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This study aims to examine the determinants of the allowance for loan losses (ALL) and loan loss provisions (LLP) for banks in the Middle East and North African (MENA) region using both a two-stage approach and simultaneous equation system to address the potential problem of estimation bias introduced by estimating the ALL and LLP separately. The paper also tests three competing hypotheses: the earnings management hypothesis, the capital management hypothesis, and the signaling hypothesis.

The authors adopt a simultaneous equation and three-stage approaches to test whether MENA banks jointly determine LLP and ALL and the determinants of the two accounts. The sample consists of all available electronic data for 75 banks (451 bank-year observations) in nine MENA countries over the period 2000-2008.

Evidence suggests that the two accounts are jointly determined. The results support the earnings management hypothesis – meaning that MENA banks have engaged in year-to-year income smoothing. The authors also find that LLP and ALL provide signals about future earnings.

The authors acknowledge that the LLP account is only one of many accounts on the income statement that could be used for signaling or to manage earnings, and that the ALL is one of several accounts that could be used for signaling, earnings or capital management. Future studies could examine other accruals for their role in managing earnings, signaling and capital.

The results indicate that bank managers use LLP and ALL accounts to manage earnings management, policy makers may want to limit the ability of banks to manipulate earnings.

Prior research on the loan loss accounting practices has been based on single equation models of the determinants of LLP and ALL. An issue that has not been adequately addressed in this literature is that ALL and LLP may be interrelated and jointly determined by banks. If the two accounts are not independent of each other, failure to include one when estimating the other may lead to an omitted variable problem, while including both in the same equation induces a potential simultaneity bias. The study is the first empirical work examining whether ALL and LLP are jointly determined by banks. By jointly estimating LLP and ALL, the study permits an assessment of the magnitude of the potential error from adopting ordinary least squares estimation of a single equation model.

We test for the validity of the smoothing and signalling hypotheses of dividend determination.

Using a VAR framework we examine the dynamic behaviour of share prices, dividends and earnings for 137 UK manufacturing and service companies, observed over the period 1970‐2003.

There is strong evidence of a contemporaneous relationship between prices, dividends and earnings, and little evidence of independence between these variables. Some evidence in favour of both the smoothing and the signalling hypothesis is obtained from causality tests, with perhaps more support for the latter hypothesis. However, there is considerable diversity in the causal relationships between prices, dividends and earnings.

No single hypothesis regarding the determination of dividends, and the predictive power of dividends for earnings and prices appears to dominate.

The results presented here are of interest to markets agents in that while they suggest there is no single transition mechanism linking prices, dividends and earnings, nevertheless these three variables are strongly correlated and exhibit varying degrees of causality.

The purpose of this paper is to investigate the opinions of managers of Indian firms on stock splits and bonus shares (stock dividends) and relate them to explanations for stock distributions identified in the prior literature.

The authors use descriptive statistics from a mail survey to the company secretaries of 500 firms listed on the National Stock Exchange of India to elicit their responses about statements involving stock splits and bonus shares.

The survey evidence shows that among the competing motives for stock splits, the liquidity hypothesis receives the highest level of support followed by the attention-getting variant of the signaling hypothesis, signaling, and the preferred trading range hypotheses. Regarding bonus shares, respondents express strong support for the retained earnings, liquidity, and signaling hypotheses but lesser support for the cash substitution and preferred trading range hypotheses.

The survey evidence provides new insights into the stated motivations for stock distributions, especially bonus shares, among Indian firms but the ability to generalize the results is tempered by the relatively small number of respondents. This limits the ability to test for statistically significant differences between the various competing hypotheses. Hence, the results are suggestive rather than definitive.

The survey evidence suggests that no single explanation dominates all others for issuing stock splits or bonus shares in India. Thus, managers have multiple reasons for engaging in stock distributions.

Few studies use survey methodology to examine Indian dividend policy. Given the dearth of survey evidence on stock distributions among Indian firms, this study not only updates the limited evidence on stock splits but also provides the first survey evidence about managerial views on bonus shares.

