Search results

The belief that the London Stock Exchange is a near‐perfect market is common both among economists and the lay public. The main basis for this belief is that stock and share prices are very sensitive to the influence of supply and demand in the market. But undoubtedly the belief is also influenced by the very effective public relations efforts of the Stock Exchange Council and also the members of the exchange—the brokers and jobbers who operate the market mechanism.

The governance of capital market institutions did not receive much interest compared to their banking sector counterparts, partly due to their different ownership structures. Recent trends; increased competition, technological advances, structural changes, globalization, all had their share of impact on governance systems of capital markets institutions particularly on exchanges. Corporate governance of non-financial firms and capital markets institutions differ in several ways. Firstly the role of risk management differs since they may impose systemic risks to the financial system. Secondly well-implemented governance structures and processes are required but are not sufficient in capital markets since there are several conflicts of interests to be addressed. Therefore whether and how effectively they function is what matters. Thirdly the governance structures of such institutions exhibit different effectiveness on their decisions.The governance of FIs in capital markets is discussed in terms of board structure and management, risk governance, supervisors, shareholders, executive compensation, role of regulators, authorities and values and culture. The role of stock exchanges in corporate governance are discussed separately in terms of implementing corporate governance codes, demutualisation and its impact on regulations, transparency and accountability issues and the effects of M&As among exchanges. Market needs strong analytical tools and reliable benchmarks to assess governance risk. The corporate control and the regulation of the institutions by the exchanges when the corporations (regulated) are the competitors of the exchanges (regulators) or owned by the stockholders of the exchanges must be addressed. The risk of regulatory arbitrage, calls for the need of harmonisation among regulators. Better regulation of FIs and greater global coordination among regulators are seen as the most two important issues to prevent another crisis.

In recent years, stock exchanges have been increasingly integrating and merging their activities at a national and international scale. While consolidation is often driven by technological, legal and competitive changes, whether merger activities are efficient in terms of market microstructure remains unknown. Academic research to date has analyzed the causes behind these mergers primarily from the technological, legal and competitive perspective, whereas relatively little literature considers their impact on the exchange itself. The paper aims to consider the case of the Euronext merger to explain this topic by studying this merger and its effect on Euronext's market risk (measured by volatility).

The paper uses a standard General Auto‐regressive Conditional Heteroskedasticity (GARCH (1,1)) process to study the volatility of the underlying markets and use break methodology to highlight the merger effects. It also adds control samples to account for any change in volatility that could be caused by factors other than the merger event.

The results suggest that the Euronext merger did not affect the market risk. In particular, the paper finds no evidence that the integration onto the same platforms for trading and clearing had a significant effect on the volatility of the merging markets.

This study contributes to clarify business issues and to guide policy makers on exchange industrial organization.

The present paper further contributes to the ongoing discussion about the drawbacks and merits of horizontal exchange integration.

This paper aims to study the influence of political-economic reform and especially privatisation on the quality of financial reporting of the Egyptian companies.

The paper analyses data from official documents and 34 interviews with company executives, financial analysts, external auditors and Stock Exchange regulators to inform our understanding of the relationship between changes in the Egyptian environment and the quality of financial reporting.

The findings of the research suggest that the recent Egyptian political-economic reform, resulting in privatisation has significant influence on negative accounting practices and hence on lowering the quality of financial reporting through its effect on: departure from uniform accounting system and public accounting regulations; issuing new stock exchange regulative rules; reviving the role of Stock Exchange; and increasing competition within Stock Exchange regarding raising funds.

This paper contributes to the literature by identifying the effect of socio-cultural factors on motivating executives to 7 exercise negative accounting practices and hence producing low-quality financial reports (FRs) and by highlighting the fact that accounting practices cannot be generalised worldwide due to the absence of universal socio-cultural factors which shape these practices. This paper employs new institutional sociology theory and contributes to that theory by acknowledging the active interplay between institutional context and economic environment.

Financial markets’ integration and technological advances in equity trading may have reduced the potential benefits from listing a firm's shares on a foreign exchange. Nevertheless, a significant number of firms continue to cross‐list every year. This paper examines the recent cross‐listing trends and reviews the literature on motives to cross‐list.

The literature review includes a summary of theoretical studies grouped into cross‐listing theories including market segmentation, liquidity, investor recognition, information disclosure, legal bonding, proximity preference and business strategy theories, and also includes a discussion of testable implications and empirical evidence for each of the above mentioned cross‐listing theories.

