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This paper aims to explore the effectiveness of an artificial neural network (ANN) in predicting fraudulent financial reporting in small market capitalization companies in Malaysia.

Based on the concepts of ANN, a mathematical model was developed to compare non-fraud and fraud companies selected from among small market capitalization companies in Malaysia; the fraud companies had already been charged by the Securities Commission for falsification of financial statements. Ten financial ratios are used as fraud risk indicators to predict fraudulent financial reporting using ANN.

The findings indicate that the proposed ANN methodology outperforms other statistical techniques widely used for predicting fraudulent financial reporting.

The study is one of few to adopt the ANN approach for the prediction of financial reporting fraud.

Fama–French model (FFM) has been successful in helping to predict the financial markets, but investors have been interested in creating more sophisticated models to better predict the performance of the stock market. The objective of the extended version is to create a more robust econometric model to better predict the performance of the Mexican Stock Market.

The study divides the Mexican Stock Market into six different portfolios. The criteria to build those portfolios are the same one used in Fama–French (1992). The study comprises 78 stocks listed in the Mexican Stock Market that are analyzed monthly during 1997–2018. The study analyzes the period before and after the 2008–2009 financial crisis to identify whether there are important changes. The estimation applies the traditional and an extended version of the FFM that include macroeconomic variables such as country risk, economic activity, inflation rate, and exchange rate and some financial variables recommended in the literature.

Results indicate that classic FFM variables are statistically significant in most cases, but relevant macroeconomic variables such as the interest rate, exchange rate and country risk stand out for being weakly relevant in most of the portfolios. However, it is noticed that some of these macroeconomic variables became relevant for different portfolios only after the 2008–2009 crisis, especially in portfolios which include small market capitalization firms.

The study includes the stocks listed in the Mexican Stock Market. One limitation is the small number of stocks available, which reduces the possibility of creating well diversified portfolios. This study includes 78 stocks. The stocks removed from the sample are from firms that were not listed during six consecutive months or whose market capitalization did not change in the same period. Outlier data were removed from the sample to capture in better way the general performance of the stock market.

The objective of the extended version is to create a more robust econometric model than the traditional model. It is expected that such estimations can be helpful to investors to make better decisions when they try to predict performance in the stock market.

An extended version of the FFM can be helpful to investors to make better decisions when they try to predict performance in the stock market.

To the best of our knowledge there are no more studies in the literature of the Mexican financial market that apply the same methodology.

This study aims to analyse, from a corporate finance and governance perspective, the reasons why managers decide to delist their companies from a stock exchange. On the basis of the five hypotheses of voluntary delisting, this study examines why listed companies delist themselves voluntarily in the construction and real estate sectors.

By using actual data to examine contractors and real estate companies listed on the Tokyo Stock Exchange between 2004 and 2014, this study analyses whether these companies delist themselves voluntarily. The pooled binary logit model is used as the statistical method.

In both the construction and real estate sectors, the concentration of shareholders has a significantly positive effect on voluntary delisting, thus supporting the transfer of wealth effect hypothesis. In construction, market capitalisation has a significantly negative effect on voluntary delisting, thus supporting the maintenance cost reduction hypothesis. In the real estate sector, the ratio of market capitalisation to total assets has a significantly negative effect on voluntary delisting, thus supporting the undervalue elimination hypothesis.

By comparing the construction and real estate sectors, this study reveals both unique and common reasons for voluntary delisting in each sector. It also offers valuable insights to managers, regulators setting standards in securities markets and investors.

Building on pecking order theory, this study seeks to understand the various financial factors that influence top management's decision regarding the company’s capital structure. The authors attempt to understand and analyse whether the capital structure of mid‐ and small‐cap firms is affected by cash surplus scaled to total assets. Along with other determinants of capital structure such as liquidity, profitability, tangibility, market capitalisation and age, this is considered one of the major factors. Cash surplus is calculated using data from the cash flow statement. It is defined as the difference in cash from operating activities and that from investing activities and is scaled to total assets. To the best of the authors’ knowledge, this is the first study to regress cash surplus scaled to total assets and other determinants over leverage to examine the impact on mid‐ and small‐cap firms. The pecking order theory was found to hold for firms earning cash surplus.

