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1 – 10 of over 1000
Article
Publication date: 11 December 2023

Nitika Gaba and Madhumathi R.

Research on the significance of corporate social responsibility (CSR) and value creation is nascent as compared to CSR and financial performance. The concept of value is also…

Abstract

Purpose

Research on the significance of corporate social responsibility (CSR) and value creation is nascent as compared to CSR and financial performance. The concept of value is also evolving because of changing business environments, globalization and the expanded idea of CSR. Nowadays, managers expect a more quick, pragmatic approach to satisfy valid stakeholder claims while simultaneously creating competitive advantage through reputation and investor value. The paper aims to examine the impact of CSR on the market and sustainable value creation through CSR expenditure in India and the moderating role of pressure-sensitive institutional investors (PSII).

Design/methodology/approach

The study used panel data regression methodology on a sample of 1,845 non-financial Indian firms from 2015 to 2021.

Findings

CSR creates market and sustainable value for non-financial Indian firms in line with stakeholder theory. The authors find a positive moderating role of governance represented by PSII on CSR and market value creation but not on sustainable value.

Research limitations/implications

The study is based on secondary data. CSR, despite being a regulatory obligation, provided long-term benefits that increased their sustainable growth rate. The results highlight the importance given by financial markets to CSR activities. Other types of institutional investors can also be examined in future research. CSR can be embedded in the core operations of the firm, which can help in fostering a culture of sustainability and responsible business practices that benefit firms and society as a whole. Tax incentives can be provided to firms investing in CSR.

Practical implications

CSR provides long-term benefits to the firm, which enhances the goodwill and integrity of the firm in the market. The results reveal that besides capital market investors, firms are subject to the scrutiny of consumers, communities and the government as expectations rise and information spreads faster, which can have repercussions. CSR helps in meeting such expectations and the perceived value of the firms. Managers and chief executive officers (CEOs) can pay attention to the type of institutional investors like PSII, which can be formed as a part of the firm’s CSR strategy.

Social implications

The positive impact of CSR on sustainable value expresses a long-term management orientation based on the improvement of stakeholder relations and the associated environmental impacts referring to cohesion and consensus, market opportunities and strengthened reputation and image. A sustainable company involves a conscious and continuing effort in the equilibrium between contrasting stakeholders’ expectations in an attempt to optimize value creation. Tax exemption can be provided for CSR activities.

Originality/value

The authors contribute to the scant literature on CSR and value creation, especially sustainable value, as most of the prior studies are not empirical on sustainable value in the Indian context. Managers and CEOs can pay attention to the types of institutional investors like PSII, which can be formed as a part of the firm’s strategy.

Details

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

Keywords

Article
Publication date: 15 December 2023

Sahil Narang and Rudra P. Pradhan

This study aims to examine the reaction of anchor investors (AIs) to pre-IPO earnings management (EM). The authors use the unique detailed bid data from the Indian anchor…

Abstract

Purpose

This study aims to examine the reaction of anchor investors (AIs) to pre-IPO earnings management (EM). The authors use the unique detailed bid data from the Indian anchor experiment. The authors also study the reputed AIs’ EM detection ability and pricing behavior in response to pre-IPO EM.

Design/methodology/approach

The authors use unique AI bid data for 169 Indian IPO firms. Utilizing the logistic regression and Tobit regression models with industry and year-fixed effects, the authors examine the relationship between various measures of AI participation and proxies of short-term and long-term discretionary accruals.

Findings

The authors document that pre-IPO EM is positively associated with the likelihood of anchor backing but negatively related to the likelihood of reputed anchor backing. The findings indicate that AIs are misled by pre-IPO EM, but reputed AIs are not. The authors also observe that reputed AIs, compared to the non-reputed, pay less than the upper band with increasing EM. The findings are robust to using various AI measures and EM proxies.

Practical implications

The findings have significant implications for regulators in the implementation of AI concept in non-anchor markets and better implementation of policies in existing anchor settings. Findings can also be relevant for non-institutional investors in the IPO domain.

