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This study examines the value implications of oil price uncertainty for investors in diversified firms using a sample of 922 USA firms from 2001 to 2019.
Abstract
Purpose
This study examines the value implications of oil price uncertainty for investors in diversified firms using a sample of 922 USA firms from 2001 to 2019.
Design/methodology/approach
Our study employs a panel dataset to examine the value implications of oil price uncertainty for diversified firm investors. We consider several alternative specifications to account for unobserved factors and measurement errors that could potentially bias our results. In particular, we use alternative measures of the excess value of diversified firms and oil price uncertainty, additional control variables, fixed-effects models, the Oster test, impact threshold for confounding variable (ITCV) analysis, two-stage least square instrumental variable (2SLS-IV) analysis and the system-GMM model.
Findings
We find that the excess value of diversified firms, relative to a benchmark portfolio of single-segment firms, increases with high oil price uncertainty. The impact of oil price uncertainty is asymmetric, as corporate diversification is value-increasing for diversified firm investors only when the volatility is due to positive oil price changes and amidst supply-driven oil price shocks. The excess value increases irrespective of diversified firms’ financial constraints and oil usage. Diversified firms become conservative in their internal capital allocations with high oil price uncertainty. Such conservatism is value-increasing for diversified firm investors, as it supports higher performance in response to oil price uncertainty.
Originality/value
Our study has three important implications: first, they are relevant to investors in understanding the portfolio value implications of oil price uncertainty. Second, they are helpful for firm managers while comprehending the value-relevant implications of internal capital allocations. Finally, our findings are policy relevant in the context of the future of diversified firms in developed markets.
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Ly Thi Hai Tran, Thoa Thi Kim Tu and Bao Cong Nguyen To
This paper aims to investigate the relationship between uncertainty and corporate cash holdings with the moderating role of political connections.
Abstract
Purpose
This paper aims to investigate the relationship between uncertainty and corporate cash holdings with the moderating role of political connections.
Design/methodology/approach
We employ fixed effects estimation on a panel dataset of 669 Vietnamese listed firms over the 2010–2020 period, with one- and two-way standard error clustering. We conduct various robustness tests, including two-stage least squares/instrumental variable and generalized method of moments regressions, alternative cash holding measure, and additional controls for macroeconomic conditions and ownership types.
Findings
The effect of uncertainty on cash holdings is weakened for firms with political connections relative to those without the connections. Although general firms depend on cash flows to adjust their cash holding behavior when uncertainty increases, our findings suggest that politically connected firms do not rely on internal cash flows to accumulate cash when confronted high uncertainty.
Practical implications
Our findings on the role of political connections in moderating the relationship between cash holding and economic policy uncertainty have practical implications for policymaking. Since political connections serve as a buffer for a firm’s liquidity, firms may want to seek those connections, which can, in turn, lead to increasing informal costs and unfair business environment.
Originality/value
This is the first study investigating the role of political connections to the nexus of cash, cash flow and uncertainty, providing novel evidence regarding the less dependence on internal cash flows to save cash by politically connected firms. Second, the paper enriches the literature on the motives of cash holdings by proposing a modified agency view in the context of weak investor protection. Therefore, our findings strengthen the explanation for the positive effect of uncertainty on firms’ cash holdings in emerging markets.
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Opeoluwa Adeniyi Adeosun, Suhaib Anagreh, Mosab I. Tabash and Xuan Vinh Vo
This paper aims to examine the return and volatility transmission among economic policy uncertainty (EPU), geopolitical risk (GPR), their interaction (EPGR) and five tradable…
Abstract
Purpose
This paper aims to examine the return and volatility transmission among economic policy uncertainty (EPU), geopolitical risk (GPR), their interaction (EPGR) and five tradable precious metals: gold, silver, platinum, palladium and rhodium.
Design/methodology/approach
Applying time-varying parameter vector autoregression (TVP-VAR) frequency-based connectedness approach to a data set spanning from January 1997 to February 2023, the study analyzes return and volatility connectedness separately, providing insights into how the data, in return and volatility forms, differ across time and frequency.