Data were collected from the CMIE Prowess database of all firms listed on the NIFTY Small cap 250 index and NIFTY Midcap 150 index. The data of non-financial firms belonging to the midcap and small-cap sector, listed on the National Stock Exchange of India from 2012 to 2019 were considered. After cleaning the data, an unbalanced panel of 171 companies totalling 1,362 observations for the NIFTY Small-cap 250 index and another panel of 96 companies with 761 observations for the NIFTY Midcap 150 index was created. Panel data regression analysis was used to determine the effect of cash surplus scaled to total assets on the firms' capital structure.

This study demonstrates how small- and midcap firms' behave differently in taking capital structure decisions. Pecking order theory was found to hold for firms earning cash surplus as a proportion of total assets (Surplusta).

The study was conducted through data available on secondary sources and database. The study can be better conducted by conducting a primary survey too. Further study may be conducted with a blend of secondary and questionnaire method. The results can be compared to check the similarity in findings.

Managers can benefit from the findings when making decisions on long- and short-term loans. This study can help managers in terms of the financial variables that have a role to play in the financial leverage of the company. The decision of the managers of midcap or small-cap firms would be different. Factors influencing short- and long-term borrowings are different. Academics can discuss whether there is any difference in the influence of capital structure variables of small- and midcap companies and the reasons for such differences. Judicious decisions on capital structure will create wealth for the shareholders as the right decision about leverage would result in a proper cost of capital. The findings also add to the existing literature on the Pecking order theory.

Academics can discuss whether there is any difference in the influence of capital structure variables of small- and midcap companies and the reasons for such differences.

The study extends the existing literature by demonstrating that the capital structure of mid and small-cap firms is affected by cash surplus scaled to total assets. The pecking order theory was found to hold for firms earning cash surplus. This study can inform the practitioners about the financial variables that have a role to play in the company's financial leverage. As the results and significance of the variables of the midcap or small-cap firms are different, the decisions of the managers of these firms would be separate for the capital structure of their firms. The study also infers that the factors influencing short and long-term borrowings are different. The study determines whether managers' decision-making in such companies is different in terms of raising short- and long-term loans. The study attempts to guide managers in considering the different variables that would influence their capital structure decisions, particularly the decision to include debt in the capital. Financial variables need not be of equal importance for managers belonging to small- and midcap companies.

This paper aims to investigate the rounding-up in reported income numbers of Indian companies by examining the evidence of unusual occurrence of zero and nine in reported income numbers such as profit after tax and earnings per share (EPS). It also examines such rounding-up patterns under different scenarios such as companies varying across different time periods, income size, market capitalization, industries, initial public offering and earnings news.

All 1,707 companies listed on National Stock Exchange of India were considered for analysis. This study covered a period of 21 years from 1991-1992 to 2011-2012. Data were collected from PROWESS database.

In Indian companies, the rounding-up pattern in reported income numbers is in conformity with existing studies (Carslaw, 1988; Thomas, 1989). In case of income numbers, the observed proportionate occurrence of zero and nine is significantly different from the expected proportionate occurrence. The study found that anomalies in reported earnings vary across industry. Further, it is found that the per cent deviations are more in case of companies having high income levels, high market capitalization and with positive news.

In future studies, it will be interesting to develop a model reflecting the causes for such rounding-up of income numbers.

The paper provides an insight analysis on the rounding-up behavior of Indian companies and facilitates the understanding of occurrence of such anomalies under various scenarios. This paper may be useful to all the users of accounting information.

First study on examining the rounding-up of reported income numbers and EPS by companies in India.

Previous articles have demonstrated the extent to which financial institutions have come to own a growing proportion of ordinary shares in industrial and commercial companies. In the present article we examine the implications of this development for two areas of particular concern: corporate control and corporate financing.

In the backdrop of emerging market setting of India, this study aims to attempt to identify how Institutional investors use sell side analyst outputs for their decision-making processes in light of inherent biases in their forecasts and recommendations. The study also conceptualizes the role of internal buy side teams in the process and try to figure out the key attributes and services provided by sell side analysts, which provide maximum value to the investors.