A long line of research has addressed whether there are sex differences in cooperation and other forms of prosocial behavior. Studies of social dilemmas (situations that pose a conflict between individual and collective interests) have yielded particularly contradictory conclusions about whether males or females are more cooperative. We present an evolutionary framework that synthesizes previous results and generates new insights into the sex and cooperation question. The framework addresses two general bases of sex differences in cooperation. First, we show how variation in the motivational structure of social dilemmas generates sex differences in cooperation. We then address two aspects of social structure, that, according to evolutionary reasoning, generate sex differences in cooperation: the sex composition of the group, and the interpersonal versus intergroup nature of the dilemma. After presenting new hypotheses and reviewing existing research relevant to each hypothesis, we conclude by making suggestions for future research.

The purpose of this paper is to test whether underpricing can serve as a signal of quality in a financing-investment environment and to compare it under the two institutions for financing offers that are commonly observed in corporate financial markets: take-it-or-leave-it offer (TLO) and the competitive bidding offer (CBO).

The research paper uses experimental economics methodology and laboratory experiments to investigate the research question.

The results suggest that underpricing can serve as a signal of quality but not sustainable as a repeat strategy. Over time, the high-quality firms converge to a pooling strategy rather than bearing the cost of signaling. Additionally, underpricing is lower under CBO than under TLO institution due to competitive bidding. Signaling under CBO institution may be less salient due to possible mimicking by the low-quality firms.

This paper presents a first experimental investigation of the underpricing-signaling hypothesis in a financing-investment environment under asymmetric information. The choice of institution in a financing environment produces qualitatively and strategically different behavior among firms and investors.

Scholars have examined the importance of a firm's dividend policy through two competing paradigms: the signalling hypothesis and the free cash‐flow hypothesis. It has been argued that our understanding of dividend policy is hindered by the lack of a model that integrates the two hypotheses. The purpose of this paper is to address this by developing a theoretical dividend model that combines the signalling and free cash‐flow motives. The objective of the analysis is to shed light on the complex relationship between dividend policy, managerial incentives and firm value.

In order to consider the complex nature of dividend policy, a dividend signalling game is developed, in which managers possess more information than investors about the quality of the firm (asymmetric information), and may invest in value‐reducing projects (moral hazard). Hence, the model combines signalling and free cash‐flow motives for dividends. Furthermore, managerial communication and reputation effects are incorporated into the model.

Of particular interest is the case where a firm may need to cut dividends in order to invest in a new value‐creating project, but where the firm will be punished by the market, since investors are behaviourally conditioned to believe that dividend cuts are bad news. This may result in firms refusing to cut dividends, hence passing up good projects. This paper demonstrates that managerial communication to investors about the reasons for the dividend cut, supported by managerial reputation effects, may mitigate this problem. Real world examples are provided to illustrate the complexity of dividend policy.

This work has been inspired by, and develops that of Fuller and Thakor, and Fuller and Blau, which considers the signalling and free cash‐flow motives for dividends. Whereas those authors consider the case where firms only have new negative net present value (NPV) projects available (so that dividend increases provide unambiguously positive signals to the market in both the signalling and free cash‐flow cases), in this paper's model, the signals may be ambiguous, since firms may need to cut dividends to take positive NPV projects. Hence, the model assists in understanding the complexity of dividend policy.

To investigate whether a stock split is still considered a policy that creates value for the underlying company and the rationale behind such action for companies listed on the NASDAQ.

The event study methodology of Strong is employed to examine the announcement effect of stock splits on stock prices.

The results indicate a positive market reaction at the stock split announcement and that the liquidity hypothesis explains well the rationale for the stock splits.

The sample is quite small (57 observations) and the examination period is limited to 1999 and 2000.

Findings are of particular interest to researchers, practitioners and investors that have an interest in firms listed on NASDAQ.

Limited research on the stock price behaviour of firms listed on NASDAQ around stock split announcement date.

This study aims to cover an important yet largely under-explored topic: the dynamic process of bank liquidity management in a vast developing economy by considering pool of funds hypothesis, signaling hypothesis and risk management hypothesis.

The authors apply the dynamic common correlated effect (DCCE) method with an error correction model format to a long panel datasets of 84 Indonesian banks from January 2003 to August 2019, resulting in 16,800 observations.