Originality/value

This is one of the few studies on institutional investors' IPO bidding behavior in response to pre-IPO EM. However, this is the first study to analyze AIs' IPO bidding behavior in response to pre-IPO EM.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 17 March 2023

Stewart Jones

This study updates the literature review of Jones (1987) published in this journal. The study pays particular attention to two important themes that have shaped the field over the…

Abstract

Purpose

This study updates the literature review of Jones (1987) published in this journal. The study pays particular attention to two important themes that have shaped the field over the past 35 years: (1) the development of a range of innovative new statistical learning methods, particularly advanced machine learning methods such as stochastic gradient boosting, adaptive boosting, random forests and deep learning, and (2) the emergence of a wide variety of bankruptcy predictor variables extending beyond traditional financial ratios, including market-based variables, earnings management proxies, auditor going concern opinions (GCOs) and corporate governance attributes. Several directions for future research are discussed.

Design/methodology/approach

This study provides a systematic review of the corporate failure literature over the past 35 years with a particular focus on the emergence of new statistical learning methodologies and predictor variables. This synthesis of the literature evaluates the strength and limitations of different modelling approaches under different circumstances and provides an overall evaluation the relative contribution of alternative predictor variables. The study aims to provide a transparent, reproducible and interpretable review of the literature. The literature review also takes a theme-centric rather than author-centric approach and focuses on structured themes that have dominated the literature since 1987.

Findings

There are several major findings of this study. First, advanced machine learning methods appear to have the most promise for future firm failure research. Not only do these methods predict significantly better than conventional models, but they also possess many appealing statistical properties. Second, there are now a much wider range of variables being used to model and predict firm failure. However, the literature needs to be interpreted with some caution given the many mixed findings. Finally, there are still a number of unresolved methodological issues arising from the Jones (1987) study that still requiring research attention.

Originality/value

The study explains the connections and derivations between a wide range of firm failure models, from simpler linear models to advanced machine learning methods such as gradient boosting, random forests, adaptive boosting and deep learning. The paper highlights the most promising models for future research, particularly in terms of their predictive power, underlying statistical properties and issues of practical implementation. The study also draws together an extensive literature on alternative predictor variables and provides insights into the role and behaviour of alternative predictor variables in firm failure research.

Details

Journal of Accounting Literature, vol. 45 no. 2
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 3 January 2023

Xiangyan Shi, Juan Wang and Xiaoyi Ren

The purpose of this paper is to investigate the effect of share pledging by controlling shareholders on earnings informativeness.

Abstract

Purpose

The purpose of this paper is to investigate the effect of share pledging by controlling shareholders on earnings informativeness.

Design/methodology/approach

Using a sample of 23,120 firm-year observations from 2003 to 2019 in China, this paper examines how share pledging by controlling shareholders affects earnings informativeness, measured by earnings persistence and earnings response coefficients.

Findings

This paper finds that share pledging by controlling shareholders makes earnings less informative. The adverse impacts are more pronounced when share pledging distorts incentives of controlling shareholders to a greater extent and when the signaling of share pledging about a firm’s weak future performance is stronger. Finally, this paper further shows that the 2018 new regulation on share pledging effectively alleviates the negative impacts of share pledging on earnings informativeness.

Originality/value

First, this paper adds to the growing literature on the economic consequence of share pledging by documenting the adverse impacts of share pledging on earnings informativeness. The literature on the economic consequence of share pledging is often mixed, which justifies further research on the impacts of share pledging on earnings informativeness. Second, this paper documents a new signaling channel through which share pledging affects earnings informativeness. Third, the finding of this paper on the 2018 new regulation on share pledging may be interesting to research agencies, such as the Chartered Financial analyst institute and Institutional Shareholder Services institute that recommend tightening regulations on share pledging.

Details

International Journal of Accounting & Information Management, vol. 31 no. 2
Type: Research Article
ISSN: 1834-7649

Keywords

Article
Publication date: 1 November 2022

Lokman Tutuncu

The last two years are characterized by record numbers of initial public offerings (IPOs), foreign investor abstinence and rising retail investor appetite in the Turkish stock…

Abstract

Purpose

The last two years are characterized by record numbers of initial public offerings (IPOs), foreign investor abstinence and rising retail investor appetite in the Turkish stock market. This study aims to investigate whether retail investor dominance coupled with foreign investor aversion has significant impact on initial and short-term returns.

Design/methodology/approach

The research covers the population of 188 companies going public at Borsa Istanbul from 2010 to the end of 2021. Three hypotheses are developed and tested by means of ordinary least squares and Tobit regressions to examine the association between investor allocations and returns. A new measure for retail investor trade size, average retail investment per capita (ARI) is utilized to explain the linkage between retail investor appetite and short-term returns. Two-stage least squares and Heckman selection regressions are employed for robustness tests to address potential endogeneity.

