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1 – 10 of 451The purpose of this paper is to investigate equity appraisal techniques employed by non‐professional investors from the Central European emerging stock market (CEESM) of Poland…
Abstract
Purpose
The purpose of this paper is to investigate equity appraisal techniques employed by non‐professional investors from the Central European emerging stock market (CEESM) of Poland. The paper examines investment decision‐making processes in the context of the current financial crisis in a pioneering attempt to shed some light on crisis‐induced changes in investment strategies. In addition, the study tests the usefulness and predictive abilities of analytical tools employed by non‐professional investors when faced with unstable stock‐market conditions.
Design/methodology/approach
Questionnaires and experiments conducted with a large group of Polish investors – trading equities in their home market – in order to gain information on the most commonly used investment strategies. Their views are contrasted with similarly obtained opinions expressed by UK non‐professional investors to highlight differences in approaches to investments. Finally, a series of semi‐structured interviews was conducted to discuss how the current financial crisis has affected investment strategies among Polish and UK investors.
Findings
Technical analysis (TA) is the preferred tool utilized by non‐professional investors in Poland. However, the current financial crisis caused the majority of Polish practitioners to adopt fundamental analysis which, in this case, is undertaken to support initial conclusions derived from TA. At this point, investees' financial statements coupled with analyses of the main macroeconomic indicators for CEESMs became the main source of decision‐influencing information.
Practical implications
The paper addresses an area which is gaining in importance and is of interest to both practitioners and service providers for non‐professional investors. Further investigation is recommended of nascent challenges to investing in CEESMs with practical implications for policy makers and investors.
Originality/value
The current paper refers to the global financial crisis which occurred in the years 2008‐2010. To date, there are no previous studies devoted to an investigation of how investors' trading strategies were influenced by the international financial crisis. Moreover, there are relatively few studies which target practitioners from CEESMs. The paper focuses on the non‐professionals, as this group of investors seems to be relatively under‐researched. Therefore, a number of important implications can be drawn from the current paper with regard to investment strategies tailored to overcome a financial crisis.
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Dalia Hussein El-Sayed, Eman Adel, Omar Elmougy, Nadeen Fawzy, Nada Hatem and Farida Elhakey
This study examines whether manipulation in attributes of corporate narrative disclosures and the use of graphical representations can bias non-professional investors' judgment…
Abstract
Purpose
This study examines whether manipulation in attributes of corporate narrative disclosures and the use of graphical representations can bias non-professional investors' judgment towards firms' future performance, in an emerging market context.
Design/methodology/approach
The authors conduct three different experiments with a 2 × 2 between-subjects design, using accounting and finance senior undergraduate students to proxy for the non-professional investors.
Findings
Results show that simple (more readable) disclosures improve non-professional investors' judgment towards firms' future performance. In addition, it is found that non-professional investors are prone to a recency effect from the intentional ordering of narrative information, when using complex (less readable) narratives. However, no primacy effect is found, when using simple (more readable) disclosures. The results further provide evidence that the inclusion of graphical representations, along with the manipulated narrative disclosures, can moderate the recency effect of information order, when using less readable and complex narrative disclosures.
Research limitations/implications
The results reveal that although the content of corporate disclosures can be objective, neutral and relevant, manipulation in textual features and the use of graphical presentations, can interact to impact how non-professional investors perceive and process the disclosed information. This study provides an Egyptian evidence regarding this issue, as the majority of prior studies concentrate on developed capital markets. In addition, it contributes to prior studies evaluating the appropriateness of the Belief Adjustment Model predictions about the effect of textual presentation order on decision-making, by providing evidence from an emerging market.
Practical implications
Results attempt to increase the awareness of investors and encourage them to use multiple sources of information to avoid the probable bias that can result from management's manipulation of narratives. In addition, the study could be of interest to regulators and standard-setters, where the results reveal the need for guidelines and regulations to guide the disclosure of narrative information and the use of graphical information in corporate reports.
Originality/value
To the best of the authors' knowledge, this is the first study to examine the effect of two impression management strategies in narrative disclosures (readability and information order), along with the use of graphical representations, on non-professional investors' judgment in an emerging market, like Egypt.
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The purpose of this paper is to investigate the factors that may affect female Saudi students who are considered potential non‐professional investors.
Abstract
Purpose
The purpose of this paper is to investigate the factors that may affect female Saudi students who are considered potential non‐professional investors.
