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This study aims to test the validity of the Rajan theory in South Africa and other selected emerging markets (Chile, Peru and Brazil) during the period 1975–2019.

In this study, the researchers used time-series data to estimate a Bayesian Vector Autoregression (BVAR) model with hierarchical priors. The BVAR technique has the advantage of being able to accommodate a wide cross-section of variables without running out of degrees of freedom. It is also able to deal with dense parameterization by imposing structure on model coefficients via prior information and optimal choice of the degree of formativeness.

The results for all countries except Peru confirmed the Rajan hypotheses, indicating that inequality contributes to high indebtedness, resulting in financial fragility. However, for Peru, this study finds it contradicts the theory. This study controlled for monetary policy shock and found the results differing country-specific.

The findings suggest that an escalating level of inequality leads to financial fragility, which implies that policymakers ought to be cautious of excessive inequality when endeavouring to contain the risk of financial fragility, by implementing sound structural reform policies that aim to attract investments consistent with job creation, development and growth in these countries. Policymakers should also be cautious when implementing policy tools (redistributive policies, a sound monetary policy), as they seem to increase the risk of excessive credit growth and financial fragility, and they need to treat income inequality as an important factor relevant to macroeconomic aggregates and financial fragility.

This article aims to investigate how institutional characteristics affect the level of financial development of economies collectively and compare between developed and undeveloped economies.

A dynamic panel with 131 countries, including developed and developing ones, was utilized; the estimators of the generalized method of moments system (GMM system) model were selected because they have econometric characteristics more suitable for analysis, providing superior statistical precision compared to traditional linear estimation methods.

The results from the full panel suggest that concrete and well-defined institutions are important for financial development, confirming previous research, with a more limited scope than the present work.

Limitations of this research include the availability of data for all countries worldwide, which would make the research broader and more complete.

A panel of countries was used, divided into developed and developing countries, to analyze the impact of institutional variables on the financial development of these countries, which is one of the differentiators of this work. Another differentiator of this research is the presentation of estimates in six different configurations, with emphasis on the GMM system model in one and two steps, allowing for comparison between results.

This study seeks to examine the relationship between macroeconomic shock indicators, namely geopolitical risk (GPR), global economic policy uncertainty (GEPU) and financial stress (FS), and returns as well as volatilities on seven carefully selected stock markets in Africa. Specifically, the study intends to unravel the co-movement and interdependence between the respective macroeconomic shock indicators and each of the stock markets under consideration across time and frequency.

This study employed wavelet coherence approach to examine the strength and stability of the relationships across different time scales and frequency components, thereby providing valuable insights into specific periods and frequency ranges where the relationships are particularly pronounced.

The study found that GEPU, Financial Stress (FS) and GPR failed to induce significant influence on African stock market returns in the short term (0–4 months band), but tend to intensify in the long-term band (after 6th month). On the contrary, stock market volatilities exhibited strong coherence and interdependence with GEPU, FSI and GPR in the short-term band.

This study happens to be the first of its kind to comprehensively consider how the aforementioned macro-economic shock indicators impact stock markets returns and volatilities over time and frequency. Further, none of the earlier studies has attempted to examine the relationship between macro-economic shocks, stock returns and volatilities in different crisis periods. This study is the first of its kind in to employ data spanning from May 2007 to April 2023, thereby covering notable crisis periods such as global financial crisis (GFC) and the COVID-19 pandemic episodes.

Despite the growing recognition of the complex interplay between macroeconomic shock indexes and stock market dynamics, there is a significant research gap concerning their interconnectedness and return spillovers in the context of the African stock market. This leaves much to be desired, given that the financial market in Africa is arguably one of the most preferred destinations for hedge and portfolio diversification (Alagidede, 2008; Anyikwa and Le Roux, 2020). Further, like other financial markets across the globe, the increased capital flow, coupled with declining information asymmetry in Africa, has deepened intra and inter-sectoral integration within and across national borders. This has, thus, increased the susceptibility of financial markets in Africa to spillover of shocks from other sectors and jurisdictions. Additionally, while previous studies have investigated these factors individually (Asafo-Adjei et al., 2020), with much emphasis on developed markets, an all-encompassing examination of spillovers and the connectedness between the aforementioned macroeconomic shock indexes and stock market returns remains largely unexplored. This study happens to be the first to consider the impact of each of the indexes on stock returns in Africa, with evidence spanning from May 2007 to April 2023, covering notable global crisis episodes such as the Global Financial Crisis (GFC), the COVID-19 pandemic and the Russia–Ukraine war.