Findings
The results of the return connectedness show that gold, palladium and silver are affected more by EPU in the short term, while all precious metals are influenced by GPR in the short term. EPGR exhibits strong contributions to the system due to its elevated levels of policy uncertainty and extreme global risks. Palladium shows the highest reaction to EPGR, while silver shows the lowest. Return spillovers are generally time-varying and spike during critical global events. The volatility connectedness is long-term driven, suggesting that uncertainty and risk factors influence market participants’ long-term expectations. Notable peaks in total connectedness occurred during the Global Financial Crisis and the COVID-19 pandemic, with the latter being the highest.
Originality/value
Using the recently updated news-based uncertainty indicators, the study examines the time and frequency connectedness between key uncertainty measures and precious metals in their returns and volatility forms using the TVP-VAR frequency-based connectedness approach.
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Hiva Rastegar, Gabriel Eweje and Aymen Sajjad
This paper aims to unravel the relationship between market-driven impacts of climate change and firms’ deployment of renewable energy (RE) innovation. The purpose is to understand…
Abstract
Purpose
This paper aims to unravel the relationship between market-driven impacts of climate change and firms’ deployment of renewable energy (RE) innovation. The purpose is to understand how market-related forces, influenced by uncertainty, shape firms’ behaviour in response to climate change challenges.
Design/methodology/approach
Drawing on the behavioural theory of the firm (BTOF), the paper develops a conceptual model to decode the relationship between each category of market-driven impacts and the resulting RE innovation within firms. The model takes into account the role of uncertainty and differentiates between multinational enterprises (MNEs) and domestic firms.
Findings
The analysis reveals five key sources of market-driven impacts: investor sentiment, media coverage, competitors’ adoption of ISO 14001, customer satisfaction and shareholder activism. These forces influence the adoption of RE innovation differently across firms, depending on the level of uncertainty and the discrepancy between environmental performance and aspiration level.
Originality/value
This paper contributes to the literature in four ways. Firstly, it emphasises the importance of uncertainty associated with market-driven impacts, which stimulates different responses from firms. Secondly, it fills a research gap by focusing on the proactivity of firms in adopting RE innovation, rather than just operational strategies to curb emissions. Thirdly, the paper extends the BTOF by incorporating the concept of uncertainty in explaining firm behaviour. Finally, it provides insights into the green strategies of MNEs in the face of climate change, offering a comprehensive model that differentiates MNEs from domestic firms.
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Yi Zhang, Tianqi Zhang, Hang Zhou and Jian Qin
People usually try to avoid uncertainty. Recently, however, uncertainty has become an emerging marketing tool in the hedonic product industry. In the case of blind box…
Abstract
Purpose
People usually try to avoid uncertainty. Recently, however, uncertainty has become an emerging marketing tool in the hedonic product industry. In the case of blind box consumption, for example, the consumers become addicted to the uncertainty created by businesses, leading to repeat purchases and even indulgences. Previous research has, yet, to focus on the impact of uncertainty on indulgence and the role of emotions.
Design/methodology/approach
This paper constructs and validates a chain mediation model of uncertainty triggering indulgent consumption based on the information gap theory, positive emotion theory and uncertainty resolution theory and examines the difference between resolved and unresolved uncertainty. This study also explores differences in the impact of whether uncertainty is resolved on emotions. The uncertainty-resolved group elicited a more positive emotional response than the uncertainty-unresolved group, leading to a more indulgent consumption.
Findings
The results of three studies show that uncertainty influences indulgent consumption through curiosity and positive emotion, and that curiosity and positive emotion play separate and chain mediating roles between uncertainty and indulgent consumption, respectively. We validate our central hypothesis with questionnaires among blind box consumer groups, examining the moderating role of perceived luck and risk preferences.
Originality/value
The findings shed new light on firms' use of uncertainty to promote consumer purchases.
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Viput Ongsakul, Pandej Chintrakarn, Suwongrat Papangkorn and Pornsit Jiraporn
Taking advantage of distinctive text-based measures of climate policy uncertainty and firm-specific exposure to climate change, this study aims to examine the impact of…
Abstract
Purpose
Taking advantage of distinctive text-based measures of climate policy uncertainty and firm-specific exposure to climate change, this study aims to examine the impact of firm-specific vulnerability on dividend policy.
Design/methodology/approach
To mitigate endogeneity, the authors apply an instrumental-variable analysis based on climate policy uncertainty as well as use additional analysis using propensity score matching and entropy balancing.
