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1 – 10 of 657This paper aims to contribute to formulating the methodological framework for a paradigm of Islamic economics, using the development of the conventional economics, theoretical and…
Abstract
Purpose
This paper aims to contribute to formulating the methodological framework for a paradigm of Islamic economics, using the development of the conventional economics, theoretical and mathematical methods.
Design/methodology/approach
The study based on the inductive and mathematical methods to contribute to economic theory within the methodological framework for Islamic Economics, by using the return rate of Musharakah rather than the interest rate in influence the economic activity and monetary policy.
Findings
Via replacement, the concept of the interest rate by the return rates of Musharakah. It concludes that the central bank can control the monetary policy, economic activity and the efficient allocation of resources by using the return rates of Musharakah through the framework of Islamic economy.
Practical/implications
The study is a contribution to formulate the methodological framework for a paradigm of Islamic economics, where it investigates the impact of return rates of Musharakah on the money market and monetary policy, by the mathematical methods used in the conventional economy. Also, the study illustrates the importance of further studies that examine the methodological framework for Islamic Economics.
Originality/value
The study aims to contribute to formulating the Islamic economic theory, through the return rate of Musharakah financing instead of the interest rate, and its effectiveness of the monetary policy. As well as reformulating the concepts of the investment function, the present value and the marginal efficiency rate of investment according to the Islamic economy approach.
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Kingstone Nyakurukwa and Yudhvir Seetharam
Utilising a database that distinctly classifies firm-level ESG (environmental, social and governance) news sentiment as positive or negative, the authors examine the information…
Abstract
Purpose
Utilising a database that distinctly classifies firm-level ESG (environmental, social and governance) news sentiment as positive or negative, the authors examine the information flow between the two types of ESG news sentiment and stock returns for 20 companies listed on the Johannesburg Stock Exchange between 2015 and 2021.
Design/methodology/approach
The authors use Shannonian transfer entropy to examine whether information significantly flows from ESG news sentiment to stock returns and a modified event study analysis to establish how stock prices react to changes in the two types of ESG sentiment.
Findings
Using Shannonian transfer entropy, the authors find that for the majority of the companies studied, information flows from the positive ESG news sentiment to stock returns while only a minority of the companies exhibit significant information flow from negative ESG news sentiment to returns. Furthermore, the study’s findings show significantly positive (negative) abnormal returns on the event date and beyond for both upgrades and downgrades in positive ESG news sentiment.
Originality/value
This study is among the first in an African context to investigate the impact of ESG news sentiment on stock market returns at high frequencies.
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Kléber Formiga Miranda, Jefferson Ricardo do Amaral Melo and Orleans Silva Martins
This study aims to examine the listing of firms at the highest corporate governance level of the Brazilian stock exchange (B3) as a means of legitimation and its relationship with…
Abstract
Purpose
This study aims to examine the listing of firms at the highest corporate governance level of the Brazilian stock exchange (B3) as a means of legitimation and its relationship with risk and return on investment.
Design/methodology/approach
This paper analyzes 205 companies from 2010 to 2019, in which firms listed at the Novo Mercado level were compared with groups composed of other firms traded on B3.
Findings
The main results demonstrate that a listing at the supposedly higher level of corporate governance in Brazil does not indicate lower risk, a higher return or even a better risk-return ratio.
Research limitations/implications
The findings are restricted to this sample, representing the association identified between the analyzed phenomena and not a cause-effect relationship.
Practical implications
The highest level of corporate governance in Brazil brings together firms that present a higher risk (at least systematic) and lower returns (at least financial) because they seek to legitimize themselves in the market as firms committed to better management practices.
Social implications
These findings are useful to investors, the stock exchange, regulatory agents and the companies themselves to reflect on the purpose and usefulness of different levels of corporate governance in Brazil.
Originality/value
This study differs from the others that relate corporate governance to risk or return because it does not deal individually with corporate governance practices, but rather the phenomenon that is listed in a special governance level, created by the stock exchange, serving as a kind of seal legitimation.
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This research provides some evidence by the vine copula approach, suggesting the significant and symmetric causal relation between subsections of Baltic Exchange and hence…
Abstract
Purpose
This research provides some evidence by the vine copula approach, suggesting the significant and symmetric causal relation between subsections of Baltic Exchange and hence concluding that investing in different indexes, which is currently a risk diversification system, is not a correct risk reduction strategy.
