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Int. J. Financial Stud., Volume 11, Issue 2 (June 2023) – 29 articles

Cover Story (view full-size image): This plot exhibits the daily movement of the SP500 and eight top South African sector indices of the Johannesburg Stock Exchange between January 2004 and April 2022. The plot shows abrupt price drops during the 2008 global financial crisis and the 2020 COVID-19 pandemic crisis. There is evidence of extreme co-movement in the upper tail and asymmetric dependence on the integrated economy, supported by the fact that there is only a spillover effect from the SP500 to the top South African sector indices, while the reverse is not observed. View this paper
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26 pages, 400 KiB  
Article
Management’s Discretionary Assessments of Goodwill Impairments—Evidence from STOXX Europe 600
by Frode Kjærland, Kristian Forbord, Are Oust and Håkon Stephani
Int. J. Financial Stud. 2023, 11(2), 81; https://doi.org/10.3390/ijfs11020081 - 20 Jun 2023
Viewed by 1379
Abstract
The main issues of accounting reporting regarding goodwill are whether a firm’s management reliably conveys their private information about future earnings, and whether they disclose value-relevant and useful information to accounting users. In the current International Financial Reporting Standards (IFRS) regulations, the goodwill [...] Read more.
The main issues of accounting reporting regarding goodwill are whether a firm’s management reliably conveys their private information about future earnings, and whether they disclose value-relevant and useful information to accounting users. In the current International Financial Reporting Standards (IFRS) regulations, the goodwill impairment test is based on management’s discretionary assessments. This study examines how goodwill impairment is reported under IFRS considering company- and industry-specific economic factors, proxies for earnings management, and macroeconomic crisis years. We extend previous research using tobit and logit regressions by employing a fixed-effects model. This approach is possible because of a panel dataset comprising 449 of 600 active companies sampled from the STOXX Europe 600 index from 2005 to 2018. We find that goodwill impairments are largely concentrated in certain companies, industries, and years. The regression models show a significant negative correlation between companies’ return on total assets and goodwill impairments. Moreover, we discover that goodwill impairments have a significant positive correlation with goodwill intensity, debt ratio, and the proxy for reporting a one-off big bath charge. In addition, we find that the global financial crisis in 2008–2009 and the European debt crisis in 2011 differ significantly from other fiscal years. Full article
18 pages, 655 KiB  
Article
The Interplay of Formal Institutional and Cultural Distances and the Financial Performance of Foreign Subsidiaries in Latin America
by Henrique Correa da Cunha, Mohamed Amal, Svante Andersson, Dinora Eliete Floriani and Carlyle Farrell
Int. J. Financial Stud. 2023, 11(2), 80; https://doi.org/10.3390/ijfs11020080 - 20 Jun 2023
Viewed by 1172
Abstract
We investigate how formal institutional distance (FID) moderates the cultural distance (CD) and financial performance relationships of foreign subsidiaries of firms. Following recent research, we estimate the asymmetric effects of CD by considering its size and direction towards host countries on the opposite [...] Read more.
We investigate how formal institutional distance (FID) moderates the cultural distance (CD) and financial performance relationships of foreign subsidiaries of firms. Following recent research, we estimate the asymmetric effects of CD by considering its size and direction towards host countries on the opposite poles of each cultural dimension’s scale. We propose that a limited understanding of the formal institutions in the host country, as measured by the magnitude and direction of the FID, can positively moderate the CD–performance relationship. This is mainly because foreign subsidiary firms may be more reliant on their capacity to navigate the less formal (and more implicit) aspects of the host country’s institutional environment, such as their ability to cope with the CD. We use foreign subsidiary data from the Orbis database, which includes 22 developed and 22 developing home countries and over 1400 foreign subsidiaries operating in 10 of Latin America’s largest economies (host countries) from 2012 to 2015 (a period of 3 years). Findings confirm the asymmetric effects of CD; however, by considering the direction of FID, our findings reveal that the more FID is directed towards host countries that are less developed, the more significant the effects of CD on financial performance. These findings contribute to our knowledge of how formal and informal institutional distances interact by showing that the greater the FID towards less developed host countries, the more pronounced the effects of CD. Full article
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15 pages, 6660 KiB  
Review
A Bibliometric Analysis of Fintech Trends: An Empirical Investigation
by Girish Garg, Mohd Shamshad, Nikita Gauhar, Mosab I. Tabash, Basem Hamouri and Linda Nalini Daniel
Int. J. Financial Stud. 2023, 11(2), 79; https://doi.org/10.3390/ijfs11020079 - 19 Jun 2023
Cited by 7 | Viewed by 2192
Abstract
Financial technology, or Fintech, has captured the attention of scholars, students, and institutions across worldwide for over a decade. With a plethora of new financial services, products, and innovative methods to engage with clients, the impact of technology on the financial sector has [...] Read more.
Financial technology, or Fintech, has captured the attention of scholars, students, and institutions across worldwide for over a decade. With a plethora of new financial services, products, and innovative methods to engage with clients, the impact of technology on the financial sector has been extensively studied. This research paper provides a summary of scientific research on FinTech by using bibliometric analysis. Using the Scopus database, the paper analyzed 665 publications and identified research gaps and new study topics through “VOS-Viewer” software and “Biblioshiny” using RStudio. The study focused on FinTech’s functions and research constraints in digital finance by assessing citation links between the most significant articles. The findings provide a starting point for further investigation and offer opportunities for researchers to expand their expertise in exciting and innovative studies. Overall, this study seeks to help researchers discover new avenues for exploration in Fintech while advancing their present understanding. There exists much scope in the area of Digital Lending, Supply Chain Finance, the Internet of Things, and RoboAdvisers. Full article
(This article belongs to the Special Issue Literature Reviews in Finance)
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19 pages, 2577 KiB  
Article
An Exploration of Overconfidence and the Disposition Effect in the Stock Market
by Benomar Ikram, Ben El Haj Fouad and Chelh Sara
Int. J. Financial Stud. 2023, 11(2), 78; https://doi.org/10.3390/ijfs11020078 - 13 Jun 2023
Viewed by 2138
Abstract
This paper offers a comprehensive empirical overview of the impact of overconfidence in the stock market, thus contributing to the existing research literature on this topic. The study employs a bibliometric approach that utilizes the VOSviewer to extract and analyze 277 articles registered [...] Read more.
