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Article
Publication date: 25 September 2018

Keith Chan and Ruoyun Zhao

The purpose of this paper is to examine the information content in the Standard & Poor (S&P) 500 index revision and its impact on the corporate bonds and earnings of the…

Abstract

Purpose

The purpose of this paper is to examine the information content in the Standard & Poor (S&P) 500 index revision and its impact on the corporate bonds and earnings of the firms whose stocks are added to or deleted from the index.

Design/methodology/approach

The paper uses panel regressions on a 13-year sample of the companies added and deleted from the S&P 500 index.

Findings

The regression results on the bond yields and earnings show that analysts and investors draw positive (negative) information from Index additions (deletions) and adjust their expectations of the firm performance as well as the required rates of return on corporate bonds after index revisions.

Research limitations/implications

The paper suggests that deletions from the Index have significantly negative impacts on corporate bonds and earnings performance of deleted firms while additions to the index do not have significant impacts on the bonds or realized earnings of added firms.

Originality/value

This paper uses corporate bonds and earnings to test competing hypotheses proposed to explain the excess stock returns of index revision, including information content hypothesis and liquidity hypothesis. The results are consistent with the information content hypothesis and do not support the liquidity hypothesis.

Details

Managerial Finance, vol. 44 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 4 July 2008

Mahmoud M. Nourayi and Frank P. Daroca

This paper aims to examine the impact on executive compensation (both cash and in total) of regulation, size of sales and number of employees, and nature of the business…

Abstract

Purpose

This paper aims to examine the impact on executive compensation (both cash and in total) of regulation, size of sales and number of employees, and nature of the business in terms of new‐economy vs traditional.

Design/methodology/approach

This study uses the ExecuComp database as the information source. Regression analysis is used to test hypotheses that focus on firm size in terms of sales, market and accounting returns, and the number of firm employees. The sample consists of 455 US firms from 25 industries, and covers the period 1996‐2002.

Findings

Firm size and market‐based return are the most significant explanatory variables in affecting executive compensation. More limited support was found for accounting‐based returns, as was changes in the number of employees.

Research limitations/implications

Findings of this study may be limited by the temporal context. Around the turn of this century may have been an unusual time in America's corporate history. The economic outlook of the late 1990s may be fundamentally different from the one facing firms now or in the future. Consequently, future research will be needed to determine to what extent these results can be generalized to periods of different economic prospects.

Originality/value

This study examines the impact of firms' operational characteristic on Chief Executive Officer (CEO) compensation.

Details

Managerial Finance, vol. 34 no. 8
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 1 January 2009

Jocelyn D. Evans, Mark K. Pyles and Hyuntai Choo

The purpose of this paper is to analyze the role of large equity ownership by both institutions and outside block shareholders in monitoring the board of directors…

Abstract

Purpose

The purpose of this paper is to analyze the role of large equity ownership by both institutions and outside block shareholders in monitoring the board of directors’ decision to initially adopt defense mechanisms and the subsequent capital market reaction to the adoption.

Design/methodology/approach

This paper employs an empirical methodology that controls for selection bias. Multiple regressions were employed to assess the relationship among the variables.

Findings

Stockholder wealth effects of poison pills are positively related to pressure‐resistant institutions, which is consistent with effective monitoring. The wealth effects of poison pills, however, are negatively related to pressure‐sensitive investors, consistent with passivity. No empirical relation was found between ownership structure and shareholder approved amendments such as classified boards and fair price amendments.

Research limitations/implications

This study was conducted as a large sample analysis over an earlier time period that was more applicable for evaluating anti‐takeover techniques.

Practical implications

The results are consistent with pressure‐resistant institutions actively monitoring to prevent unilaterally implemented defense mechanisms of all types, whereas pressure‐sensitive institutions appear to more readily accept poison pills.

Originality/value

These results suggest that failing to control for the type of outside investor may not clearly portray documented relations in other corporate governance studies.

Details

Managerial Finance, vol. 35 no. 1
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 14 July 2006

Mahmoud M. Nourayi

The relationship between CEO compensation and firm performance is a field of intense theoretical and empirical research. The purpose of this study is to gain additional…

Abstract

The relationship between CEO compensation and firm performance is a field of intense theoretical and empirical research. The purpose of this study is to gain additional insights into the nature of this relationship by examining empirically the relatively unexplored areas of its non-linearity. The findings of this study show strong evidence that supports the view that the relationship between executive compensation and firm performance is non-linear and asymmetric. Additionally, the structure of asymmetry is found to be dependent upon the measure of performance. Convexity characterizes the asymmetry of the relationship between executive compensation and market returns, while concavity distinguishes the asymmetry of the relationship between executive compensation and accounting returns.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-1-84950-447-8

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Article
Publication date: 28 February 2020

Shabir Ahmad, Kamran Ahmed Siddiqui and Hoda Mahmoud AboAlsamh

The purpose of this paper is to examine the impact of owner family involvement in business on sustainable survival of family small-to-medium enterprises (SMEs) and to…

Abstract

Purpose

The purpose of this paper is to examine the impact of owner family involvement in business on sustainable survival of family small-to-medium enterprises (SMEs) and to empirically validate the intervening role of corporate social responsibility (CSR).

