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Article
Publication date: 18 January 2021

Vera Palea

The purpose of this paper is to discuss whether fair value accounting fits for long-term equity investments, which are considered key to retool economies according to…

Abstract

Purpose

The purpose of this paper is to discuss whether fair value accounting fits for long-term equity investments, which are considered key to retool economies according to sustainability criteria. In doing so, the paper focuses on the European Union and addresses the European Commission’s (2018a) concern that current accounting rules are unfit for achieving the United Nations Sustainable Development goals and the targets of the Paris Agreement on climate change.

Design/methodology/approach

The paper grounds in a wide literature review on the effects of fair value accounting on investors’ asset allocation strategies. By critically integrating literature on the notion of long-term investment with theories and possible accounting approaches, the paper provides implications for a revision of the current measurement system for long-term equity investments.

Findings

The literature review supports the view that fair value accounting has played a role in discouraging equity investments over time, thus leaving economies with poorer risk-sharing and weaker long-term investments. The paper contributes to the debate on alternative measurement systems by suggesting possible solutions in relation to controversies arising from empirical evidence.

Originality/value

Reorienting economies according to sustainability criteria represents an urgent issue which requires prompt and policy-oriented responses. Accordingly, this paper offers insights and guidelines that can help policymakers revise current accounting rules for long-term equity investments in line with sustainable development objectives.

Details

Meditari Accountancy Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 12 July 2021

Ali Alipour

This paper aims to compare the future orientation (FO) society practices dimension of the Globe model with Hofstede's long-term orientation (LTO) by testing their causal…

Abstract

Purpose

This paper aims to compare the future orientation (FO) society practices dimension of the Globe model with Hofstede's long-term orientation (LTO) by testing their causal effects on three firm-level variables: cash holdings, long-term investments and acquisitions. In doing so, this research challenges the already taken-for-granted assumption in the empirical research that the two dimensions are equivalent.

Design/methodology/approach

Hierarchical linear modeling (HLM) was used to test the hypotheses on 7,065 firms across 49 countries between 2000 and 2017.

Findings

The findings show that the causal impacts of FO society practices and LTO on a given construct are not consistent. Although LTO increases cash holdings, the impact of FO society practices on this variable is insignificant. Additionally, unlike FO society practices, which significantly increases long-term investments and acquisitions, LTO does not influence long-term investments and decreases acquisitions.

Originality/value

This study is valuable since it addresses the confusion surrounding the similarities and differences between FO society practices and LTO. Despite the dissimilarity also emphasized by Globe, Hofstede claims that they are equivalent, and the great majority of the empirical literature has assumed them to be equivalent in their analyses. Addressing this confusion, this research provides further empirical evidence that these two dimensions are dissimilar. The additional important contribution of the study is theorizing and examining the impact of FO society practices and LTO on the firm-level outcomes that reflect their temporal orientation (i.e. long-term investments and acquisitions), which is surprisingly neglected in the literature.

Details

Cross Cultural & Strategic Management, vol. 28 no. 4
Type: Research Article
ISSN: 2059-5794

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Article
Publication date: 15 June 2020

Maqsood Ahmad

The purpose of this article is to clarify the mechanism by which underconfidence heuristic-driven bias influences the short-term and long-term investment decisions of…

Abstract

Purpose

The purpose of this article is to clarify the mechanism by which underconfidence heuristic-driven bias influences the short-term and long-term investment decisions of individual investors, actively trading on the Pakistan Stock Exchange.

Design/methodology/approach

Investors' underconfidence has been measured using a questionnaire, comprising numerous items, including indicators of short-term and long-term investment decision. In order to establish the influence of underconfidence on the investment decisions in both the short and long run, a 5-point Likert scale questionnaire has been used to collect data from the sample of 203 investors. The collected data were analyzed using SPSS and AMOS graphics software. Hypotheses were tested using structural equation modeling technique.