This paper offers a comprehensive empirical overview of the impact of overconfidence in the stock market, thus contributing to the existing research literature on this topic. The study employs a bibliometric approach that utilizes the VOSviewer to extract and analyze 277 articles registered between 1992 and January 2023. By providing a detailed analysis of the literature, this research expands our understanding of the impact of overconfidence in the stock market and offers avenues for future studies in this area. The results of this analysis are noteworthy, as they reveal several important findings. These include the exponential growth of scientific production in recent decades, the concentration of research in specific journals indexed in the Journal Citation Reports, the presence of institutional co-author networks, and the thematic and temporal segregation of financial behavior concepts. The most significant finding of this study is the identification of six major clusters: investor behavior during times of crisis; behavioral finance; herding and risk-taking concepts; psychological and cognitive decisions; emotions and decision-making; and the performance of stocks. This temporal evolution of research demonstrates the emergence of various perspectives on the relationship between individual financial behavior and the global market. This study represents a pioneering effort in the field of bibliometric analysis as it is the first to specifically examine the subject of overconfidence in the stock market using this method. Full article
(This article belongs to the Special Issue Literature Reviews in Finance)
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19 pages, 368 KiB  
Article
Impacts of U.S. Stock Market Crash on South African Top Sector Indices, Volatility, and Market Linkages: Evidence of Copula-Based BEKK-GARCH Models
by Benjamin Mudiangombe Mudiangombe and John Weirstrass Muteba Mwamba
Int. J. Financial Stud. 2023, 11(2), 77; https://doi.org/10.3390/ijfs11020077 - 10 Jun 2023
Viewed by 1650
Abstract
This paper examines the effects of the Standard and Poor’s 500 (SP500) stock index crash during the global financial crisis and the COVID-19 pandemic periods on the South African top sector indices (basic materials, consumer goods, consumer services, financials, healthcare, industrials, technology, and [...] Read more.
This paper examines the effects of the Standard and Poor’s 500 (SP500) stock index crash during the global financial crisis and the COVID-19 pandemic periods on the South African top sector indices (basic materials, consumer goods, consumer services, financials, healthcare, industrials, technology, and telecommunication). The results of a copula-based BEKK-GARCH approach technique demonstrate the existence of price and volatility spillover during times of stock crashes. We discover that during a stock crisis, strong shocks and higher volatility spillover effects from the United States (U.S.) SP500 index to the top sector indices of the South African Johannesburg Stock Exchange (JSE) markets are more significant. However, there is no integrated economy, as the results did not show any spillover effects from South Africa to U.S. markets. Furthermore, the Gumbel copulas have higher dependence parameters, implying that extreme co-movements occur in the upper tails, suggesting the possibility of a large transmission of shocks from the SP500 to the eight top sector indices of the JSE and showing an asymmetric dependence between these markets. This result is important for investors willing to invest in the South African sector of equity markets to develop hedging strategies to prevent risk spillover from developed markets. Full article
29 pages, 3170 KiB  
Review
Islamic Finance in the Era of Financial Technology: A Bibliometric Review of Future Trends
by Hanan Qudah, Sari Malahim, Rula Airout, Mohammad Alomari, Aiman Abu Hamour and Mohammad Alqudah
Int. J. Financial Stud. 2023, 11(2), 76; https://doi.org/10.3390/ijfs11020076 - 09 Jun 2023
Cited by 11 | Viewed by 7069
Abstract
This study focused on a current study on Islamic finance and financial technology as well as prospective topics for future research. As a bibliometric and visualization tool for the Web of Science core collection database and viewer-based literature, 918 papers dealing with Islamic [...] Read more.
This study focused on a current study on Islamic finance and financial technology as well as prospective topics for future research. As a bibliometric and visualization tool for the Web of Science core collection database and viewer-based literature, 918 papers dealing with Islamic finance and financial technology authored between 1999 and 2022 were analyzed. Cluster analysis, all-keyword co-occurrence analysis, and bibliographic coupling mapping are all investigated in the study. This research enables us to propose future research paths that may be useful in reflecting on the significant impact that technology will have on the growth of Islamic finance and financial technology. The survey discovered four main research trends: the first trend shown is “Financial Inclusion and Corporate Governance in Islamic Fintech”. The second trend focuses on “information technology and future financial Islamic services”. The third trend is “The Transformation of Islamic Finance: How Fintech is Changing the Game”. The fourth trend is related to “Islamic Finance: A Growing Force in the Digital Age”. This study provides a comprehensive analysis of research trends at the intersection of Islamic finance and financial technology, identifying future research directions. Full article
(This article belongs to the Special Issue Literature Reviews in Finance)
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22 pages, 1116 KiB  
Article
The Determinants of Capital Adequacy in the Jordanian Banking Sector: An Autoregressive Distributed Lag-Bound Testing Approach
by Ahmad Mohammad Obeid Gharaibeh
Int. J. Financial Stud. 2023, 11(2), 75; https://doi.org/10.3390/ijfs11020075 - 07 Jun 2023
Cited by 1 | Viewed by 1816
Abstract
The current study aims to examine the determinants of the capital adequacy ratio (CAR) in the context of Jordanian banks through a literature review and analysis of empirical evidence. The aggregate data were obtained from Globaleconomy.com, the Financial Soundness Indicators, the Central Bank [...] Read more.
