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1 – 10 of over 7000Jakob Müllner, Igor Filatotchev and Thomas Lindner
The purpose of this paper is to bridge the disciplinary divide between international finance and international business (IB) to realign academic research with business reality in…
Abstract
Purpose
The purpose of this paper is to bridge the disciplinary divide between international finance and international business (IB) to realign academic research with business reality in which strategy and finance align to determine firms’ success or failures.
Design/methodology/approach
The authors discuss theoretical differences between the fields of international finance and IB strategy that caused the fields to develop in isolation with little fertilization across disciplines. The authors review scarce interdisciplinary contributions between the fields. Finally, the authors identify complementarities that suggest fruitful avenues for future research.
Findings
The authors find a persistent disconnect between finance and strategy/IB literature that can be explained by fundamentally different aims and assumptions about the markets. While finance theory seeks to explain typical effects under functioning markets, strategy and IB theories focus inherently on exceptional effects and market inefficiencies.
Research limitations/implications
The fundamental theoretical differences that isolate finance and strategy/IB create avenues for interdisciplinary research that harness the complementarities of the two disciplines. These include strategic aspects of capital structure, internal capital market inefficiencies, corporate governance, capital market liability of foreignness and institutional aspects of financial management.
Practical implications
With this paper, the authors not only bring academic researchers in finance and strategy closer to corporate practice. The theoretical discussion also challenges the functional blind spots of practitioners and encourages more holistic decision-making.
Social implications
Challenging market functioning and recognizing market inefficiencies using strategy and IB foundations connects financial economics with non-market topics such as environment, society and governance or impact investing.
Originality/value
The value and originality of the paper come from the qualitative, epistemological approach to study and analyse the divide between international finance and strategy/IB scholarship.
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Radwan Alkebsee, Ahsan Habib and Junyan Li
This paper aims to examine the association between green innovation and the cost of equity in China. This study relies on the investors’ base perspective and shareholders’…
Abstract
Purpose
This paper aims to examine the association between green innovation and the cost of equity in China. This study relies on the investors’ base perspective and shareholders’ perceived risk perspective to investigate the relation between green innovation and the cost of equity in China.
Design/methodology/approach
The paper uses firm-fixed effect regression for a sample of Chinese public companies for the period 2008–2018.
Findings
The authors find a negative relationship between green innovation and the cost of equity capital. This negative association is found to be more pronounced for less financially constrained firms, during periods of high economic policy uncertainty, and for firms with a strong internal control environment. Finally, the paper shows that the negative association became more pronounced after the passage of the Environmental Protection Law of China in 2012. The results remain robust to possible endogeneity concerns.
Originality/value
This study contributes to the green innovation literature by documenting that shareholders favorably view firms implementing green innovation policies. The study also has policy implications for Chinese regulators in improving the green credit policy.
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Brigitte de Graaff and Bert Steens
The purpose of this paper is to explore the perceived benefits of integrated reporting (IR) and factors influencing the motives that supervisory board members (SBMs) have for…
Abstract
Purpose
The purpose of this paper is to explore the perceived benefits of integrated reporting (IR) and factors influencing the motives that supervisory board members (SBMs) have for advocating a change towards IR implementation.
Design/methodology/approach
An exploratory survey study was conducted to investigate the influence of external market conditions, internal organizational conditions and observed benefits on the motivation to advocate IR adoption in companies that have not yet implemented IR. A unique set of survey data from 62 SBMs of Dutch companies was used for analysing the propositions derived from IR literature and based on institutional theory, legitimacy theory and diffusion of innovation theory.
Findings
The respondents indicated to be supportive of IR adoption. SBMs who had experienced the implementation of IR observed that IR offers benefits. Their motives for advocating a change towards IR in companies that had not implemented IR were influenced most by the observed benefits in IR companies. SBMs only involved in companies that had not adopted IR are motivated to support IR adoption to a similar extent. These findings suggest that directly observed benefits by SBMs need to exceed a considerable minimum level before these SBMs are more motived to advocate IR than their peers who have not witnessed the implementation of IR and that experiences are shared across companies. The motivation of both groups is influenced by external market conditions but not by internal organizational conditions.
