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1 – 10 of 387Eun Jung Lee, Sungmin Kim and Yongwon Jang
This paper examines whether long-term foreign investors may force firms to use a costly dividend to mitigate inefficient managerial behavior. The authors also hypothesize that the…
Abstract
This paper examines whether long-term foreign investors may force firms to use a costly dividend to mitigate inefficient managerial behavior. The authors also hypothesize that the relation between foreign investment horizons and payout policy depends upon the extent of the corporate governance. The authors find that firms held by long-term foreign investors make dividend more often in the subsequent years. The authors also find that foreign investors with long-term investments do not cause firms to pay dividends when firms have strong corporate governance. It suggests that long-term foreign investors serve as a substitute for strong corporate governance with respect to controlling agency conflicts.
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Murad Harasheh, Alessandro Capocchi and Andrea Amaduzzi
There is still an ongoing debate on the value relevance of capital structure and its determinants. Recently the issue has been explored in family firms after being explored in…
Abstract
Purpose
There is still an ongoing debate on the value relevance of capital structure and its determinants. Recently the issue has been explored in family firms after being explored in mature firms. This paper investigates the role of institutional investors and the firm's innovation activity in influencing the firm's decision and ability to acquire debt capital.
Design/methodology/approach
A large sample of 700 privately-held family firms in Italy from 2010 to 2019. Two analysis techniques are used: panel analysis and path analysis. The value of debt and the debt ratio are used as leverage measures. The value of patent (as a proxy for innovation) and institutional investor are the explanatory variables.
Findings
The results show that institutional investors have no relationship with financial leverage measures except when controlling for an interaction variable (Institutional investors × Lombardy region). The patent value is positively correlated with debt; however, the ratio patent-to-asset is negatively related to financial leverage indicating higher risk exposure. The nonlinearity test demonstrates a turning point when the relationship between patent value and debt inverts.
Practical implications
Firms should monitor their innovation activity since excessive innovation increases risk exposure and affects financing opportunities and value. The involvement of institutional investors does not always enhance value.
Originality/value
Existing literature focuses separately on family firm innovations and financial leverage as outcome variables, emphasizing the role of institutional investors in both fields by adopting agency theory and socioemotional wealth framework. In this study, the authors go further by merging both relationships, investigating the dynamics of the institutional-family firm innovation relationship in influencing the firm's capital structure. The authors contribute to the ongoing debate by providing original findings on capital structure, governance and innovation, supported by rigorous methods to enhance family firms' decision-making.
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Luigi Nasta, Barbara Sveva Magnanelli and Mirella Ciaburri
Based on stakeholder, agency and institutional theory, this study aims to examine the role of institutional ownership in the relationship between environmental, social and…
Abstract
Purpose
Based on stakeholder, agency and institutional theory, this study aims to examine the role of institutional ownership in the relationship between environmental, social and governance practices and CEO compensation.
Design/methodology/approach
Utilizing a fixed-effect panel regression analysis, this research utilized a panel data approach, analyzing data spanning from 2014 to 2021, focusing on US companies listed on the S&P500 stock market index. The dataset encompassed 219 companies, leading to a total of 1,533 observations.
Findings
The analysis identified that environmental scores significantly impact CEO equity-linked compensation, unlike social and governance scores. Additionally, it was found that institutional ownership acts as a moderating factor in the relationship between the environmental score and CEO equity-linked compensation, as well as the association between the social score and CEO equity-linked compensation. Interestingly, the direction of these moderating effects varied between the two relationships, suggesting a nuanced role of institutional ownership.
Originality/value
This research makes a unique contribution to the field of corporate governance by exploring the relatively understudied area of institutional ownership's influence on the ESG practices–CEO compensation nexus.
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Rangapriya Saivasan and Madhavi Lokhande
Investor risk perception is a personalized judgement on the uncertainty of returns pertaining to a financial instrument. This study identifies key psychological and demographic…
Abstract
Purpose
Investor risk perception is a personalized judgement on the uncertainty of returns pertaining to a financial instrument. This study identifies key psychological and demographic factors that influence risk perception. It also unravels the complex relationship between demographic attributes and investor's risk attitude towards equity investment.
Design/methodology/approach
Exploratory factor analysis is used to identify factors that define investor risk perception. Multiple regression is used to assess the relationship between demographic traits and factor groups. Kruskal–Wallis test is used to ascertain whether the factors extracted differ across demographic categories. A risk perception framework based on these findings is developed to provide deeper insight.
