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1 – 10 of 358Prior studies generally focus on income smoothing through discretionary accruals and document that managers have incentives to smooth earnings due to various reasons. This paper…
Abstract
Purpose
Prior studies generally focus on income smoothing through discretionary accruals and document that managers have incentives to smooth earnings due to various reasons. This paper aims to focus on income smoothing through research and development (R&D) management and examine whether and how income smoothing through R&D management affects credit rating agencies’ perception of firm risk.
Design/methodology/approach
The authors use financial statement data from the CRSP/Compustat Merged data set universe for the period from 1992 to 2019 after excluding financial and utility industries. The authors follow the model for credit ratings used in previous literature to test the hypothesis. Specifically, the authors use an ordered probit model to express credit ratings as a function of income smoothing attributes.
Findings
The authors find that R&D-based income smoothing improves a firm’s credit rating. However, the positive effect of R&D-based income smoothing on credit ratings is less than that of accruals-based income smoothing. This study also shows that the positive effect of R&D-based income smoothing is more pronounced for firms less subject to opportunistic incentives, further strengthening the notion that managers smooth earnings through R&D management to provide more informative earnings.
Originality/value
This study contributes to the income smoothing literature in several ways. First, the authors contribute to the research by showing that managers’ income smoothing activity through R&D management positively affects firms’ credit rating. Second, the authors also document the relative benefits of the two different income smoothing techniques in terms of improving credit agencies’ perception of firms’ creditworthiness.
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Saida Mancer, Abdelhakim Necir and Souad Benchaira
The purpose of this paper is to propose a semiparametric estimator for the tail index of Pareto-type random truncated data that improves the existing ones in terms of mean square…
Abstract
Purpose
The purpose of this paper is to propose a semiparametric estimator for the tail index of Pareto-type random truncated data that improves the existing ones in terms of mean square error. Moreover, we establish its consistency and asymptotic normality.
Design/methodology/approach
To construct a root mean squared error (RMSE)-reduced estimator of the tail index, the authors used the semiparametric estimator of the underlying distribution function given by Wang (1989). This allows us to define the corresponding tail process and provide a weak approximation to this one. By means of a functional representation of the given estimator of the tail index and by using this weak approximation, the authors establish the asymptotic normality of the aforementioned RMSE-reduced estimator.
Findings
In basis on a semiparametric estimator of the underlying distribution function, the authors proposed a new estimation method to the tail index of Pareto-type distributions for randomly right-truncated data. Compared with the existing ones, this estimator behaves well both in terms of bias and RMSE. A useful weak approximation of the corresponding tail empirical process allowed us to establish both the consistency and asymptotic normality of the proposed estimator.
Originality/value
A new tail semiparametric (empirical) process for truncated data is introduced, a new estimator for the tail index of Pareto-type truncated data is introduced and asymptotic normality of the proposed estimator is established.
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The purpose of this paper is to test the existence of stylized facts, such as the volatility clustering, heavy tails seen on financial series, long-term dependence and…
Abstract
Purpose
The purpose of this paper is to test the existence of stylized facts, such as the volatility clustering, heavy tails seen on financial series, long-term dependence and multifractality on the returns of four real estate indexes using different types of indexes: conventional and Islamic by comparing pre and during COVID-19 pandemic.
Design/methodology/approach
Firstly, the authors examined the characteristics of the indexes. Secondly, the authors estimated the parameters of the stable distribution. Then, the long memory is detected via the estimation of the Hurst exponents. Afterwards, the authors determine the graphs of the multifractal detrended fluctuation analysis (MF-DFA). Finally, the authors apply the WTMM method.
Findings
The results suggest that the real estate indexes are far from being efficient and that the lowest level of multifractality was observed for Islamic indexes.
Research limitations/implications
The inefficiency behavior of real estate indexes gives us an idea about the prediction of the behavior of future returns in these markets on the basis of past informations. Similarly, market participants would do well to reassess their investment and risk management framework to mitigate new and somewhat higher levels of risk of their exposures during the turbulent period.
Originality/value
To the authors’ knowledge, this is the first real estate market study employing STL decomposition before applying the MF-DFA in the context of the COVID-19 crisis. Likewise, the study is the first investigation that focuses on these four indexes.
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Asif Tariq, Masroor Ahmad and Aadil Amin
Standard economic theory predicts that any increase in public spending is accompanied by a rise in inflation in an economy. This paper presents empirical proof that prices do not…
Abstract
Purpose
Standard economic theory predicts that any increase in public spending is accompanied by a rise in inflation in an economy. This paper presents empirical proof that prices do not always rise with an increase in public expenditure but only up to a certain threshold level. The primary aim of this paper is to unearth the government size-inflation nexus in India for the period from 1971 to 2019.
Design/methodology/approach
The logistic STAR (smooth transition autoregression) model is employed to unravel the government size-inflation nexus for the Indian economy from a non-linear perspective.
