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Article
Publication date: 9 September 2022

Dipanwita Chakraborty, Neeraj Gupta, Jitendra Mahakud and Manoj Kumar Tiwari

The purpose of this study is to examine the impact of corporate governance (CG) on the shareholding level of retail investors in Indian listed firms.

Abstract

Purpose

The purpose of this study is to examine the impact of corporate governance (CG) on the shareholding level of retail investors in Indian listed firms.

Design/methodology/approach

Primarily, a broad CG-index was constructed based on the Indian Companies Act, 2013; Clause 49 listing agreement; and Securities Contracts (Regulation) Act, 1956. Thereafter, a panel data approach has been used to examine the association between CG attributes and retail shareholdings (RSs) during 2014–2015 and 2018–2019.

Findings

Authors find that the firm-level CG quality positively affects retail investors’ shareholding level. The results explain that among various attributes of CG, retail investors pay more attention to firms’ audit and board information while making investment decisions. The results also reveal that the influence of CG attributes on RSs is lesser for group-affiliated, mature and large-sized firms than for stand-alone, young and small-sized firms.

Practical implications

First, the study provides new insight to the firms for increasing retail-shareholding levels and complying with India’s ongoing minimum public shareholding norms by improving CG practices concerning specific CG mechanisms. Second, it illuminates the regulators and policymakers to monitor and strengthen firms’ governance quality in light of ongoing regulatory reforms.

Originality/value

This study is a new investigation that explores the impact of CG on investment decisions of retail investors from the perspective of an emerging economy.

Details

Managerial Auditing Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 24 February 2021

Krishna Vishwanath Iyer and V.V. Ravi Kumar

This paper aims to propose an innovative blockchain-based system enabling implementation of a bond-pays model in credit rating industry. Issuer-pays model has led to…

Abstract

Purpose

This paper aims to propose an innovative blockchain-based system enabling implementation of a bond-pays model in credit rating industry. Issuer-pays model has led to conflict of interest resulting in rating shopping and inflation. Alternative business models have their own problems, e.g. investor-pays model suffers from “free rider” and public dissemination challenges, whereas government-controlled business models can lead to market distortion. Bond-pays model has been difficult to implement owing to operational difficulties in managing co-ordination amongst multiple entities involved, often with conflicting goals. Blockchain technology enables inter-organizational systems that foster trust amongst non-trusting entities, facilitating business functions such as credit rating to be carried out.

Design/methodology/approach

This paper outlines current processes in credit rating business that has led to repeated rating failures and proposes a new set of processes, leveraging capabilities of blockchain technology to enable implementation of an arms-length bond-pays model.

Findings

A proof-of-concept system, namely, rating chain has been designed to implement a small part of the proposed model to establish technical feasibility in a blockchain environment.

Practical implications

A fully functional blockchain-based system on bond-pays business model, if built and adopted, could impact how credit rating market functions currently and could contribute to a reduction in rating-related challenges.

Originality/value

The proposal to adopt blockchain technologies in implementing a bond-pays model in credit rating industry is a novel contribution.

Article
Publication date: 15 August 2016

Boonlert Jitmaneeroj

Despite their important role for small and medium-sized enterprise (SME) policy reform, the individual scores of the ten categories of business regulations in the World…

Abstract

Purpose

Despite their important role for small and medium-sized enterprise (SME) policy reform, the individual scores of the ten categories of business regulations in the World Bank’s Doing Business report are often overshadowed by the equal-weighted overall score and ease of doing business ranking. The purpose of this paper is to examine the causal interrelations between category scores and pinpoint the critical categories for reform.

Design/methodology/approach

Based on the latest 2016 Doing Business report, this paper applies the four-stage integrative framework to investigate the causal relationships between category scores and the overall score for business regulations for SMEs. The four-stage analysis includes cluster analysis, data mining, partial least square path modeling, and importance-performance map analysis (IPMA).

Findings

The overall score for business regulations is not only influenced by the direct effects of the category scores but also by the indirect effects of the causal interrelations between these scores. The IPMA suggests that policy-makers should examine the priorities of the category scores before making a decision about business regulatory reforms for SMEs. This paper suggests that policy-makers should allocate resources in order of priority – to resolving insolvency, getting credit, trading across borders, registering property, protecting minority investors, paying taxes, enforcing contracts, getting electricity, dealing with construction permits, and, finally, starting a business.

Originality/value

This four-stage methodology is the first attempt to construct a roadmap for business regulatory reforms for SMEs that addresses the problem of equal weighting and subjective causal relationships between category scores.