The current study aims to examine the determinants of the capital adequacy ratio (CAR) in the context of Jordanian banks through a literature review and analysis of empirical evidence. The aggregate data were obtained from Globaleconomy.com, the Financial Soundness Indicators, the Central Bank of Jordan, and World Bank Data covering the period from 2003 to 2021. The aggregate data were analyzed using autoregressive distributed lag (ARDL), utilizing Econometric Views (EViews) software. The empirical results suggest a short-run causality relationship running from banks’ credit-to-deposits ratio, banks’ leverage ratio, banks’ liquidity ratio, and one-year-lagged ROE to the CAR. The results also suggest the existence of short-run causality running from the capital-to-assets ratio, one-year-lagged capital-to-asset ratio, liquid-assets-to-deposits ratio, and coverage ratio to CAR. In addition, the results show the leverage ratio and liquidity ratio as having positive long-run associations with CAR. A positive and significant long-run association was also found between CAR, on the one hand, and the capital-to-assets ratio and the liquid assets to deposits ratio; the coverage ratio, on the other hand, showed a negative and statistically significant long-run association with CAR. The pairwise Granger causality test results reveal that liquid asset to deposits, money supply, profitability, and the capital-to-assets ratio Granger cause CAR. The study findings emphasize the importance of understanding the factors impacting CAR, the direction of the influence, the magnitude of the influence of the determinants of CAR in emerging economies such as Jordan and taking appropriate measures to safeguard the stability and resilience of the banking industry. Full article
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17 pages, 2327 KiB  
Review
Political Uncertainty and Initial Public Offerings: A Literature Review
by Purvi Jhawar and Jayanta Kumar Seal
Int. J. Financial Stud. 2023, 11(2), 74; https://doi.org/10.3390/ijfs11020074 - 06 Jun 2023
Viewed by 2269
Abstract
The literature on the influence of political and policy-related uncertainties on financial aspects has gained an impetus in the last two decades. This study adds to the existing literature by reviewing the impact of political uncertainty on initial public offerings (IPOs). We aim [...] Read more.
The literature on the influence of political and policy-related uncertainties on financial aspects has gained an impetus in the last two decades. This study adds to the existing literature by reviewing the impact of political uncertainty on initial public offerings (IPOs). We aim to provide a holistic overview of the past research in this domain, identify the potential research gaps, and explore them further. We performed a bibliometric analysis using VOSviewer to identify the major keywords used, the most cited papers, the authors, and the major countries where research in this domain has taken place. Our perspective on the current state of the literature has been threefold. First, considering the importance of market timing in the firm’s decision to go public, it was seen that firms had shown an unwillingness to come up with an IPO during periods of high political uncertainty. Second, political uncertainty has shown its influence in all the phases of the IPO process; however, political connections and donations mitigate this effect. Third, the research in this domain is still at a very nascent stage and is mainly restricted to China and the US. Thus, we believe that there are several areas that are yet to be explored. Full article
(This article belongs to the Special Issue Literature Reviews in Finance)
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17 pages, 329 KiB  
Article
Winner Strategies in a Simulated Stock Market
by Ali Taherizadeh and Shiva Zamani
Int. J. Financial Stud. 2023, 11(2), 73; https://doi.org/10.3390/ijfs11020073 - 30 May 2023
Viewed by 1328
Abstract
In this study, we explore the dynamics of the stock market using an agent-based simulation platform. Our approach involves creating a multi-strategy market where each agent considers both fundamental and technical factors when determining their strategy. The agents vary in their approach to [...] Read more.
In this study, we explore the dynamics of the stock market using an agent-based simulation platform. Our approach involves creating a multi-strategy market where each agent considers both fundamental and technical factors when determining their strategy. The agents vary in their approach to these factors and the time interval they use for technical analysis. Our findings indicate that investing heavily in reducing the value–price gap was a successful strategy, even in markets where there were no trading forces to reduce this gap. Furthermore, our results remain consistent across various modifications to the simulation’s structure. Full article
16 pages, 358 KiB  
Article
Lines of Credit and Family Firms: The Case of an Emerging Market
by Ghada Tayem and Mohammad Tayeh
Int. J. Financial Stud. 2023, 11(2), 72; https://doi.org/10.3390/ijfs11020072 - 29 May 2023
Viewed by 1108
Abstract
Lines of credit constitute an integral part of a firm’s liquidity policy; however, there is limited research on lines of credit in emerging markets. This study fills this gap by examining firm incentives to access and draw from lines of credit using the [...] Read more.
Lines of credit constitute an integral part of a firm’s liquidity policy; however, there is limited research on lines of credit in emerging markets. This study fills this gap by examining firm incentives to access and draw from lines of credit using the context of Jordan, a bank-based emerging market, focusing on the impact of family firms. To account for the endogeneity of family control, this study estimates the probability of accessing a line of credit using seemingly unrelated bivariate probit regression and its usage using treatment effect regression. The article documents that family firms are less likely to obtain a line of credit and their drawdowns are smaller compared to non-family firms. These findings support the agency’s view on having and using lines of credit. Other findings are consistent with a substitution effect between internal and external liquidity sources which implies a cost wedge between the two sources of liquidity. Full article
20 pages, 9943 KiB  
Review
A Decade of Cryptocurrency Investment Literature: A Cluster-Based Systematic Analysis
by José Almeida and Tiago Cruz Gonçalves
Int. J. Financial Stud. 2023, 11(2), 71; https://doi.org/10.3390/ijfs11020071 - 25 May 2023
Cited by 5 | Viewed by 5117
Abstract
This study aims to systematically analyze and synthesize the literature produced thus far on cryptocurrency investment. We use a systematic review process supported by VOSviewer bibliographic coupling to review 482 papers published in the ABS 2021 journal list, considering all different areas of [...] Read more.