Findings
The finding of our study confirm the non-linear relationship between the size of the government and inflation in India. The estimated threshold level for government size is precisely found to be 9.27%. The size of the government exerts a negative influence on inflation until it reaches the optimal or threshold level. Any further increase in the size of government beyond this threshold level would result in a rise in inflation.
Research limitations/implications
The findings have implications for the conduct of fiscal policy. Policymakers can increase government spending in a regime of small government size without having any inflationary impacts by generating revenues from taxes and other sources instead of relying much on the central bank. In the regime of a large-sized government, adhering strictly to the discipline in the conduct of fiscal and monetary policies would help curb inflation and enhance growth synchronously, hence alleviating any loss of welfare.
Originality/value
To the best of the authors’ knowledge, this study is an attempt to revisit the government size-inflation nexus in India from a non-linear perspective using the Smooth Transition Autoregression (STAR) model for the first time.
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Thu-Ha Thi An, Shin-Hui Chen and Kuo-Chun Yeh
This study examines the role of financial development (FD) in enhancing the growth effect of foreign direct investment (FDI) in emerging and developing Asia from 1996 to 2019.
Abstract
Purpose
This study examines the role of financial development (FD) in enhancing the growth effect of foreign direct investment (FDI) in emerging and developing Asia from 1996 to 2019.
Design/methodology/approach
The study exploits the new broad-based Financial Development Index of the International Monetary Fund (IMF) and adopts panel smooth transition regression (PSTR) to perform alternative empirical models for a multidimensional analysis of the FD threshold effect in the growth–FDI nexus.
Findings
The results show two thresholds of FD mediating the nonlinear effect of FDI on growth. FD beyond a certain level will enhance the growth effect of FDI, but very high levels of FD will not induce foreign investment to benefit economic growth in emerging and developing Asian economies. The impact of financial institutions on the FDI–growth link is stronger than that of financial markets. Besides, FDI’s effect on growth has an inverted-U shape conditional on financial depth, whereas it is positively associated with the accessibility and efficiency of the financial system.
Practical implications
These results suggest policy implications for emerging and developing Asian countries, emphasizing the other side of “too much finance” and the potential for improvement in the access to and efficiency of the financial system to boost the effects of FDI and FD in the growth of these economies.
Originality/value
The study is the first multifaceted investigation into the influence of FD on the growth effect of FDI. Beyond the previous empirical evidence showing only the impact of credit from banking sector, this study shows different mediating effects of different financial sectors and three dimensions of financing (depth, access and efficiency). The study suggests essential implications for the region in adjusting long-run policies to enhance the FDI–FD–growth link.
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Paul Owusu Takyi, Constance Sorkpor and Grace Nkansa Asante
The purpose of this paper is to explore the impact of mobile money on savings and saving practices among individuals in Ghana.
Abstract
Purpose
The purpose of this paper is to explore the impact of mobile money on savings and saving practices among individuals in Ghana.
Design/methodology/approach
Employing an instrumental variable (IV) estimation technique, comprehensive data from the Financial Inclusion Insight (FII) Survey is used, implemented by InterMedia company and conducted from December 2014 to January 2015 in Ghana.
Findings
It is found that mobile money use generally increases savings and saving behavior among individuals in Ghana. In particular, our results show that mobile money use increases the probability of individuals saving for business startup or business expansion, child's education and emergencies. Also, for the heterogeneous effects of mobile money use on saving practices, strong evidence that the use of mobile money is more pronounced in rural areas than in urban centers is found.
Originality/value
To the best of our knowledge, no empirical study has been done on Ghana to extensively examine how mobile money affects various saving practices in Ghana as it is done in this paper. The paper highlights the need for ongoing enhancement of financial inclusion in rural areas by the government of Ghana and other stakeholders to boost savings among rural folks, while not neglecting that in urban areas. Generally, the findings for this paper support the use of mobile money as a tool for enhancing the financial inclusion agenda by policymakers in Ghana and many other countries around the world.
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Melaku Abegaz and Pascal Ngoboka
This paper examines household and community characteristics that influence the entry of rural households into non-farm entrepreneurship and investigates the various factors that…
Abstract
Purpose
This paper examines household and community characteristics that influence the entry of rural households into non-farm entrepreneurship and investigates the various factors that influence the market exit of non-farm enterprises (NFEs).
Design/methodology/approach
The authors use data from three rounds (2011/12, 2013/14 and 2015/16) of the World Bank’s Living Standards Measurement Study – Integrated Surveys on Agriculture (LSMS-ISA). The authors employ panel logit and multilevel logit models to examine the probability of opening one or more enterprises and the enterprise exit rates.
Findings
Results indicate that the likelihood of starting a NFE is positively associated with primary education attainment, access to credit, experiencing idiosyncratic shocks and availability of formal financial institutions. Age, higher education attainment and rising farm input prices constrain entry into non-farm entrepreneurship. The enterprise exit rate is negatively associated with small-town residence, wealth, access to tar/gravel roads and cellphone communication.
