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1 – 10 of 128Mai T. Said and Mona A. ElBannan
The purpose of this study is to examine the impact of firm environmental, social and governance (ESG) rating scores on market perception and stock behavior from 2017 to 2021 while…
Abstract
Purpose
The purpose of this study is to examine the impact of firm environmental, social and governance (ESG) rating scores on market perception and stock behavior from 2017 to 2021 while controlling for COVID-19 severity score.
Design/methodology/approach
The authors used panel regression models with robust standard errors based on cross-country and cross-industry sample of 1,324 ESG firms from 25 emerging countries across four regions. Four separate regression analyses are used. Hausman test is used to determine whether fixed-effect (FE) or random-effect approaches should be used in regression models. Lagrange multiplier test is used to test for time FEs, and F-test for individual effects to choose between pooled ordinary least squares model and FE. Two-unit root tests are conducted to check stationarity. Heteroskedasticity and serial correlation were controlled through a robust covariance matrix estimation.
Findings
The authors provide evidence that the stakeholder theory persists in emerging countries. Overall, the results suggest that firms’ stock behavior is positively associated with the level of environmental and social performance in the region. However, the results do not provide empirical evidence to support the link between ESG performance and stock market perception proxied by the price-to-sales ratio. The results suggest that Refinitiv and Bloomberg ESG rating scores have a positive impact on stock performance in emerging markets, albeit the Bloomberg rating score is insignificant.
Practical implications
Favorable impact of environmental and social performance on stock performance suggests that policymakers should take initiatives to raise awareness toward investments in ESG projects. Evidence shows that ESG stock performance in emerging markets does not insulate firms from the COVID-19 severity. Furthermore, this study highlights the inconsistency in calculating the ESG ratings, therefore, a more standardized approach is recommended to support investors seeking sustainable investments.
Social implications
The findings have social implications for investors with proenvironmental preferences and nonpecuniary motives for ethical investments. Asset fund managers should develop ESG investment strategies to promote investor preferences that are linked to the proenvironmental and prosocial attitudes by increasing their investments in stocks of firms that behave ethically and support the environment. Furthermore, the findings show that investors pay a price for ethical and socially responsible investments as they are evaluating the environmental and social activities, hence, the firm ESG profile influences equity valuation and risk assessment.
Originality/value
The study extends the literature and provides evidence from the unique setting of emerging markets by analyzing the relationship between ESG rating scores and the COVID-19 severity scores on one hand, and stock behavior and market perception on the other.
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Susovon Jana and Tarak Nath Sahu
This study aims to investigate the possibilities of cryptocurrencies as hedges and diversifiers in the Indian stock market before and during financial crisis due to the pandemic…
Abstract
Purpose
This study aims to investigate the possibilities of cryptocurrencies as hedges and diversifiers in the Indian stock market before and during financial crisis due to the pandemic and the Russia–Ukraine war.
Design/methodology/approach
Researchers have used daily data on cryptocurrencies and Indian stock prices from March 10, 2015 to August 26, 2022. The researchers have used the dynamic conditional correlations (DCC)-GARCH model to determine the volatility spillover and dynamic correlation between stocks and digital currencies. Further, researchers have explored hedge ratio, portfolio weight and hedging effectiveness using the estimates of the DCC-GARCH model.
Findings
The findings indicate a negative conditional correlation between equities and cryptocurrencies before the crisis and a positive conditional correlation except for Tether during the crisis. Which implies that cryptocurrencies serve as a hedging asset in the stock market before a crisis but are not more than a diversifier during the crisis, except for Tether. Notably, Tether serves as a safe haven during times of crisis. Finally, the study suggests that Bitcoin, Ethereum, Binance Coin and Ripple are the most effective diversifiers for Indian stocks during the crisis.
Originality/value
This study makes several contributions to the existing literature. First, it compares the hedge and diversification roles of cryptocurrencies in the Indian stock market before and during crisis. Second, the study findings provide insights on risk hedging and can serve as a guide for investors. Third, it may help rational investors avoid underestimating risk while constructing portfolios, particularly in times of financial turmoil.
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Rexford Abaidoo and Elvis Kwame Agyapong
This study examines the extent to which regulatory policy uncertainty, macroeconomic risk, banking industry innovations, etc. influence variability in financial sector development…
Abstract
Purpose
This study examines the extent to which regulatory policy uncertainty, macroeconomic risk, banking industry innovations, etc. influence variability in financial sector development among emerging economies in sub-Sahara Africa (SSA).
Design/methodology/approach
Data for the empirical inquiry were compiled from a sample of 25 economies from the subregion from 2010 to 2020. Empirical estimates examining the relationships noted above were carried out using the two-step system generalized method of moments estimation technique.
Findings
Results the empirical estimates suggest that regulatory policy uncertainty and macroeconomic risk adversely influence or constrain financial sector development among the economies examined in the study. Banking industry innovations on the other hand is found to positively influence the development of the financial sector in these economies. Furthermore, moderating empirical analysis suggests that effective governance positively moderates the relationship between banking industry innovations and financial development among economies in the subregion.
