Financial Decisions, Behavioral Biases, and Governance in Emerging Markets

2018 ◽  
pp. 160-184
Author(s):  
Emir Hrnjic ◽  
David M. Reeb ◽  
Bernard Yeung
Keyword(s):  
Corporate Governance ◽  
Emerging Markets ◽  
Financial Markets ◽  
Economic Incentives ◽  
Emerging Countries ◽  
Financial Decisions ◽  
Behavioral Biases ◽  
Financial Decision ◽  
Governance Models ◽  
The Cost

In this chapter, we theorize that corporate governance models in emerging countries, relative to their developed economy peers, countenance greater behavioral biases in financial decision-making. Our arguments start with the notion that officers and directors of a firm choose the types and venues of various financial instruments to fund the firm and design various mechanisms to allocate these funds across divisions and projects within the firm. We posit that these allocation and capital sourcing decisions are influenced by both economic incentives and behavioral biases, which potentially differ between firms in developed and emerging markets. Specifically, we argue that the governance models used in emerging markets facilitate rapid managerial choices but occur at the cost of allowing behavioral-based distortions in both product and financial markets. Building on this notion, we provide insights into financial decisions, behavioral biases, and governance in emerging markets by assimilating behavioral financial economics and models of corporate governance.

scholarly journals An Analysis and Comparison of Multi-Factor Asset Pricing Model Performance during Pandemic Situations in Developed and Emerging Markets

Mathematics ◽  
2022 ◽  
Vol 10 (1) ◽  
pp. 142
Author(s):  
Konstantin B. Kostin ◽  
Philippe Runge ◽  
Michel Charifzadeh
Keyword(s):  
Emerging Markets ◽  
Factor Model ◽  
Five Factor Model ◽  
Emerging Market ◽  
Model Performance ◽  
Research Area ◽  
Emerging Countries ◽  
Developed Markets ◽  
The Cost ◽  
Three Factor

This study empirically analyzes and compares return data from developed and emerging market data based on the Fama French five-factor model and compares it to previous results from the Fama French three-factor model by Kostin, Runge and Adams (2021). It researches whether the addition of the profitability and investment pattern factors show superior results in the assessment of emerging markets during the COVID-19 pandemic compared to developed markets. We use panel data covering eight indices of developed and emerging countries as well as a selection of eight companies from these markets, covering a period from 2000 to 2020. Our findings suggest that emerging markets do not generally outperform developed markets. The results underscore the need to reconsider the assumption that adding more factors to regression models automatically yields results that are more reliable. Our study contributes to the extant literature by broadening this research area. It is the first study to compare the performance of the Fama French three-factor model and the Fama French five-factor model in the cost of equity calculation for developed and emerging countries during the COVID-19 pandemic and other crisis events of the past two decades.

BoD Structure and Corporate Governance Models

2021 ◽  
pp. 281-292
Author(s):  
Mahboob Ullah
Keyword(s):  
Corporate Governance ◽  
Financial Markets ◽  
Financial Crises ◽  
Growth And Development ◽  
Good Governance ◽  
Corporate Boards ◽  
Corporate Structure ◽  
Corporate Body ◽  
Technology Advancement ◽  
Governance Models

Corporate governance, the soul of every corporate body, is indispensable for the survival, growth, and development of any kind of organization. It has significant impact and influence in attaining the confidence of stakeholder. Good governance leads to instill the confidence of stakeholder. The significance of corporate governance has increased globally in past decades due to financial crises, technology advancement, liberalizations, emergence of financial markets, and liberalization of trade and capital mobilization. Corporate boards, academicians, legislators, and in all businesses, corporate governance are believed to be a mainstream concern in corporate structure.

Trust and Household Portfolios

2021 ◽  
pp. 78-97
Author(s):  
Diego Lubian
Keyword(s):  
Financial Markets ◽  
Empirical Evidence ◽  
Financial Literacy ◽  
Risky Assets ◽  
Financial Decisions ◽  
Portfolio Decisions ◽  
Financial Decision ◽  
Financial Portfolio ◽  
Socio Demographic Factors ◽  
The Relationship

This article provides empirical evidence on the existence and the extent of the influence of trust in financial decisions using individual data on Italian households from the Survey on Household Income and Wealth, 2010. This article studies the relationship between, trust in people, trust in banks and more detailed previously unexplored dimensions of trust, and household financial portfolio decisions. The article provides empirical evidence that trust in people and trust in banks affect both participation in financial markets, the share of risky assets and the diversification of the financial portfolio, controlling socio-demographic factors, risk aversion, and financial literacy as well. The article finds that trust is important for individuals with a lower level of education who have limited possibilities to acquire and process information on financial markets need to rely in trustworthy relationship to define their financial portfolio. Further, we present evidence that the main channel by which trust affects financial decision making and determines too little participation, a lower share of risky assets in the financial wealth and poorly diversified portfolios is trust in family and friends.

Corporate Governance Mechanisms on the Internal Relations Between Managers and Subordinates

2021 ◽  
pp. 202-212
Author(s):  
Qudsia Aziz
Keyword(s):  
Corporate Governance ◽  
Financial Markets ◽  
Social Group ◽  
Legal Framework ◽  
Governance Mechanism ◽  
Corporate Governance Mechanisms ◽  
The World ◽  
Internal Relations ◽  
Corporate Governance Mechanism ◽  
Governance Models

The concept of governance is as old as human civilization. However, recently the usage of this term has increased multifarious. A broader concept of corporate governance involves a set of relationships amongst the organization's stakeholders. A stakeholder is any person, organization, social group, or society at large that has a stake in the business. Recognizing the importance of corporate governance, most of the countries in the world have developed their own corporate governance mechanism known as corporate governance models. The mechanism of corporate governance depends upon various indigenous factors such as legal framework, regulatory framework, the pattern of shareholding, breadth, and depth of financial markets.