Practical implications
The findings have implications for potential IR adopters and institutions promoting the further diffusion of IR as they emphasize the need for tangible benefits of IR and confirm that sharing good practices and benefits of IR can provide a catalyst for IR adoption. The findings contribute to the understanding of the motivation of SBMs as an important organizational condition for implementing IR as this study provides insights in the factors that drive this motivation of key actors influencing the decision to implement IR. Furthermore, the finding that these factors predominantly comprise tangible results and external market conditions is relevant from an organizational change perspective.
Social implications
Understanding the mechanisms of IR-adoption decisions provides a relevant basis for deploying programmes promoting IR as a general reporting standard. This could provide society and a broad range of stakeholders with access to information incorporated in integrated reports. It could ultimately have a major impact on society by improving decision-making and increasing the long-term sustainability of organizations and their relations with stakeholders.
Originality/value
This study provides preliminary empirical evidence concerning the perspectives of SBMs on their motives for advocating IR, based on a unique sample from a country that has been involved with IR from its start.
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Boban Melović, Milica Vukčević and Marina Dabić
The aim of this paper is to show how a bank's brand value is quantitatively assessed using the Interbrand methodology, taking into account the specifics of the banking market…
Abstract
Purpose
The aim of this paper is to show how a bank's brand value is quantitatively assessed using the Interbrand methodology, taking into account the specifics of the banking market. Therefore, the objective of this paper is to review the ways in which brands contribute to the higher market value of banks by strengthening intellectual capital (IC), as reflected in increased levels of competitiveness and the reputation that the bank maintains in the minds of customers.
Design/methodology/approach
This paper applies the Interbrand methodology, which indicates that the assessment of brand value implies the determination of economic profit as the difference between the net operating profit after tax and the cost of capital. The brand profit is then calculated as the product of the economic profit and the index of the brand role. Brand value is obtained as the product of the brand's profit and the discount rate of the brand. In order to further test the results obtained through the application of the Interbrand methodology, linear regression was applied to the panel data in order to provide more efficient econometric estimates of the model parameters.
Findings
This research has shown that the Interbrand methodology's empirical foundations lie in the Montenegrin banking market, but also that, out of all of the analyzed parameters, the greatest significance is obtained from the profit of the brand, which influences the value of bank brands.
Research limitations/implications
This research is related to the service sector–in this case, financial services – meaning that it is necessary to adjust the calculation of the weighted average cost of capital. Although the banking sector is a very competitive market, a limitation exists in the fact that the research was conducted only in Montenegro. In other words, in order to achieve a more detailed analysis, this methodology should be applied to more countries, such as those within the Western Balkans, as they have a relatively similar level of development.
Practical implications
A main contribution of this paper is that the assessment of the banks' brand value could be useful to future investors. Therefore, the improvement of the financial sector–in this case, banks–as institutions that hold a dominant position in the financial market in Montenegro, is a particularly important issue. It is important to point out that the research conducted could serve as a means by which to bridge the gap between theory and practice, since the methodology of the consulting company Interbrand has been optimized and adjusted to the Montenegrin banking market.
Social implications
On considering the fact that most countries of the Western Balkans are at a similar level of development, the authors can conclude that, with the help of this adapted form of methodology, this research can be applied to assess banks' brand value in neighboring countries.
Originality/value
This paper serves as the basis for further research as the analysis of banking institutions that comprise both marketing and financial aspects, i.e. the application of the Interbrand methodology, was not conducted in Montenegro. Also, this paper overcomes the literal gap between theory and practice as there is little research thus far involving the application of the Interbrand methodology to the field of finance; especially in the field of banking. The authors point out the specifics of the banking sector as a key explanation for this. This is why it is necessary to make certain adjustments to the methodology. The research has positive implications for banks' internal and external stakeholders. The originality of this research is reflected in the fact that the Interbrand methodology has been optimized in order to assess the brand of banks, taking into account the specificity of the analyzed market. Brand is analyzed as a component of IC: another factor that exemplifies the value of this research.