Details

Journal of Small Business and Enterprise Development, vol. 23 no. 3
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 21 July 2022

Chaolun Yuan, Weihua Liu, Gang Zhou, Xiaoran Shi, Shangsong Long, Zhixuan Chen and Xiaoyu Yan

This study aims to empirically examine the effect of supply chain innovation (SCI) announcements on shareholder value within the context of Industry 4.0 and Industry 5.0.

Abstract

Purpose

This study aims to empirically examine the effect of supply chain innovation (SCI) announcements on shareholder value within the context of Industry 4.0 and Industry 5.0.

Design/methodology/approach

This study uses an event study method to examine the effect of SCI announcements on shareholder value of the 156 listed companies in China.

Findings

First, SCI announcements have a positive effect on shareholder value. Second, SCI with an integrated form more positively affects shareholder value than SCI with an independent form. SCI at the strategy level more positively affects shareholder value than SCI at the operation level. Technology-type SCI more positively affects shareholder value than process-type SCI. Third, this study finds that investors pay more attention to the SCI of companies in the service industry than that of in the manufacturing industry. Finally, the post-hoc analysis finds that digital SCI more positively affects shareholder value than intelligent SCI.

Originality/value

First, most scholars use questionnaire data rather than second-hand data to conduct empirical research to explore the impact of SCI on performance. Second, although scholars focus on performance comprehensively, including operational, financial, relational and environmental performance, no scholars use an event study to explore the impact of SCI on the stock market. Third, no scholars have explored the differential impact of SCI in different industries. Forth, few scholars have classified SCI according to the characteristics to explore the differential impact of SCI. Finally, the differences between SCI of Industry 4.0 and SCI of Industry 5.0 have been described, but no scholars have used empirical research to explore the differences.

Details

Industrial Management & Data Systems, vol. 122 no. 8
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 12 March 2018

Cheedradevi Narayanasamy, Mamunur Rashid and Izani Ibrahim

The purpose of this paper is to bridge the gap between the theory underlying divergence of opinion (DOP) and a cognitive concept termed as attention by specifically…

Abstract

Purpose

The purpose of this paper is to bridge the gap between the theory underlying divergence of opinion (DOP) and a cognitive concept termed as attention by specifically focussing on the volume and price behaviour in initial public offering (IPO) settings.

Design/methodology/approach

Employing the hierarchical regression for a sample of 282 Malaysian fixed price IPOs issued from 2004 to 2014, this research investigated the effect of investors’ attention on other information that complements the information revealed by initial return on DOP. Measure of market adjusted turnover (AbTO) from non-IPO setting was used to capture the DOP in the after-market, while investors’ attention was on a dichotomise scale variable which was captured by the increase/decrease of the Google search index (GOGC2) on the month of listing compared to a month prior to listing.

Findings

The findings indicate that attention moderates the relationship between initial return (also surrogates underpriced IPOs) and DOP. The findings suggest that disagreement to initial returns is reduced, while liquidity in the after-market is promoted, when investors pay more attention to other information that complements price change. The findings also indicate that behavioural tendency is less when individual participation is weak.

Research limitations/implications

This paper highlights the importance of interaction effects in explaining the behavioural tendency in the after-market.

Practical implications

The weak individual investors’ participation and greater attention reduce the market inefficiency in Malaysia.

Originality/value

The finding is consistent with the view that the level of individual investors’ participation and information disclosure requirements has an implication on behavioural bias, which affects DOP in the after-market.

Details

Review of Behavioral Finance, vol. 10 no. 1
Type: Research Article
ISSN: 1940-5979

Keywords

Open Access
Article
Publication date: 31 August 2016

Dongyoup Lee

This article examines the informational content of credit default swap (CDS) net notional for future stock and CDS prices. Using the information on CDS contracts…

11

Abstract

This article examines the informational content of credit default swap (CDS) net notional for future stock and CDS prices. Using the information on CDS contracts registered in DTCC, a clearinghouse, I construct CDS-to-debt ratios from net notional, that is, the sum of net positive positions of all market participants, and total outstanding debt issued by the reference entity. Unlike the ratio using the sum of all outstanding CDS contracts, this ratio directly indicates how much of debt is insured with CDS and therefore, is a natural measure of investors’ concern on a credit event of the reference entity. Empirically, I find crosssectional evidence that the current increase in CDS-to-debt ratios can predict a decrease in stock prices and an increase in CDS premia of the reference firms in the next week. Greater predictability for firms with investment grade credit ratings or low CDS-to-debt ratios suggests that investors pay more attention to firms in good credit conditions than those regarded as junk or already insured considerably with CDS.