Findings
The authors show that an increase in climate policy uncertainty exacerbates firm-specific exposure considerably. Exploiting climate policy uncertainty to generate exogenous variation in firm-specific exposure, the authors demonstrate that companies more susceptible to climate change are significantly less likely to pay dividends and those that do pay dividends pay significantly smaller dividends. For instance, a rise in firm-specific exposure by one standard deviation weakens the propensity to pay dividends by 5.11%. Climate policy uncertainty originates at the national level, beyond the control of individual firms and is thus plausibly exogenous, making endogeneity less likely.
Originality/value
To the best of the authors’ knowledge, this study is the first attempt in the literature to investigate the effect of firm-specific exposure on dividend policy using a rigorous empirical framework that is less vulnerable to endogeneity and is more likely to show a causal influence, rather than a mere correlation.
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Mahlagha Darvishmotevali, Catherine Prentice and Levent Altinay
In a dynamic and complex environment, employees’ creative performance (CP) can be essential in developing a distinguished and competitive strategy for an organization. Using the…
Abstract
Purpose
In a dynamic and complex environment, employees’ creative performance (CP) can be essential in developing a distinguished and competitive strategy for an organization. Using the lens of competency management, this study aims to examine how employees perceived environmental uncertainty (PEU) and competency formula relate to employee CP, with a focus on the hospitality industry.
Design/methodology/approach
The data was collected from employees in the hospitality sector. Both symmetrical (PLS-SEM) and asymmetrical (fuzzy-set qualitative comparative analysis [fsQCA]) tests were performed to gain in-depth knowledge of how individual, organizational and environmental factors can be configured to explain employees’ CP.
Findings
The symmetrical analysis shows that the competency formula mediates the negative impacts of PEU on two dimensions of creativity – that is, novelty and utility. The fsQCA testing generated contrasting findings and revealed that uncertainty, along with the formula elements, is a unique antecedent condition and opportunity for employees’ CP. The inconsistent findings indicate asymmetrical and complex relationships between the proposed antecedents and outcomes in the case of employee creativity.
Practical implications
A combination of symmetrical and asymmetrical approaches is necessary to uncover the complex relationships among employees, organizations and the environment. This study shows that organizational agility, competency strategies and comprehensive strategic management processes can be configured to explain positive outcomes for organizations during uncertain circumstances. The findings can be used by human resource practitioners to maximize employee creativity and enhance organizational performance.
Originality/value
To the best of the authors’ knowledge, this study is the first to use symmetrical and asymmetrical testing to address the inadequacy of explaining employee CP in complex and uncertain environments, and highlight the crucial role of the competency formula in enhancing novelty and utility dimensions of CP. This research examines the impact of various internal and external factors (i.e. individual, organizational and contextual) on employee creativity within the hospitality industry.
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Yu-Shan Hsu, Yu-Ping Chen, Flora F.T. Chiang and Margaret A. Shaffer
Integrating anxiety and uncertainty management (AUM) theory and theory of organizing, this study aims to contribute to the knowledge management literature by examining the…
Abstract
Purpose
Integrating anxiety and uncertainty management (AUM) theory and theory of organizing, this study aims to contribute to the knowledge management literature by examining the interdependent and bidirectional nature of knowledge transfer between expatriates and host country nationals (HCNs). Specifically, the authors investigate how receivers’ cognitive response to senders’ behaviors during their interactions becomes an important conduit between senders’ behaviors and the successful transfer of knowledge.
Design/methodology/approach
The authors used the actor partner interdependence model to analyze data from 107 expatriate-HCN dyads. The authors collected the responses of these expatriate-HCN dyads in Shanghai, Taipei, Hong Kong, Vietnam, South Korea, Malaysia, Thailand, Indonesia and India.
Findings
Receivers’ interaction anxiety and uncertainty, as a response to senders’ relationship building behaviors, mediate the relationship between senders’ relationship building behaviors and successful knowledge transfer. When senders are expatriates, senders’ communication patience and relationship building behaviors interact to reduce the direct and indirect effects of both receivers’ interaction anxiety and uncertainty. However, when senders are HCNs, the moderation and moderated mediation models are not supported.
