to a relevant sustainability activity or project. The author shows that a firm’s total income can be divided into the target and surplus income components. The author then explores the possible activities that firms may allocate surplus income to in the interest of sustainability.

Finding: The surplus income model or approach allows a firm to contribute or donate to a relevant sustainability activity or project out of its surplus income. Under this model, managers are incentivised to generate surplus income from which they can contribute to a relevant sustainability activity or project, thereby making the firm a champion of sustainability.

Originality: Previous studies have not examined how earnings management by firms can contribute to sustainability. This chapter fills this gap in the literature.

This study examines short selling as one external determinant of corporate tax avoidance. Prior research suggests that short sellers have information advantages over retail investors, and high short-interest levels are a bearish signal of targeted stock prices. As a result, when short-interest levels are high, managers have been shown to take actions to minimize the negative effect of high short interest on firms’ stock prices. Tax-avoidance activities may convey a signal of bad news (i.e., high stock price crash risk). We predict that, when short-interest levels are high, managers possess incentives to reduce firm tax avoidance in order to reduce the associated stock price crash risk. Consistent with this prediction, we find that short interest is negatively associated with subsequent tax-avoidance levels. This effect is incremental to other factors identified by prior research. We conclude that short selling significantly constrains corporate tax avoidance.