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1 – 10 of over 3000Purpose: This chapter presents a discussion of the COVID-19 global debt crisis.Methodology: The chapter uses the discourse analysis method to identify the cause of the COVID-19…
Abstract
Purpose: This chapter presents a discussion of the COVID-19 global debt crisis.
Methodology: The chapter uses the discourse analysis method to identify the cause of the COVID-19 global debt crisis and suggests ways to overcome the crisis.
Findings: The chapter argues that the high debt incurred by many countries during the COVID1-19 pandemic, combined with tightening global financial conditions, led to a significant increase in global debt. The author suggests ideas to avert a debt crisis. It was argued that rich countries could forgive the debt owed to them by heavily indebted countries or consider interest repayment holidays, debt-for-green swaps, or other debt-relief options. Heavily indebted countries can consider restructuring their debt, reevaluating their economic policy priorities, and raising taxes. Multilateral organisations can assist heavily indebted countries and engage in debt forgiveness advocacy.
Implication: There is a need for rich countries and creditor organisations to offer some relief to heavily indebted countries to help them meet their debt repayment obligations during and after the pandemic.
Originality: The chapter is one of the first to analyse the global COVID-19 debt situation.
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Timm Gödecke and Dirk Schiereck
This paper aims to investigate the impact of the largest shareholder's voting stake on the firm's capital structure decision.
Abstract
Purpose
This paper aims to investigate the impact of the largest shareholder's voting stake on the firm's capital structure decision.
Design/methodology/approach
To empirically analyze the influence of the voting stake on leverage, a large sample of 814 exchange-listed firms is applied. The baseline regression analysis is complemented by several robustness tests and a difference-in-difference regression analysis to mitigate endogeneity concerns.
Findings
The authors find a negative relationship between the voting stake of the largest shareholder and leverage, consistent with the notion that large, undiversified shareholders have the incentive to reduce risk. Additionally, results reveal that family control has a positive moderating effect, indicating that the negative relationship is less pronounced for family controlled firms.
Research limitations/implications
The authors contribute to the research by suggesting ownership concentration as another determinant of capital structure. Further, the authors add to the literature by showing how the association between ownership concentration and leverage is moderated by family control and that the identity of the largest shareholder is of great importance.
Practical implications
The paper provides important insights to the current debate on the proposal of the European Commission to reintroduce shares with multiple votes as part of the Listing Act. The authors expect the regulation to exacerbate the concentration of voting rights, which results in lower leverage and thus limits corporate growth.
Originality/value
The authors differentiate from previous studies by focusing the largest shareholders' voting stake, instead of using the ownership stake, to assess the impact of ownership concentration on leverage.
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Peipei Liu and Wei-Qiang Huang
This study is the first that aims to investigate international transmission channels of sovereign risk among G20 and explore its influential factors by applying the…
Abstract
Purpose
This study is the first that aims to investigate international transmission channels of sovereign risk among G20 and explore its influential factors by applying the multidimensional SAR model.
Design/methodology/approach
Multiple spatial weight matrices can capture the contiguity of spatial units from various dimensions, which could be exploited to improve the precision of inference as well as prediction accuracy. To the best of the authors’ knowledge, this is the first study to investigate international transmission channels of sovereign risk among G20 and explore its influential factors by applying the multidimensional SAR model.
Findings
With network structure analysis, this study finds that they contain different information content from the perspective of graphical display, node strength and correlation. Developed and emerging countries all play major roles in trade connection, while only developed countries play major roles in financial linkage. Second, by applying the multidimensional SAR model, only the spatial autocorrelation coefficients for trade and financial linkages are significant during the full sample period, which is in sharp contrast to published studies using the SAR model with a single matrix. Third, the spillover channels that play major roles in various periods are different. Only trade channel plays a role during crisis periods and it is the most important. Fourth, the spatial correlation among countries greatly amplifies the shock’s impacts on one market. And spatial effect for developed countries is larger than those for emerging countries, while the mean spatial effect of a unit shock in the USA on emerging countries is slightly greater than that on developed countries.
Originality/value
Multiple spatial weight matrices can capture the contiguity of spatial units from various dimensions, which could be exploited to improve the precision of inference as well as prediction accuracy. To the best of the authors’ knowledge, this is the first study to investigate international transmission channels of sovereign risk among G20 and explore its influential factors by applying the multidimensional SAR model.
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Danish Ahmed, Yuantao Xie and Khelfaoui Issam
Life insurance is bought with a prior belief that promise stipulated in policy will be honored when due. Discernibly, this belief is backed by the confidence that financial…
Abstract
Purpose
Life insurance is bought with a prior belief that promise stipulated in policy will be honored when due. Discernibly, this belief is backed by the confidence that financial markets and economy will demonstrate satisfactory performance. However, individuals' confidence levels may get shaken through naïve reinforcement learning if they witness negative market or economic condition. Considering this the authors investigate the relationship between investor confidence and life insurance demand.
