Corporate fraud and information asymmetry in emerging markets

2019 ◽  
Vol 26 (1) ◽  
pp. 95-112 ◽  
Author(s):  
Abdul Ghafoor ◽  
Rozaimah Zainudin ◽  
Nurul Shahnaz Mahdzan
Keyword(s):  
Emerging Markets ◽  
Information Asymmetry ◽  
Event Study ◽  
Capital Market ◽  
Emerging Market ◽  
Developed Countries ◽  
Governance Mechanism ◽  
Ols Regression ◽  
Content Type ◽  
Practical Implications

PurposeThe purpose of this study is to examine changes in firms’ level of information asymmetry in emerging market of Malaysia for the period of 2000-2016. Specifically, the study focuses on changes in the quoted spread and quoted depth following the fraud announcement.Design/methodology/approachThe study uses a unique set of fraud sample using enforcement action releases (EARs) identified from the Security Commission of Malaysia and Bursa Malaysia. To estimate the result, the authors use event study methodology, OLS regression and simultaneous model on a set of 67 fraudulent firms.FindingsThe results of event study, OLS regression and simultaneous equation models suggest that information asymmetry increases on fraud discovery. The authors also use the analysis on subsamples classified by the type of regulator (who issued the enforcement release) and type of fraud committed. However, the authors find no evidence of a difference in information asymmetry across these groups. Overall, the results support the reputational view of fraud that it damages the firms’ reputation and increases uncertainty in the capital market.Research limitations/implicationsThese findings provide valuable insights into understanding the information asymmetry around fraud announcements, especially for Malaysia, where the majority of the public-listed companies are family-controlled and under significant state control. The results of this study call for the active role that regulators can play to achieve a transparent and liquid capital market.Practical implicationsThe research has practical implications. Specifically, for Malaysia, fraud is the primary area for National Results Areas (NKRA) in the Government Transformation Program (GTP). Therefore, for regulators and policymakers to ensure a liquid and transparent capital market, identifying the factors that elicit the fraudulent behavior and improving the related governance mechanism are necessary steps to prevent the fraudulent practices.Social implicationsDue to increased information asymmetry on fraud announcements, the demand for equity decreases that may affect not only the fraudulent firms but also results in negative externality for non-fraudulent firms, thus impairing their ability to fund equity.Originality/valueA significant majority of studies have focused on corporate frauds in developed countries such as the USA that is characterized by dispersed ownership system and a strong capital market. One of the vocal critics of the agency theory is that it neglects the social and institutional framework within which companies operate. In emerging markets, such as Malaysia, the published academic papers on fraud and information asymmetry are very limited. As emerging markets practice different cultures, corporate governance mechanisms and market regulations, the study is significant to investigate the behavior of investors in such markets.

Measuring the service gaps in the roles of quantity surveyors in the emerging market

2016 ◽  
Vol 23 (5) ◽  
pp. 1111-1131 ◽  
Author(s):  
AbdulLateef Olanrewaju
Keyword(s):  
Emerging Markets ◽  
Construction Industry ◽  
Design Methodology ◽  
Emerging Market ◽  
Supply And Demand ◽  
The Other ◽  
Primary Data ◽  
Content Type ◽  
Practical Implications ◽  
Survey Questionnaires

Purpose – The opportunities that the emerging markets present to the players in the construction industry means that the players need to expand on the scope and size of their responsibilities and duties to the stakeholders. Each of the professionals now demands more specialised and sophisticated services from one another. The other players in the construction industry now require more emerging responsibilities and duties from the quantity surveyors. The purpose of this paper is to examine the roles that “modern” quantity surveyors play by measuring the gaps that exist in the services that the quantity surveyors provide. Design/methodology/approach – Primary data are collected through survey questionnaires. In total, 23 roles played by modern quantity surveyors are identified and addressed to the respondents to rank the rate at which quantity surveyors provide these “emerging” services. The collected data were analysed statistically. Findings – The results of the findings led to the conclusion that the quantity surveyors were not meeting the expectations of other players. Therefore, for competitiveness, quantity surveyors need to better meet demand expectations. Research limitations/implications – This findings of this research are constrained to the services or functions that the quantity provide in the construction industry. Practical implications – This knowledge is valuable to academic institutions that offer quantity surveying programmes, to practicing quantity surveyors, governments, and other players in the construction industry. It will allow quantity surveyors to reconcile supply and demand expectations. Originality/value – There is no known conclusive empirical study on services offered by quantity surveyors in any emerging markets. Therefore, the findings offer a fresh understanding on the services of quantity surveyors not only in Nigeria but elsewhere. While some of the services are common, others are peculiar to emerging markets.

