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1 – 10 of 586Arash Arianpoor and Seyyed Sajjad Naeimi Tajdar
This study aims to explore the relationship between firm risk, capital structure, cost of equity capital and social and environmental sustainability during the COVID-19 pandemic…
Abstract
Purpose
This study aims to explore the relationship between firm risk, capital structure, cost of equity capital and social and environmental sustainability during the COVID-19 pandemic for companies listed on Tehran Stock Exchange.
Design/methodology/approach
To this aim, the information about 190 companies in 2014–2020 was retrieved to be analyzed. The total risk and systematic risk were used as the indicators of company risk; the industry-adjusted earnings price ratio (IndEP) and GORDON were used for the cost of equity capital. To measure social sustainability and environmental sustainability, the procedure suggested by Arianpoor and Salehi (2020) was used.
Findings
Underleveraged firms have had a lower total risk during the COVID-19 pandemic, while overleveraged firms have not had a higher risk during this time. In overleveraged firms, using systematic risk has a negative impact on social sustainability during the COVID-19 pandemic. In overleveraged firms, using total risk and systematic risk has a significant negative impact on environmental sustainability in the pandemic. Besides, overleveraged firms have a lower cost of equity capital (IndEP) during COVID-19.
Originality/value
To the best of the authors’ knowledge, no similar study has so far examined the joint impact of COVID-19 and corporate risk on social and environmental sustainability and also the joint impact of COVID-19 and capital structure on the cost of equity. This study contributes to the related literature by providing corporations with insightful post-pandemic directions on capital structure decisions and social and environmental activities. Furthermore, this research and the relevant findings can help understand and develop social responsibility in Iran as a developing country.
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Ines Ben Flah, Azhaar Lajmi and Zaineb Hlioui
This paper aims to examine the effect of corporate social responsibility (CSR) on firm performance (FP) of companies listed on the Tunis Stock Exchange.
Abstract
Purpose
This paper aims to examine the effect of corporate social responsibility (CSR) on firm performance (FP) of companies listed on the Tunis Stock Exchange.
Design/methodology/approach
This paper reports on two empirical studies. The first was an exploratory qualitative study carried out on a sample of 30 Tunisian companies operating in different sectors. The second empirical study used a panel data regression analysis, to examine data from 46 companies listed on the Tunis Stock Exchange during the 2017 to 2021 period.
Findings
The results of the exploratory qualitative study pointed out the specificities of the Tunisian context as to the importance of CSR. The results highlighted also the importance of the 2018 CSR law in Tunisia, yet it drew attention to the non-implementation of its applying texts, meaning that CSR is not always enforced in the Tunisian context. Moreover, in this qualitative study, most companies confirmed that CSR is a key factor behind good governance practices. By studying the impact of CSR on various FP proxies, the results highlight that CSR has a positive and significant impact on FP measured by ROA as an accounting variable and stock returns as a market-measure variable. In addition, the authors confirm the moderating effect of innovation on the CSR and FP relationship. Indeed, innovation affects corporate FP differently. It hinders accounting-based FP while fostering the market-based one.
Practical implications
The study provides insights for managers into how CSR approaches can be used to maximize profits, improve its FP and reputation, while considering the corporate innovative capacities. CSR is a real performance lever for companies, a means of improving their economic, environmental and social efficiency. It enables companies to anticipate constraints and prevent risks, reduce certain operational costs, optimize resources, communicate a good image and stand out from the competition, gain easier access to innovation, strengthen their competitive edge, gain easier access to financing and strengthen their territorial and social roots.
Originality/value
The main contribution of this paper is the adoption of two empirical approaches. These two methods are complementary. The first is an exploratory qualitative approach aimed at better understanding the current state of CSR implementation by Tunisian companies. The second one is quantitative, a panel data regression analysis. Furthermore, the authors test the moderating effect of innovation on the studied link. To the best of the authors’ knowledge, this is the first paper that investigates the moderating effect of innovation on CSR FP in the Tunisian context. Finally, robustness tests were conducted to test the reliability of this study’s results.
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Bhavya Srivastava, Shveta Singh and Sonali Jain
The present study assesses the commercial bank profit efficiency and its relationship to banking sector competition in a rapidly growing emerging economy, India from 2009 to 2019…
Abstract
Purpose
The present study assesses the commercial bank profit efficiency and its relationship to banking sector competition in a rapidly growing emerging economy, India from 2009 to 2019 using stochastic frontier analysis (SFA).
Design/methodology/approach
Lerner indices, conventional and efficiency-adjusted, quantify competition. Two SFA models are employed to calculate alternative profit efficiency (inefficiency) scores: the two-step time-decay approach proposed by Battese and Coelli (1992) and the recently developed single-step pairwise difference estimator (PDE) by Belotti and Ilardi (2018). In the first step of the BC92 framework, profit inefficiency is calculated, and in the second step, Tobit and Fractional Regression Model (FRM) are utilized to evaluate profit inefficiency correlates. PDE concurrently solves the frontier and inefficiency equations using the maximum likelihood process.