This study aims to systematically analyze and synthesize the literature produced thus far on cryptocurrency investment. We use a systematic review process supported by VOSviewer bibliographic coupling to review 482 papers published in the ABS 2021 journal list, considering all different areas of knowledge. This paper contributes an in-depth systematic analysis on the unconsolidated topic of cryptocurrency investment through the use of a cluster-based approach grounded in a bibliographic coupling analysis, revealing complex network associations within each cluster. Four literature clusters emerge from the cryptocurrency investment literature, namely, investigating investor behavior, portfolio diversification, cryptocurrency market microstructure, and risk management in cryptocurrency investment. Additionally, the study delivers a qualitative analysis that reveals the main conclusions and future research venues by cluster. The findings provide researchers with cluster-based information and structured networking for research outlets and literature strands. Full article
(This article belongs to the Special Issue Literature Reviews in Finance)
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16 pages, 3404 KiB  
Article
Modelling Systemic Risk in Morocco’s Banking System
by Ayoub Kyoud, Cherif El Msiyah and Jaouad Madkour
Int. J. Financial Stud. 2023, 11(2), 70; https://doi.org/10.3390/ijfs11020070 - 21 May 2023
Cited by 3 | Viewed by 1911
Abstract
The Moroccan banking system suffered a significant impact due to the extreme market conditions caused by the COVID-19 outbreak, which led to an increase in non-performance loans. This, in turn, reduced the value of banks’ assets and their ability to meet their obligations, [...] Read more.
The Moroccan banking system suffered a significant impact due to the extreme market conditions caused by the COVID-19 outbreak, which led to an increase in non-performance loans. This, in turn, reduced the value of banks’ assets and their ability to meet their obligations, implicitly raising systemic risk. In such circumstances, the collapse of one financial institution could cause a series of bankruptcies and endanger the overall state of the economy. Given the limited attention devoted to the analysis of systemic risk in the Moroccan banking system, this paper aimed to fill this gap by analyzing the Moroccan banks’ systemic risk exposure and assessing their stability during the COVID-19 crisis, using Quantile Regression Neural Network (QRNN) optimized by Adam algorithm to calibrate the Conditional Value at Risk (CoVaR). This study revealed a significant increase in systemic risk during the pandemic crisis and highlights the suitability of more complex QRNN in assessing systemic risk. The findings emphasize the need for regulators to pay close attention to banks’ risk exposures when implementing measures to mitigate systemic risk, such as increasing banks’ capital requirements or increasing the amount of high-quality liquid assets. Full article
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23 pages, 1670 KiB  
Article
Negative Interest Rates and Its Impact on GDP, FDI and Banks’ Financial Performance: The Cases of Switzerland and Sweden
by Petr Wawrosz and Semen Traksel
Int. J. Financial Stud. 2023, 11(2), 69; https://doi.org/10.3390/ijfs11020069 - 17 May 2023
Viewed by 2764
Abstract
The article deals with the issue of how negative interest rate policies, introduced in the second decade of the 21st century in some countries, affect certain macroeconomic indicators and bank performance. We concentrate specifically on Switzerland and Sweden. We use correlation analysis to [...] Read more.
The article deals with the issue of how negative interest rate policies, introduced in the second decade of the 21st century in some countries, affect certain macroeconomic indicators and bank performance. We concentrate specifically on Switzerland and Sweden. We use correlation analysis to reveal the relationship between interest rates and GDP, the level of foreign direct investment (FDI) and some indicators of banks’ performance. We found that negative interest rates (NIRs) are strongly correlated with the level of GDP in both Switzerland and Sweden but that they do not affect their FDI. The share of banks´ deposits in GDP is also strongly correlated with NIR. Other indicators of bank performance do not show a strong correlation for both countries. Our evidence is consistent with NIR not being associated with undesirable effects concerning economic growth and bank performance in Switzerland and Sweden. The value of FDI depends on many factors—mainly on the attractiveness of a country for foreign investors in terms of its political and economic stability and by general conditions for business operation. Full article
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19 pages, 2921 KiB  
Article
The Effect of Financial Policies Implemented during COVID-19 on Bank Credit in the Central American Region
by Daniel Ventosa-Santaulària, Arnoldo Marmolejo and Luis Alvarado
Int. J. Financial Stud. 2023, 11(2), 68; https://doi.org/10.3390/ijfs11020068 - 16 May 2023
Cited by 1 | Viewed by 1549
Abstract
As a result of the COVID-19 pandemic, governments and central banks worldwide implemented a wide range of policies to support households and businesses, among them a series of measures to support the availability of credit. This paper quantitatively assesses how monetary and regulatory [...] Read more.
As a result of the COVID-19 pandemic, governments and central banks worldwide implemented a wide range of policies to support households and businesses, among them a series of measures to support the availability of credit. This paper quantitatively assesses how monetary and regulatory policy measures helped lessen the effect of the economic downturn on bank credit to the private sector, and on non-performing loans, and focuses on small EMEs, which have been the subject of little analysis in this regard. Specifically, it looks at a number of countries in the Central American region. The resulting estimates show that the policies implemented substantially reduced the negative impact of the crisis on bank credit and nonperforming loans, and that the measures largely responsible for this mitigation were regulatory rather than monetary. Full article
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12 pages, 265 KiB  
Article
Qualitative Analysis of IAS 2 Capability for Handling the Financial Information Generated by Cost Techniques
by Amer Morshed and Abdulhadi Ramadan
Int. J. Financial Stud. 2023, 11(2), 67; https://doi.org/10.3390/ijfs11020067 - 13 May 2023
Cited by 3 | Viewed by 2422
Abstract
Using a qualitative research design, this study examined the inventory valuation conflict between financial managers and auditors and its implications for the International Accounting Standard 2 (IAS 2). This study found that the conflict arose due to the lack of precise instructions in [...] Read more.