Findings

This article provides further empirical insights into the relationship between heuristic-driven biases and investment decision-making in the short and long run. The results suggest that underconfidence bias has a markedly negative influence on the short-term and long-term decisions made by investors in developing markets. It means that heuristic-driven biases can impair the quality of both short-term and long-term investment decisions.

Practical implications

This article encourages investors to avoid relying on cognitive heuristics, namely, underconfidence or their feelings when making short-term and long-term investment strategies. It provides awareness and understanding of heuristic-driven biases in investment management, which could be very useful for finance practitioners' such as investor who plays at the stock exchange, a portfolio manager, a financial strategist/advisor in an investment firm, a financial planner, an investment banker, a trader/broker at the stock exchange or a financial analyst. But most importantly, the term also includes all those persons who manage corporate entities and are responsible for making its financial management strategies. They can improve the quality of their decision-making by recognizing their behavioral biases and errors of judgment, to which we are all prone, resulting in more appropriate investment strategies.

Originality/value

The current study is the first to focus on links between underconfidence bias and short-term and long-term investment decision-making. This article enhanced the understanding of the role that heuristic-driven bias plays in the investment management and more importantly, it went some way toward enhancing understanding of behavioral aspects and their influence on the investment decision-making in an emerging market. It also adds to the literature in the area of behavioral finance specifically the role of heuristics in investment strategies; this field is in its initial stage, even in developed countries, while, in developing countries, little work has been done.

Details

Management Decision, vol. 59 no. 3
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 22 February 2021

Imran Khan, Mustafa Afeef, Shahid Jan and Anjum Ihsan

The purpose of this paper is to investigate the effect of heuristic biases, namely, availability bias and representativeness bias on investors’ investment decisions in the…

Abstract

Purpose

The purpose of this paper is to investigate the effect of heuristic biases, namely, availability bias and representativeness bias on investors’ investment decisions in the Pakistan stock exchange, as well as the moderating role of long-term orientation.

Design/methodology/approach

Using a structured questionnaire, a total of 374 responses have been collected from individual investors trading in PSX. The relationship was tested by applying the partial least square structural equation model using SmartPLS 3.2.2. Further, Henseler and Chin’s (2010) product indicator approach for moderation analysis was applied to the data set.

Findings

The results revealed that availability bias and representativeness bias have a significant and positive influence on the investment decisions of investors. Furthermore, a significant moderating effect of long term orientation on the effect of representativeness bias on investment decision is observed. This suggests that investors’ long term orientation weaken the effect of representativeness bias on investment decision. However, no significant moderating effect was observed for availability bias.

Originality/value

The paper provides novel insights on the role of heuristic-driven biases on the investment decisions of individual investors in the stock market. Particularly, it enhanced the understanding of behavioral aspects of investment decision-making in an emerging market.

Details

Qualitative Research in Financial Markets, vol. 13 no. 2
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 17 September 2019

Xiaoqiong Wang and Siqi Wei

This paper aims to examine the monitoring role of institutional investors in corporate decision-making by classifying financial institutions based on geographical…

Abstract

Purpose

This paper aims to examine the monitoring role of institutional investors in corporate decision-making by classifying financial institutions based on geographical proximity and investment horizon from 1980 to 2014.

Design/methodology/approach

By using unique data sets on firm and institution location and investor horizon measure (Gaspar et al., 2005), the authors categorize institutional investors into six proximity-horizon classifications. This method captures the heterogeneity of investors. The corporate decisions assessed include firm investment, financing, payout policy, misbehavior, takeover defenses and profitability.

Findings

Both geographical proximity and investment horizon are directly related to institutional investors' monitoring cost. As a result, the effectiveness of institutional monitoring may vary based on geographical proximity and investment horizon. This paper collectively examines both dimensions of financial institutions and provides evidence that institutional investors present different preferences for corporate policies. Given stronger information advantage, both local and nonlocal investors that are long-term oriented fulfill better roles in monitoring corporate decisions but from different perspectives.

Research limitations/implications

Different from previous studies that treat institutional investors homogeneously, this paper provides empirical support that investors are indeed different in influencing firm policies.