Home country underdevelopment and internationalization

2017 ◽  
Vol 27 (3) ◽  
pp. 217-230 ◽  
Author(s):  
Alvaro Cuervo-Cazurra ◽  
Ravi Ramamurti
Keyword(s):  
Emerging Markets ◽  
Comparative Advantage ◽  
Home Country ◽  
Emerging Market ◽  
Content Type ◽  
Emerging Market Multinationals ◽  
Economic Underdevelopment ◽  
Conceptual Paper ◽  
Practical Implications ◽  
At Home

Purpose The purpose of this study is to use the rise of emerging-market multinationals as a vehicle to explore how a firm’s country of origin influences its internationalization. Design/methodology/approach This paper is a conceptual paper. Findings We argue that the home country’s institutional and economic underdevelopment can influence the internationalization of firms in two ways. First, emerging-market firms may leverage innovations made at home to cope with underdeveloped institutions or economic backwardness to gain a competitive advantage abroad, especially in other emerging markets; We call this innovation-based internationalization. Second, they may expand into countries that are more developed or have better institutions to escape weaknesses on these fronts at home; we call this escape-based internationalization. Research limitations/implications Comparative disadvantages influence the internationalization of the firm differently from comparative advantage, as it forces the firm to actively upgrade its firm-specific advantage and internationalize. Practical implications We explain two drivers of internationalization that managers operating in emerging markets can consider when facing disadvantages in their home countries and follow several strategies, namely, trickle-up innovation, self-reliant innovation, improvisation management, self-reliance management, technological escape, marketing escape, institutional escape and discriminatory escape. Originality/value We explain how a firm’s home country’s comparative disadvantage, not just its comparative advantage, can spur firms its internationalization.

Determinants of liquidity in Malaysian SMEs: a quantile regression approach

2018 ◽  
Vol 67 (9) ◽  
pp. 1566-1584 ◽  
Author(s):  
Shaista Wasiuzzaman
Keyword(s):  
Regression Analysis ◽  
Quantile Regression ◽  
Emerging Market ◽  
Developed Countries ◽  
Data Availability ◽  
Firm Level ◽  
Liquidity Management ◽  
Ols Regression ◽  
Content Type ◽  
Quantile Regression Analysis

PurposeThe management of liquidity has always been seen as a critical but often ignored issue in finance. Despite the abundance of studies on liquidity management, these studies mainly focus on developed countries and on large firms. Liquidity is critical for the small firm but studies on liquidity management in small and medium enterprises (SMEs) are lacking. The purpose of this paper is to examine the firm-level determinants of liquidity of SMEs in Malaysia.Design/methodology/approachData are collected for a total of 986 small firms in Malaysia from 2011 to 2014, resulting in a total of 2,683 observations. Firm-specific variables and the effect of the economy are considered as the possible determinants of liquidity. Ordinary least squares (OLS) regression analysis with standard errors adjusted for firm-level clustering and quantile regression analysis are used for this purpose.FindingsAnalysis using OLS regression technique indicates that a firm’s profitability, its growth, asset tangibility, size, age and firm status are significant factors in influencing its liquidity decision. Leverage and economic condition are not found to have any significant influence on liquidity. However, quantile regression analysis provides a different picture especially for SMEs with liquidity at the quantile levels ofθ=0.10 and 0.90. Atθ=0.10, only profitability, tangibility and firm status are significant, while atθ=0.90, tangibility, size, firm status and, to some extent, age are significant in influencing liquidity levels.Originality/valueTo the author’s knowledge, this is the first study analyzing the liquidity decision of SMEs in an emerging market such as Malaysia. Most studies on liquidity management of SMEs are focused on developed countries due to data availability but these studies are also only a handful. Additionally, this study uses quantile regression analysis which highlights the need to analyze financial decisions at different levels rather than at the aggregate level as done in OLS regression analysis.