Using a qualitative research design, this study examined the inventory valuation conflict between financial managers and auditors and its implications for the International Accounting Standard 2 (IAS 2). This study found that the conflict arose due to the lack of precise instructions in the IAS 2 regarding cost–unit calculations. It was recommended that the IAS 2 should provide more examples or use the chamber of commerce as a source of information to clarify what should be considered as the product cost of storage expenses. This study supported previous findings that job order costing was used for customized manufacturing, while process costing was used for standardizing manufacturing. It also highlighted the importance of process costing in evaluating equivalent units and normal and abnormal losses in production, which affect inventory value. This study concluded that cost techniques should be viewed as managerial tools for calculating the cost of a unit. Cost managers should use their expertise to develop the cost formula for their specific industry while maintaining confidentiality. This study contributed to the literature by highlighting the importance of process costing in evaluating inventory valuation and resolving conflicts between financial managers and auditors. It also provided practical implications for improving the treatment of inventory in the IAS 2. This included directing the implementation of stable policies and attaching some indices when computing equivalent units, abnormal losses, and product costs. This study’s limitations included the use of a small sample size, and future studies should consider larger sample sizes from different industries and countries. Full article
(This article belongs to the Special Issue Advances in Corporate Disclosure Practice)
20 pages, 331 KiB  
Article
The Effect of Female Directors on ESG Practice: Evidence from China
by Hongyu Peng and Tirapot Chandarasupsang
Int. J. Financial Stud. 2023, 11(2), 66; https://doi.org/10.3390/ijfs11020066 - 27 Apr 2023
Cited by 2 | Viewed by 4058
Abstract
This paper empirically examines the impact of female directors on corporate ESG disclosure scores based on upper echelons theory and women’s ethics of care theory by conducting a multiple regression analysis on 8193 observations of Chinese listed companies from 2010 to 2020. Our [...] Read more.
This paper empirically examines the impact of female directors on corporate ESG disclosure scores based on upper echelons theory and women’s ethics of care theory by conducting a multiple regression analysis on 8193 observations of Chinese listed companies from 2010 to 2020. Our results demonstrate the importance of female directors’ participation in promoting corporate ESG practices. We conclude that the higher the proportion of female directors on the board, the higher the corporate ESG practice score. Further analysis also revealed that a favorable institutional environment and non-state enterprises positively moderate the relationship between female directors and corporate ESG practices. These results highlight the significant contribution of female directors to corporate ESG practices. Our paper sheds additional light on issues related to female directors and corporate ESG practices in Chinese listed companies, expands the theoretical knowledge of ethical decision-making and institutional environments in listed companies, enriches research in the area of female directors’ decision-making, and has important implications for corporate governance related policy-making in China. Full article
(This article belongs to the Special Issue Diversity in Global Finance)
14 pages, 291 KiB  
Article
Internal Control Managers’ Accounting Experiences on Audit Quality—Focus on ESG
by Suyon Kim
Int. J. Financial Stud. 2023, 11(2), 65; https://doi.org/10.3390/ijfs11020065 - 26 Apr 2023
Cited by 1 | Viewed by 2940
Abstract
The purpose of this research is to investigate whether internal control (IC) managers’ experience in accounting influences audit quality, employing a regression analysis by utilizing a novel dataset of Korean firms from 2018 to 2020. According to the findings, IC managers who have [...] Read more.
The purpose of this research is to investigate whether internal control (IC) managers’ experience in accounting influences audit quality, employing a regression analysis by utilizing a novel dataset of Korean firms from 2018 to 2020. According to the findings, IC managers who have a deeper understanding of accounting or more expertise in the field have a positive impact on audit quality. Nuancing this link between the accounting-specific experiences of IC managers and audit quality, the study examines how ESG investment impacts the relationship between IC managers’ accounting-related experiences and audit quality. The result confirms that the negative effect of low ESG investment on a firm’s sustainability is reduced when IC managers are with strong accounting competency. In other words, in a circumstance in which a company’s audit risk is high due to insufficient ESG investments, IC managers’s high degree of accounting proficiency cope with audit risk to increase audit quality. Additionally, by analyzing a dataset recently obtained from Korea that assesses the level of accounting expertise possessed by IC managers, it has become evident that this experience plays a key role in the process of improving audit quality. These findings imply that policymakers’ and standard setters’ efforts to promote high-quality audits should be coordinated with IC managers’ accounting experiences. Full article
17 pages, 533 KiB  
Article
Non-Performing Loans and Net Interest Margin in the MENA Region: Linear and Non-Linear Analyses
by Khalil Alnabulsi, Emira Kozarević and Abdelaziz Hakimi
Int. J. Financial Stud. 2023, 11(2), 64; https://doi.org/10.3390/ijfs11020064 - 25 Apr 2023
Cited by 3 | Viewed by 3417
Abstract
This paper analyzes the linear and non-linear relationship between non-performing loans and bank profitability measured by the Net Interest Margin for a sample of 74 Middle Eastern and North African banks over the period of 2005–2020. We used the System Generalized Method of [...] Read more.
This paper analyzes the linear and non-linear relationship between non-performing loans and bank profitability measured by the Net Interest Margin for a sample of 74 Middle Eastern and North African banks over the period of 2005–2020. We used the System Generalized Method of Moments (SGMM) as a linear approach and the Panel Smooth Transition Regression (PSTR) model as a non-linear approach. The empirical results of the SGMM approach indicated that the ratio of NPLs negatively affects bank profitability. The findings of the non-linear relationship based on the PSTR model confirmed the existence of a threshold effect. We found that below the threshold of 4.42%, the effect of NPLs is negative but not significant, while after surpassing this threshold, the effect becomes negative and significant. As for bank specifics, we revealed that bank size is positively and significantly associated with bank profitability. For industry factors, we found that more bank concentration decreases bank profitability. Regarding the financial environment, we concluded that the global financial crisis exerted a negative impact on bank profitability. Moreover, we revealed a positive and significant impact of GDP on bank profitability as well as a negative impact of inflation on bank profitability. This study has some limitations regarding the social, economic, and financial differences of the whole sample, which includes banks from the Middle East and others from North Africa. Hence, decomposing the whole sample into two sub-samples could improve the results of this paper. Full article
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16 pages, 997 KiB  
Article
Restaurants’ Solvency in Portugal during COVID-19
by Conceição Gomes, Filipa Campos, Cátia Malheiros and Luís Lima Santos
Int. J. Financial Stud. 2023, 11(2), 63; https://doi.org/10.3390/ijfs11020063 - 24 Apr 2023
Viewed by 2589
Abstract
The main purpose of this study is to understand how Portuguese restaurants’ solvency was affected by the COVID-19 pandemic, considering the factors that influence it. Financial information was collected for the years 2019 and 2020 in the SABI database to elaborate a quantitative [...] Read more.
