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This paper aims to examine the impact of bank’s capital buffer on return on equity (ROE) in the context of Islamic and conventional banks in GCC countries.

The authors collect data from 83 commercial banks comprising of 49 conventional banks and 34 Islamic banks for the period 2010–2019. The final data set comprises of 744 bank-year observations. The authors apply generalized methods of moments estimation technique and panel least square to analyze the data.

The authors document that Tier-1 capital, total regulatory capital (TRC) and equity to asset ratio (EAR) negatively affect banks’ ROE. However, the impact disappears for conventional banks and sustains for Islamic banks if these two clusters of banks are treated separately. Furthermore, the negative impact of equity capital on earning is more pronounced for large and listed commercial banks.

Findings of this research imply that Islamic banks in GCC countries has scope to manage equity capital more efficiently. Hence, they should concentrate on using banks equity wisely to successfully compete with the conventional banks.

Since the global financial crisis of 2009, Islamic banks of GCC countries have been reporting lower ROE compared to their conventional counterparts. On the other hand, Islamic banks maintain higher level of Tier-1 capital, TRC and EAR. This evidence hypothetically suggests that Islamic banks are overly cautious in managing their capital buffer that results in lower ROE. To the best of the author’s/authors’ knowledge, no other study in the literature tests this hypothesis in the GCC context.

The study seeks to find the effect of financial leverage on the firm performance of non-financial companies listed in the Tokyo stock market.

The study collected data from 263 companies in the automobile and industrial producer sectors listed on the Tokyo stock exchange between 2001 and 2021. The generalized method of moments was used to estimate the effect of leverage on financial performance due to its ability to overcome the problems of endogeneity and autocorrelation.

The study found that the equity multiplier has a positive and statistically significant effect on return on assets (ROA), return on equity (ROE) and earning per share (EPS). The study discovered that the interest coverage ratio has a positive and statistically significant effect on ROA, ROE, EPS and Tobin’s Q. The results revealed that the degree of financial leverage and debt to earnings before interest, taxes, depreciation and amortization (EBITDA) have a negative and statistically significant effect on ROE, EPS and Tobin’s Q. The study also found that the capitalization ratios of the firms have a negative and statistically significant effect on ROA, ROE, EPS and Tobin’s Q.

The use of debt financing, which presents financial leverage, indicates that the companies can make enough earnings to pay off the interest and principal (debt service obligations), which were shown by the interest coverage ratio, as well as to pay all the long-term fixed expenses, which were shown by the fixed charge coverage ratio. Interest and fixed charge coverage have a positive statistically significant effect on the financial performance of automobile and industrial producer companies.

The study focused on the effect of financial leverage on financial performance by relying on pecking and trade-off theories to contribute to the existing body of literature in finance.

The average U.S. farm size has risen dramatically over the last three decades. Motives for this trend are the subject of a large body of literature. This study incorporates farm size risk and return analysis into this research stream. In this paper, cross-sectional and temporal relations between farm size and returns are examined and characterized.

Relying on farm level panel data from Kansas Farm Management Association (KFMA) for 140 farms from 1996 to 2018, this article examines the relationship between farm size and returns and investigates whether farm size is related to risk. Two measures of farm returns are used: excess return on equity and risk-adjusted return on equity. Value of farm production and total farm acres are used as measures of farm size.

Findings suggest a significant and positive relationship between farm size and excess return on equity as well as farm size and risk-adjusted return on equity. However, this return premium associated with farm size is not associated with additional risk. Stated differently, farm size can be viewed as a farm characteristic that is associated with higher return without additional risk.

These findings provide further support for ongoing farm consolidation.

The results suggest the trend towards consolidation in production agriculture is likely to continue. Larger farms bear less risk.

This chapter focuses on testing optimal capital structure theory: The role of intervening variable debt to equity ratio (DER) on the influence of the financial performance, Ownership Structure of Independent Board of Commissioners (IBCO), Audit Committee (ACO), and Institutional Ownership on Firm Value. The research design was explanatory research using path analysis. Using purposive sampling, 61 manufacturing companies, observation period from 2014 to 2018 with 286 N samples. The research novelty empirically can prove the role of intervening variable DER on the effect of return on assets (ROA) on firm value and shows the market response to the ROA is fully reflected by DER, indicating the existence of an optimal capital structure. The role of DER on the effect of ROE and IBCO on firm value is a partial mediation with the inverse direction. This phenomenon shows that the mechanism of forming a balance between the responses of investors and creditors relates to debt financing.

This study aims to investigate the relationship between risks and the expected return of financial investment because the relationship between them is negative; if the investors agree to the higher level of risk, they have the greater the expected return; therefore, investors always require a degree of proportionality between the risks and returns.

This study applied the standard deviation, variance, coefficient of variation methods and matrix function to measure risks. Besides, the dataset is a return on equity ROE, which is collected in three companies at time series from 2005 to 2020.

When the variance or the standard deviation is higher, the return on the securities is higher, but the securities are a higher risk and vice versa. The results showed risk levels of stocks that are 2.509%, 0.367%, 3.666% and the corresponding return mean of 38.68%, 23.99% and 14.02%.

The results support the portfolio management policy appropriately. This study identifies issues for managers, investors and readers to consider: have a comprehensive solution among microcosmic policies, finance policy, investment policy and other policies to control and balance the relationship between risks and returns; have appropriate policies to regulate funds to stimulate investment in the long term.