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Most of the major Islamic countries’ stock exchanges have not been able to perform at the same pace with the major emerging countries’ stock exchanges since the mid of 1990s. The…
Abstract
Purpose
Most of the major Islamic countries’ stock exchanges have not been able to perform at the same pace with the major emerging countries’ stock exchanges since the mid of 1990s. The purpose of this paper is to examine the implications of stock market liberalization on cost of capital as one of the crucial driver to stock market development and physical investment growth in emerging Islamic countries.
Design/methodology/approach
This study employs static panel data techniques on the sample of seven emerging Islamic countries over the years 1989-2008.
Findings
The findings of this study suggest that stock market liberalization significantly reduces cost of capital in the stock markets of sample Islamic countries, which carries policy-oriented implications. Reduction in the cost of capital increases the number of exchange-traded companies, profitability of projects and aggregate investment level; therefore, the study findings are highly concerned by the economic policymakers, corporations and investors alike.
Research limitations/implications
In the literature, different proxies are employed to measure stock market liberalization and cost of capital as well. Due to data limitations, this study could not employ different proxies for both, especially for stock market liberalization, for robustness purpose. That limitation further restricted the coverage of Islamic stock markets and time period. Therefore, generalization of the study results for overall Islamic stock markets can be slightly drawn.
Originality/value
The paper provides further understanding regarding the effects of SML on cost of capital, thereby indirectly on the stock market development, in the context of EIC.
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Sarah Korein, Ahmed Abotalib, Mariusz Trojak and Heba Abou-El-Sood
This paper is motivated by the heated debates preceding the introduction of additional regulatory requirements of Basel III on capital conservation buffer (CCB) and regulatory…
Abstract
Purpose
This paper is motivated by the heated debates preceding the introduction of additional regulatory requirements of Basel III on capital conservation buffer (CCB) and regulatory leverage (RLEV) in banks of emerging markets. The paper aims to examine which policy ratio can improve bank efficiency (BE), in one of the most resilient banking settings in the Middle East and North Africa (MENA) region.
Design/methodology/approach
The analysis is performed on a sample of 13 banks for the period 2010–2018 in Egypt and proceeds in two steps. In the first step, the data envelopment analysis model is used to derive bank-specific efficiency scores. In the second step, BE scores are regressed on the two types of regulatory capital and a set of control variables.
Findings
The paper is motivated by regulatory debates on the viability of RLEV and CCB in enhancing BE. The results show that higher RLEV and CCB are associated with a reduction in BE and that RLEV is highly associated with BE compared to CCB. Hence, results are relevant to policymakers in designing measures for improving BE in emerging markets.
Originality/value
The findings contribute to a small but growing stream of research on capital adequacy in emerging markets. This study provides results on the viability of risk-based vs non-risk-based capital requirements. The findings are also relevant to bank regulators in similar emerging market settings in their efforts to introduce and phase in minimum leverage requirements according to Basel III.
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Gouda Abdel Khalek and Amany Rizk
This paper aims to obtain a recent estimate of the cost of precautionary foreign reserve accumulation that emerging market and developing economies (EMDEs) had to endure to…
Abstract
Purpose
This paper aims to obtain a recent estimate of the cost of precautionary foreign reserve accumulation that emerging market and developing economies (EMDEs) had to endure to protect themselves against the risks of financial globalization. In addition, the study estimates the cost of excess reserves in emerging market economies (EMEs) using various reserve adequacy indicators that reflect potential sources of foreign exchange drains and vulnerability in EMEs' balance of payments.
Design/methodology/approach
This paper begins by explaining the accumulation of foreign reserves in EMDEs as a self-protection strategy against the risks of financial globalization. Next, it sheds light on the different types of economic costs of foreign reserve accumulation. Finally, it estimates the cost of foreign reserve accumulation in EMEs during the period (1990–2018) and in EMDEs during the period (1990–2015) due to data availability.