Originality/value

To the authors’ best knowledge, this is the first study that classifies investors based on two dimensions, geographical proximity and investment horizon, and examines their joint effects on corporate policies. This proximity-horizon classification allows the authors to better disentangle the effects of institutional ownership structure on the monitoring outcomes.

Details

Studies in Economics and Finance, vol. 36 no. 3
Type: Research Article
ISSN: 1086-7376

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Book part
Publication date: 1 November 2016

Abstract

Details

Governing for the Future: Designing Democratic Institutions for a Better Tomorrow
Type: Book
ISBN: 978-1-78635-056-5

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Article
Publication date: 27 May 2014

Ridzwana Mohd Said, Maliah Sulaiman and Nik Nazli Nik Ahmad

The present study aims to examine the effect of environmental information on fund managers’ investment and bank officers’ lending decisions. Specifically, it looks at the…

Abstract

Purpose

The present study aims to examine the effect of environmental information on fund managers’ investment and bank officers’ lending decisions. Specifically, it looks at the effect of qualitative and quantitative forms of environmental information to their decisions.

Design/methodology/approach

Drawing from the normative pressure of institutional theory, the study seeks to identify the extent to which education and professional networks influence investment and lending decisions of fund managers and bank officers. A laboratory experiment was used to collect the data. Twenty-three subjects volunteered in each experimental group, totalling 69 responses from fund managers and bank officers. The subjects were Master of Administration (MBA) students in universities located in Selangor and Kuala Lumpur, Malaysia, to proxy for real practitioners.

Findings

The results reveal that fund managers and bank officers do not incorporate environmental information in their investment and lending decisions. Thus, the normative pressure of institutional theory is supported.

Research limitations/implications

Acknowledging the limitations of data generalisability using student surrogates, future research utilising real practitioners is proposed.

Practical implications

Recognising the importance of environmental information to be incorporated in investment and lending decisions of these major stakeholders, the results suggest universities, professional bodies and companies need to raise awareness concerning the importance and relevance of environmental information in various decisions.

Originality/value

The study offers some preliminary insights into the use of environmental information by fund managers and bank officers in Malaysia.

Details

Social Responsibility Journal, vol. 10 no. 2
Type: Research Article
ISSN: 1747-1117

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Article
Publication date: 22 December 2020

Ahsan Akbar, Xinfeng Jiang and Minhas Akbar

The present study aims to investigate the impact of working capital management (WCM) practices on the investment and financing patterns of listed nonfinancial companies in…

Abstract

Purpose

The present study aims to investigate the impact of working capital management (WCM) practices on the investment and financing patterns of listed nonfinancial companies in Pakistan for a span of 10 years.

Design/methodology/approach

The study is based on secondary financial data of 354 listed nonfinancial Pakistani firms during the period of 2005–2014. The two-step generalized method of moment (GMM) regression estimation technique is employed to ensure the robustness of results.

Findings

Empirical testing reveals that: excessive funds tied up in working capital have a negative impact on the investment portfolio of sample firms. Besides, a negative relationship between change in fixed assets and excess net working capital posits that, eventually, firms use idle resources tied up in short-lived assets to boost their investment activities. Furthermore, larger working capital levels were associated with higher leverage ratio which indicates that firms with inefficient WCM policies have to rely heavily on long-term debt to meet their short-term financing requirements. Additional results indicate that firms that take more time to sell inventory and convert receivables to cash, make more use of debt. Results of cash management models illustrate that cash-rich firms have lower leverage levels which signal the strong financial health and internal revenue generation capability of such firms.

Originality/value

There is a dearth of empirical studies that examine the implications of WCM decisions on a firm's capital structure. Besides, these studies are only confined to how a WCM policy influences the long-term investment activities of a firm. The research contributes to the extant literature by empirically revealing a link between the WCM practices and the firm's long-range investment and financing patterns. Hence, financial managers shall account for the impact of their short-term financial management decisions on the capital structure of the firm.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

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Article
Publication date: 14 November 2018

Samra Chaudary

The paper takes a behavioral approach by making use of the prospect theory to unveil the impact of salience on short-term and long-term investment decisions. This paper…

Abstract

Purpose

The paper takes a behavioral approach by making use of the prospect theory to unveil the impact of salience on short-term and long-term investment decisions. This paper aims to investigate the group differences for two types of investors’ groups, i.e. individual investors and professional investors.

