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Article
Publication date: 19 September 2023

Ahmed S. Baig, Muhammad Imran Chaudhry and R. Jared DeLisle

In this paper, the authors study the phenomenon of price clustering in the Pakistan Stock Exchange (PSX), a market viewed as one of the best-performing stock markets in the world…

Abstract

Purpose

In this paper, the authors study the phenomenon of price clustering in the Pakistan Stock Exchange (PSX), a market viewed as one of the best-performing stock markets in the world during 2014–2017. The authors study the effect of stock-level variables on price clustering and analyze the determinants of the cross-sectional patterns of price clustering in the PSX, in particular the causal link between price clustering and political instability.

Design/methodology/approach

The authors' dataset comprises daily observations on 100 PSX stocks spanning from January 1, 2009 to June 30, 2019. The authors use multivariate regression and spectral analysis to shed light on the dynamics of stock price clustering in PSX.

Findings

The authors document abnormally high levels of stock price clustering, particularly on integer increments, in PSX. The nature of stock price clustering in PSX is consistent with the negotiation hypothesis of Harris (1991). The levels of stock price clustering on PSX are persistent and contain a cyclical component. Furthermore, the authors find that political uncertainty in Pakistan is a significant contributor to the high levels of price clustering on PSX. The authors' conclusions are robust to alternative econometric specifications and different measures of price clustering and political uncertainty.

Practical implications

The authors' findings are of interest to investors and policymakers. Since price clustering decreases market quality and degrades the information content of stock prices, the authors' study shows that price efficiency in PSX has not improved despite major reforms over the last decade. One practical implication of the authors' results is that investors should be cautious while rebalancing portfolios around political events such as general elections because stock price clustering increases in the PSX during these periods. As a result, stock prices are likely to deviate from their intrinsic values.

Originality/value

Research on price clustering is limited to developed markets, and emerging/frontier markets have been largely overlooked. The phenomenon of price clustering in the PSX has yet to be studied, despite the relevance of the PSX for emerging/frontier market investors.

Details

Managerial Finance, vol. 50 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

Open Access
Article
Publication date: 9 February 2024

Luca Menicacci and Lorenzo Simoni

This study aims to investigate the role of negative media coverage of environmental, social and governance (ESG) issues in deterring tax avoidance. Inspired by media…

1115

Abstract

Purpose

This study aims to investigate the role of negative media coverage of environmental, social and governance (ESG) issues in deterring tax avoidance. Inspired by media agenda-setting theory and legitimacy theory, this study hypothesises that an increase in ESG negative media coverage should cause a reputational drawback, leading companies to reduce tax avoidance to regain their legitimacy. Hence, this study examines a novel channel that links ESG and taxation.

Design/methodology/approach

This study uses panel regression analysis to examine the relationship between negative media coverage of ESG issues and tax avoidance among the largest European entities. This study considers different measures of tax avoidance and negative media coverage.

Findings

The results show that negative media coverage of ESG issues is negatively associated with tax avoidance, suggesting that media can act as an external monitor for corporate taxation.

Practical implications

The findings have implications for policymakers and regulators, which should consider tax transparency when dealing with ESG disclosure requirements. Tax disclosure should be integrated into ESG reporting.

Social implications

The study has social implications related to the media, which act as watchdogs for firms’ irresponsible practices. According to this study’s findings, increased media pressure has the power to induce a better alignment between declared ESG policies and tax strategies.

Originality/value

This study contributes to the literature on the mechanisms that discourage tax avoidance and the literature on the relationship between ESG and taxation by shedding light on the role of media coverage.

Details

Sustainability Accounting, Management and Policy Journal, vol. 15 no. 7
Type: Research Article
ISSN: 2040-8021

Keywords

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