Originality/value
This study’s approach to the mechanics of financial development among economies in SSA is designed to offer different perspectives to those found in the existing literature on financial development in three fundamental ways. First, although the verification of the role of banking industry innovations in financial development may not be new, it is important to point out that the approach used in this study is based on an index for innovations with different constituents or principal components in its construction; making the variable significantly different from what has been examined in the literature. In addition, the review of regulatory policy uncertainty and macroeconomic risk (both variables are multifaceted constructs using the principal component analysis procedure) further brings into this study’s analysis, a different approach to examining conditions influencing variability in financial development among developing economies.
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Cyrus A. Ramezani and James J. Ahern
As digital technologies expand access to new forms of legalized gambling, including sports betting and online gaming, it is important to assess the impact of macroeconomic and…
Abstract
Purpose
As digital technologies expand access to new forms of legalized gambling, including sports betting and online gaming, it is important to assess the impact of macroeconomic and equity market outcomes on fund flows into gambling. The authors’ findings will be of interest to policymakers and the gambling industry, as various forms of gambling, including day trading, gain broad public acceptance.
Design/methodology/approach
The authors examine the impact of macroeconomic forces, business cycles, and financial market wealth on gambling. The authors propose a nonlinear model linking aggregate gambling expenditures to macroeconomic, stock market, and gambling industry variables. The authors estimate the proposed model using nonlinear estimation procedures.
Findings
The authors find that price of wagering, incomes, and supply of gambling opportunities are the primary determinants of wagering demand. Aggregate wagering is negatively impacted by realized stock returns and market volatility, but rises during recessions.
Originality/value
To the best of the authors’ knowledge, the questions posed and addressed in this manuscript have not been addressed in prior literature.
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Ying Huang, Xiankui Hu, Kenneth Hunsader and Steven Xiaofan Zheng
The authors of this study aim to investigate possible explanations of the prevalence of price clustering in the final offer prices of mergers and acquisitions (M&A).
Abstract
Purpose
The authors of this study aim to investigate possible explanations of the prevalence of price clustering in the final offer prices of mergers and acquisitions (M&A).
Design/methodology/approach
The authors use final offer price in M&A deals to investigate the price clustering phenomena. The authors used regressions and logistic regressions to examine potential factors that might affect pricing strategy by looking into one-time acquirers and experienced serial acquirers.
Findings
Price clustering increases with negotiation uncertainties characterized as competitive bidding, number of bidders, challenged deals and duration. Moreover, the authors find persistent price clustering in experienced serial acquirers that are more experienced and better equipped with handling uncertainties, suggesting a preference of using round numbers regardless of levels of uncertainties. The authors' evidence shows that price clustering results from a combination of Harris' (1991) costly negotiation hypothesis where round prices may be used to lower search costs and psychological bias and preference.
Originality/value
The authors appear to be the first to investigate alternative theories that support M&A offer price clustering behavior, finding that both the costly negotiation and psychological bias and preference theories apply to M&A final price formation. Thus, the authors' major contribution, specific to the M&A process, is a clarification of physical and psychological factors associated with bidding and negotiation behavior. The authors are confident that the authors' study impacts conventional knowledge regarding M&A deal negotiation strategies, including bidding behavior, contract negotiation, financial analysis, management practices and risk management.
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Ho Thuy Tien, Nguyen Mau Ba Dang and Ngo Thai Hung
This paper aims to investigate the conditional equicorrelation and cross-quantile dependence between the DeFi, European and GCC currency markets (Oman, Qatar, Bahrain, Kuwait…
Abstract
Purpose
This paper aims to investigate the conditional equicorrelation and cross-quantile dependence between the DeFi, European and GCC currency markets (Oman, Qatar, Bahrain, Kuwait, Saudi Arabia and the United Arab Emirates).
Design/methodology/approach
This study applies the GARCH-DECO model and cross-quantilogram framework.
Findings
The findings reveal evidence of weak and negative average equicorrelations between the examined markets through time, excluding the COVID-19 outbreak and Russia–Ukraine conflict, which is consistent with the literature examining relationships in different markets. From the cross-quantilogram model, the authors note that the dependence between DeFi, EURO and GCC foreign exchange rate markets is greatest in the short run and diminishes over the medium- and long-term horizons, indicating rapid information processing between the markets under consideration, as most innovations are transmitted in the short term.
Practical implications
For the pairs of DeFi and currency markets, the static and dynamic optimal weights and hedging ratios are also estimated, providing new empirical data for portfolio managers and investors.
Originality/value
To the best of the authors’ knowledge, this is one of the most important research looking into the conditional correlation and predictability between the DeFi, EURO and GCC foreign exchange markets. More importantly, this study provides the first empirical proof of the safe-haven, hedging and diversification qualities of DeFi, EURO and GCC currencies, and this work also covers the COVID-19 pandemic and the Russia–Ukraine war with the use of a single dynamic measure produced by the GARCH-DECO model. In addition, the directional predictability between variables under consideration using the cross-quantilogram model is examined, which can be capable of capturing the asymmetry in the quantile dependent structure. The findings are helpful for both policymakers and investors in improving their trading selections and strategies for risk management in different market conditions.