Originality/value
The study contributes to the knowledge management literature by investigating knowledge transfer between expatriates and HCNs using an interpersonal cross-cultural communication lens. The authors make refinements to AUM theory by going beyond the sender role to highlighting the interdependence between senders and receivers in the management of anxiety and uncertainty which, in turn, influences the effectiveness of cross-cultural communication. The study is also unique in that the authors underscore an important yet understudied construct, communication patience, in the successful transfer of knowledge.
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Zaifeng Wang, Tiancai Xing and Xiao Wang
We aim to clarify the effect of economic uncertainty on Chinese stock market fluctuations. We extend the understanding of the asymmetric connectedness between economic uncertainty…
Abstract
Purpose
We aim to clarify the effect of economic uncertainty on Chinese stock market fluctuations. We extend the understanding of the asymmetric connectedness between economic uncertainty and stock market risk and provide different characteristics of spillovers from economic uncertainty to both upside and downside risk. Furthermore, we aim to provide the different impact patterns of stock market volatility following several exogenous shocks.
Design/methodology/approach
We construct a Chinese economic uncertainty index using a Factor-Augmented Variable Auto-Regressive Stochastic Volatility (FAVAR-SV) model for high-dimensional data. We then examine the asymmetric impact of realized volatility and economic uncertainty on the long-term volatility components of the stock market through the asymmetric Generalized Autoregressive Conditional Heteroskedasticity-Mixed Data Sampling (GARCH-MIDAS) model.
Findings
Negative news, including negative return-related volatility and higher economic uncertainty, has a greater impact on the long-term volatility components than positive news. During the financial crisis of 2008, economic uncertainty and realized volatility had a significant impact on long-term volatility components but did not constitute long-term volatility components during the 2015 A-share stock market crash and the 2020 COVID-19 pandemic. The two-factor asymmetric GARCH-MIDAS model outperformed the other two models in terms of explanatory power, fitting ability and out-of-sample forecasting ability for the long-term volatility component.
Research limitations/implications
Many GARCH series models can also combine the GARCH series model with the MIDAS method, including but not limited to Exponential GARCH (EGARCH) and Threshold GARCH (TGARCH). These diverse models may exhibit distinct reactions to economic uncertainty. Consequently, further research should be undertaken to juxtapose alternative models for assessing the stock market response.
Practical implications
Our conclusions have important implications for stakeholders, including policymakers, market regulators and investors, to promote market stability. Understanding the asymmetric shock arising from economic uncertainty on volatility enables market participants to assess the potential repercussions of negative news, engage in timely and effective volatility prediction, implement risk management strategies and offer a reference for financial regulators to preemptively address and mitigate systemic financial risks.
Social implications
First, in the face of domestic and international uncertainties and challenges, policymakers must increase communication with the market and improve policy transparency to effectively guide market expectations. Second, stock market authorities should improve the basic regulatory system of the capital market and optimize investor structure. Third, investors should gradually shift to long-term value investment concepts and jointly promote market stability.
Originality/value
This study offers a novel perspective on incorporating a Chinese economic uncertainty index constructed by a high-dimensional FAVAR-SV model into the asymmetric GARCH-MIDAS model.
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Endrit Kromidha and Nia Kurniati Bachtiar
This study explores resilience learning from uncertainty, taking a holistic view by considering individual, firm and contextual factors. Resilience development is understood by…
Abstract
Purpose
This study explores resilience learning from uncertainty, taking a holistic view by considering individual, firm and contextual factors. Resilience development is understood by focusing on how uncertainty is related to entrepreneurs and their environment, suggesting that developing resilience needs to be a continuous learning process.
Design/methodology/approach
This qualitative study explores factors related to entrepreneurial uncertainty, resilience and learning. Evidence is drawn from interviews with rural entrepreneurs in two regions of Indonesia, and analyzed using a rigorous approach to generate codes, second-order themes and aggregate dimensions for the theoretical contributions.
Findings
Uncertainty readiness, uncertainty response and uncertainty opportunity for resilience emerge as the key learning areas from this study. They are related to resilience on a personal, community and systemic level. The proposed framework relates learning from uncertainty to the process of developing resilience for entrepreneurs and their communities.
Originality/value
This study proposes a framework based on resilience motivation and learning from uncertainty as usual. It explores the relationships between uncertainty readiness, responses and opportunities with personal, relational and systemic resilience factors. This contributes to entrepreneurship behavior research at the intersection of organization studies and management in the socio-economic and often informal context of developing countries.
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