Design/methodology/approach
The daily observations of Baltic Capesize Index (BCI), Baltic Handysize Index (BHSI), Baltic Dirty Tanker Index (BDTI) and Baltic LNG Tanker Index (BLNG) over an eight-year period have been used. After collecting data, calculating the return and estimating the marginal distribution of return rates for each of the indexes applying asymmetric power generalized autoregressive conditional heteroskedasticity and autoregressive moving average (APGARCH-ARMA), and with the assumption of skew student's t-distribution, the dependence of Baltic indexes was modeled based on Vine-R structures.
Findings
A positive and symmetrical correlation was observed between the study groups. High and low tail dependence is observed between all four indexes. In other words, the sector business groups associated with each of these indexes react similarly to the extreme events of other groups. The BHSI has a pivotal role in examining the dependency structure of Baltic Exchange indexes. That is, in addition to the direct dependence of Baltic groups, the dependence of each group on the BHSI can transmit accidents and shocks to other groups.
Practical implications
Since the Baltic Exchange indexes are tradable, these findings have implications for portfolio design and hedging strategies for investors in shipping markets.
Originality/value
Vine copula structures proves the causal relationship between different Baltic Exchange indexes, which are derived from different types of markets.
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Baoping Ren and Wei Jie
Constant or decreasing returns and increasing returns to scale are two kinds of mechanism in economic growth. The goal of supply-side structural reform is to promote the…
Abstract
Purpose
Constant or decreasing returns and increasing returns to scale are two kinds of mechanism in economic growth. The goal of supply-side structural reform is to promote the establishment of the mechanism with increasing returns to scale. The paper aims to discuss this issue.
Design/methodology/approach
This paper argues that the overall economic structure of the developing economy has been divided into the sector of constant or decreasing returns to scale and the sector of increasing returns to scale due to the dual economic structure. Among them, the supply-side structural reform is mainly to reduce the sector of decreasing returns to scale and increase the sector of increasing returns to scale. Based on the hypothesis of such two-sector economic structure in the supply side of developing economies and on the industrial data, this paper empirically tests the returns to scale of China’s supply structure. The result suggests that so far the sector of constant or decreasing returns to scale dominates the supply structure of China’s economic growth, which results in the state of decreasing returns to scale in China’s overall economy.
Findings
Therefore, to realize the long-term sustained growth and transformation of the development pattern of China’s economy, the authors must carry out the supply-side structural reform, vigorously develop the modern industrial sectors characterized by modern knowledge and technology, and promote the development of an innovation-driven economy.
Originality/value
Besides, the authors must accelerate the transformation from traditional industrial sectors to modern industrial sectors, actively promote China’s industrial structure toward rationalization and high gradation, as well as build a modern industrial system so as to facilitate the formation of the mechanism of increasing returns to scale and accelerate the transformation of the driving force of China’s economic growth.
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Mohammadreza Tavakoli Baghdadabad
We propose a risk factor for idiosyncratic entropy and explore the relationship between this factor and expected stock returns.
Abstract
Purpose
We propose a risk factor for idiosyncratic entropy and explore the relationship between this factor and expected stock returns.
Design/methodology/approach
We estimate a cross-sectional model of expected entropy that uses several common risk factors to predict idiosyncratic entropy.
Findings
We find a negative relationship between expected idiosyncratic entropy and returns. Specifically, the Carhart alpha of a low expected entropy portfolio exceeds the alpha of a high expected entropy portfolio by −2.37% per month. We also find a negative and significant price of expected idiosyncratic entropy risk using the Fama-MacBeth cross-sectional regressions. Interestingly, expected entropy helps us explain the idiosyncratic volatility puzzle that stocks with high idiosyncratic volatility earn low expected returns.
Originality/value
We propose a risk factor of idiosyncratic entropy and explore the relationship between this factor and expected stock returns. Interestingly, expected entropy helps us explain the idiosyncratic volatility puzzle that stocks with high idiosyncratic volatility earn low expected returns.
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Richard Arhinful and Mehrshad Radmehr
The study seeks to find the effect of financial leverage on the firm performance of non-financial companies listed in the Tokyo stock market.
Abstract
Purpose
The study seeks to find the effect of financial leverage on the firm performance of non-financial companies listed in the Tokyo stock market.
Design/methodology/approach
The study collected data from 263 companies in the automobile and industrial producer sectors listed on the Tokyo stock exchange between 2001 and 2021. The generalized method of moments was used to estimate the effect of leverage on financial performance due to its ability to overcome the problems of endogeneity and autocorrelation.