Findings
The results suggest that foreign banks are less profit efficient than domestic equivalents, supporting the “home-field advantage” hypothesis in India. Further, increasing competition drives bank managers to make riskier lending and investment choices, decreasing bank profit efficiency. However, this effect varies depending on bank ownership and size.
Originality/value
Literature on the competition bank efficiency link is conspicuously scant, with a focus on technical and cost efficiency. Less is known regarding the influence of competition on bank profit efficiency. The article is one of the first to examine commercial bank profit efficiency and its relationship to banking sector competition. Additionally, the study work represents one of the first applications of the FRM presented by Papke and Wooldridge (1996) and the PDE provided by Belotti and Ilardi (2018).
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Ahmed Bouteska, Taimur Sharif and Mohammad Zoynul Abedin
Given the serious question raised by the subprime of the 2008 global financial crisis over the rising practices of excessive rewarding of executives in the USA and European firms…
Abstract
Purpose
Given the serious question raised by the subprime of the 2008 global financial crisis over the rising practices of excessive rewarding of executives in the USA and European firms, the executive pay-performance nexus has emerged as a popular topic of debate in the contemporary corporate finance research. Conducted mostly on the Anglo-Saxon contexts, research outcomes have been inconclusive and dichotomous. Considering this backdrop, this study aims to investigate the endogenous relationship between executive compensation and risk taking in the context of the USA.
Design/methodology/approach
Using a large sample of non-financial firms from 2010 to 2020 based on panel data and two-stage least square regression. In this study, the riskier corporate decision is measured as book leverage and ratio of R&D expense to total assets. Chief executive officers’ (CEO) experience and age are used as instrumental variables, and these are expected to influence compensation incentives and, hence, affect firm riskiness indirectly. Firm size, return on assets and CEO turnover are reported to affect compensation and corporate decisions, therefore, included as control variables. Given that higher executive compensation is related to riskier corporate decision in firms, this study incorporates total wealth (i.e. accumulated equity related compensation) as an additional proxy of compensation, and this selection is justifiable by the perfect contracting notion of the agency theory.
Findings
The results of this study show a significant positive and increasing nexus among compensation and riskier corporate decisions. Besides, the compensation level proxied through the percentage of each form of compensation in total compensation is very important as greater equity and greater salary diminishes risk taking.
Practical implications
The outcomes of this study have useful implications for firm stakeholders and policymakers.
Originality/value
The level of pay measured by the percentage of each type of compensation in total compensation is of utmost importance as it can increase or decrease risk taking in corporate decisions.
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Tapas Kumar Sethy and Naliniprava Tripathy
This study aims to explore the impact of systematic liquidity risk on the averaged cross-sectional equity return of the Indian equity market. It also examines the effects of…
Abstract
Purpose
This study aims to explore the impact of systematic liquidity risk on the averaged cross-sectional equity return of the Indian equity market. It also examines the effects of illiquidity and decomposed illiquidity on the conditional volatility of the equity market.
Design/methodology/approach
The present study employs the Liquidity Adjusted Capital Asset Pricing Model (LCAPM) for pricing systematic liquidity risk using the Fama & MacBeth cross-sectional regression model in the Indian stock market from January 1, 2012, to March 31, 2021. Further, the study employed an exponential generalized autoregressive conditional heteroscedastic (1,1) model to observe the impact of decomposed illiquidity on the equity market’s conditional volatility. The study also uses the Ordinary Least Square (OLS) model to illuminate the return-volatility-liquidity relationship.
Findings
The study’s findings indicate that the commonality between individual security liquidity and aggregate liquidity is positive, and the covariance of individual security liquidity and the market return negatively affects the expected return. The study’s outcome specifies that illiquidity time series analysis exhibits the asymmetric effect of directional change in return on illiquidity. Further, the study indicates a significant impact of illiquidity and decomposed illiquidity on conditional volatility. This suggests an asymmetric effect of illiquidity shocks on conditional volatility in the Indian stock market.
Originality/value
This study is one of the few studies that used the World Uncertainty Index (WUI) to measure liquidity and market risks as specified in the LCAPM. Further, the findings of the reverse impact of illiquidity and decomposed higher and lower illiquidity on conditional volatility confirm the presence of price informativeness and its immediate effects on illiquidity in the Indian stock market. The study strengthens earlier studies and offers new insights into stock market liquidity to clarify the association between liquidity and stock return for effective policy and strategy formulation that can benefit investors.
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Gurmeet Singh Bhabra and Ashrafee Tanvir Hossain
The purpose of this paper is to investigate the relationship between CEOs' inside debt holdings (pension benefits and deferred compensation) and the operating leverage of the…
Abstract
Purpose
The purpose of this paper is to investigate the relationship between CEOs' inside debt holdings (pension benefits and deferred compensation) and the operating leverage of the firms they manage, with the aim to examine whether CEO incentives play a role in corporate risk-taking.