The impact of artificial intelligence (AI) finance on financing constraints of non-SOE firms in emerging markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jun Shao ◽  
Zhukun Lou ◽  
Chong Wang ◽  
Jinye Mao ◽  
Ailin Ye
Keyword(s):  
Emerging Markets ◽  
Emerging Market ◽  
Financing Constraints ◽  
Content Type ◽  
Emerging Market Countries ◽  
Finance Development ◽  
Cash Flow Sensitivity ◽  
The Impact ◽  
The Relationship ◽  
Practical Implications

PurposeThis study investigates the impact of AI finance on financing constraints of non-SOE firms in an emerging market.Design/methodology/approachUsing a sample of non-SOE listed companies in China from 2011 to 2018, this research employs the cash–cash flow sensitivity model to examine the effect of AI finance on financing constraints of non-SOE firms.FindingsWe find that the development of AI finance can alleviate the financing constraints of non-SOE firms. Further, we document that such effect is more pronounced for smaller firms, more innovative firms and firms in developing areas.Practical implicationsThis study suggests that emerging market countries can ease the financing constraints of non-SOE firms by promoting AI finance development.Originality/valueThis study, to the best of our knowledge, is the first one to explore the relationship between AI finance development and financing constraints of non-SOE firms in emerging markets.

The influence of motivations on international location choice in least developed, emerging and developed countries: evidence from Chinese MNEs

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Fernando Angulo-Ruiz ◽  
Albena Pergelova ◽  
William X. Wei
Keyword(s):  
Emerging Markets ◽  
Multinational Enterprises ◽  
Location Choice ◽  
Emerging Market ◽  
Developed Countries ◽  
Asia Pacific ◽  
Institutional Constraints ◽  
Least Developed Countries ◽  
Content Type ◽  
Developed Economies

Purpose This research aims to assess variations of motivations when studying international location decisions. In particular, this study aims to assess the influence of diverse motivations – seeking technology, seeking brand assets, seeking markets, seeking resources and escaping institutional constraints – as determinants of the international location choice of emerging market multinational enterprises (EM MNEs) entering least developed, emerging, and developed countries. Design/methodology/approach The authors develop a set of hypotheses based on the ownership–location–internalization framework and complement it with an institutional perspective. The conceptual model posits that the different internationalization motivations (seeking technology, seeking brand assets, seeking markets, seeking resources and escaping institutional constraints) will impact the location choice of EM MNEs in developed economies, emerging markets or least developed countries. This study uses the 2013 survey data collected by the China Council for the Promotion of International Trade and the Asia Pacific Foundation of Canada. The final sample of analysis of this research includes 693 observations. Findings After controlling for several variables, two-stage Heckman regressions show there is a variation of motivations when EM MNEs enter least developed countries, emerging markets and developed economies. EM MNEs are motivated to enter least developed countries to seek markets and resources. Conversely, those firms enter developed countries in their search for technological assets and to escape institutional constraints at home. While the present study findings show a clear difference in the motivations that lead to location choice in least developed vs developed countries, the results are not as clear for location in other emerging countries. Research limitations/implications The paper offers empirical support for the importance of motivations as crucial determinants of location choice. Originality/value This paper provides a detailed quantitative study on the internationalization location choice of EM MNEs based on their motivations. Though theoretical models underscore the importance of motivations, we know very little about how, in practice, motivations drive location choice. This study contributes to the international location choice literature a deeper understanding of how diverse motivations drive choices of expansion into developed economies, emerging markets or least developed countries.

