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Article

Nacasius U. Ujah, Jorge Brusa and Collins E. Okafor

The purpose of this paper is to examine the influence of bank structure and earnings management on bank performance in international markets. Specifically, the authors…

Abstract

Purpose

The purpose of this paper is to examine the influence of bank structure and earnings management on bank performance in international markets. Specifically, the authors empirically examine non-foreign banks in the following emerging countries: Brazil, China, India, Mexico, Nigeria, Russia, and South Africa.

Design/methodology/approach

A review of loan loss portfolio and bank’s power structure is examined to formulate testable conjectures. The authors used data collected from Bankscope for the aforementioned countries. The data range is from 1997 to 2009.

Findings

The results suggest that: first, bank market structure and earnings management have a significantly negative influence on bank performance. Second, the negative influence is more pronounced in banks with higher level of concentration and earnings management.

Practical implications

The evidence suggest that banks with monopoly power have a greater incentive to establish lending relationships, and monopoly enhancing regulation in the financial sector at the time of the Civil War contributed to industrialization in the USA. The evidence in the emerging market suggest that monopoly power (bank structure) and propensity to manage earnings leads to lower bank performance. As such, helping bankers in understanding the effect of their bank structure in relation to their performance.

Originality/value

To the author’s knowledge, this is the first study that explores the determinants of managed earnings and bank structure on bank performance in emerging markets.

Details

Managerial Finance, vol. 43 no. 7
Type: Research Article
ISSN: 0307-4358

Keywords

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Article

Jorge Brusa, Rodrigo Hernandez and Pu Liu

The purpose of this paper is to examine whether the seasonal anomaly known as the reverse weekend effect detected at index level can also be observed at individual stock level.

Abstract

Purpose

The purpose of this paper is to examine whether the seasonal anomaly known as the reverse weekend effect detected at index level can also be observed at individual stock level.

Design/methodology/approach

This paper's methodology is based on the model first developed by Connolly and then employed by Chang, Pinegar, and Ravichandran in which returns are regressed against the dummy variable for Monday. In addition, the conditional variance is also included into the mean equation following Engle, Lilien, and Robins. Given the increasing evidence that equity returns are conditionally heteroskedastic, the paper includes in the conditional variance the lag of the squared residual from the mean equation (i.e. autoregressive conditional heteroskedasticity term introduced by Engle) and the previous period's forecast variance (i.e. the generalized autoregressive conditional heteroskedasticity term introduced by Bollerslev). Also, the paper controls for the different impact of good and bad news on the conditional variance following Glosten, Jaganathan, and Runkle.

Findings

It is found that the anomaly is widely distributed among large firms, not just confined to a few firms. The finding suggests that the anomaly at the index level is not driven by the extreme returns of a few firms. The paper also finds that the anomaly at the firm level is not evenly distributed across the weeks of the month. Furthermore, trading volume and illiquidity of individual firms can only partially explain the seasonal anomaly.

Originality/value

This paper extends the study of the reverse weekend effect in individual firms.

Details

Managerial Finance, vol. 37 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

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Article

Jorge Brusa, Wayne L. Lee and Carole Shook

The purpose of this paper is to examine the effects of golden parachutes on shareholders' wealth when the measure is used as a compensation device instead of a takeover…

Abstract

Purpose

The purpose of this paper is to examine the effects of golden parachutes on shareholders' wealth when the measure is used as a compensation device instead of a takeover defense. The results show that the adoption of the measure has a negative influence on shareholders' wealth. These negative results are more prevalent for firms with an operating performance above their industry peers and are significantly influenced by the previous performance of the firm and the size of the golden parachute.

Design/methodology/approach

Event study and regression analysis.

Findings

The results show that the adoption of the measure has a negative influence on shareholders' wealth. These negative results are more prevalent for firms with an operating performance above their industry peers and are significantly influenced by the previous performance of the firm and the size of the golden parachute.

Practical implications

Investors will have more information about the reaction of stock markets at the announcement of golden parachutes.

Originality/value

The paper presents a new evaluation of the adoption of golden parachutes on shareholders' wealth when the measure is used as a compensation device instead of a takeover defense.

Details

Managerial Finance, vol. 35 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

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