Design/methodology/approach

The authors analyze data from 489 owner and nonowner executives of 150 family SMEs using PLS-SEM (Partial Least Square–Structural Equation Modeling).

Findings

The authors found evidence that family involvement in business positively impacts the sustainable survival of family SMEs while corporate social responsibility partially mediates this relationship. Apart from effective family involvement in business, active involvement in social causes enhances a firm's ability to survive longer.

Research limitations/implications

This study was conducted in a geographic context and data were collected from family-managed and controlled firms. Further research is needed to generalize the findings to all types of family firms in the global context. In an Islamic society, family firms need to invest in social causes, human development, and environmental sustainability through zakat, sadaqat, and donations.

Practical implications

The findings imply that family firms require stakeholder-centric competitive strategies and socially responsible behavior along with effective family control, commitment, enrichment, and successful succession since the path to sustainable survival goes through CSR.

Originality/value

Survival is the biggest challenge facing family SMEs forcing them to achieve the ability to sustain longer. Rooted in transaction cost economics (TCE) theory of the family firm and stakeholder theory, this paper validates an integrative model for family SMEs' sustainable survival.

Details

Journal of Small Business and Enterprise Development, vol. 27 no. 2
Type: Research Article
ISSN: 1462-6004

Keywords

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Article
Publication date: 11 November 2020

Huthayfa Nabeel Jabari and Rusnah Muhamad

The purpose of this paper is to examine the influence of gender diversity among the board of directors (BOD) and Shariah supervisory board (SSB) members on the financial…

Abstract

Purpose

The purpose of this paper is to examine the influence of gender diversity among the board of directors (BOD) and Shariah supervisory board (SSB) members on the financial performance of Islamic banks in Indonesia and Malaysia.

Design/methodology/approach

Data for a sample of 19 Islamic banks for the period 2010–2018 were collected to test the research hypotheses using pooled ordinary least squares estimation method. Generalized least squares estimation method was used to confirm that the results are robust. This study lagged the explanatory variables by one period to control for potential endogeneity.

Findings

The findings suggest that Islamic banks with more gender-diverse BOD and SSB are expected to have better financial performance. In addition, this paper finds that an increase in Islamic banks’ size may undermine the positive impact of gender diversity among SSB members on Islamic banks’ financial performance.

Research limitations/implications

This study was conducted only on Islamic banks in Indonesia and Malaysia owing to data constraints; thus, the results may not be generalizable to Islamic banks in other countries.

Practical implications

Improving financial performance is crucial for banks, especially for Islamic banks, to sustain their fast-growing share globally. Therefore, the findings of this study are expected to provide insight and understanding in the selection and appointment of BOD and SSB members at Islamic banks.

Social implications

By having women represented in the BOD and SSB, Islamic banks will benefit equally from valuable abilities across demographic groups in the society. Furthermore, if the members of the BOD and SSB are properly selected, Islamic banks with more gender-diverse boards can effectively contribute to enhancing social welfare of various segments in the society.

Originality/value

This is the first study, as far as is known to the authors, that provides empirical evidence on the influence of gender diversity among BOD and SSB members on the financial performance of Islamic banks. This paper is expected to be used as a reference by the shareholders and customers of Islamic banks in ensuring that the BOD and SSB have the best optimal composition that maximizes their profits.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 29 April 2021

Tran Van Phuong Duong, Szu-Hsien Lin, Huei-Hwa Lai and Tzu-Pu Chang

This research examines how macroeconomic variables can precisely predict bull/bear stock markets in China and Taiwan.

Abstract

Purpose

This research examines how macroeconomic variables can precisely predict bull/bear stock markets in China and Taiwan.

Design/methodology/approach

This paper adopts a two-state Markov switching model to characterize the bull and bear markets spanning from 1994 to 2019 and then conduct a bear stock market predictability test by running regressions between the filtered probabilities of bear markets and a series of macroeconomic variables in turn at different horizons of 1, 3, 6, 12 and 24 months.