The main purpose of this study is to understand how Portuguese restaurants’ solvency was affected by the COVID-19 pandemic, considering the factors that influence it. Financial information was collected for the years 2019 and 2020 in the SABI database to elaborate a quantitative methodology; a descriptive analysis was used and Pearson’s correlation coefficient, a Paired t-test, a one-way ANOVA test, and a multiple linear regression were used to test the formulated hypotheses. The findings confirm that solvency is affected by several determinants, such as financial autonomy, indebtedness, financial leverage, asset turnover, return on equity, and long-term bank debt. Solvency is influenced positively by financial autonomy and financial leverage. In contrast, solvency is negatively influenced by indebtedness, asset turnover, and long-term bank debt. Additionally, this paper represents the first study, in the restaurant sector in Portugal, which analyses the importance of solvency and its determinants, by facing a normal year with a crisis year. The paper is innovative in terms of knowledge about restaurant solvency behavior in periods of financial crisis and also because the COVID-19 pandemic has added an additional variable to restaurant solvency: short-term bank debt. In terms of theoretical implications, this study provides further insights about the factors influencing solvency in restaurant businesses during periods of a financial crisis. The main practical contributions are linked to improving the leadership skills of restaurant owners and managers to deal with periods of crisis in general, thus improving the solvency of their businesses and decreasing the risks associated with bankruptcy. Full article
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20 pages, 592 KiB  
Article
Durable Consumption-Based Asset Pricing Model with Foreign Factors for the Korean Stock Market
by Cheol-Keun Cho and Bosung Jang
Int. J. Financial Stud. 2023, 11(2), 62; https://doi.org/10.3390/ijfs11020062 - 24 Apr 2023
Cited by 1 | Viewed by 1678
Abstract
This paper explores the implications of consumption heterogeneity between domestic and foreign investors on the cross-section of stock returns in a host country. We argue that foreign investors in a small open economy integrated into global financial markets may face consumption risk, which [...] Read more.
This paper explores the implications of consumption heterogeneity between domestic and foreign investors on the cross-section of stock returns in a host country. We argue that foreign investors in a small open economy integrated into global financial markets may face consumption risk, which could result in risk premia being reflected in stock returns. To account for the potential influence of foreign investors on asset prices in a host country, we develop a two-country durable consumption model under market incompleteness, which extends the one-country durable consumption model. The proposed model includes both domestic and foreign pricing factors. We investigate the empirical performance of our model with Fama–French portfolios for Korea, taking U.S. investors as representative foreign investors. The empirical results advocate the two-country durable consumption model, confirming the significant role of foreign factors in the cross-section of domestic stock returns. Additionally, R2 tests conducted with different sets of test assets show that the explanatory power of our model is comparable to that of the Fama–French three-factor model. Full article
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17 pages, 672 KiB  
Article
Factors Influencing Accounting Outsourcing Using the Transaction Cost Economics Model
by Ivana Tomašević, Sandra Đurović, Nikola Abramović, Lidija Weis and Viktor Koval
Int. J. Financial Stud. 2023, 11(2), 61; https://doi.org/10.3390/ijfs11020061 - 03 Apr 2023
Cited by 3 | Viewed by 3419
Abstract
This paper presents the results of research conducted to identify the factors that influence the decisions of company management to outsource accounting services. A transaction cost economics (TCE) model was used to analyse factors that influence high levels of outsourcing of accounting tasks [...] Read more.
This paper presents the results of research conducted to identify the factors that influence the decisions of company management to outsource accounting services. A transaction cost economics (TCE) model was used to analyse factors that influence high levels of outsourcing of accounting tasks in the case of Montenegro, where, based on our sample, 75.4% of companies enter outsourcing arrangements with bookkeeping agencies or with external accountants. With an adaptation of International Accounting Standards (IAS) and legal requirements for submission of standardised year-end reports, there is evident growth of bookkeeping and financial service providers on the market and an evident trend of companies entering accounting service outsourcing with those agencies. A survey was developed to investigate 12 variables that, according to the TCE model, influence outsourcing decisions. The selection of variables was based on previous research in the field using the TCE or Resource-Based View model (the most common models used for this analysis). In contrast, new variables were introduced that measure the effects of the introduction of IAS through legal reporting obligations in Montenegro. By developing the model this way, it became possible to predict 47% of the variance of the dependent variable and to identify the main factors (other than price) that influence the decision of managers to outsource accounting services. Full article
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26 pages, 1262 KiB  
Article
The Moderating Role of Online Social Media in the Relationship between Corporate Social Responsibility Disclosure and Investment Decisions: Evidence from Egypt
by Ahmed Abdel Magid, Khaled Hussainey, Javier De Andrés and Pedro Lorca
Int. J. Financial Stud. 2023, 11(2), 60; https://doi.org/10.3390/ijfs11020060 - 01 Apr 2023
Cited by 2 | Viewed by 3401
Abstract
Despite the spread and progress in the literature related to the disclosure of corporate social responsibility (CSR) performance around the world as one of the most essential tools for achieving sustainable development in society, its value relevance is still uncertain. Using a survey [...] Read more.