This study employs the novel quantile vector autoregression (QVAR) model, making it the first of its kind in literature. By applying the QVAR, the study captures the potential nonlinear and asymmetric relationship between stock returns and the factors of interest across different quantiles, i.e. bearish, normal and bullish market conditions. Thus, the approach allows for a more accurate and nuanced examination of the tail dependence and extreme events, providing insights into the behaviour of the variables under extreme events.

The study revealed that connectedness and spillovers intensified under bearish and bullish market conditions. It was also observed that, among the macroeconomic shock indicators, FSI exerted the highest influence on stock returns in Africa in both bullish and normal market conditions. Across the various market regimes, the Egyptian Exchange (EGX) and the Nairobi Stock Exchange (NSE) were net receiver of shocks.

This study happens to be the first to consider the impact of each of the indexes on stock returns in Africa, with evidence spanning from May 2007 to April 2023, covering notable global crisis episodes such as the GFC, the COVID-19 pandemic and the Russia–Ukraine war. On the methodology front, this study employs the novel QVAR model, making it one of the few studies in recent literature to apply the said method.

The paper investigates if the process that led to the birth of the Euro Area had a significant impact in homogenizing the capital structure decisions of European firms since the first introduction of the common currency.

A large sample of firms was constructed, and a Tobit-censored regression model was utilized to investigate the determinants of firms' observed capital structures. The Black–Scholes–Merton model was used to infer market values of assets, as well as the volatility of those values, from the observed market values of equity and the corresponding volatility. The existing differences in national tax rules were considered for estimating firm-specific marginal tax rates.

It was found that, despite the currency union and the institutional harmonization process, certain factors still play a different role. In particular, the impact of profitability is consistent with the pecking order view in some countries, and with the trade-off theory in others. Assets risk, measured as the annualized volatility of the market enterprise value, is the best predictor of observed leverage ratios. The sector of activity is significant in determining leverage decisions even when assets' risk is taken into account. Despite the monetary union and the increased financial and institutional integration in the Euro Area, the country of origin still plays a significant role in capital structure decisions, suggesting that other country-level factors may affect firms' financing behaviour.

The paper indicates that, despite the long harmonization process of institutions, regulations and public budget required to join the Euro, firms' financing decisions are still affected by country-specific factors once the common currency is introduced. Therefore, new entrant countries in the Euro area should not expect their companies to immediately conform with those located in other countries within the common currency area.

This article investigated the impact of the currency change from national currencies to the Euro on the determinants of capital structure choices. It was shown that, despite the long harmonization process that led to the birth of the Euro Area, national factors still affect firms' financing decisions. This provides guidance for policymakers in countries that are planning to join the Euro about the impact this will have on firms' financing decisions in the entrant country.

This study investigates whether the disclosure of derivatives is value relevant in emerging markets and evaluates the effects of the 2008/2009 global financial crisis on the value relevance of derivative disclosures.

Panel regression models using sub-samples and a crisis interaction term were applied to a sample of the 200 largest non-financial firms by market capitalization listed on the Johannesburg Stock Exchange (JSE) from 2005 to 2017 to assess the consequences of the financial crisis.

The results suggest that the disclosure of derivatives is value relevant in the hitherto understudied context of emerging markets. The 2008/2009 financial crisis had a significant impact on derivatives use and the value relevance of derivatives disclosure by JSE-listed companies.

Companies should reconsider both how they employ derivatives as part of their risk management practices and how they communicate derivatives use to stakeholders in the financial statements. The findings facilitate a comparative analysis across various market contexts by researchers and assist investors in better decision-making. The findings can influence regulatory practices and can help standard setters to review disclosure requirements.

The benefits of corporate hedging were studied from an emerging market perspective, using an original dataset and approach to investigate the effects of international financial volatility on emerging markets. The authors tested whether companies are valued differently, based on their disclosure of the use of derivatives in the financial statements, and the effect of the financial crisis on the value relevance derivatives disclosures.

