Impact of deviation from target working capital on firm profitability: evidence from India

2019 ◽  
Vol 68 (8) ◽  
pp. 1510-1527 ◽  
Author(s):  
Punam Prasad ◽  
Narayanasamy Sivasankaran ◽  
Ankur Shukla
Keyword(s):  
Negative Impact ◽  
Stock Exchange ◽  
Fixed Effect ◽  
Working Capital ◽  
Content Type ◽  
Operating Income ◽  
Investment Level ◽  
Firm Profitability ◽  
Effect Regression ◽  
The Impact

Purpose The purpose of this paper is to assess the impact of deviation from the target investment in working capital (WC) (measured by net trade cycle (NTC)) on the profitability (measured by gross operating income (GOI) and net operating income (NOI)) of the listed non-financial Indian firms. Design/methodology/approach The study is based on the data collected on NTC, GOI, NOI and other variables pertaining to 242 listed non-financial Indian firms that form part of the Bombay Stock exchange 500 Index for the period 2012–2017 (1,452 firm-year observations). Following Banos-Caballero et al. (2010), the authors use a firm fixed effect regression as the benchmark regression for finding out the determinants of NTC of the sample firms. Furthermore, this study explores the impact of deviation (above and below target) from the target investments in WC on the firm profitability (GOI and NOI) employing fixed effect regression. Findings The result of this study reveals that Indian firms maintain a target NTC and try to converge in case of any deviations to it. Furthermore, the profitability of the sample firms was observed to be influenced by the deviation from the target NTC irrespective of whether the deviation was above or below the target investment level in WC. Practical implications This study highlights the importance of good WC management for firms due to the negative impact of the over- and under-investments in WC and contributes to the existing body of knowledge by suggesting that managers should keep close to the target WC and not deviate from this in order to maximize the firms’ profitability. Originality/value To the best of the knowledge of the researchers, this is perhaps the first study to examine the impact of firms’ deviation from their target investment in WC on the profitability for non-financial firms listed and operating in India.

Epidemics and Chinese firms' stock returns: is COVID-19 different?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Quang Thi Thieu Nguyen ◽  
Dao Le Trang Anh ◽  
Christopher Gan
Keyword(s):  
Stock Returns ◽  
Negative Impact ◽  
Stock Exchange ◽  
Market Performance ◽  
Disease Outbreaks ◽  
Stock Exchanges ◽  
Content Type ◽  
Event Study Method ◽  
Economic Shock ◽  
The Impact

PurposeThis study investigates the Chinese stocks' returns during different epidemic periods to assess their effects on firms' market performance.Design/methodology/approachThe study employs an event study method on more than 3,000 firms listed on Shanghai and Shenzhen stock exchanges during periods of SARS, H5N1, H7N9 and COVID-19FindingsEpidemics' effect on firms' stock returns is persistent up to 10 days after the event dates. Although the impact varies with types and development of the disease, most firms experience a negative impact of the epidemics. Among the epidemics, COVID-19 has the greatest impact, especially when it grows into a pandemic. The epidemics' impact is uneven across industries. In addition, B-shares and stocks listed on Shanghai Stock Exchange are more negatively influenced by the epidemic than A-shares and those listed on Shenzhen Stock Exchange.Research limitations/implicationsThe results of the study contribute to the limited literature on the effects of disease outbreaks as an economic shock on firm market performance. Given the possibility of other epidemics in the future, the study provides guidance for investors in designing an appropriate investing strategy to cope with the epidemic shocks to the market.Originality/valueThe research is novel in the way it compares and assesses the economic impact of different epidemics on firms and considers their impact at different development stages.