Mitigating the risks of acquiring foreign strategic assets

2019 ◽  
Vol 35 (8) ◽  
pp. 21-23
Keyword(s):  
Design Methodology ◽  
Reading Time ◽  
Emerging Market ◽  
Developed Countries ◽  
Location Strategy ◽  
Content Type ◽  
Strategic Assets ◽  
Pertinent Information ◽  
Timing Of Entry ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings This research paper concentrates on a range of entry options available to emerging market companies who intend to expand their global reach by seeking strategic assets in developed countries. The results reveal that the emerging market investor’s appetite for amassing strategic assets, such as Western brands and technologies, materially influences their location strategy, their chosen mode of ownership, and their investment intensity but not their timing of entry. Originality/value The briefing saves busy executives, strategists, and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Blind spots in global strategy: applications in emerging markets

2016 ◽  
Vol 23 (4) ◽  
pp. 531-550 ◽  
Author(s):  
Seung Ho Park ◽  
Gerardo R. Ungson
Keyword(s):  
Emerging Markets ◽  
Government Intervention ◽  
Emerging Market ◽  
Blind Spot ◽  
Global Strategy ◽  
Content Type ◽  
Local Companies ◽  
Global Strategies ◽  
Practical Implications ◽  
Blind Spots

Purpose The purpose of this paper is to apply the concept of blind spot to illustrate the misapplication of extant global strategies to emerging markets. The authors discuss cases of multinationals and indigenous local companies to draw insights on firm operations in emerging markets. The authors unpack four specific blind spots that have resonated repeatedly in their operations: an adherence to unqualified scaling, the intractability of localization, the opacity of non-government intervention, and an undue attention to disruption rather than transformation. The study concludes with recommendations that can help companies be better aware of the blind spots and manage more effectively in emerging markets. Design/methodology/approach Conceptual. Findings Four blind spots: an adherence to unqualified scaling, the intransitivity of localization, the illusion of non-government intervention, and an undue attention to disruption rather than transformation. Practical implications The paper is primarily for practitioners. Originality/value This study presents some of the key findings from our previous studies on emerging market issues. The authors recently published four different books on various themes on emerging markets. The findings presented in this paper come strictly from these previous projects.

Ownership, tax and intercorporate loans in China

2019 ◽  
Vol 27 (1) ◽  
pp. 111-129 ◽  
Author(s):  
Wei Huang
Keyword(s):  
Emerging Markets ◽  
Tax Reform ◽  
Emerging Market ◽  
Foreign Direct Investments ◽  
Governance Mechanism ◽  
Governance System ◽  
Tax System ◽  
Controlling Shareholder ◽  
Content Type ◽  
Domestic Firms

Purpose This paper aims to investigate the interconnections between corporate ownership, tax system and controlling shareholder tunneling through intercorporate loans in an emerging market setting. Design/methodology/approach China’s Enterprises Income Tax reform in 2008 abolished its previous multiple-tiers tax system under which foreign direct investment (FDI) firms enjoyed preferential tax rates than domestic firms by introducing a new unified-rate tax system. Using difference-in-differences tests, the author analyzes changes of controlling shareholders tunneling through intercorporate loans among Chinese listed companies around this reform. Findings The author documents significant reductions of intercorporate loans after the reform. More importantly, the author reveals that foreign-invested firms experienced larger reductions of intercorporate loans than domestic firms. The author also shows that state association matters for domestic firms’ response to the reform. In addition, the author documents positive stock market reaction to the tax reform announcement for firms that exhibited higher level of tunneling prior to the reform, indicating market expectation of reduced principal-principal conflict post-reform. Research limitations/implications The findings suggest effective corporate governance system is warranted to constrain intercorporate fund transfers in emerging markets where tax incentives are used for attracting inward foreign direct investments. Institutional reforms in emerging markets aimed at removing market frictions can alleviate the problem of controlling shareholder expropriations of minority interests or tunneling. Originality/value This is a pioneering study that reveals the role of tax as a public governance mechanism in weak minority investor protection environment.