The authors obtain convincing evidence of dynamic liquidity management with an error correction mechanism. The time needed to adjust to a liquidity shock ranges from 2.5 to 3.5 months. The empirical results strongly support the pool of funds and signaling hypotheses, whereas risk management motive appears to have secondary importance.

The regulator should also encourage banks to diversify liquidity management to include interbank money market and off-balance-sheet instruments. The current condition shows that bank liquidity management is strongly correlated with intermediation dynamics and thus is contracyclical. Banks could end up with tight liquidity in a booming economy, which would pose a severe risk to their financial standing.

To authors’ knowledge, this study is the first to analyze bank liquidity management behavior empirically using a panel error correction mechanism. Here, the authors also try to combine a practitioner perspective with a scientific one.

Accelerated share repurchases (ASRs) represent an important recent innovation in repurchase methods. Although executives often mention signaling undervaluation as a motivation for ASRs, managing earnings per share (EPS) has been argued as a key alternative motivation in the financial press. This paper aims to investigate whether ASRs are driven by managerial opportunism (i.e. managing EPS) or managerial optimism (i.e. signaling undervaluation) and whether stock market participants see through these motives.

The sample consists of 293 ASRs conducted between 2004 and 2011. Firms suspected of using ASRs to manage EPS (EPS-suspect firms) were identified by examining actual reported EPS, as-if EPS (i.e. EPS that would have been reported in the absence of an ASR), and analysts’ consensus EPS forecasts. A logistic regression of EPS-suspect versus non-EPS-suspect ASR transactions was performed. Analysts’ reactions to ASR announcements and investors’ reactions to post-ASR earnings announcements were examined. Changes in post-ASR operating performance were also analyzed.

Twenty-nine per cent of ASR firms (EPS-suspect firms) would have missed the consensus EPS forecasts had they not implemented the repurchase. Managerial incentives – securing bonuses and maintaining reputation by avoiding EPS misses – appear to lie behind this opportunistic use of ASRs. Upward revision observed in analysts’ EPS forecasts upon the announcement of ASRs is short-lived, indirectly facilitating firms’ use of ASRs to meet or beat consensus forecasts. Investors, however, are not fooled by managers’ use of ASRs as an earnings management device. Unlike EPS-suspect firms, non-EPS-suspect firms exhibit positive abnormal operating performance during the post-ASR period, suggesting that these firms use ASRs as a signaling device rather than as an earnings management device.

ASRs can be used by managers to signal better future performance to investors. However, managers who intend to do so should carefully consider the timing of an ASR. Initiating an ASR when the company is facing the risk of missing analysts’ EPS forecasts may be interpreted as the ASR being motivated by EPS management concerns rather than signaling, diminishing the credibility of a positive signal intended to be conveyed through the ASR. Further, when considering payout policy and executive compensation decisions, corporate boards need to be cognizant of managers’ incentives for undertaking ASRs. The use of ASRs opportunistically to boost EPS is prevalent, and this action is followed by poor performance.

A number of novel results are documented using tests that are methodologically distinct from those used in related previous research. Notably, this is the first study to distinguish between EPS-suspect and non-EPS-suspect ASR firms and examine the determinants as well as consequences of using ASRs as an earnings management versus signaling device. One out of every four ASR firms are EPS-suspects. Analysts react to ASR announcements by only temporarily increasing their short-term EPS forecasts. Investors see through managers’ use of ASRs as an earnings management device. While ASRs are prone to managerial opportunism, a large number of firms use ASRs to communicate favorable information about their future operating performance to investors.

This paper examines stock prices reaction to open market repurchases announcements at the São Paulo Stock Exchange between May 30, 1997 and October 31, 1998. This institutional scenario is a good testing ground for some theoretical hypotheses about stock repurchases announcements, because during this period there were taxes on capital gains but not on dividends. Using an event study methodology, we examined 110 episodes and found very small abnormal returns. Those results can not be explained by two main competing theoretical explanations. The Cumulative Abnormal Returns pattern found clearly suggests that repurchase announcements affected the behavior of stock prices in ways not described in previous studies.