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1 – 10 of over 1000As cryptocurrencies continue to gain viability as an asset class, institutional investors and publicly traded firms have started taking investment positions in digital currencies…
Abstract
Purpose
As cryptocurrencies continue to gain viability as an asset class, institutional investors and publicly traded firms have started taking investment positions in digital currencies. What firms may not be considering, however, is the effect these assets may have on their risk profiles. This study aims to (1) measure the effect of cryptocurrencies on the risk and return characteristics of publicly traded companies; (2) decipher the motives behind holding cryptocurrencies as an asset class; and (3) determine whether one reason for holding is more effective than another. To conduct this research, the four largest publicly traded holders of cryptocurrency as well as four of the most prominent cryptocurrencies are explored.
Design/methodology/approach
The cross-sectional analysis approach has been used to analyze the daily returns, volatility, betas and Sharpe Ratios of firms during periods without cryptocurrency strategies and during periods with cryptocurrency strategies.
Findings
The impact of the cryptocurrency asset class on common stock performance and corporate disclosures are documented. The importance of risk disclosures on cryptocurrency holdings is emphasized: Firms must better inform their stakeholders through comprehensive disclosures in financial statements. Firms utilize cryptocurrencies for various reasons such as treasury management tools or as direct sources of income. Consequently, the impact on returns and risks varies substantially.
Originality/value
To the best of the authors’ knowledge, this is one of the first studies on cryptocurrency investments in the treasury departments of publicly traded companies. The study contributes to the literature by extracting relevant information regarding company risk reporting and cryptocurrency risk at firms. The conclusions also promote firm transparency with detailed reporting of cryptocurrency holding risks.
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Carlos J.O. Trejo-Pech, Karen L. DeLong and Robert Johansson
The United States (US) sugar program protects domestic sugar farmers from unrestricted imports of heavily-subsidized global sugar. Sugar-using firms (SUFs) criticize that program…
Abstract
Purpose
The United States (US) sugar program protects domestic sugar farmers from unrestricted imports of heavily-subsidized global sugar. Sugar-using firms (SUFs) criticize that program for causing US sugar prices to be higher than world sugar prices. This study examines the financial performance of publicly traded SUFs to determine if they are performing at an economic disadvantage in terms of accounting profitability, risk and economic profitability compared to other industries.
Design/methodology/approach
Firm-level financial accounting and market data from 2010 to 2019 were utilized to construct financial metrics for publicly traded SUFs, agribusinesses and general US firms. These financial metrics were analyzed to determine how SUFs compare to their agribusiness peer group and general US companies. The comprehensive financial analysis in this study covers: (1) accounting profit rates, (2) drivers of profitability, (3) economic profit rates, (4) trend analysis and (5) peer comparisons. Quantile regression analysis and Wilcoxon–Mann–Whitney statistics are employed for statistical comparisons.
Findings
Regarding various profitability and risk measures, SUFs outperform their agribusiness peers and the general benchmark of all US firms in terms of accounting profit rates, risk levels and economic profit rates. Furthermore, compared to other US industries using the 17 French and Fama classifications, SUFs have the highest return on investment and economic profit rate―measured by the Economic Value Added® margin―and the second-lowest opportunity cost of capital, measured by the weighted average cost of capital.
Originality/value
This study finds nothing to suggest that the US sugar program hinders the financial success of SUFs, contrary to recent claims by sugar-using firms. Notably in this analysis is the evaluation of economic profit rates and a series of robustness techniques.
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Daniel Vancin and Guilherme Kirch
This paper aims to empirically verify the impact of the mandatory dividend law on the investment of publicly traded companies.
Abstract
Purpose
This paper aims to empirically verify the impact of the mandatory dividend law on the investment of publicly traded companies.
Design/methodology/approach
The sample includes 212,595 observations from publicly traded companies from 47 different countries over the period from 2000 to 2016. The authors estimated a regression model by panel data methods to show the impact of the mandatory dividend on firm’s investment, more specifically in their sensitivities of investment to cash flow and to growth opportunities. In addition, the average treatment effect on the treated was estimated through sample matching.
Findings
The results indicate that the mandatory dividend have a direct and indirect impact on corporate investment.
Originality/value
Legislators and economic agents can use the results of the present research to evaluate the continuity or implementation of this legal mechanism (mandatory dividend) to evaluate economic moments favorable to its use or to create different legal rules to smooth the impact of this mechanism on the investment of companies.
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Abstract
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Thamirys de Sousa Correia and Wenner Glaucio Lopes Lucena
The purpose of this paper is to verify the relations of the board of directors with the code of business ethics (CBE) of Brazilian publicly traded companies.
Abstract
Purpose
The purpose of this paper is to verify the relations of the board of directors with the code of business ethics (CBE) of Brazilian publicly traded companies.
Design/methodology/approach
As for the methodology, data were collected from companies that traded shares in Brasil, Bolsa e Balcão (B3) through the Comdinheiro database and codes of ethics or business conduct. For this, in relation to the dependent variable, indexes were elaborated to represent the CBE (CBEI). To represent the independent variables of the board of directors, the following variables were selected: size of board, gender of the president, independence, chairman/CEO, age and number of meetings.