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Onyinye Imelda Anthony-Orji, Ikenna Paulinus Nwodo, Anthony Orji and Jonathan E. Ogbuabor
This paper aims to examine Nigeria’s dynamic output and output volatility connectedness with USA, China and India using quarterly data from 1981Q1 to 2019Q4.
Abstract
Purpose
This paper aims to examine Nigeria’s dynamic output and output volatility connectedness with USA, China and India using quarterly data from 1981Q1 to 2019Q4.
Design/methodology/approach
The study adopted the network approach of Diebold and Yilmaz (2014) and used the normalized generalized forecast error variance decomposition from an underlying vector error correction model to build connectedness measures.
Findings
The findings show that the global financial crisis (GFC) increased the connectedness index far more than the 2016 Nigeria economic recession. The moderate effect of the 2016 Nigeria economic recession on the connectedness index underscores the fact that Nigeria is a small, open economy with minimal capacity to spread output shock. For both real output and its volatility, the total connectedness index rose smoothly and systematically through time, thereby leaving the economies more connected in the long run.
Originality/value
To the best of the authors’ knowledge, this paper is among the first to examine Nigeria’s dynamic output and output volatility connectedness with the USA, China and India using new empirical insights from the GFC versus 2016 Nigerian recession. The study, therefore, concludes that the Nigerian economy should be diversified immediately as a hedge against future real output shocks, while the USA, China and India should maintain and sustain their current policy frameworks to remain less vulnerable to real output shocks.
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The study assesses impact of individual cultural values on investment choices (aggressive or conservative), of 450 investors with behavioural biases and risk propensity in serial…
Abstract
Purpose
The study assesses impact of individual cultural values on investment choices (aggressive or conservative), of 450 investors with behavioural biases and risk propensity in serial as mediators in the relationship.
Design/methodology/approach
The study used serial mediation analysis using Hayes model 6 for creating six models.
Findings
Findings of the study indicated that individualism traits are inclined to aggressive investment choices due to presence of overconfidence biases. Uncertainty avoidance and longtermism traits of investors resulted in aggressive investment choices due to presence of herd mentality bias. The moderating impact of past investing experiences was found significant.
Originality/value
The study indicates the importance of cultural values and past investing experiences of investors that may develop biases to assess investment choices and decisions of investors.
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The purpose of this research is to study the relationship between exchange rate fluctuations and stock market returns of the seven highest economic performing emerging countries…
Abstract
Purpose
The purpose of this research is to study the relationship between exchange rate fluctuations and stock market returns of the seven highest economic performing emerging countries (E7).
Design/methodology/approach
The study is conducted using the daily data for exchange rates and stock market returns in each of the E7 countries from January 1, 2019, to January 1, 2022. The study employs the ordinary least squares, autoregressive distributed lag error correction regression and generalized autoregressive conditional heteroskedasticity (GARCH (1,1)) regression models to fully investigate the impact of exchange rate on stock markets. For further investigation, the GARCH (1,1) model is run twice for each country with and without the inclusion of exchange rate to determine its effect on the volatility of stock returns.
Findings
The findings support the presence of cointegration relationship between the variables for all countries. The results reveal significant positive long-run relationship between exchange rates and stock market returns in all countries except for Indonesia, which evidenced a significant negative impact. The results of the GARCH (1,1) add that the inclusion of exchange rate in the model accounts for a slight change in the volatility of stock returns.
Originality/value
The research provides empirical evidence that appreciating currencies are perceived positively by investors leading to better performing capital markets. The outcomes of this study may assist policy makers in understanding to what degree changes in exchange rates can influence capital markets, as well as narrow the gap in literature regarding which theory is more relevant in explaining how exchange rate fluctuations impact market values.
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Mehdi Mili, Asma Yahiya Al Amoodi and Hana Bawazir
This study aims to investigate the asymmetric impact of daily announcements regarding COVID-19 on investor sentiment in the stock market.
Abstract
Purpose
This study aims to investigate the asymmetric impact of daily announcements regarding COVID-19 on investor sentiment in the stock market.
Design/methodology/approach
This study uses a Non-Linear Autoregressive Distribution Lag (NARDL) model that relies on positive and negative partial sum decompositions of the Coronavirus indicators. Five investor sentiments had been used and the analysis is conducted on the full sample period from 24th February 2020 to 25th March 2021.
Findings
The results show that new cases have a greater impact on investor sentiment compared to daily announcements of new deaths related to COVID-19. In addition to revealing a significant impact of new COVID-19 new cases and new death announcements on a daily basis on investor sentiment over the short- and long-term, this paper also highlights the nonlinearity and asymmetry of this relationship in the short and long run. Investors' sentiments are more affected by negative news regarding Covid 19 than positive news.
Originality/value
Financial markets have been severely affected by COVID-19 pandemic. This study is the first to measure the extent of reaction of investors to positive and negative announcements of COVID-19. Interestingly, this study examines the asymmetric effect of daily announcements on new cases and new deaths by COVID-19 on investor sentiments and derive many implications for portfolio managers.
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