Design/methodology/approach
The authors used bias corrected bootstrapped sample of OECD economies to examine the link between investor confidence and life insurance demand when two possible economic conditions were witnessed: 1) normal/economic expansion and 2) economic/debt impairment. The findings are robust to alternate estimation techniques and endogeneity.
Findings
The authors found that lower investor confidence, sovereign debt impairment and negative market condition will have negative repercussion on life insurance demand. On the other hand, investor confidence-life insurance demand nexus is merely influenced by market and economic condition.
Originality/value
This is a premier research explaining the nexus between investor confidence and life insurance demand in the context of life-cycle hypothesis, sovereign ratings channel and experience-confidence-belief framework. The finding will help economic policy-makers in developing pre-emptive measures to protect life insurance businesses from negative repercussions of lower confidence and negative market conditions.
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Lingling Zhao, Vito Mollica, Yun Shen and Qi Liang
This study aims to systematically review the literature in the fields of liquidity, informational efficiency and default risk. The authors outline the key research streams and…
Abstract
Purpose
This study aims to systematically review the literature in the fields of liquidity, informational efficiency and default risk. The authors outline the key research streams and provide possible pathways for future research.
Design/methodology/approach
The study adopts bibliographic mapping to identify the most influential studies in the research fields of liquidity, informational efficiency and default risk from 1984 to 2021.
Findings
The study identifies four key research themes that include efficiency and transparency of markets; corporate yield spreads; market interactions: bonds, stocks and cryptocurrencies; and corporate governance. By assessing publications published from 2018 to 2021, the authors also document seven key emerging research trends: cross markets, managerial learning and corporate governance, state ownership and government subsidies, international evidence, machine learning (FinTech approaches), environmental themes and financial crisis. Drawing on these emerging trends, the authors highlight the opportunities for future research.
Research limitations/implications
Keyword searches have limitations since some studies might be overlooked if they do not match the specified search criteria, even though their relevance to the topic is under investigation. Adopt the R project to expand this review by incorporating more literature from other databases, such as the Scopus database could be a possible solution.
Practical implications
The four key research streams contribute to a comprehensive understanding of liquidity, informational efficiency and default risk. The emerging trends integrate existing knowledge and leave the chance for innovative research to expand the research frontier.
Originality/value
This study fulfills the systematic literature review streams in the fields of liquidity, informational efficiency and default risk, and provides fruitful opportunities for future research.
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Walid Mensi, Imran Yousaf, Xuan Vinh Vo and Sang Hoon Kang
This paper examines asymmetric multifractality (A-MF) in the leading Middle East and North Africa (MENA) stock markets under different turbulent periods (global financial crisis…
Abstract
Purpose
This paper examines asymmetric multifractality (A-MF) in the leading Middle East and North Africa (MENA) stock markets under different turbulent periods (global financial crisis [GFC] and European sovereign debt crisis [ESDC], oil price crash and COVID-19 pandemic).
Design/methodology/approach
This study applies the asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) method of Cao et al. (2013) to identify A-MF and MENA stock market efficiency during the COVID-19 pandemic.
Findings
The results show strong evidence of different patterns of MF during upward and downward trends. Inefficiency is higher during upward trends than during downward trends in most of the stock markets in the whole sample period, and the opposite is true during financial crises. The Turkish stock market is the least inefficient during upward and downward trends. A-MF intensifies with an increase in scales. The evolution of excessive A-MF for MENA stock returns is heterogeneous. Most of the stock markets are more inefficient during a pandemic crisis than during an oil crash and other financial crises. However, the inefficiency of the Saudi Arabia and Qatar stock markets is highly sensitive to oil price crashes. Overall, the level of inefficiency varies across market trends, scales and stock markets and over time. The findings of this study provide investors and policymakers with valuable insights into efficient investment strategies, risk management and financial stability.
Originality/value
This paper first explores A-MF in the MENA emerging stock markets. The A-MF analysis provides useful information to investors regarding asset allocation, portfolio risk management and investment strategies during bullish and bearish market states. In addition, this paper examines A-MF under different turbulent periods, such as the GFC, the ESDC, the 2014–2016 oil crash and the COVID-19 pandemic.
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Given the dearth of thorough summaries in the literature, this systematic review and bibliometric analysis attempt to take a meticulous approach meant to present knowledge on the…
Abstract
Purpose
Given the dearth of thorough summaries in the literature, this systematic review and bibliometric analysis attempt to take a meticulous approach meant to present knowledge on the constantly developing subject of stock market volatility during crises. In outline, this study aims to map the extant literature available on stock market volatility during crisis periods.
