Estimating defaults in organized security lending markets

2016 ◽  
Vol 24 (3) ◽  
pp. 343-362
Author(s):  
Latif Cem Osken ◽  
Ceylan Onay ◽  
Gözde Unal
Keyword(s):  
Credit Risk ◽  
Stock Returns ◽  
Stock Price ◽  
Price Volatility ◽  
Equity Market ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Content Type ◽  
Central Counterparties ◽  
Risk Determinants

Purpose This paper aims to analyze the dynamics of the security lending process and lending markets to identify the market-wide variables reflecting the characteristics of the stock borrowed and to measure the credit risk arising from lending contracts. Design/methodology/approach Using the data provided by Istanbul Settlement and Custody Bank on the equity lending contracts of Securities Lending and Borrowing Market between 2010 and 2012 and the data provided by Borsa Istanbul on Equity Market transactions for the same timeframe, this paper analyzes whether stock price volatility, stock returns, return per unit amount of risk and relative liquidity of lending market and equity market affect the defaults of lending contracts by using both linear regression and ordinary least squares regression for robustness and proxying the concepts of relative liquidity, volatility and return constructs by more than variable to correlate findings. Findings The results illustrate a statistically significant relationship between volatility and the default state of the lending contracts but fail to establish a connection between default states and stock returns or relative liquidity of markets. Research limitations/implications With the increasing pressure for clearing security lending contracts in central counterparties, it is imperative for both central counterparties and regulators to be able to precisely measure the risk exposure due to security lending transactions. The results gained from a limited set of lending transactions merit further studies to identify non-borrower and non-systemic credit risk determinants. Originality/value This is the first study to analyze the non-borrower and non-systemic credit risk determinants in security lending markets.

Ex-post stock return behaviour of corporate restructurings and corporate control

2016 ◽  
Vol 15 (4) ◽  
pp. 484-498
Author(s):  
Dongnyoung Kim ◽  
Tih Koon Tan
Keyword(s):  
Stock Returns ◽  
Stock Return ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Content Type ◽  
Tracking Stocks ◽  
Ex Post ◽  
Corporate Restructurings ◽  
Tracking Stock ◽  
And Control

Purpose This paper aims to investigate the correlation between stock returns of the parent and newly created entity and the degree of return skewness in parents in the three different corporate restructurings. Design/methodology/approach Using a sample of spin-offs, equity carve-outs and tracking stocks, ordinary least squares regression is used to test the relationship between stock return correlation as well as stock return skewness and the type of corporate restructurings. Findings Tracking stock offering has the largest correlation in stock returns, whereas spin-off has the least correlation in stock returns. Also, the result from the skewness test is not consistent with the hypothesis that the stock returns skewness is positively related to the degree of ownership and control. Originality/value This is one of the few papers looking at the three corporate restructurings and their return skewness.

Performance of shariah-compliant firms and non-shariah-compliant firms in the MENA region

2016 ◽  
Vol 7 (4) ◽  
pp. 268-281 ◽  
Author(s):  
Omar Farooq ◽  
Amal Alahkam
Keyword(s):  
United Arab Emirates ◽  
Stock Price ◽  
Statistical Significance ◽  
Ordinary Least Squares ◽  
Business Networks ◽  
Least Squares Regression ◽  
Sampling Errors ◽  
Mena Region ◽  
Content Type ◽  
The Impact

Purpose This paper aims to document the relative performance of non-financial shariah-compliant firms and non-financial non-shariah-compliant firms in the MENA (Morocco, Egypt, Saudi Arabia, United Arab Emirates, Jordan, Kuwait and Bahrain) region during the period between 2005 and 2009. Design/methodology/approach This paper uses pooled ordinary least squares regression analysis to document the effect of shariah compliance on stock price performance in the MENA region on a sample of non-financial firms that consists of shariah- and non-shariah-compliant firms. Findings Using market-adjusted returns as a proxy for performance, this paper shows that shariah-compliant firms underperform non-shariah-compliant firms. The results also show that underperformance of shariah-compliant firms holds in the civil law and in the common law countries. Interestingly, this paper also shows that difference between the performance of shariah-and non-shariah-compliant firms disappears during the crisis period. Research limitations/implications This paper argues that the characteristics of shariah-compliant firms are such that these firms are at a disadvantage relative to their non-shariah-compliant counterparts. For example, high leverage of their counterpart firms can act as a disciplining mechanism and positively affect performance of these firms. Similarly, high account receivables and high cash allow non-shariah-compliant firms to make more effective business networks than shariah-compliant firms and fund large capital expenditures. Consequently, shariah-compliant firms underperform non-shariah-compliant firms. This study’s results, however, should be read with caution, as they are mainly based upon the performance of large volume, statistical significance, sampling errors and possible labeling miss-specification. Further research on this topic with different research methodology is essential. Originality/value This paper takes a financial view rather than religious view while highlighting the impact of shariah characteristics on firm performance.