Wanted: strategic partners for young firms eager to enter foreign markets

2020 ◽  
Vol 41 (1) ◽  
pp. 3-10 ◽  
Author(s):  
Lili Mi ◽  
Yuanfei Kang ◽  
Yulong Liu
Keyword(s):  
Structural Equation ◽  
Multinational Enterprises ◽  
Emerging Market ◽  
Developed Countries ◽  
Content Type ◽  
Investment Projects ◽  
Wholly Owned Subsidiary ◽  
Emerging Market Firms ◽  
Chinese Foreign Direct Investment ◽  
Practical Implications

Purpose This paper aims to investigate the relationship between strategic asset-seeking intent and firms’ entry strategies of foreign investment in the context of emerging market firms. Design/methodology/approach This study is based on survey data of 392 Chinese foreign direct investment projects. Structural equation modelling is used for data analysis. Findings With stronger strategic asset-seeking intent, emerging market multinational enterprises are likely to locate their subsidiaries in developed countries, use a wholly owned subsidiary mode and invest with greater intensity, while they do not have a clear preference in entry timing. Practical implications The strategic asset-seeking intent applies not only to emerging market firms but also to small and medium firms in general that have limited resources and a need to catch up with stronger competitors. This study therefore provides guidance to these firms. Originality/value This study contributes by investigating how the strategic asset-seeking intent affects firms’ strategies. The findings have practical implications for strategic managerial decisions that lead to sustained competitive advantage and improved firm performance.

Corporate sustainability in SMEs: an Asian perspective

2020 ◽  
Vol 14 (1) ◽  
pp. 109-138
Author(s):  
Maitreyee Das ◽  
K. Rangarajan ◽  
Gautam Dutta
Keyword(s):  
Sustainable Development ◽  
Literature Review ◽  
Emerging Markets ◽  
Emerging Market ◽  
Corporate Sustainability ◽  
Literature Survey ◽  
Content Type ◽  
Proposed Model ◽  
Research Questions ◽  
Practical Implications

Purpose The purpose of this paper is to do a thorough literature review to assess the current status of corporate sustainability (CS) practices, issues and challenges in small and medium enterprises (SMEs) and based on literature suggest a model that can improve and strategically manage their sustainability practices in the emerging market context of Asia. Design/methodology/approach After setting the theoretical background on why the corporations need to shoulder the responsibility of sustainable development, the authors did a high level literature review to estimate the gap area and based on the findings formulated some research questions on why the SMEs, more specifically those in Asian emerging market, are lagging behind in terms of CS practices. Next, using the “literature survey” as the methodology the authors did a thorough in-depth literature review to answer the above research questions and organised the findings in light of those research questions. Considering the research gap and the crucial role of SMEs in a country’s economic progress the authors restricted the literature search on CS in the case of SMEs only. Findings CS is a well-practiced area in big organisations. However, the literature suggests that in the case of SMEs the situation is different. Social and environmental practices are grossly neglected in SMEs more specifically in emerging markets. Existing literature mentions that collaborative mode of operation, government policy and facilitation, supporting organisation culture can positively influence SME’s sustainability performance, and hence, improve their financial performance. Research limitations/implications The conceptual model has been developed based on suggestions and recommendations in western countries context. To establish the validity of the model in the Asian business scenario it needs to be tested with a sizable sample of SMEs in the Asian market. Practical implications The current paper has practical implications both for academic research on sustainable development and also in business development. The proposed model in the current form is based on the literature survey only. Once such a model is empirically established this can be proved beneficial for providing guidance to SMEs to enhance the sustainability of their business operations. Moreover, environmental and social best practices adopted by SMEs will also have a positive influence on society and the environment in the long run. Originality/value This paper had done a country-wise comparison of sustainable practices in SMEs and based on the recommendations and suggestions of different scholars as found in the detailed literature review, the authors developed few research propositions and also presented a conceptual model. Finally, to address the gap it mentions some future research possibilities to test and validate the proposed model in the context of SMEs in emerging markets of Asia.

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