The impact of Iran Central Bank’s sanction on Tehran Stock Exchange

2017 ◽  
Vol 59 (3) ◽  
pp. 365-375 ◽  
Author(s):  
Mahdi Salehi ◽  
Mostafa Karimzadeh ◽  
Navid Paydarmanesh
Keyword(s):  
Central Bank ◽  
Stock Price ◽  
Negative Impact ◽  
Stock Exchange ◽  
Oil Prices ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact ◽  
Positive Effect

Purpose US sanctions have been a major feature of US Iran policy since Iran’s 1979 Islamic revolution, but the imposition of UN and worldwide bilateral sanctions on Iran that began in 2006 and increased dramatically as of 2010 is recent by comparison. The objectives of US sanctions have evolved over time. Broad international sanctions imposed on Iran harmed Iran’s economy and contributed to Iran’s acceptance of agreements that exchange constraints on its nuclear program for sanctions relief. The subject of this study is important because both Iran and the international communities are demanding for information about the effect of sanctions on Iran. In an international and regional perspective, it seems that sanctions have a negative impact on economic, social and even political status of Iran. Therefore, this paper aims to examine the impact of Iran Central Bank sanction on Tehran Stock Exchange as on December 31, 2011. Design/methodology/approach Variables of model are consisted by exchange rate, oil prices and Tehran Stock Exchange Price Index (TEPIX) from October 2, 2011 to March 29, 2012, which is offered daily. To analyze the model, the authors used Johansen–Juselius and Autoregressive Distributed Lag (ARDL) methods. Findings The results indicate that there is a long-run equilibrium relationship between selected variables as oil prices, and exchange rates have a positive effect on the TEPIX. In other words, the results of the econometric estimation show the positive effect of the Iran Central Bank sanction on the TEPIX. Thus, because of economic sanctions imposed by the Western countries, Tehran Stock Exchange has been growing. Originality/value No empirical research exists that examines the impact of sanctions on stock price in developing countries. This study fills this gap by examining the links between sanctions and stock price in Iran.

Determinants of changes in share prices in banking sector of Pakistan

2014 ◽  
Vol 30 (2) ◽  
pp. 121-130 ◽  
Author(s):  
Shahid Mohammad Khan Ghauri
Keyword(s):  
Banking Sector ◽  
Stock Exchange ◽  
Small Sample Size ◽  
Small Sample ◽  
Share Price ◽  
Content Type ◽  
Share Prices ◽  
Effect Regression ◽  
Asset Growth ◽  
The Impact

Purpose – Over the past many years ago, lot of work has been completed by the researchers trying to understand the relationship between different factors and stock exchange prices. The author has tried to explain different factors that affect share prices. The purpose of this paper is to know about the impact of size, dividend, profitability, asset growth of 15 Pakistani banks on share price on the basis of previous behavior of all the variables with each other. Design/methodology/approach – A sample of 15 banks has been selected from Karachi stock exchange for the period of 2008-2011, Arch-Garch and unit root cannot be applied to check the stationarity and volatility due to small sample size. The analysis utilized fixed effect regression model, the test includes regressing the dependent variable SP (share price) and independent variables size, DY (dividend yield), ROA (return on asset), and AG (asset growth). Findings – Results show that “size” has a positive significant relationship with the share price while the other variables have insignificant relationship. Originality/value – This paper helps in determination of the factors that affect share price fluctuations in banking sector of Pakistan. The similar affects can be observed in financial sector in other countries.

scholarly journals The Influence and Significance of Financial Ratios on Firm Profitability: Evidence from the Listed Banks on Iraqi Stock Exchange

Webology ◽  
2021 ◽  
Vol 18 (Special Issue 04) ◽  
pp. 206-228
Author(s):  
Ali Naser Thabet ◽  
Maysoon Dawood Hussein ◽  
Emad Kendory
Keyword(s):  
Factor Analysis ◽  
Negative Impact ◽  
Positive Impact ◽  
Stock Exchange ◽  
Statistical Significance ◽  
Ratio Analysis ◽  
Financial Ratio ◽  
Financial Ratio Analysis ◽  
Firm Profitability ◽  
The Impact

This study aims to assess the impact of the ratios on companies profitability through examination examination of the data from an Iraqi exchange (ISE) sample of banks for the 2007-2015 period. Sample data was analyzed following the multiple regression model and factor analysis, to explore the statistical significance of relationships between firm profitability and the components of financial ratio analysis. Empirical findings of the study indicate that financial ratio analysis variables of Earnings per share (ID), Interest Repetition (IR) and Current Ratio (TR), which are directly related to return on Assets (ROA), have a significantly positive impact on firm profitability of listed banks in ISE. The study also reveals that the Book Value per share (BV), another component of the independent variable, has a significant but negative impact on firm profitability. In addition, the factor analysis further reveals that, relative to the other variables, ID, BV and ROA represents the most important variables applied in this study.