Findings
The study found that the equity multiplier has a positive and statistically significant effect on return on assets (ROA), return on equity (ROE) and earning per share (EPS). The study discovered that the interest coverage ratio has a positive and statistically significant effect on ROA, ROE, EPS and Tobin’s Q. The results revealed that the degree of financial leverage and debt to earnings before interest, taxes, depreciation and amortization (EBITDA) have a negative and statistically significant effect on ROE, EPS and Tobin’s Q. The study also found that the capitalization ratios of the firms have a negative and statistically significant effect on ROA, ROE, EPS and Tobin’s Q.
Practical implications
The use of debt financing, which presents financial leverage, indicates that the companies can make enough earnings to pay off the interest and principal (debt service obligations), which were shown by the interest coverage ratio, as well as to pay all the long-term fixed expenses, which were shown by the fixed charge coverage ratio. Interest and fixed charge coverage have a positive statistically significant effect on the financial performance of automobile and industrial producer companies.
Originality/value
The study focused on the effect of financial leverage on financial performance by relying on pecking and trade-off theories to contribute to the existing body of literature in finance.
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Omar Esqueda and Thomas O'Connor
The authors measure the cost of equity to earnings yield differential for a sample of 2,035 non-financial firms. In a series of Logit and Tobit regressions, the authors examine if…
Abstract
Purpose
The authors measure the cost of equity to earnings yield differential for a sample of 2,035 non-financial firms. In a series of Logit and Tobit regressions, the authors examine if the cost of equity to earnings yield differential is related to dividend policy in the manner predicted by agency theory.
Design/methodology/approach
Agency theory says a firm's optimal dividend policy is partially determined by the relationship between the earnings yield and the cost of equity capital. When the cost of equity is higher (lower) than the earnings yield, firms are motivated to (not) pay dividends as this reduces the cost of capital and holding other things constant, increases corporate valuations. The authors test whether managers set dividend policies to maximize the value of the firm.
Findings
The study’s findings show that when the cost of equity is higher (lower) than earnings yield, firms are more (less) likely to be dividend payers and the payouts are higher (lower). The results are robust to the inclusion of share repurchases as an alternative to cash distributions. The study’s findings support the cost of equity hypothesis and are consistent with alternative dividend theories.
Originality/value
The study’s findings support the cost of equity hypothesis and are consistent with alternative dividend theories. To the authors’ knowledge, this is the first paper testing the cost of equity hypothesis.
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The dividend month premium is the phenomenon that firms have abnormal returns in predicted dividend month. This study aims to examine the dividend month premium in the Korean…
Abstract
The dividend month premium is the phenomenon that firms have abnormal returns in predicted dividend month. This study aims to examine the dividend month premium in the Korean stock market, using common stocks listed on the KOSPI and KOSDAQ from January 1999 to December 2016. Abnormal returns are estimated using the following asset price models: capital asset pricing model, Fama–French three-factor model and the Fama–French–Carhart four-factor model. This study finds positive abnormal returns in predicted dividend months, and even for the within-firm portfolio that buys stocks in the predicted dividend months and sells the same stocks in other months. The price impact and the subsequent reversals are greater with lower liquidity and higher dividend yield, implying that the price pressure from dividend-seeking investors affects this dividend month premium. In addition, the anomalies with the pre-declaration stock are smaller than the post-declaration stock, suggesting the necessity to improve the cash dividend policy of post-declaration for market efficiency.
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This paper aims to provide empirical evidence on the extent of alteration institutional characteristics, i.e. legal origin and corruption levels, may have on the signaling effects…
Abstract
Purpose
This paper aims to provide empirical evidence on the extent of alteration institutional characteristics, i.e. legal origin and corruption levels, may have on the signaling effects of auditors’ reputation, underwriters’ reputation and ownership retention on initial public offering (IPO) initial returns in OECD countries.
Design/methodology/approach
Cross-sectional data composed of 6,182 IPOs from 30 OECD countries are used for 2003-2012. Ordinary least square with multiple linear regressions is used to test the hypotheses.
Findings
The findings indicate that the legal framework and corruption level of a country alters the signaling effects of underwriters’ reputation, auditors’ reputation and ownership retention in an IPO environment. These three variables mitigate information asymmetry, signal firm value to potential investors and ultimately decrease IPO initial returns. This relationship is more significant in the civil law countries. Corruption levels negatively moderate the relationship in the common law and Scandinavian civil law countries but have no significance in the German and French civil law countries, indicating the importance of the signaling variables in these two civil law countries.
Originality/value
This study examines the extent of the alterations that the legal framework and the corruption levels cause to the signaling relationship between auditors’ reputation, underwriters’ reputation and ownership retention on IPO initial returns in selected OECD countries.
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