The study is centered upon in-depth semi-structured interviews of ten institutional investors from top Indian asset management companies covering a wide range of topics tied back to theoretical explanations. The data collected was transcribed, coded and analyzed using content analysis to ensure a systematic synthesis of point of view.

The findings show that internal analyst teams of institutional investors play a dominant role in terms of validation of sell side analysts’ outputs (given the inherent biases in sell side analyst forecasts). Further, the engagement of sell side analysts by the investors are determined not only through profitable recommendations but also on the basis of soundness of the investment rationale along with other services provided. Finally, this study puts into perspective, the critical role of analyst industry knowledge and access to company management (as opposed to analyst pedigree and forecast accuracy) for institutional investors decision-making.

The findings of the paper have profound implications for various stakeholders such as companies, sell side analysts, policy makers, researchers and students of finance in terms of detailed understanding of investment processes of institutional investors in the context of emerging markets like India, which have a different legal and regulatory set-up compared to developed markets. The authors also provide a critical perspective through an intriguing paradox that exists between finance theory and its relevance for actual practitioners.

To the best of the authors’ knowledge, this is the first study in India which look inside the “black box” of institutional investors and their decision-making process, especially with respect to how they use sell side outputs.

Purpose: Ethical investing is considered to be the pinnacle of embedding environmental considerations in investing. Environmental considerations form a major part of corporate social responsibility (CSR), and CSR is considered to have a positive effect on investment returns. The purpose of this chapter is to assess the degree of environmental considerations embedded in faith-based funds investment criteria. The comparative analysis between principles and practice through faith-based investing is undertaken.

Design/Methodology: Prospectuses of selected faith-based mutual funds and other information around investment strategies provided on the Funds’ websites have been analyzed in detail. Content analysis has been undertaken in order to evaluate the existence and types of environmental related criteria demonstrated by the Funds. The criteria are compared to the faith principles on environmental responsibility.

Findings: It is generally assumed that CSR requirements form the premise of socially responsible investing. The authors find that faith-based investing criteria are narrowly defined and that they represent biases which do not promote environmentally responsible investing.

Implications: The major implication is that inspite of the availability of faith-based environmental responsibility principles, faith-based funds represent a case of economic returns prioritization over environmental considerations. Environment accountability principles that exist need to be promoted regularly so that they become an essential element of every day decision-making including faith-based economic decision-making.

Originality: This study contributes to the debate on ethical investing from the perspective of faith-based mutual funds.

While the “Information Age” has provided the technological tools to “democratize” data and make it widely available to a vast audience of knowledge consumers, ironically it has also provided the materials for a tapestry of rules, regulations and processes that make it more difficult for individuals to access information relevant to both their public and private lives. The purpose of this paper is to examine the role of the private sector in the control and policing of financial crime, and provide an empirical and theoretical framework for understanding the complex tensions created by the simultaneous expansion of both data sources and technologies to collect and format data to create marketable information “products.”

Three primary methods were used to gather the data for this research. Extensive literature reviews were conducted together with an analysis of existing data bases. Finally, a number of interviews were done with various corporate managers to ascertain their views of the existing climate of regulation and/or to determine their approach to monitoring financial crime.

Regarding the private sector's role in the control of financial crime, this research found five distinct roles; each with its own dynamics and implications for successful suppression of unlawful conduct. The five roles are grudging informant, enthusiastic intelligence operative, agent provocateur, cop on the take, and officer friendly. A calculus of incentives and disincentives determines which role will be adopted by the private sector.

Since this paper was exploratory in nature, resulting in a new taxonomy of compliance types, more in depth research ascertaining the empirical validity of each type would be in order. Such knowledge can help policy makers formulate rules and regulations that will enhance public/private partnerships in the control of financial crime.

This study investigates the impact of the enhanced continuous disclosure regime introduced in December 2002 on several measures of information risk in NZX‐listed stocks. We employ two microstructure models and an intraday data set to measure information risk in a sample of 71 stocks. Our empirical results show that the reforms enacted in December 2002 had no significant effect on either the level of information‐based trading or the adverse selection component of market spreads in our sample of NZX‐listed stocks.