Stakeholder relationship capability and investment efficiency: a mosaic theory test

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hasan Valiyan ◽  
Mohammadreza Abdoli ◽  
Mohammad Amin Saghari
Keyword(s):  
Capital Market ◽  
Information Disclosure ◽  
Stock Exchange ◽  
Investment Efficiency ◽  
Content Type ◽  
Investment Level ◽  
Mosaic Theory ◽  
Theory Test ◽  
The Impact ◽  
Stakeholder Relationship

Purpose Considering the constraints on resources and the need for firms’ planning to avoid recession and underdevelopment, enhanced investment efficiency would promote the capital market attractiveness and increase the performance of capital market investment. Empowering these markets through investment efficiency requires to promote the flow of information disclosure to stakeholders to provide the greater coherence and integration of information, enhance equal decision-making capabilities and promote trust and confidence in the company. The present study aims to examine the impact of stakeholder relationship capability on investment efficiency through testing the mosaic theory. Design/methodology/approach In this study, two criteria (namely, the ratio of net fixed assets to total assets and investment level) were used to measure investment efficiency. Furthermore, meta-synthesis and Delphi analyses were adopted based on a five-point Likert scale to measure the development of stakeholder relationship capability. To collect the research data, the questionnaires were sent to 142 companies in 2019, of which 112 questionnaires were returned by the managers of the firms listed in Tehran Stock Exchange. To fit and test the research hypothesis, partial least squares analysis was used. Findings After confirming the fit of the model, the results revealed that the stakeholder relationship capability had a positive and significant effect on investment efficiency. Originality/value With regard to the mosaic theory, this finding confirms that the equity of information in reflecting news and knowledge among stakeholders can promote the role of the firm’s stakeholder relationship capability, thus enhancing the investment efficiency.

The relationship between relative performance and managerial change

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahdi Salehi ◽  
Masomeh Mirozadeh ◽  
Mohammad Sadegh Adibian ◽  
Hamideh Nazaridavaji ◽  
Fahimeh Irvani Qale Sorkh
Keyword(s):  
Hypothesis Testing ◽  
Negative Impact ◽  
Stock Exchange ◽  
Relative Performance ◽  
Contributing Factors ◽  
Content Type ◽  
Change Factors ◽  
Industry Type ◽  
The Impact ◽  
The Relationship

Purpose The current study aims to investigate the relationship between relative performance and change manager in Iran. Design/methodology/approach For this study, the reasons for CEO change and the contributing factors to performance were defined based on the industry type. A systematic elimination approach is applied to select the study sample among listed companies on the Tehran Stock Exchange during 2012–2016. Finally, a 390 firm-year population was tested using multiple regression. Findings The results of hypothesis testing indicate that the possibility of managerial change is less likely after a positive return of the market performance. Moreover, hypothesis testing results reveal that peer firms and specific-firm performance do not contribute to managerial change. The findings also demonstrate that systematic risk has a negative impact on managerial change, whereas unsystematic risks do not significantly play a part in managerial change. Originality/value As the present study is the pioneer study on the impact of managerial change factors on Iranian firms' relative performance, the findings of this study can contribute to the realm of this study and the related literature.