Findings

This paper shows that inflation rates, changes in real exchange rates, and foreign currency reserve growth are key predictors of bear markets in China, while term spreads, unemployment rates and foreign reserve growth are major factors that can predict bear markets in Taiwan. Remarkably, industrial production growth does not have predictive power for bear markets, which may suggest emerging markets are driven by fund flows rather than real economic activities. Besides, the impact directions of foreign currency reserve growth are opposite, which may be due to different proportions of the financial accounts in their balance of payments.

Practical implications

In practical respect, this paper provides market participants the usefulness, impact direction and implications of bear market predictors when building their market-timing strategies in China and Taiwan stock markets. The government institutions may also thereby make appropriate policies to prevent huge stock market downturns and serious drawbacks.

Originality/value

It highlights the “fund-driven market hypothesis” and “foreign currency reserve effects” that commonly dominate Taiwan and China stock markets since both are highly affected by international funds.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

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Article
Publication date: 29 July 2014

Ming-Tien Tsai and Wen-Hui Tung

– This study aims to explore the effects of corporate governance structure and resources on foreign direct investment (FDI) commitment and firm performance.

Abstract

Purpose

This study aims to explore the effects of corporate governance structure and resources on foreign direct investment (FDI) commitment and firm performance.

Design/methodology/approach

The data are collected from high-tech firms listed by the Taiwan Stock Exchange. All selected 137 firms have complete FDI and other required data during 2007-2009. The mean values of the variables during the three-year period were used for analysis.

Findings

The results indicate that both chief executive officer (CEO) duality and government shareholding affect a firm’s FDI; and the higher the management shareholding ratio, the lower the return on equity. Moreover, a large ownership of substantial shareholders can enhance a firm’s performance; and higher institutional ownership can lead to higher firm performance.

Research limitations/implications

This study analyses the limited data from 137 high-tech firms in Taiwan during the three-year period of 2007-2009. Further analyses of other industries, countries and time periods are needed to generalize the conclusions.

Practical implications

A firm with CEO duality should increase the ratio of government holding to mitigate the influence of CEO on FDI decisions. When a firm’s performance is poor, the ratio of managerial holdings should be reduced; conversely, the firm could attract more holdings from domestic securities and funds to improve performance.

Originality/value

This study provides guidelines for shareholders to analyze governance structure and formulate their investment strategies. Corporate policymakers may use these as the principles for designing a corporate governance structure that could engender optimal firm performance.

Details

Chinese Management Studies, vol. 8 no. 3
Type: Research Article
ISSN: 1750-614X

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Article
Publication date: 1 February 1980

Michael Keating

As the investing public flocks to no‐frills discount brokers and does its own investment homework, more and more of these soldiers of fortune can be found around the…

Abstract

As the investing public flocks to no‐frills discount brokers and does its own investment homework, more and more of these soldiers of fortune can be found around the loose‐leaf financial services in the business departments of public and academic libraries. Because of their intensive, comprehensive coverage of the most widely traded stocks, two of the major stock reporting services, Moody's Investors Fact Sheets and Standard & Poor's Stock Reports, are becoming increasingly vital to libraries of all types. What follows is a comparison of the two services.

Details

Reference Services Review, vol. 8 no. 2
Type: Research Article
ISSN: 0090-7324

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Article
Publication date: 31 July 2009

Karel Hrazdil

Many papers have argued that there are long‐run downward‐sloping demand curves (LRDDC) for stocks. The purpose of this paper is to analyze this hypothesis using a new…

Abstract

Purpose

Many papers have argued that there are long‐run downward‐sloping demand curves (LRDDC) for stocks. The purpose of this paper is to analyze this hypothesis using a new, unique, and ostensibly information‐free event: the re‐weighting of the Standard & Poor (S&P) 500 index from market based to free‐float based, which involves a significant shift in supply that, under the LRDDC, should result in significant and permanent price movements.

Design/methodology/approach

Event study methodology is used to examine abnormal returns and trading activity around the free‐float weight implementation dates for S&P 500 firms with various investable weight factors.

Findings

As a result of S&P 500 index re‐weighting, affected stocks experience statistically significant excess returns of −1.54 percent during the event week. This return is reversed during the following 30 days as trading volume returns to normal levels. These results are contrary to previous studies that analyze ostensibly informational events and/or different exchanges.

Research limitations/implications

Results of this study indicate that arbitrage appears to be effective in eliminating a long‐term mispricing, which challenges the validity of the LRDDC hypothesis.

Originality/value

This study contributes to the body of literature on the S&P 500 index firms by providing supporting evidence for the price‐pressure hypothesis.

Details

Managerial Finance, vol. 35 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

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