Despite the spread and progress in the literature related to the disclosure of corporate social responsibility (CSR) performance around the world as one of the most essential tools for achieving sustainable development in society, its value relevance is still uncertain. Using a survey approach involving investors dealing in stocks of 60 enterprises listed on the Egyptian Stock Exchange (EGX) and included in the environmental, social, and governance index (S&P/EGX ESG index) and the equal-weight index (EGX100 EWI index), we empirically examine the importance of CSR financial performance disclosure by examining the extent to which it can influence investors’ choices. In addition, we assess whether company reputation acquired through online social media (OSM) influences the extent to which CSR performance disclosure influences such judgments. To examine these matters, we conduct two tests: the first examines the influence of disclosure of company environmental activities on investors’ decisions and the other examines the influence of disclosure of company social activities on investor decisions. Turning to our key results, we find that investment decision makers in both experiments tend to invest only in companies that have higher CSR performance scores. In the context of OSM, we provide and discuss empirical evidence that investment decision makers are more responsive to investing in companies included in the S&P/EGX ESG index, which have a positive e-reputation for CSR performance, than companies included in the EGX100 EWI index, which do not have such a reputation, which confirms that e-reputation, as one of the most important outputs of OSM, has a marginal impact on investment decisions and moderates the relation between disclosure of high CSR scores and investors’ decisions. Therefore, this paper presents a modern starting point for CSR experts and academics, particularly in the emerging markets. In general, our paper expands the CSR-related investment literature. In line with the affect-as-information theory, our paper also expands the OSM literature by indicating that the effects of OSM depend on the information context, where failure to provide information to investors or other stakeholders in a timely manner may render the information useless. Full article
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13 pages, 454 KiB  
Article
Reaction of US and Chinese Stock Markets to COVID-19 News
by Hock-Ann Lee, Venus Khim-Sen Liew, Mohd Fahmi Ghazali and Samina Riaz
Int. J. Financial Stud. 2023, 11(2), 59; https://doi.org/10.3390/ijfs11020059 - 31 Mar 2023
Viewed by 1867
Abstract
The COVID-19 outbreak slowed down global economic activities substantially, resulting in unrest in the financial markets, especially in the beginning of the pandemic outbreak. This study aims to investigate if COVID-19 caused abnormal returns in the US and the Chinese stock markets in [...] Read more.
The COVID-19 outbreak slowed down global economic activities substantially, resulting in unrest in the financial markets, especially in the beginning of the pandemic outbreak. This study aims to investigate if COVID-19 caused abnormal returns in the US and the Chinese stock markets in the beginning of the pandemic outbreak. Event study methodology is adopted for this purpose. This study finds that a significant negative impact appeared immediately after the Wuhan lockdown in the Chinese markets, while the US markets were slow to pick up. The former was more severely hurt after lockdown, while the latter was more brutally affected after COVID-19 was labeled a global threat. COVID-19 also played a significant role in connecting these two stock markets. The US and China should collaborate further in combating this novel and notorious global pandemic. Full article
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12 pages, 764 KiB  
Article
Overreaction in a Frontier Market: Evidence from the Ho Chi Minh Stock Exchange
by Loc Dong Truong, Giang Ngan Cao, H. Swint Friday and Nhien Tuyet Doan
Int. J. Financial Stud. 2023, 11(2), 58; https://doi.org/10.3390/ijfs11020058 - 29 Mar 2023
Cited by 2 | Viewed by 2023
Abstract
The purpose of the study is to investigate the overreaction hypothesis in relation to the Ho Chi Minh Stock Exchange (HOSE). The data used in this study consist of a monthly price series of 392 stocks traded on the HOSE, covering the period [...] Read more.
The purpose of the study is to investigate the overreaction hypothesis in relation to the Ho Chi Minh Stock Exchange (HOSE). The data used in this study consist of a monthly price series of 392 stocks traded on the HOSE, covering the period starting on 5 January 2004 through to 30 June 2021. The findings derived from the tests examining the differences in excess returns across the winner and loser portfolios confirm that the overreaction phenomenon exists in the HOSE. More specifically, following the creations of the portfolios, the loser portfolio outperformed the winner portfolio by 1.80% and 2.17% in the second and third month, respectively. In addition, the differences in cumulative abnormal returns between the loser and winner portfolios were significantly positive for almost all tracking periods. These findings support the hypothesis that the Vietnam stock market is inefficient in its weak form. Based on these results, we suggest that investors can earn abnormal returns by using contrarian trading strategies in the Vietnam stock market. Full article
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48 pages, 7357 KiB  
Article
Equity-Market-Neutral Strategy Portfolio Construction Using LSTM-Based Stock Prediction and Selection: An Application to S&P500 Consumer Staples Stocks
by Abdellilah Nafia, Abdellah Yousfi and Abdellah Echaoui
Int. J. Financial Stud. 2023, 11(2), 57; https://doi.org/10.3390/ijfs11020057 - 28 Mar 2023
Cited by 1 | Viewed by 3278
Abstract
In recent years, a great deal of attention has been devoted to the use of neural networks in portfolio management, particularly in the prediction of stock prices. Building a more profitable portfolio with less risk has always been a challenging task. In this [...] Read more.
In recent years, a great deal of attention has been devoted to the use of neural networks in portfolio management, particularly in the prediction of stock prices. Building a more profitable portfolio with less risk has always been a challenging task. In this study, we propose a model to build a portfolio according to an equity-market-neutral (EMN) investment strategy. In this portfolio, the selection of stocks comprises two steps: a prediction of the individual returns of stocks using LSTM neural network, followed by a ranking of these stocks according to their predicted returns. The stocks with the best predicted returns and those with the worst predicted returns constitute, respectively, the long side and the short side of the portfolio to be built. The proposed model has two key benefits. First, data from historical quotes and technical and fundamental indicators are used in the LSTM network to provide good predictions. Second, the EMN strategy allows for the funding of long-position stocks by short-sell-position stocks, thus hedging the market risk. The results show that the built portfolios performed better compared to the benchmarks. Nonetheless, performance slowed down during the COVID-19 pandemic. Full article
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15 pages, 335 KiB  
Article
Multiple Blockholders and Firm Value: A Simulation Analysis
by Annalisa Russino
Int. J. Financial Stud. 2023, 11(2), 56; https://doi.org/10.3390/ijfs11020056 - 27 Mar 2023
Viewed by 1290
Abstract
In this paper, we analyse the relationship between the distribution of ownership and firm value in the presence of multiple blockholders. In recent years, the topic has attracted the attention of many scholars. Yet, the empirical evidence on the relationship between the distribution [...] Read more.