Portfolio Investment in Malaysia and Saudi Arabia

2022 ◽  
pp. 155-175
Author(s):  
Fariza Hashim ◽  
Nadisah Zakaria ◽  
Abdul Rahim Abu Bakar ◽  
Kamilah Kamaludin
Keyword(s):  
Saudi Arabia ◽  
Stock Market ◽  
Emerging Markets ◽  
Financial Markets ◽  
Selection Criteria ◽  
Abnormal Returns ◽  
Emerging Countries ◽  
Portfolio Investment ◽  
Stock Selection ◽  
Portfolio Returns

Several strategies are adopted by investors in lowering the risk of investment while maximising its return. Graham's stock selection criteria are noted as one of the best strategies in selecting portfolios by investors. Although the model is universally accepted, it is less commonly practised and examined in emerging markets. Considering the growth of these emerging countries' financial markets, it is worthwhile to investigate the doctrine's effect on investment in these countries. This study endeavours to review the consequence of Graham's stock selection criteria on portfolio returns in the Malaysian and Saudi Arabian stock markets. Each country represents the fastest growing market in their region which justifies this study. The study found that the Malaysian stock market is capable of proffering abnormal returns to investors while the Saudi stock market is capable to offer abnormal returns to investors despite being an undeveloped and immature stock market. The study concludes that the model of stock selection remains beneficial and indeed valuable to regional investments.

Emerging Markets Have Emerged

2016 ◽  
Author(s):  
Marko Dimitrijević ◽  
Timothy Mistele
Keyword(s):  
Corporate Governance ◽  
Emerging Markets ◽  
Financial Markets ◽  
Government Policies ◽  
Developed Markets ◽  
The One

Argues that emerging markets have emerged; the traditional distinctions between emerging and developed markets—the size of their economies, the size of their financial markets, corporate governance, government policies, even growth—have blurred or disappeared; the one surviving distinction between them is the price you pay for growth.

To the Question of Corporate Governance Institutional Environment in Developing and Emerging Markets

2020 ◽  
Vol 3 (57) ◽  
Author(s):  
Zhanat Zhussupova ◽  
Mohamed El-Hodiri
Keyword(s):  
Corporate Governance ◽  
Emerging Markets ◽  
Critical Reflection ◽  
Institutional Environment ◽  
Institutional Framework ◽  
Factors Affecting ◽  
Developing Markets ◽  
Governance Models ◽  
Main Factors ◽  
Institutional Features

This work is an attempt to contribute to thinking about the institutional framework of corporate governance in the context of its evolution in the developing and emerging markets (DEM). We raise the question whether the DEM countries adapt the mechanisms and practices of the corporate governance models of leading economies. We first introduce the concept and genealogy of the new institutional economy. Then we trace the specifics of the modern models of corporate governance and the main factors affecting these models. We finally engage in critical reflection on the problems in corporate governance in both developed and developing markets through the prism of the fundamental, institutional features of each country.

scholarly journals The role of the brain in financial decisions: A viewpoint on neuroeconomics

2018 ◽  
pp. 6
Author(s):  
Guillermo Mateu ◽  
Lucas Monzani ◽  
Roger Muñoz Navarro
Keyword(s):  
Decision Making ◽  
Financial Markets ◽  
Brain Activity ◽  
Financial Decisions ◽  
Main Research ◽  
Economic Decisions ◽  
Decision Making Processes ◽  
Financial Decision ◽  
The Brain

In this article, we explain the important role neuroscience plays in economic and financial environments. Hence, we present neuroeconomics as a way to describe how decision-making processes affect brain activity, focusing especially on the importance of economic and financial decisions. We answer some questions regarding the role of emotions in finance, the psychological factors present in financial markets, and how neuropsychological stimuli affect our economic decisions. We conclude by citing the main research in the area of neuroscience in financial decision-making processes, and highlight further research projects in these areas.

scholarly journals Corporate governance: An examination of U.S. and European models

2013 ◽  
Vol 9 (2) ◽  
pp. 6-11 ◽  
Author(s):  
Heidi Hylton Meier ◽  
Natalie C. Meier
Keyword(s):  
Corporate Governance ◽  
International Markets ◽  
National Registry ◽  
Financial Decisions ◽  
The United Kingdom ◽  
Sarbanes Oxley ◽  
The Us ◽  
Governance Models ◽  
Similarities And Differences ◽  
Over Time

As the model for corporate governance has emerged in the US after decades of evolution, culminating with the Sarbanes-Oxley Act in 2002, there has also been interest in corporate governance models used in other countries. This has particular importance considering the increased competition for capital in international markets with investors wishing to make sound financial decisions by seeking information from companies, regardless of their national registry, that is open, accessible and accurate. This paper examines the framework for corporate governance in the US, its evolution over time, and reviews corporate governance models used in the United Kingdom, the Netherlands, Germany and Switzerland. A comparison of these models is provided presenting similarities and differences, strengths and weakness, and obstacles to harmonization.

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