Design/methodology/approach
The authors investigate the relation between CEO inside debt holdings (CIDH) (pension benefits and deferred compensation) and the operating leverage (DOL) of the firms they manage. Using a sample of 11,145 US firm-year observations over the period 2006–2017, the authors find a strong negative association between CIDH and DOL. Additional analyses reveal that the relationship between CIDH and DOL is more pronounced in firms with heightened agency issues, powerful CEOs and for CEOs with stronger professional networks. The results are robust to various sensitivity and endogeneity tests.
Findings
The authors find strong evidence confirming the expected negative association between CEO inside debt and DOL suggesting that firms with higher inside debt tend to maintain lower levels of operating leverage. These findings continue to hold with the alternative measure for the inside debt and operating leverage, and across a range of tests designed to rule out the possibility that the primary findings are in any way driven by potential endogeneity. In addition, the findings demonstrate that the presence of manager-shareholder agency conflicts can strengthen the inside debt–DOL relationship suggesting the strong role of inside debt in reducing firm risk.
Research limitations/implications
Findings in this paper have implications for design of compensation structures so that corporate boards can establish incentives as a tool for risk management. A limitation of this study is that it is focused on one market, i.e. US listed companies, so the findings may not be applicable on a global scale.
Originality/value
To the best of the authors’ knowledge, this is the first study that links firm-level management of operating leverage through design of CEO inside debt incentives (two obvious choices for risk-reduction at the CEOs’ disposal include reducing financial risk through reduction of firm leverage and reducing operating risk through reduction of operating leverage). While use of firm leverage as an instrument of choice has been explored in the past, use of operating leverage to achieve risk reduction when CEO possess high inside holding, has received very little attention.
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Wenjing Wang, Moting Wang and Yizhi Dong
The paper's purpose is to investigate the effects of digital finance on the risk of stock price crashes and the underlying transmission mechanisms, and to provide suggestions to…
Abstract
Purpose
The paper's purpose is to investigate the effects of digital finance on the risk of stock price crashes and the underlying transmission mechanisms, and to provide suggestions to inhibit the stock crash risk (CR).
Design/methodology/approach
This paper selects all companies that were listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange from 2011 to 2020. It then uses the two-way fixed effect model and the intermediary effect model to verify such effects.
Findings
The overall outcomes demonstrate such a result that the CR of listed companies in China can be significantly reduced by the development of digital finance, and the overall transparency of business financial information and the equity pledge of controlling shareholders are the two underlying transmission mechanisms that digital finance can cause effects on the CR of stocks.
Research limitations/implications
The main limitations are that there may exist some problems in the method for evaluating the CR of stocks. And there may be a problem of endogeneity caused by the empirical model cannot control all correlation variables.
Practical implications
This paper would provide policy implications, for different roles, to inhibit the stock CR and to make the development of the economy more stabilize.
Social implications
Digital finance can promote economic development while restraining financial risks at the same time. Therefore, although this study is based on the relevant data from China, it can also provide a reference for other economies with different basic conditions from China, to promote the overall development of the world economy.
Originality/value
The current academic research on digital finance or stock price CR has been relatively sufficient, but there are few papers that combined both. By combining digital finance with stock CR, this paper researches the influence of digital finance on the CR of stocks through empirical analysis. So, this paper would provide new research ideas and evidence for potential influence factors of the CR of stocks, fill the gap in this research field and provide certain help for subsequent scholars to conduct relevant research.
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Muntazir Hussain, Ramiz Rehman and Usman Bashir
This study investigates the relationship between female CEOs and SMEs’ financing decisions. The study also examined the moderating role of ownership structure (female, foreign…
Abstract
Purpose
This study investigates the relationship between female CEOs and SMEs’ financing decisions. The study also examined the moderating role of ownership structure (female, foreign, and state ownership) in female CEO-SMEs’ financing decisions.
Design/methodology/approach
The study has applied Generalized Least Square (GLS) and Binomial Logistic Regression. The study has used firm-level data from 2,700 Small and Medium Enterprises (SMEs) in the Chinese economy.
Findings
The results suggest that female CEOs use debt financing. However, the financing decision of female CEOs varies if we account for female ownership, foreign ownership, state ownership, firm association with big firms, and the industry in which the firm operates. This study also provides robust evidence that female CEOs utilize debt financing under certain conditions and that female CEOs prefer long-term debt financing to short-term debt financing when considering debt maturity choices.
Originality/value
Recent studies report a negative relationship between female CEOs and financing decisions based on the rationale that females are risk-averse and choose less risky financing compared to their male counterparts. This study posits new evidence that female CEO financing decisions are not always risk averse if we consider female ownership, foreign ownership, state ownership, firm association with big firms, and the industry in which the firm operates. Thus, we contribute to the corporate governance literature, and this study implies a corporate financing policy.
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