Practical implications
Policymakers and administrators should strive to address the challenges that communities face in transportation, communication and financial services. Policies aimed at stabilizing prices and increasing access to mobile communication, primary education and road infrastructure could help expand the rural non-farm sector.
Originality/value
Previous studies primarily examined the determinants of participation in NFEs at a given time using cross-sectional data. The current study uses panel data to study the dynamics of NFE ownership by investigating households’ decisions to enter into or exit from the sector.
Peer review
The peer review history for this article is available at https://publons.com/publon/10.1108/IJSE-09-2022-0611
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Lin Jia, Ying Zhang and Chen Lin
Social interaction in comment sections has become a key factor for backers' decision making in crowdfunding platforms. However, current research on the two-way social interaction…
Abstract
Purpose
Social interaction in comment sections has become a key factor for backers' decision making in crowdfunding platforms. However, current research on the two-way social interaction in crowdfunding is insufficient, and there exist inconsistent conclusions. This study focuses on the social interaction between creators and backers and explores its influence on the successful exit of crowdfunding projects.
Design/methodology/approach
The extended Cox model is used for the empirical analysis of 1,988 crowdfunding projects on the Modian (www.modian.com) platform, a crowdfunding platform for cultural and creative projects in China. The two-way social interaction is reflected in comment quantity and sentiment, as well as reply rate.
Findings
Results reveal an inverted U-shaped relationship between comment quantity/sentiment and the successful exit of crowdfunding projects. This relationship is strengthened by high reply rate.
Originality/value
This study focuses on comment quantity and sentiment. The inverted U-shaped results reconcile previous conclusions. Replies from creators are regarded as a separate factor, and their moderating role is explained. The study research proves the importance of social interaction in crowdfunding platforms and provides suggestions for backers, creators and platform managers.
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Anam Ul Haq Ganie and Masroor Ahmad
The purpose of this study is to investigate the nonlinear effects of renewable energy (RE) consumption and economic growth on per capita CO2 emissions during the time span from…
Abstract
Purpose
The purpose of this study is to investigate the nonlinear effects of renewable energy (RE) consumption and economic growth on per capita CO2 emissions during the time span from 1980 to 2020.
Design/methodology/approach
The study uses the logistic smooth transition autoregression (STAR) model to decipher the nonlinear relationship between RE consumption, economic growth and CO2 emissions in the Indian economy.
Findings
The estimated results confirm a nonlinear relationship between India’s economic growth, RE consumption and CO2 emissions. The authors found that economic growth positively impacts CO2 emissions until it reaches a specific threshold of 1.81 (per capita growth). Beyond this point, further economic growth leads to a reduction in CO2 emissions. Similarly, RE consumption positively affects CO2 emissions until economic growth reaches the same threshold level, after which an increase in RE consumption negatively impacts CO2 emissions.
Research limitations/implications
The study suggests that India should optimize the balance between economic growth and RE consumption to mitigate CO2 emissions. Policymakers should prioritize the adoption of RE during the early stages of economic growth. As economic growth reaches the specific threshold of 1.81 per capita, the economy should shift to more sustainable and energy-efficient practices to limit the effect of further CO2 emissions on further economic growth.
Originality/value
To the best of the authors’ knowledge, this study represents the first-ever endeavor to reexamine the nonlinear relationship between RE consumption, economic growth and CO2 emissions in India, using the STAR model.
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The purpose of this paper is to explore the dynamic interdependence structure and risk spillover effect between the Chinese stock market and the US stock market.
Abstract
Purpose
The purpose of this paper is to explore the dynamic interdependence structure and risk spillover effect between the Chinese stock market and the US stock market.
Design/methodology/approach
This paper mainly uses the multivariate R-vine copula-complex network analysis and the multivariate R-vine copula-CoVaR model and selects stock price indices and their subsector indices as samples.
Findings
The empirical results indicate that the Energy, Materials and Financials sectors have leading roles in the interdependent structure of the Chinese and US stock markets, while the Utilities and Real Estate sectors have the least important positions. The comprehensive influence of the Chinese stock market is similar to that of the US stock market but with smaller differences in the influence of different sectors of the US stock market on the overall interdependent structure system. Over time, the interdependent structure of both stock markets changed; the sector status gradually equalized; the contribution of the same sector in different countries to the interdependent structure converged; and the degree of interaction between the two stock markets was positively correlated with the degree of market volatility.
Originality/value
This paper employs the methods of nonlinear cointegration and the R-vine copula function to explore the interactive relationship and risk spillover effect between the Chinese stock market and the US stock market. This paper proposes the R-vine copula-complex network analysis method to creatively construct the interdependent network structure of the two stock markets. This paper combines the generalized CoVaR method with the R-vine copula function, introduces the stock market decline and rise risk and further discusses the risk spillover effect between the two stock markets.
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