Design/methodology/approach
A structured questionnaire was distributed to the participants; the obtained data were analyzed using the probit model and the Likert scale.
Findings
The results indicate that female students are more likely to own stocks if they have a high level of financial education. Variables such as age, income, grade point average (GPA), grade obtained in financial courses, and risk tolerance also affect stock ownership decision. The respondents also depend on 21 factors to analyze and evaluate stocks before making investment decisions.
Originality/value
Several studies have been conducted on investors' behavior; however, few of them have focused on non‐professional investors and none of these has focused on young, educated, female Saudi investors.
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The purpose of this paper is to assess whether internal audit role and reporting relationships affect investor perceptions of disclosure credibility.
Abstract
Purpose
The purpose of this paper is to assess whether internal audit role and reporting relationships affect investor perceptions of disclosure credibility.
Design/methodology/approach
The experiment involved a 2 × 2 design with internal audit role and reporting relationship randomly assigned among 84 MBA students serving as proxies for nonprofessional investors.
Findings
The results indicate that participants perceived disclosure credibility to be significantly higher when the Chief Audit Executive reported functionally to the audit committee and administratively to the CEO (versus both strategically and administratively to the CFO). The results reveal no significant differences in perceived disclosure credibility from the differing audit roles (i.e. primarily assurance versus primarily consulting).
Originality/value
The findings contribute to the internal audit and corporate governance literatures by providing further evidence of the importance of internal audit in investor judgement and decision making.
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The purpose of this paper is to test whether corporate governance mechanisms promoted by the Egypt Code of Corporate Governance are effective in enhancing investors' perceptions…
Abstract
Purpose
The purpose of this paper is to test whether corporate governance mechanisms promoted by the Egypt Code of Corporate Governance are effective in enhancing investors' perceptions of earnings quality.
Design/methodology/approach
The study uses a 2×2 experimental design with a strong level of corporate governance versus a weak level of corporate governance to explore the relation between corporate governance practices and the perceived quality of reported earnings.
Findings
The findings of the study reveal that strong corporate governance is associated with higher perceptions of earnings quality than weak corporate governance. These results suggest that the voluntary adoption of the Egypt Code of Corporate Governance by Egyptian firms enhances the investors' perceptions of the quality of the financial reporting process.
Research limitations/implications
The results of the study should be considered by regulators in Egypt with regard to the Egypt Code of Corporate Governance, which was issued in October 2005. However, owing to the relatively small sample size, these findings should be interpreted with caution.
Originality/value
This study contributes to the limited body of research on the impact of corporate governance on investors' perceptions of earnings quality by examining this impact in Egypt, where corporate governance is still not mandatory.
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Although markets are intensely social, stock markets are peculiar in that they are normatively anonymous spaces. Anonymity is a difficult-to-achieve social accomplishment in which…
Abstract
Purpose
Although markets are intensely social, stock markets are peculiar in that they are normatively anonymous spaces. Anonymity is a difficult-to-achieve social accomplishment in which material identity information is successfully stripped from participants. The academic literature is conflicted regarding the degree to which equity markets are anonymous and how this influences traders’ behavior.
Methodology/approach
Based on focused, tape-recorded ethnographic interviews, this chapter investigates the work practices of professional investors and brokers to describe the conditions under which brokers veil or reveal investors’ identities to their competitors, and thereby shed light on how anonymity is socially produced (or eroded) in global stock markets.
Findings
The social structure of brokered financial markets places brokers in the awkward situation of sitting in an information-poor structural location for so-called “fundamental information” while being paid to share information with professional investors who sit in an information-rich structural location. A resolution to this material and social dilemma is that brokers can erode the market’s anonymity by gifting identity information (“order flow”) – the previous, prospective, or pending trades of their clients’ competitors – thereby providing traders a competitive advantage. They share identity information in three types of performances: transparent relationships, masked relationships, and the transformation of illicit material identity information into licit and sharable “fundamental” information. Each performance partly erodes transaction-level and market-level anonymity while simultaneously partially supporting anonymity.
Practical implications
Laws and regulations requiring brokers’ confidentiality of their clients’ trades are easily and systematically eluded. Policy makers and regulators may opt to respond by increasing surveillance and mechanization of brokers’ work so as to promote a normatively anonymous market. Alternatively, they may opt to question the value of promoting and policing anonymity in financial markets by revising insider trading regulations.