Findings

Pandemic IPOs provide significantly larger short-term returns than pre-pandemic IPOs measured up to one month. Underpricing during the pandemic is not significantly greater due to 10% daily price limit, which leads to a gradual release of retail investor appetite and increase in stock prices in the short term. Retail investors control 66% of the market during the pandemic compared to 35% before, while foreign institutional investor market share declines from 53% to 6%. Average retail investor number in an offering increases by 55.4-fold during the pandemic, resulting in substantially smaller allocations to the average individual investor. Greater returns during the pandemic are associated with smaller retail investment per capita, while domestic institutional investment is associated with lower returns as typically expected from institutional investors, although its significance disappears after controlling for potential endogeneity.

Research limitations/implications

This study investigates returns up to one month. To better understand whether short-termism of retail investors and recent foreign investor aversion have detrimental effect on companies, and on the market as a whole, longer-term studies are needed. This is not possible at the current stage since not enough time has passed.

Practical implications

This research is relevant to emerging market investors and companies due to the ongoing foreign investor aversion and fast-changing market conditions. The research cautions market participants against the short-termism of retail investors and urges policymakers to regain investors with longer investment horizons.

Social implications

Many newcomer retail investors are in the stock market due to lack of more profitable alternatives in Turkey. Although their participation is accompanied by larger short-term returns for the time being, the current momentum is unlikely to last long as the pandemic ends, and interest rates around the world begin to be raised. The study urges small investors to invest in a more informed manner and aim for longer time horizons, as it may not be possible to make a quick profit in the stock markets in the near future.

Originality/value

This is the first study to investigate changing investor profile in emerging markets and its impact on returns following pandemic declaration. The question is important because the investor composition affects the investment horizon in the market.

Details

China Finance Review International, vol. 13 no. 3
Type: Research Article
ISSN: 2044-1398

Keywords

Article
Publication date: 18 February 2022

Fotini Economou, Konstantinos Gavriilidis, Bartosz Gebka and Vasileios Kallinterakis

The purpose of this paper is to comprehensively review a large and heterogeneous body of academic literature on investors' feedback trading, one of the most popular trading…

Abstract

Purpose

The purpose of this paper is to comprehensively review a large and heterogeneous body of academic literature on investors' feedback trading, one of the most popular trading patterns observed historically in financial markets. Specifically, the authors aim to synthesize the diverse theoretical approaches to feedback trading in order to provide a detailed discussion of its various determinants, and to systematically review the empirical literature across various asset classes to gauge whether their feedback trading entails discernible patterns and the determinants that motivate them.

Design/methodology/approach

Given the high degree of heterogeneity of both theoretical and empirical approaches, the authors adopt a semi-systematic type of approach to review the feedback trading literature, inspired by the RAMESES protocol for meta-narrative reviews. The final sample consists of 243 papers covering diverse asset classes, investor types and geographies.

Findings

The authors find feedback trading to be very widely observed over time and across markets internationally. Institutional investors engage in feedback trading in a herd-like manner, and most noticeably in small domestic stocks and emerging markets. Regulatory changes and financial crises affect the intensity of their feedback trades. Retail investors are mostly contrarian and underperform their institutional counterparts, while the latter's trades can be often motivated by market sentiment.

Originality/value

The authors provide a detailed overview of various possible theoretical determinants, both behavioural and non-behavioural, of feedback trading, as well as a comprehensive overview and synthesis of the empirical literature. The authors also propose a series of possible directions for future research.

Details

Review of Behavioral Finance, vol. 15 no. 4
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 15 June 2022

Jason Cavich

Following the traditions of stakeholder salience theory, this paper aims to contend that some institutional investor activists and tactics have more power, legitimacy and urgency…

Abstract

Purpose

Following the traditions of stakeholder salience theory, this paper aims to contend that some institutional investor activists and tactics have more power, legitimacy and urgency than others.

Design/methodology/approach

The author undertakes an empirical test of a saliency table looking at the effects of institutional investor heterogeneity on portfolio firm responses using ordinal logistic regression.

Findings

This study found heterogeneity for institutional investor type to drive firm responses but not tactic type raising the importance of the attributes of each type of investor activist. The author found a rank ordering of public pension plans, hedge funds and then private multiemployer funds in saliency to portfolio firms. In addition, the use of proxy-based tactics did not help or hurt each investor type. Both findings challenge prior empirical work.