Design/methodology/approach
The present study reviews 1,283 journal articles from the Scopus database published between 1994 and 2022, using the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) 2020 flow diagram. Bibliometric analysis through software like R studio and VOSviewer has been performed, that is, annual publication trend analysis, journal analysis, citation analysis, author influence analysis, analysis of affiliations, analysis of countries and regions, keyword analysis, thematic mapping, co-occurrence analysis, bibliographic coupling, co-citation analysis, Bradford’s law and Lotka’s law, to map the existing literature and identify the gaps.
Findings
The literature on the effects of crises on volatility in financial markets has grown in recent years. It was discovered that volatility intensified during crises. This increased volatility can be linked to COVID-19 and the global financial crisis of 2008, as both had massive effects on the world economy. Moreover, we identify specific patterns and factors contributing to increased volatility, providing valuable insights for further research and decision-making.
Research limitations/implications
The present study is confined to the areas of economics, econometrics and finance, business, management and accounting and social sciences. Future studies could be conducted considering a broader perspective.
Originality/value
Most of the available literature has focused on the impact of some particular crises on the volatility of financial markets. The present study is not limited to some specific crises, and the suggested research directions will serve as a guide for future research.
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Efstathios Magerakis and Dimitris Tzelepis
This paper aims to examine the impact of corruption on firm performance considering the interventional role of cash policy in the emerging market of Greece.
Abstract
Purpose
This paper aims to examine the impact of corruption on firm performance considering the interventional role of cash policy in the emerging market of Greece.
Design/methodology/approach
The current study utilizes a sample of 142,079 firm-year observations for the period 2006–2014. Descriptive statistics, multiple regression analyses and robustness checks are used to test the study's hypotheses.
Findings
The results reveal that firm performance is positively related to the control of institutional corruption, implying that firms perform better when operating in a low-corruption environment. All other things being equal, we also find that firm cash holding strengthens the positive association between control of corruption and corporate financial performance.
Research limitations/implications
This research paper takes a more holistic approach by considering institutional factors in conjunction with corporate financial policies and outcomes. In a pervasive corrupt environment, the article illustrates how firm-level mechanisms can preclude political rent-seeking to improve corporate performance. The study's main limitation is that it focuses exclusively on a single country setting, based on the extreme-critical case's logic.
Practical implications
The findings might be useful for business executives and regulators seeking a better understanding of the planning and implementation of firms' asset allocation strategies and anti-corruption policies.
Originality/value
The study augments the relevant literature on the firm-level implications of corruption by providing empirical evidence for the interventional role of cash management in the relation between corruption and firm performance, in the context of an emerging economy.
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Before the pandemic, World’s public debt was considered excessive, mainly by the standards set by the IMF, the European Union and the euro zone. Today, with the pandemic COVID-19…
Abstract
Before the pandemic, World’s public debt was considered excessive, mainly by the standards set by the IMF, the European Union and the euro zone. Today, with the pandemic COVID-19, the world economy is facing an economic crisis that only the public authorities can contain, at least in the short term. In France, the Arthuis Commission is proposing to control public debt and return to debt reduction by the end of this decade. However, the economic stakes go beyond the crisis caused by the pandemic. It is also a question of preparing a different society, one that is less unequal and capable of engaging in sustainable economic development in the face of global warming. The concern is more about the excesses of international financial speculation, growing social inequalities and living conditions on Earth, which threaten the economic and social future of new generations much more than public debt.
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Murad Harasheh and Francesca De Vincenzo
The study introduces a new approach to leverage-value relationship. Besides applying the classical regression models, the study deals with leverage as a continuous treatment…
Abstract
Purpose
The study introduces a new approach to leverage-value relationship. Besides applying the classical regression models, the study deals with leverage as a continuous treatment variable implemented on the firm’s value using the dose-response function (DFR).
Design/methodology/approach
After proper model calibration and splitting the treatment (leverage) into ten doses, a response function is generated, which enables the realization of the dose level at which the firm’s value is maximized. Furthermore, the study tests the pecking order theory (POT) and the trade-off theory (TOT) using the threshold model to see whether firms are under or over-indebted. The analysis is carried out on panel data from small-medium enterprises (SMEs), providing more valuable insights than large and mature companies.
Findings
The study used two leverage measures: total liabilities ratio and bank debt ratio. Value is measured by the market capitalization and Tobin’s Q. In general, the study finds a positive relationship between leverage and value; POT is not strongly supported, firms are below their optimal leverage and there is a certain leverage dose that would maximize firms’ value.
Practical implications
Since the threshold model and DRF show that SMEs are under-indebted, firms could benefit from extra leverage doses without affecting the firm’s risk profile, especially in a low-interest rate regime, and the potential increase in public-private expenditure after Italy obtained the European Recovery Funds.
Originality/value
The study contributes to new knowledge and understanding of financial leverage from new methodological perspectives, offering valuable insights from SMEs using novel approaches.
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