Agency problems are more severe for multinational corporations (MNCs) and multinational enterprises compared to their domestic counterparts. As companies develop diversified operations, their managers face more challenges. An incentive compensation structure has been designed to align the benefits of managers with those of shareholders. Additionally, corporate social responsibility (CSR) has become increasingly crucial for companies. MNCs must gain the trust of more investors to improve their corporate reputation and financial performance. CSR enables MNCs with a high sense of social responsibility to expand their investor base, reduce perceived risks, and decrease information asymmetry. Our empirical findings reveal that Taiwanese MNCs can enhance their performance by implementing cash-based compensation and pursuing CSR activities.

This study investigates the efficiency of value relevance and faithful representation when stock market price derivates from its firm value to the investigated IT companies listed in FTSE Taiwan 50. The empirical investigation reveals one financial indicators: Return on equity (ROE) has explanatory ability among seven financial indicators, earnings per share (EPS), book value (BV), dividend yield (Div.), price–earnings ratio (P/E), ROE, return on assets (ROA), and return on operating asset (ROOA) to both sampled companies, United Microelectronics Corporation, UMC, (2303) and Taiwan Semiconductor Manufacturing Company Limited, TSMC, (2330). Furthermore, the empirical results indicate that the higher order moments, skewness and kurtosis, of price deviation do not provide a reliable prediction or explanatory power for stock price trends.

Using various proxies for the firms' return on equity (ROE) and retention ratios (b) the authors calculate 36 sustainable growth rates, on a rolling basis, for a comprehensive set of firms over a 52-year period. The authors then assess the ability of these different sustainable growth rates to predict the actual, out-of-sample, five-year growth rates of the firms' earnings.

The authors compare the forecast to determine which method of estimating ROE and b produce the lowest mean-squared-errors and then determine the estimation method that works best for firms with different characteristics and for firms in different industries.

Overall, using the median ROE of all firms in the market and the 5-year average of the specific firm's retention ratio produces the lowest, statistically significant, forecast errors. Variations are documented based on firm characteristics, including dividend payout, level of ROE and industry.

The findings can guide practitioners in using the best earnings forecasting method.

Financial textbooks seem universally to suggest that one method of estimating the growth rate of a firm's earnings is to calculate the “sustainable growth rate” by multiplying the firm's ROE by the firm's b. At the same time, multiple methods of proxying for both ROE and b have been suggested; therefore, it is an interesting and useful empirical question, which, heretofore, has not been addressed in the literature, as to which estimation of the sustainable growth rate best approximates the actual future growth of the firm's earnings. The findings can guide practitioners in using the best earnings forecasting method.

This study focuses on listed and over-the-counter (OTC) companies in the Taiwan Stock Exchange. It found that an increase in the ownership proportion of institutional investors (INs), including foreign investors, investment trusts, and dealers can enhance the informativeness of stock prices. The relationship between these factors follows an inverted U-shaped pattern, indicating that excessively high ownership ratios can actually lead to a decrease in the informativeness of stock prices. Additionally, increasing the ownership proportions of foreign investors and investment trusts can reduce the risk of stock price collapse, while dealers show no significant relationship in this regard. This study also reveals that the technical variable of the price deviation rate is an important explanatory factor for post-collapse returns. It is positively correlated with the magnitude of the price decline after a collapse, meaning that stocks with weaker pre-collapse performance experience larger post-collapse declines. When the data during the 2020 pandemic period are excluded, changes in foreign ownership ratios show a significant positive correlation with postcrash returns in both the long and short term. The significant correlation in the short term may be due to a high proportion of foreign ownership. Any reduction in this could put pressure on stock prices, and retail investors may follow suit and sell-off, using foreign investors as a reference. The significant correlation in the long term might be due to foreign investors themselves possibly also trying to avoid the pressure that their own short-term sell-offs could exert on stock prices. The changes in the ownership ratios of investment trusts and dealers indicate that medium and long-term changes have a significant impact on postcrash returns, while the changes in the major players' ownership show no significant correlation. When data from 2020 are included in the analysis, the significance of all INs decreases.

Many studies have shown that from a theoretical and empirical point of view, downside risk-based measures of risk are better than the traditional ones. Despite academic appeal and practical implications, downside risk has not been thoroughly examined in markets outside developed country markets. Using downside beta as a measure of downside risk, this study examines the relationship between downside beta and stock returns in Indian equity market, an emerging market with unique investor, asset and market characteristics.

This is an empirical study done by using ranked portfolio return analysis and regression analysis methodologies.

The study results show that downside risk, as measured by downside beta, is distinctly priced in the Indian equity market. There is a direct positive relationship between downside beta and contemporaneous realized returns, indicating a premium for downside risk. Downside risk carries a higher weightage than upside potential in the aggregate return of the stock portfolios. Downside beta is a better measure of systematic risk than conventional market beta and downside coskewness.

The empirical results support the adoption of downside beta in practice and provide a case for replacing traditional beta with downside beta in asset pricing applications, trading and investment strategies, and capital allocation decision-making.

This is one of the first in-depth studies examining downside beta in Indian equity markets using a broad sample of individual stock returns covering a wide time range of 22 years. To the best of our knowledge, this study is the first one to compare downside beta and downside coskewness using individual stock data from the Indian equity market.