Findings
Results indicate that the cost of accumulating foreign reserves as a self-protection strategy in EMDEs and EMEs' was huge compared to their development financing needs. Applying various reserve adequacy measures demonstrates that many of the EMEs were holding inadequate precautionary reserves in 2018. Actually, this reflects the significant increase in external short term debt that many of the EMEs have witnessed since the eruption of the global financial crisis (2008). Thus increasing reserves in EMEs with weak reserve buffers and higher external debt is critical as they are more vulnerable to external shocks and capital flow reversals. Also given the estimated huge costs of accumulating foreign reserves, EMDEs should accompany it by other complementary self-protection policies and liquidity management policies to free up resources for productive investment.
Originality/value
The study contributes to the literature by estimating the cost of precautionary foreign reserve accumulation imposed on EMDEs during an extended period of time that covers a decade after the onset of the global financial crisis. Also to the authors' knowledge, this is the first study that estimates the cost of excess reserves in EMEs using various reserve adequacy indicators including the International Monetary Fund (IMF) assessing reserve adequacy (ARA) approach.
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Kaiming Guo, Jing Hang and Se Yan
Economic theories on structural change focus on factors such as fluctuations in relative prices and income growth. In addition, China’s reform and opening up has also been…
Abstract
Purpose
Economic theories on structural change focus on factors such as fluctuations in relative prices and income growth. In addition, China’s reform and opening up has also been accompanied by increasing openness, significant fluctuations in investment rates, and frictions in the labor market. Existing literature lacks a unified theoretical framework to assess the relative importance of all these determinants. The paper aims to discuss these issues.
Design/methodology/approach
To incorporate all of the potential determinants of China’s structural change, the authors build a two-country four-sector neoclassical growth model that embeds the multi-sector Eaton and Kortum (2002) model of international trade, complete input-output structure, non-homothetic preference and labor market frictions. The authors decompose the sectoral employment shares into six effects: the Baumol, Engel, investment, international trade, factor intensity and labor market friction effects. Using the data of Chinese economy from 1978 to 2011, the authors perform a quantitative investigation of the six determinants’ effects through the decomposition approach and counterfactual exercises.
Findings
Low-income elasticity of demand, high labor intensity, and the existence of the switching costs are the reasons for the high employment share in the agricultural sector. Technological progress, investment and international trade have comparatively less influence on the proportion difference of employment in the three sectors.
Originality/value
Therefore, to examine the impact on China’s structural change, in addition to Baumol effect and the Engel effect, it is also necessary to consider the impact of three more factors: international trade, investment and switching costs. Therefore, the authors decompose the factors that may influence China’s structural change into the Baumol, Engel, investment, international trade, factor intensity effect and switching cost effects. The authors evaluate these six effects using the decomposition approach and counterfactual exercises.
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The integration of the digital economy and the real economy has been a key focus in promoting digital economic development. It denotes a comprehensive digital transformation of…
Abstract
Purpose
The integration of the digital economy and the real economy has been a key focus in promoting digital economic development. It denotes a comprehensive digital transformation of national economic activities regarding technological infrastructure and production modes, which is crucial for establishing a modern economic system, advancing industrial infrastructure and modernizing industrial chains.
Design/methodology/approach
Firstly, the study delves into the internal logic behind the emergence of the new development dynamic resulting from digital technology's evolution. Secondly, it explores the mechanism of mutual promotion and support between the new development dynamic and the digital economy based on China's shift in focus from international engagement to the domestic economy during different stages of industrialization. Subsequently, it analyzes the characteristics and critical factors of digital economy development and examines the macro-, meso- and micro-level constraints on these factors. Finally, the paper explores approaches to promoting digital economy development while constructing the new development dynamic and provides relevant policy suggestions.
Findings
The construction of the new development dynamic and the development of the digital economy are inextricably linked, and only by mutually reinforcing each other can they provide an inexhaustible impetus for China's high-quality economic development.
Originality/value
The new development dynamic and the digital economy development form an indivisible whole. The new development dynamic creates the necessary conditions for digital economy development and promotes the formation of digital production modes. In turn, the development of the digital economy should strive to improve the mainstay position of the domestic economy, enhance the synergy between the domestic economy and international engagement, upgrade value chains while improving the supply and the industrial chains in China and ensure a parallel increase in labor income alongside improved productivity.
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