Findings
There is evidence of the relationship and influence of demographic factors on risk propensity and behavioural bias. From this study, it is apparent that return expectation, time horizon and loss aversion, which define the risk propensity construct, vary significantly based on demographic traits. Familiarity, overconfidence, anchoring and experiential biases which define the behavioural bias construct differ across demographic categories. These factors influence the risk perception of an individual with respect to equity investments.
Research limitations/implications
The reference for the framework of this study is limited as there has been no precedence of similar work in academia.
Practical implications
This paper establishes that information seekers make rational decisions. The paper iterates the need for portfolio managers to develop and align investment strategies after evaluation of investors' risk by including these behavioural factors, this can particularly be advantageous during extreme volatility in markets that concedes the possibility of irrational decision making.
Social implications
This study highlights that regulators need to acknowledge the investor's affective, cognitive and demographic impact on equity markets and align risk control measures that are conducive to market evolution. It also creates awareness among market participants that psychological factors and behavioural biases can have an impact on investment decisions.
Originality/value
This is the only study that looks at a three-dimensional perspective of the investor risk perception framework. The study presents the relationship between risk propensity, behavioural bias and demographic factors in the backdrop of “information” being the mediating variable. This paper covers five characteristics of risk propensity and eight behavioural biases, such a vast coverage has not been attempted within the academic realm earlier with the aforesaid perspective.
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This article investigates the effect of the performance evaluation period on the long-term investment portfolio choice and the agency problem of outsourced investments. Though…
Abstract
This article investigates the effect of the performance evaluation period on the long-term investment portfolio choice and the agency problem of outsourced investments. Though investors with the prospect utility are required to raise the portfolio weight on risky assets such as stocks for a long investment horizon, institutional investors and professional fund managers cannot help lowering the portfolio weight on risky assets to minimize the loss and to avoid disappointing clients with a short evaluation period. We find empirical evidence in the Korean capital market that stocks and bonds are indifferent to investors with the prospect utility for an evaluation period with 16 months and the optimal portfolio weight of stocks and bonds is 30% to 70%. Therefore there exists the agency problem between investors (principal) and managers (agent) due to frequent performance evaluations, which is able to explain current excessive investment in fixed income markets of most national pension funds. Our result implies that we need to consider extending the evaluation period of the investment performance to achieve the goal of asset and liability management (ALM) of national long-term funds in this low-interest-rate environment.
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Norah Almubarak and Dimo Dimov
This paper aims to adopt a practice-theory, “site ontology” perspective to understand how venture capitalists (VCs) add value to their portfolio companies (PCs).
Abstract
Purpose
This paper aims to adopt a practice-theory, “site ontology” perspective to understand how venture capitalists (VCs) add value to their portfolio companies (PCs).
Design/methodology/approach
The empirical research involves a field ethnographic study of a VC firm in Dubai, focused on revealing what constitutes value and what VCs do to add this value to their PCs.
Findings
Value adding is a profoundly social, embedded process interconnected with other ecosystem actors, investment practices and organizations. The value adding threads of VC activity are part of a holistic configuration of practices that span the investment lifecycle and different levels within the firm.
Originality/value
This research contributes a rich account of the social, symbolic nature of VC activity, depicting the everyday activities that comprise value adding practices. It is among the first to introduce practice theory to the VC context and open up a new conversation about its social ontology.
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Theresia Harrer and Robyn Owen
The purpose of this paper is to explore why, despite the development of a hybrid investing logic, funding problems are so persistent for early-stage Cleantech ventures…
Abstract
Purpose
The purpose of this paper is to explore why, despite the development of a hybrid investing logic, funding problems are so persistent for early-stage Cleantech ventures (“Cleantechs”). An institutional logics lens is adopted to analyze how key actors' perceptions and communications of the Cleantech value proposition shape information asymmetries (IAs).
Design/methodology/approach
A mixed methods approach draws on 82 Cleantech pitch decks and 31 investment guidance documents, and insights from interviews with 42 key informants and nine Cleantech CEOs and their investors.
Findings
IAs persist, first of all, because key investor and entrepreneurial actors combine different goals in the hybrid Cleantech value proposition. Interestingly, the analysis of Environmental Performance Indicators (EPIs) as a critical communication tool reveals a further mismatch in how actors actually combine logics. The authors ultimately identify three emergent actor roles – traditional laggard, developer and boundary spanner – that present a framework of how the three most influential actor groups develop EPIs and via that a hybrid Cleantech financing logic to overcome IAs.