Originality/value

The rank ordering based upon the heterogeneity of institutional investor activists and their tactical interactions are tested providing empirical evidence of the most influential activist investors and tactics in one study, which is rare in the literature.

Details

Society and Business Review, vol. 19 no. 1
Type: Research Article
ISSN: 1746-5680

Keywords

Article
Publication date: 12 January 2024

Adel Ali Al-Qadasi

Institutional investors are major shareholders in publicly traded firms and play crucial roles in the financial and governance aspects of these firms. Despite their importance…

Abstract

Purpose

Institutional investors are major shareholders in publicly traded firms and play crucial roles in the financial and governance aspects of these firms. Despite their importance, little is known about their role in internal auditing. This study aims to fill this gap by investigating the relationship between institutional investors’ ownership and investment in the internal audit function (IAF).

Design/methodology/approach

The study uses ordinary least squares regressions with two-way cluster-robust standard errors (firm and year) to estimate the relationship between institutional investors’ ownership and investment in IAF for Malaysian listed firms between 2009 and 2020.

Findings

The findings show that companies with higher levels of institutional ownership invest more in IAF, suggesting that institutional investors can effectively monitor managers due to their large holdings. Moreover, both transient and dedicated institutional investors are more likely to invest in IAF.

Originality/value

The results highlight the importance of institutional investors as a significant determinant of investment in IAF, which can aid regulators and managers in understanding the institutional investors’ role in governing and optimizing the efficient use of a firm’s resources. The findings also provide insight into institutional investors’ behavior regarding monitoring systems, which may inspire regulators and policymakers to consider increasing institutional investors’ participation to enhance governance structures.

Details

Managerial Auditing Journal, vol. 39 no. 2
Type: Research Article
ISSN: 0268-6902

Keywords

Abstract

Details

Responsible Investment Around the World: Finance after the Great Reset
Type: Book
ISBN: 978-1-80382-851-0

Article
Publication date: 8 February 2023

Rafał Wolski, Monika Bolek, Jerzy Gajdka, Janusz Brzeszczyński and Ali M. Kutan

This study aims to answer the question whether investment funds managers exhibit behavioural biases in their investment decisions. Furthermore, it investigates if fund managers…

Abstract

Purpose

This study aims to answer the question whether investment funds managers exhibit behavioural biases in their investment decisions. Furthermore, it investigates if fund managers, as a group of institutional investors, make decisions in response to central bank’s communication as well as other information in relation to various behavioural inclinations.

Design/methodology/approach

A comprehensive study was conducted based on a questionnaire, which is composed of three main parts exploring: (1) general information about the funds under the management of the surveyed group of fund managers, (2) factors that influence the investment process with an emphasis on the National Bank of Poland communication and (3) behavioural inclinations of the surveyed group. Cronbach’s alpha statistic was applied for measuring the reliability of the survey questionnaire and then chi-squared test was used to investigate the relationships between the answers provided in the survey.

Findings

The central bank’s communication matters for investors, but its impact on their decisions appears to be only moderate. Interest rates were found to be the most important announcements for investment fund managers. The stock market was the most popular market segment where the investments were made. The ultra-short time horizon played no, or only small, role in the surveyed fund managers’ decisions as most of them invested in a longer horizon covering 1 to 5 years. Moreover, most respondents declared that they considered in their decisions the information about market expectations published in the media. Finally, majority of the fund managers manifested limited rationality and were subject to behavioural biases, but the decisions and behavioural inclinations were independent and, in most cases, they did not influence each other.

Practical implications

The results reported in this study can be used in practice to better understand and to improve the fund managers’ decision-making processes.

Originality/value

Apart from the commonly tested behavioural biases in the group of institutional investors in the existing literature, such as loss aversion, disposition effect or overconfidence, this paper also focuses on the less intensively analysed behavioural inclinations, i.e. framing, illusion of the control, representativeness, sunk cost effect and fast thinking. The originality of this study further lies in the way the research was conducted through interviews with fund managers, who were found to be subject to behavioural biases, although those behavioural inclinations did not influence their investment decisions. This finding indicates that professionalism and collectivism in the group of institutional investors protect them from irrationality.

Details

Qualitative Research in Financial Markets, vol. 15 no. 5
Type: Research Article
ISSN: 1755-4179

Keywords

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