Using imbalanced panel data of nonfinancial Vietnamese listed firms from 2005 to 2021, this paper explores the potential effect of ownership on firms' cash levels.

Two hypotheses are tested using different methods, including pooled ordinary least squares (POLS) and system-generalized method of moments (GMM), to investigate the ownership–cash holding relationship for various firm scenarios. Both book and market measures of the cash ratio are examined.

Results show that foreign and state ownership encourages firms to increase their cash reserves. The positive relationship between ownership and cash holding is, especially, pronounced for firms in the financial deficit.

This research suggests that in this emerging market, outside ownership substantially accelerates cash to hedge against the unexpected issues caused by poor investor protection, low political accountability and information asymmetry.

The study contributes to the existing understanding of the relationship between ownership and corporate cash holdings in the context of a typical emerging market. Besides, it expands the existing knowledge to the extent of such relations in the event of a financial shortage.

The purpose of this study is to investigate the impact of terrorist attacks on the volatility and returns of the stock market in Tunisia.

The employed sample comprises 1250 trading day from the Tunisian stock index (Tunindex) and stock closing prices of 64 firms listed on the Tunisian stock market (TSM) from January 2011 to October 2015. The research opts for the general autoregressive conditional heteroscedasticity (GARCH) and exponential generalized conditional heteroscedasticity (EGARCH) models framework in addition to the event study method to further assess the effect of terrorism on the Tunisian equity market.

The baseline results document a substantive impact of terrorism on the returns and volatility of the TSM index. In more details, the findings of the event study method show negative significant effects on mean abnormal returns with different magnitudes over the events dates. The outcomes propose that terrorism profoundly altered the behavior of the stock market and must receive sufficient attention in order to protect the financial market in Tunisia.

Very few evidence is found on the financial effects of terrorism over transition to democracy cases. This paper determines the salient reaction of the stock market to terrorism during democratic transition. The findings of this study shall have relevant implications for stock market participants and policymakers.

The purpose of this study is to examine the relationship between the corporate social responsibility (CSR) performance of job-hopping executives at their former and subsequent firms.

We conduct regression analyses using a sample of firms listed on the Shanghai and Shenzhen Stock Exchanges from 2010 to 2020 to examine whether CSR performance is similar from one firm to the next as executives switch jobs.

We find a positive relationship between the CSR performance of former and subsequent firms under job-hopping executives. This relationship is the strongest in the year of the job switch; it weakens in the second year and eventually disappears in the third year. In addition, we show that this relationship benefits different CSR stakeholder groups and is contingent on executive and subsequent firm attributes and job-hopping characteristics. Furthermore, we demonstrate that firms that hire a new chief executive officer from a firm with a strong track record in CSR, the new firm experiences a significant surge in CSR performance compared with firms that do not experience such a shock.

This study has implications for executive hiring decisions.

This study extends the understanding of CSR determinants through the lens of inter-organisational ties associated with job-hopping executives.

There is still an ongoing debate on the value relevance of capital structure and its determinants. Recently the issue has been explored in family firms after being explored in mature firms. This paper investigates the role of institutional investors and the firm's innovation activity in influencing the firm's decision and ability to acquire debt capital.

A large sample of 700 privately-held family firms in Italy from 2010 to 2019. Two analysis techniques are used: panel analysis and path analysis. The value of debt and the debt ratio are used as leverage measures. The value of patent (as a proxy for innovation) and institutional investor are the explanatory variables.

The results show that institutional investors have no relationship with financial leverage measures except when controlling for an interaction variable (Institutional investors × Lombardy region). The patent value is positively correlated with debt; however, the ratio patent-to-asset is negatively related to financial leverage indicating higher risk exposure. The nonlinearity test demonstrates a turning point when the relationship between patent value and debt inverts.

Firms should monitor their innovation activity since excessive innovation increases risk exposure and affects financing opportunities and value. The involvement of institutional investors does not always enhance value.

Existing literature focuses separately on family firm innovations and financial leverage as outcome variables, emphasizing the role of institutional investors in both fields by adopting agency theory and socioemotional wealth framework. In this study, the authors go further by merging both relationships, investigating the dynamics of the institutional-family firm innovation relationship in influencing the firm's capital structure. The authors contribute to the ongoing debate by providing original findings on capital structure, governance and innovation, supported by rigorous methods to enhance family firms' decision-making.