An extensive cross‐listing literature offers a number of theories on the motives to cross‐list that in most cases complement each other by encompassing different aspects of the complex cross‐listing behavior. Nevertheless, continuous market developments, such as significant regulatory and technological changes in the ways capital markets operate, raise new questions on why firms cross‐list and call for further research to continue.

Evaluation of the foreign listing decision involves many complexities since it impacts a firm's financing, investment, and marketing decisions. In this paper, we identify major costs and benefits of foreign listing based on the available evidence and suggest evaluation of the foreign listing decision using an Adjusted Present Value method. We also discuss implications of some recent regulatory changes on the costs and benefits of foreign listing.

The purpose of this paper is to investigate the influence of liberalization forces, political constraints (on labor decisions) and formal control mechanisms (i.e. delegation of decision authority, objective performance measurement and merit‐based rewards) on the performance of Chinese State‐owned enterprises (SOEs).

A survey instrument was used to collect data from functional managers representing over 500 SOEs. Structural equation modeling was used to analyze the data.

The findings revealed significant and positive path relationships between liberalization forces and each of the formal control mechanisms, leading to firm performance. The findings also reveal that political constraints have a significant and negative path relationship with objective performance measures and firm performance.

The evidence provided in this study adds to our understanding of the role the institutional environment plays in the structuring and management of the firm in transitional economies. The topic is of interest, given the pace of modernization of firms in emerging economies, and the differences in the institutional “rules of the game” that exist compared with developed economies. Both of these forces have the potential to affect not only the management control practices in emerging economy firms, but also other firms that do business with them.

The purpose of this paper is to consider competition’s issues between European market firms, such as Euronext, and multilateral trading facilities, following Markets in Financial Instruments Directive’s enforcement. This new domestic competition is adding to the existing international competition among financial centers. While diversification of local trading services can improve the international competitiveness of a financial center, the fragmentation of order flows can harm its attractiveness.

The theoretical setting analyzes the interaction between heterogeneous who experiment network externalities, and heterogeneous local trading services providers (alternative platforms and incumbent) in an international context. The authors compare two forms of organizations of the market: a consolidated market, and a fragmented market with alternative platforms – in both cases, in competition with a foreign universe.

The results of this study point out the importance of the trade-off between diversification and externalities. With alternative platforms entry, enhanced competition decreases fees and redistributes informed investors between the foreign market and the domestic one. The increase of domestic platforms’ number then has more complex effects on externalities (of information and liquidity). When the liquidity externalities are low, the diversification of financial platforms increases the number of investors on domestic centers. When liquidity externalities are not negligible, despite the decrease of fees, this same diversification orientates more informed investors to the foreign center.

This model is the first to analyze jointly the internal and international competition of trading platforms with heterogeneous investors.

The purpose of this paper is to examine the impact of intellectual capital and its components on bank diversification choice.

Both asset and income diversification are computed and an unbalanced panel data set of 32 banks covering the period 2000–2015 have been used. The panel corrected standard error regression has been used to account for serial correlation and heteroscedasticity.

The study found that intellectual capital determines the choice of diversifying. Precisely, intellectual capital motivates asset diversity but it dissuades income diversification. Human capital and structural capital are major components that determine asset diversity decisions. Income diversification decision, in this case to choose a focus strategy, is determined by human capital. This gives credence for the human capital theory in Ghana. Competition encourages a focus strategy. Bank size and leverage enhances income diversification while stock exchange listing and government ownership fosters the focus strategy.

Diversification strategy, knowledge base of staff, corporate governance and internal control have been considered as factors leading to the collapse of some Ghanaian banks in 2017–2018. The study provides relevant insights for regulators, decision support units and corporate boards. Intellectual capital and value added metrics should be used for modelling and decision making as they have value relevance.

This is a premier study that has examined the nexus between diversification strategy and intellectual capital in banks.

This study aims to examine institutional ownership of companies that go public with dual-class share structures.

Several recent studies have discussed the potential advantages and disadvantages of the dual-class structure, which allows founders and insiders to maintain control of the firms they created through superior voting rights. Institutional investors oppose the dual-class structure, arguing that inferior voting rights make it difficult to respond to poor governance or performance. Previous research has shown the early value-added to the dual-class firm declines through time. This study examines institutional ownership of dual-class companies through time and compares institutional investments in initial public offerings with perpetual superior-class structures versus those with provisions to sunset those shares to one-share, one-vote structures.

Evidence suggests that institutional investors view perpetual dual-class structures as potentially riskier in terms of poor governance or performance and prefer dual-class companies with sunset provisions.

This study suggests that founders and insiders should consider either the dual-class structure with a sunset provision or if they choose the perpetual dual-class, it should include some type of event-driven safeguards.