Originality/value
Even well-regulated markets are semi-anonymous spaces due to the systematic exposure of investors’ identities to competitors by their shared brokers on a daily basis. This finding provides an additional explanation for how professional investors can imitate one another (“herd”) as well as why subpopulations of investors often trade so similarly to one another.
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Reza Alibakhshi and Mohammad Reza Sadeghi Moghadam
The purpose of this paper is to consider compromise solutions of multiple attribute decision-making methods (TOPSIS, VIKOR, and similarity-based approach) in order to evaluate and…
Abstract
Purpose
The purpose of this paper is to consider compromise solutions of multiple attribute decision-making methods (TOPSIS, VIKOR, and similarity-based approach) in order to evaluate and rank mutual funds and to compare the capabilities of different approaches based on the different traditional indices of mutual funds assessment. In addition, a new algorithm for ranking mutual funds was proposed subsequently.
Design/methodology/approach
In this research, three groups of indices including general, risk-modified performance evaluation, and risk-modified performance evaluation indices using semivariance were used in the mutual funds assessment, which led to the comparison between selected mutual funds, using three mentioned methods and three different groups of criteria. The results of this comparison were compiled and synthesized with linear assignment method. At the end, an algorithm for decision making and investing in mutual funds for professional and unprofessional investors was proposed.
Findings
Using different methods and different criteria proved that the results of similarity-based approach as a MADM technique have the ability to rank and evaluate mutual funds regardless of the criteria used compared to TOPSIS and VIKOR. Furthermore, the authors propose the algorithm of this research as a new model of mutual funds evaluation which considers a wide range of variables with respect to amateur and professional points of view.
Originality/value
The originality of this paper is threefold: first, different criteria were considered to make the evaluation more comprehensive. Second, four different approaches were used to make the results more authentic. Third, a holistic algorithm with its implication was proposed.
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Zhi-Jian Xu, Li Wang and Jing Long
The purpose of this paper is to investigate whether the Boardroom heterogeneity affects IPO underpricing for entrepreneurial firms, where Boardroom heterogeneity was classified in…
Abstract
Purpose
The purpose of this paper is to investigate whether the Boardroom heterogeneity affects IPO underpricing for entrepreneurial firms, where Boardroom heterogeneity was classified in terms of functional background, educational background, age and length of tenure.
Design/methodology/approach
A national research design was conducted using data collected from 355 firms listed on China’s Growth Enterprise Market from its start in 2009 to 2012.
Findings
The author found that IPO underpricing has a significant negative correlation with functional heterogeneity, a positive correlation with educational heterogeneity, a significant negative correlation with age heterogeneity, but it does not show significant correlation with heterogeneity in tenure. Board heterogeneity affects IPO underpricing of entrepreneurial firms partially, which means functional, educational and age heterogeneity conveys signals to potential investors regarding a firm’s quality.
Research/limitations/implications
More entrepreneurial firms in more years for data and long-term performance research design in future research would be required for further understanding of the relationships among the variables in this study.
Practical/implications
This paper suggests that IPO firms may make use of such an influencing mechanism to determine the issue price or to control the IPO underpricing by showing the Boardroom heterogeneity.
Originality/value
This paper revealed the influence of the characteristics of board members of such firms on IPO underpricing, which is rare in recent studies comparing to the study for the top management team; also this study provides empirical support for such effect.
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Ye Zhang, Louise Scholes, Kun Fu, Mathew Hughes and Fangcheng Tang
This paper is about equity crowdfunding syndicates as a form of entrepreneurial finance and looks specifically at the lead investors' human capital and their ability to raise…
Abstract
Purpose
This paper is about equity crowdfunding syndicates as a form of entrepreneurial finance and looks specifically at the lead investors' human capital and their ability to raise funds.
Design/methodology/approach
The authors develop regressions on a unique hand-collected dataset of 178 lead investors taken from the US-based platform AngelList.
Findings
Results indicate that lead investors' specialized human capital has a positive effect on their syndicate fundraising performance. However, it does not find a significant effect of general human capital. It also finds that specialized human capital is mediated by the reputation of the lead investor on the platform.
Research limitations/implications
This study extends human capital theory in the crowdfunding context by providing a more comprehensive portrait of human capital and in doing so, shifts the focus from an entrepreneur to an investor perspective, an approach much neglected in the crowdfunding literature.
Originality/value
This study advances the current knowledge on crowdfunding as it is one of the first to understand syndicate investment as an innovative and alternative platform-based financial channel. It also contributes to the current debate on the role of human capital in crowdfunding and more generally to entrepreneurial finance.
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