Originality/value
The paper enhances the entrepreneurial finance literature primarily by showing that in contexts of hybrid investing a more nuanced understanding of institutional logics in terms of ends and means is critical to overcome IAs. While prior works highlight goal incompatibilities, the findings here suggest that the (in-)compatibility of goals as well as EPI choices of the same actors is likely to be the key explanandum for the stickiness of IAs and the funding gap. The novel emerging role framework offers additional theoretical, policy and practical advances for hybrid logic development.
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The positive illiquidity–return relationship (so-called liquidity premium) is a well-established pattern in international developed stock markets. The magnitude of liquidity…
Abstract
Purpose
The positive illiquidity–return relationship (so-called liquidity premium) is a well-established pattern in international developed stock markets. The magnitude of liquidity premium should increase with market illiquidity. Existing studies, however, do not confirm this conjecture with regard to frontier markets. This may result from applying different approaches to the investors' holding period. The paper aims to identify the role of the holding period in shaping the illiquidity–return relationship in emerging and frontier stock markets, which are arguably considered illiquid.
Design/methodology/approach
The authors utilise the data on stocks listed on fourteen exchanges in Central and Eastern Europe. The authors regress stock returns on liquidity measures variously transformed to reflect the clientele effect in a liquidity–return relationship.
Findings
The authors show that the investors' holding period moderates the illiquidity–return relationship in CEE markets and also show that the liquidity premium in these markets is statistically and economically relevant.
Practical implications
The findings may be of great interest to investors, companies and regulators. Investors and companies should take liquidity into account when making decisions; regulators should employ liquidity-enhancing actions to decrease companies' cost of capital and expand firms' investment opportunities, which will improve growth perspectives for the entire economy.
Originality/value
These findings enrich the understanding of the role that the investors' holding period plays in the illiquidity–return relationship in CEE markets. To the best knowledge, this is the first study which investigates the effect of holding period on liquidity premium in emerging and frontier markets.
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This research mainly intends to ascertain the stimulus of investor investment tendencies on the amount of capital investment in the share market.
Abstract
Purpose
This research mainly intends to ascertain the stimulus of investor investment tendencies on the amount of capital investment in the share market.
Design/methodology/approach
Utilizing a sample of 477 individual investors who actively trade on the Bangladesh capital market, this empirical study was conducted. The objective of this examination is to ascertain the investment trading behavior of retail investors in the Bangladesh capital market using multiple regression, hypothesis testing and correlation analysis.
Findings
The coefficients of market categories, preferred share price ranges and investment source reveal negative predictor correlations; all predictors are statistically significant, with the exception of investment source. Positive predictive correlations exist between investor category, financial literacy degree, investment duration, emotional tolerance level, risk consideration, investment monitoring activities, internal sentiment and correct investment selection. Except for risk consideration and investment monitoring activities, all components have statistically significant predictions. The quantity of capital invested in the stock market is heavily influenced by the investment duration, preferred share price ranges, investor type, emotional toleration level and decision-making accuracy level.
Research limitations/implications
This investigation was conducted exclusively with Bangladeshi individual stockholders. Therefore, the existing study can be extended to institutional investors and conceivably to other divisions. It is possible to conduct this similar study internationally. And the query can enlarge with more sample size and use a more sophisticated econometric model. Despite that the outcomes of this study help the regulatory authorities to arrange more informative seminars and consciousness programs.
Practical implications
The conclusions have practical implications since they empower investors to modify their portfolios based on elements including share price ranges, investment horizons and emotional stability. To improve chances of success and reach financial objectives, they stress the significance of bettering financial understanding, active monitoring and risk analysis. Results can also be enhanced by distributing ownership over a number of market sectors and price points. The results highlight the value of patience and giving potential returns enough time.
Originality/value
This study on the trading behavior of investors in Bangladesh is unique and based on field study, and the findings of this study will deliver information to the stakeholders of the capital market regarding the investors’ trading behavior belonging to different categories, financial literacy level, investment duration, emotional tolerance level and internal feeling.
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Hassanudin Mohd Thas Thaker and Abdollah Ah Mand
The volatility of bitcoin (BTC) and time horizon is the center point for investment decisions. However, attention is not often drawn to the relationship between BTC and equity…
Abstract
The volatility of bitcoin (BTC) and time horizon is the center point for investment decisions. However, attention is not often drawn to the relationship between BTC and equity indices. Thus, the purpose of this paper is to investigate the volatility and time frequency domain of BTC with stock markets.
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