In this paper, we analyse the relationship between the distribution of ownership and firm value in the presence of multiple blockholders. In recent years, the topic has attracted the attention of many scholars. Yet, the empirical evidence on the relationship between the distribution of ownership among large shareholders and firm value has been non-conclusive and contradictory. We focus on the interaction between a controlling block of shareholders and a non-controlling block that can monitor the largest controlling block. We develop and simulate a simple model combining the two effects related to the presence of additional blockholders that can monitor the largest controlling block of shareholders. The first concerns the incentives of the controlling blockholders to expropriate other shareholders (the alignment effect); the second concerns the incentives for non-controlling blockholders to exercise monitoring activities (the monitoring effect). We examine the influence of the distribution of ownership between controlling and non-controlling shareholders on the total amount of company resources diverted to provide private benefits to controlling shareholders. Since net firm value is decreasing in the amount of company resources diverted, our analysis sheds light on the relationship between the ownership structure and firm value. We show that, in the presence of multiple blockholders, the relationship between ownership concentration and firm value may change depending on the relative size of the shareholders and the relative size of private benefits of control. Our results help in understanding the variety of shapes that have been empirically detected, and shed some light on the conditions that make optimal diversions, as a function of the level of ownership concentration, monotone (increasing and decreasing) or non-monotone. Full article
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24 pages, 781 KiB  
Article
Valuing Exchange Options under an Ornstein-Uhlenbeck Covariance Model
by Enrique Villamor and Pablo Olivares
Int. J. Financial Stud. 2023, 11(2), 55; https://doi.org/10.3390/ijfs11020055 - 27 Mar 2023
Viewed by 1254
Abstract
In this paper we study the pricing of exchange options between two underlying assets whose dynamic show a stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model, with Levy Background Noise Processes driven by Inverse Gaussian subordinators. We use [...] Read more.
In this paper we study the pricing of exchange options between two underlying assets whose dynamic show a stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model, with Levy Background Noise Processes driven by Inverse Gaussian subordinators. We use expansions in terms of Taylor polynomials and cubic splines to approximately compute the price of the derivative contract. Our findings show that the later approach provides an efficient way to compute the price when compared with a Monte Carlo method, while maintaining an equivalent degree of accuracy. Full article
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21 pages, 1617 KiB  
Article
Pre- and Post-COVID-19: The Impact of US, UK, and European Stock Markets on ASEAN-5 Stock Markets
by Izaan Jamil, Mori Kogid, Thien Sang Lim and Jaratin Lily
Int. J. Financial Stud. 2023, 11(2), 54; https://doi.org/10.3390/ijfs11020054 - 23 Mar 2023
Cited by 1 | Viewed by 2680
Abstract
This study investigates the relationship between closing–opening prices of stocks in the US, UK, and European markets and the prices of stocks in the five Association of Southeast Asian Nations (ASEAN-5) markets, a group consisting of five founding members, namely, Indonesia, Malaysia, the [...] Read more.
This study investigates the relationship between closing–opening prices of stocks in the US, UK, and European markets and the prices of stocks in the five Association of Southeast Asian Nations (ASEAN-5) markets, a group consisting of five founding members, namely, Indonesia, Malaysia, the Philippines, Singapore, and Thailand. In particular, this study examines the impact of US, UK, and European stock market movements on ASEAN-5 stock markets before and during the COVID-19 pandemic. An autoregressive distributed lag (ARDL) bounds testing approach was employed on two independent data sets, representing prices of stocks before and during the COVID-19 pandemic. The results reveal that among the ASEAN-5 markets, only the Philippines had a cointegration relationship with the US, UK, and European markets before the crisis. However, almost all ASEAN-5 markets moved in tandem with the US, UK, and European markets during COVID-19, except for Thailand. These empirical findings also indicate that the stock markets in the two regions tended to co-move during the COVID-19 pandemic, implying a contagion effect. Further, the causality results also provide substantial evidence of contagion between markets during the pandemic. These results imply that the stock markets in ASEAN-5 are susceptible at the opening bell to the behaviour of US, UK, and European stocks. Therefore, investors or traders in ASEAN-5 should participate in foreign markets (other than the US, UK, and Europe) that do not exhibit cointegration relationships to better mitigate and manage risk at the opening bell, especially during a global crisis. Full article
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20 pages, 2565 KiB  
Article
Portfolio Optimization Using Minimum Spanning Tree Model in the Moroccan Stock Exchange Market
by Younes Berouaga, Cherif El Msiyah and Jaouad Madkour
Int. J. Financial Stud. 2023, 11(2), 53; https://doi.org/10.3390/ijfs11020053 - 23 Mar 2023
Cited by 1 | Viewed by 3607
Abstract
Portfolio optimization is a pertinent topic of significant importance in the financial literature. During the portfolio construction, an investor confronts two important steps: portfolio selection and portfolio allocation. This article seeks to investigate portfolio optimization based on the Minimum Spanning Tree (MST) method [...] Read more.
Portfolio optimization is a pertinent topic of significant importance in the financial literature. During the portfolio construction, an investor confronts two important steps: portfolio selection and portfolio allocation. This article seeks to investigate portfolio optimization based on the Minimum Spanning Tree (MST) method applied on the Moroccan All Shares Index (MASI) historical stock log returns covering the period from 2 January 2013 to 27 October 2022 allowing us to build two portfolios: MST-Portfolio and MST-Portfolio 2. Portfolio selection was carried out for MST-Portfolio and MST-Portfolio 2, respectively, based on 63 stocks or using the Degree Centrality (DC) measure and portfolio allocation for both portfolios was carried through the use of the Inverse Degree Centrality Portfolio (IDCP). The obtained portfolios were compared with the Minimum Variance Portfolio (MV Portfolio) and Equal Weighting Portfolio (EW Portfolio) using centrality measures, diversification, and backtesting. According to the used indicators analysis, MST-Portfolio and MST-Portfolio 2 are the most well-performed and robust portfolios showing a good performance during the studied period, even during the COVID-19 crisis, and ensuring a good level of diversification. The findings demonstrate that both suggested methods can enhance portfolio performance, evidence that can help investors or active managers when optimizing their portfolios. Full article
(This article belongs to the Special Issue Asset Pricing, Investments and Portfolio Management)
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