Details

Journal of Derivatives and Quantitative Studies, vol. 24 no. 3
Type: Research Article
ISSN: 2713-6647

Keywords

Abstract

Details

Investment Traps Exposed
Type: Book
ISBN: 978-1-78714-253-4

Article
Publication date: 22 March 2022

Bader Jawid Alsubaiei

This study aims to examine the role of fund family size on the money flow of Saudi Arabian open-end equity mutual funds. The author also investigates whether the…

Abstract

Purpose

This study aims to examine the role of fund family size on the money flow of Saudi Arabian open-end equity mutual funds. The author also investigates whether the relationship between fund flow and past return varies based on the fund's family size.

Design/methodology/approach

The study analyses 256 equity funds that operated in Saudi Arabia from 2006 until 2017. Pooled and fixed-effect regression models are used to test the relationship between mutual fund flow and family size.

Findings

The results indicate that fund flow is higher for large size family funds. The results also show that the relationship between mutual fund flow and past performance is more pronounced for large size families, which supports the concept that investors pay extra attention to funds' return and size.

Research limitations/implications

The author provides evidence of the significant effect of family size of mutual funds on future money flow, which helps fund managers to understand investors' motivations for allocating their cash.

Originality/value

This paper contributes to the literature by examining the impact of family size level on the interaction between fund flow and past performance. This study is believed to be the first to investigate the family size factor in Saudi Arabia using a comprehensive data set.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 8 March 2021

Rainer Baule and Patrick Muenchhalfen

The authors evaluate the preferences of retail investors with regard to the investment in structured financial products. The purpose of the paper is an analysis of the…

Abstract

Purpose

The authors evaluate the preferences of retail investors with regard to the investment in structured financial products. The purpose of the paper is an analysis of the relative importance of key product attributes namely the issuing bank, the product structure, the associated costs and the disclosed risk.

Design/methodology/approach

The authors conduct a choice-based conjoint analysis, based on an online experiment. Participants judge their preferences for products which are presented by shortened key information documents according to the requirements of EU regulation.

Findings

Investors consider the costs and the product structure to be most important, whereas the issuer and information on risk are of less interest. Their preferences depend on their (self-evaluated) expertise: while inexperienced retail investors concentrate on costs, experienced investors pay more attention to the product structure.

Research limitations/implications

The study is limited to a subsegment of the market, the discount certificates. For these products, issuing banks gain insight into the attractiveness of their products. Furthermore, the study carries implications for regulators: since investors emphasize the costs in their decisions, an unbiased disclosure of costs should be enforced.

Originality/value

While the recent literature has studied preferences for the investment in mutual funds, this is the first paper which directly analyzes the drivers of an investment in structured retail products.

Details

Review of Behavioral Finance, vol. 14 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 19 February 2020

Khawla Hlel, Ines Kahloul and Houssam Bouzgarrou

This paper aims to examine whether International Financial Reporting Standards (IFRS) adoption and corporate governance attributes increase the management earnings…

Abstract

Purpose

This paper aims to examine whether International Financial Reporting Standards (IFRS) adoption and corporate governance attributes increase the management earnings forecasts’ accuracy disclosed in prospectuses for French Initial Public Offerings (IPOs).

Design/methodology/approach

The analysis is based on cross-sectional regression explaining the absolute forecast errors by using 45 French firms that made IPOs between 2005 and 2016 in two French financial markets: Euronext and Alternext.

Findings

In agreement with the agency theory and the signaling theory, the authors find that the IFRS adoption and the effective corporate governance, proxied by the board characteristics, increase the accuracy of management forecasts. As a result, this latter gives a credible signal in constructing and sustaining shareholders’ trust on the transparency and the reliability of such financial information.

Research limitations/implications

It is plausible that the limited size of the sample represents a limitation of this study. Another limitation is that no other corporate governance attributes such as board meeting frequency, audit committee measures and ownership structure are used.

Practical implications

Shareholders can take benefit from management forecasts accuracy to structure their investment portfolios efficiently to allocate their funds more effectively and mitigate the costs of adverse selection that they have to face. Furthermore, the authors expect the findings to be interesting to IPO firms, as this study highlights the efficiency of larger and independent boards in decreasing managerial discretion, increasing disclosure quality and supervising management. The results could encourage GAAP-adopters countries to move toward IFRS, as this research reinforces the role of IFRS in enhancing the quality of financial disclosure by offering the required information for shareholders.

Originality/value

This study is important because the potential investors should assess management earnings forecasts accuracy before they consider it when evaluating IPO firms. Also, this paper has some implications for the financial market. It is recommended that future investors pay more attention, when assessing the accuracy of management earnings forecasts, to the accounting regulations of the financial reporting along with the corporate governance mechanisms. Moreover, this study could incite French regulators to revise the AFEP-MEDEF code. Under this code, it could insist that larger and independent boards are more effective in performing their governing roles than smaller boards.

Details

Journal of Financial Reporting and Accounting, vol. 18 no. 2
Type: Research Article
ISSN: 1985-2517

Keywords

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