Findings
With that said, the results show that the size of the board, the independence and the number of meetings explain the informative content of the CBE. Also, the accumulation of positions of president and CEO negatively influences CBEI, so the research suggests that non-accumulation of positions reduces agency conflicts, generating transparency of CBEI, according to Agency Theory.
Research limitations/implications
Considering the analysis of this research, it is important to highlight that the results should not be generalized because of the limitation of the sample period and because it was only for the Brazilian companies. However, they cannot be invalidated, given that, because of the robustness of the econometric models, it was possible to make inferences about the relations of the board of directors and the CBE of companies that trade in Brasil, Bolsa e Balcão (B3).
Practical implications
The relations identified in this study between the board of directors and the CBE imply the involvement of top executives, so that the CBE be closer to the characteristics of the business, while the values must be transmitted with clear language, avoiding misunderstandings and conflicts that may be used by individuals in bad faith, with the purpose of apologizing for illegal acts of company.
Social implications
The board’s characteristics seek to support corporate responsibilities, fulfilling a diversity of issues in the operational scenario, including influencing the information content of the CBE. Besides being an expression of the organizational culture, because it evidences the rules of behavior and values of the company.
Originality/value
The business ethics, which in this research is represented by the CBE, is a factor in which there is evidence in international studies that there are relations with the board of directors. In this context, the present study seeks to verify the relationship between the board of directors and the CBE of Brazilian publicly traded companies.
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Nils Teschner and Herbert Paul
The purpose of this research is to study the impact of divestitures on shareholder wealth. This study covers selloffs of publicly traded companies in Germany, Austria and…
Abstract
Purpose
The purpose of this research is to study the impact of divestitures on shareholder wealth. This study covers selloffs of publicly traded companies in Germany, Austria and Switzerland (DACH region) during the period 2002–2018. It aims to understand the overall effect of selloffs on shareholder wealth as well as the impact of important influencing factors.
Design/methodology/approach
This study is part of capital market studies which investigate shareholder wealth effects (abnormal returns) using event study methodology. To determine the significance of abnormal returns, a standardized cross-sectional test as suggested by Boehmer et al. (1991) was applied. The sample consists of 393 selloffs of publicly traded companies with a deal value of at least EUR 10m.
Findings
The findings confirm the overall positive impact of selloffs on shareholder wealth. The average abnormal return on the announcement day of the sample companies amounts to 1.33%. The type of buyer, the relative size of the transaction as well as the financial situation of the seller in particular seem to influence abnormal returns positively.
Originality/value
This study investigates shareholder wealth creation through selloffs in the DACH region, a largely neglected region in divestiture research, but now very relevant due to increasing pressure of active foreign investors. Sophisticated statistical methods were used to generate robust findings, which are in line with the results of similar studies for the US and the UK.
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Margaret D. Nowicki, Eric E. Lewis and Jeffrey W. Lippitt
There is a tremendous need for the valuation of small businesses. Oftentimes, small businessowners do not have the wherewithal to gather the data and keep it up to date for use in…
Abstract
There is a tremendous need for the valuation of small businesses. Oftentimes, small businessowners do not have the wherewithal to gather the data and keep it up to date for use in situations that require valuation. Formal valuations are necessary because they provide objective evidence of value, in contrast to value set by markets on which public companies are traded. This article focuses on some factors that impact the valuation of the business and will help small businessowners feel more comfortable talking with financial professionals about how the business might be valued.
Renata Turola Takamatsu and Luiz Paulo Lopes Fávero
The purpose of this paper is to evaluate the influence of the informational environment on the relevance of accounting information in companies traded in stock exchanges of…
Abstract
Purpose
The purpose of this paper is to evaluate the influence of the informational environment on the relevance of accounting information in companies traded in stock exchanges of emerging markets.
Design/methodology/approach
For this purpose, the authors calculated indicators based on figures derived from the financial statements and variables that sought to capture the influence of the economic and institutional environment. The sample consisted of publicly traded companies from 20 countries classified as emerging by Standard & Poors. Macroeconomic information was obtained through the International Country Risk Guide database. The analysis period ranged from 2004 to 2013, excluding missing data, variables considered as outliers, besides the exclusion of data from companies that presented negative equity.
Findings
It was observed that the financial variables presented signs consistent with the literature, except for the price-to-book variable and the asset change variable. The inclusion of variables related to the accounting informational environment offered evidence that the more opaque the accounting environment in the country, the lesser the ability of the profits to portray the variations of stock returns. The variable that captured the adoption of international standards was consistent with expectations, i.e. the adoption of international standards would increase the quality of accounting information, showing a positive signal. Moreover, the variable aggressiveness of the earnings was statistically significant and negative, consistent with the literature.
Research limitations/implications
The variables earnings smoothing and aversion to losses did not show the expected behaviour though, highlighting the possible limitations of these proxies used to capture the opacity of the earnings.
Originality/value
When institutional moderators were included, it was observed that the adoption of the IFRS standards positively affected the relationship, which is more relevant when the accounting figures were under its aegis. Recently, countless nations’ transition to international accounting standards has been justified by the need to use high-quality reporting standards. The research sought to contribute to strengthen this dimension, presenting evidence that the dummy variable included to capture the adoption of international standards had a positive effect on the relationship.
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