The impact of corporate governance on intellectual capitals efficiency in Iran

2020 ◽  
Vol 13 (4) ◽  
pp. 749-766 ◽  
Author(s):  
Mahmoud Lari Dashtbayaz ◽  
Mahdi Salehi ◽  
Alieyh Mirzaei ◽  
Hamideh Nazaridavaji
Keyword(s):  
Corporate Governance ◽  
Human Capital ◽  
Audit Committee ◽  
Negative Impact ◽  
Stock Exchange ◽  
Value Added ◽  
Content Type ◽  
Financial Expertise ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this study is to evaluate the impact of corporate governance on intellectual capital (IC) in companies listed on the Tehran stock exchange. Design/methodology/approach In this paper, the board features (size, independence and CEO duality) and the characteristics of the audit committee (financial expertise, independence and size) are considered to measure the factors of corporate governance. The IC is also divided into communicative, human, structural and value-added IC. Research data are gathered using a sample of 132 companies during 2013-2016. Research hypotheses are analyzed using panel data and logistic regression models. Findings The findings indicate that while the board’s independence, financial expertise and the size of the audit committee are negatively related to the communicative capital, the relationship between audit committee independence and communicative capital is positive and significant. Further, the authors observe that there is a positive relationship between board independence and human capital, a negative and significant link between audit committee size and human capital. By the way, the results reveal that audit committee independence and audit committee size have, respectively positive and negative impact on structural capital. Originality/value The results of the current study may give more insight into the relationship between corporate governance and managerial capital in developing nations.

Sales nationality and debt financing impact on firm’s performance and risk

2017 ◽  
Vol 12 (1) ◽  
pp. 103-126 ◽  
Author(s):  
Ahmad Y. Khasawneh ◽  
Qais A. Dasouqi
Keyword(s):  
Fixed Effects ◽  
Negative Impact ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Debt Financing ◽  
Industrial Firms ◽  
Content Type ◽  
Domestic Firms ◽  
Amman Stock Exchange ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of debt financing on both performance and systematic risk in Amman Stock Exchange listed firms. The authors focus the study to analyze the differences between services and industrial firms in one sense and the differences between international and domestic firms in the other sense, as the study depends on the geographical distribution of sales to classify the nationality of firms. Design/methodology/approach The study sample includes all listed Jordanian firms in Amman Stock Exchange from 2005 to 2013 for both industrial and services sectors. Using panel data techniques, fixed effects regression with modified Driscoll-Kraay standard error as a remedy for heteroscedasticity problem is employed. Findings The results show that there is a significant negative impact of debt financing on the firm’s performance, where the sector and the sales nationality play an important role. Moreover, the results indicate that there is a significant positive impact of debt financing on the firm’s systematic risk. Taking the sector and sales nationality into consideration, the authors find that the debt financing has no significant impact on the systematic risk of services firms and domestic firms. Additionally, the findings indicate that services firms and international firms are, on average, more riskier than industrial firms and domestic firms, respectively. Originality/value The paper provides a visibility on the comparison between international and local firms in Jordan in terms of the impact of debt financing on the financial performance and systematic risk in one research.

The impact of terrorism on industry returns and systematic risk in Pakistan

2017 ◽  
Vol 30 (4) ◽  
pp. 413-429 ◽  
Author(s):  
Syed Jawad Hussain Shahzad ◽  
Peter Josef Stauvermann ◽  
Ronald Ravinesh Kumar ◽  
Tanveer Ahmad
Keyword(s):  
Oil And Gas ◽  
Negative Impact ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Discrete Wavelet ◽  
Financial Industry ◽  
Content Type ◽  
Consumer Services ◽  
Short Run ◽  
The Impact

Purpose This study aims to examine the impact of terrorism on return and systematic risk of Pakistan’s equity industries. Daily data from 1 January 2000 to 31 December 2014 for 12 industries based on the specific types of companies listed on Karachi Stock Exchange are used for the empirical analysis. Design/methodology/approach A multiplicative (additive) term is introduced in the standard capital asset pricing model to examine the change in systematic risk (industry returns) in response to the terrorist activities. The authors use the multiscale beta approach (Yamada, 2005) and the maximal overlap discrete wavelet transform (MODWT) to test the heterogeneous market hypothesis. Findings Terrorism activities increase the systematic risk for most of the industries and the negative impact on returns of banks and the financial industry. It is noted that terrorism positively impacts (increases) the industrial systematic risk mainly in short-run (between two and four days-time horizon). Originality/value The paper examines the impact of terrorism on a broad list of industries’ (banks, basic materials, chemicals, construction, consumer goods, consumer services, financials, industrials, minerals, oil and gas, textile and utilities) risk and return in Pakistan, using the multiscale beta approach (Yamada, 2005) and the MODWT methods.

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