Design/methodology/approach

The study uses partial least square-based structural equation modeling technique, measurement invariance test and multigroup analysis test on a unique data set of 277 active equity traders which included professional money managers and individual investors.

Findings

Results showed that salience has a significant positive impact on both short-term and long-term investment decisions. The impact was almost 1.5 times higher for long-term investment decision as compared to short-term decision. Furthermore, multigroup analysis revealed that the two groups (individual investors and professional investors) were statistically significantly different from each other.

Research limitations/implications

The study has implications for financial regulators, money managers and individual investors as it was found that individual investors suffer more with salience heuristic and may end up with sub-optimal portfolios due to inefficient diversification. Thus, investors should be cautious in fully relying on salience and avoid such bias to improve investment returns.

Practical implications

The study concludes with a discussion of policy and regulatory implications on how to minimize salience bias to achieve optimum and diversified portfolios.

Originality/value

The study has significantly contributed to the growing body of applied behavioral research in the discipline of finance.

Details

Kybernetes, vol. 48 no. 8
Type: Research Article
ISSN: 0368-492X

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Article
Publication date: 9 August 2021

Terence Y.M. Lam and Calvin Chen

Higher education is now one of the biggest export sectors in the Australian economy. Purpose-built student accommodation (PBSA) has emerged as a new asset class in…

Abstract

Purpose

Higher education is now one of the biggest export sectors in the Australian economy. Purpose-built student accommodation (PBSA) has emerged as a new asset class in Australia, as demanded by international and domestic students. As of 25 October 2020, there were still approximately 400,000 onshore international students and 135,000 offshore students despite the COVID pandemic. Various universities remain optimistic about their returns to Australia. Active PBSA investors remain focussed on the longer-term fundamentals and return of the Australian student market. This study aims to examine the investment potential of the PBSA sector in Sydney.

Design/methodology/approach

The triangulation method was used to confirm whether the literature findings on the high potential of PBSA investment apply to the context of the Sydney market. Qualitative expert interviews with two directors of major international real estate consulting firms, one private family trust investor and one director of a development company, were conducted in tandem with a qualitative multiple-case study of three major PBSAs via interviews with their building managers. These selected participants broadly covered the stakeholder settings across the industry.

Findings

A positive and solid trend of demand and rental growth was confirmed by the expert interviews and the performance of PBSA cases in Sydney, as supported by the growing number of international students in the longer term. To enhance the rental growth, and hence total returns, self-contained studio-type accommodation with quality facilities and social support should be provided, and operators should consistently track the needs of students and provide them with a better living experience.

Research limitations/implications

PBSA is a new asset class and there have been limited supply and sale transactions to enable detailed examination of the capital growth, so this research has focussed on rental growth. When the PBSA market becomes more mature, further research should be conducted to analyse the strength of this emerging investment’s capital growth and total returns.

Practical implications

In the longer term, PBSA is a low-risk property investment with potentially high returns in Sydney. Institutional investors and real estate consultants can make informed decisions to build up the property portfolio. PBSA is capital-intensive and has low liquidity, so this type of investment is particularly suitable for institutional investors.

Social implications

Universities should provide more suitable PBSA accommodations by themselves or partnerships with private developers. Planning authorities should include more PBSA residential uses in the land zoning plan. This is to provide more affordable accommodations to meet the demand of cost-sensitive students.

Originality/value

This research confirms PBSA is a low-risk investment with potentially high returns within the context of the Sydney market. The findings will benefit the major stakeholders of PBSA in their investment decisions, including investors, developers and universities.

Details

International Journal of Housing Markets and Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8270

Keywords

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