Corporate social responsibility: what motivates management to disclose?

2015 ◽  
Vol 11 (3) ◽  
pp. 513-534 ◽  
Author(s):  
Tay Chia Ling ◽  
Nigar Sultana
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Stock Price ◽  
Ordinary Least Squares ◽  
Statistical Technique ◽  
Annual Reports ◽  
Least Squares Regression ◽  
Technical Trading ◽  
Content Type ◽  
Corporate Social

Purpose – The purpose of this paper is to provide empirical evidence on the significance of signal breaches from technical trading indicators in explaining variations in the level of corporate social responsibility disclosures (CSRD) by firms. The authors seek to determine whether firms disclose corporate social responsibility (CSR) information in a genuine attempt to report their impact on society and environment or whether firms use CSRD as a shield to legitimise their business operations. Design/methodology/approach – Signal breaches from the Moving Average Convergence Divergence and Chande’s TrendScore technical trading indicators were utilised, while the voluntary environmental and social accounting disclosure index developed by Williams (1998) was adapted to measure the extent of CSRD by Singaporean firms in 2011. Ordinary least squares regression was the principal multivariate statistical technique used to analyse the data collected. Findings – Findings of this paper indicate a positive and significant association between the number of technical indicator signal breaches for a firm and the level of CSRD by that firm, particularly in the environment, energy, human resources and products and customers categories. Research limitations/implications – The collection of CSRD information is based solely on annual reports and within the context of Singapore. Results, therefore, are not completely generalisable to different jurisdictional settings. Practical implications – Findings suggest that firms with a volatile stock price trend provide greater CSRD, possibly as a legitimacy strategy to distract or change the perceptions of investors from its current legitimacy status. Findings, therefore, highlight to regulators the need to strengthen regulatory requirements and implement stricter guidelines on CSR reporting, given the importance of CSRD to users. Social implications – Findings from this study have several implications for various stakeholders including investors, regulators and society in general. Overall, findings also suggest that stakeholders should not rely solely on CSRD in their decision-making process. Originality/value – This is the first paper that has proxied stock price movement by using breaches in technical trading indicators when examining reported levels of CSRD by firms. Moreover, results greatly build on the sparse CSR research on Singapore.

Non-GAAP measure disclosure and insider trading incentives in high-tech IPO firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bishal BC ◽  
Bo Liu
Keyword(s):  
Stock Returns ◽  
Initial Public Offering ◽  
Insider Trading ◽  
Stock Price ◽  
Positive Association ◽  
Ordinary Least Squares ◽  
High Tech ◽  
Significant Positive Association ◽  
Content Type ◽  
Public Offering

Purpose This paper aims to investigate whether the non-generally accepted accounting principles (GAAP) performance measures (NGMs) disclosure by high-tech initial public offering (IPO) firms signal firms’ efforts to maintain relatively high stock price levels before the expiration of the lock-up period to benefit insider selling. Design/methodology/approach The authors perform ordinary least squares and logit regressions using financial statement data and hand collected data on NGM disclosures for high-tech firms during the IPO process. Findings The authors find that the top executives of high-tech IPO firms with NGM disclosures are significantly more likely to sell and sell significantly more insider shares at the lock-up expiration than those of high-tech IPO firms without NGM disclosures. At the same time, while high-tech NGM firms have stock returns similar to their counterparts without NGMs for the period before the lock-up expiration, their stock returns are substantially lower after insider selling following the lock-up expiration. Practical implications By documenting the negative association between NGM disclosures and post-lockup expiration stock performance, the study highlights managerial deliberate optimism about the firm’s prospects which may not materialize. Hence, investors should take the NGM disclosures with a grain of salt. Originality/value This paper fills a notable void in the non-GAAP reporting literature by documenting a statistically and economically significant positive association between managerial equity trading incentives and NGM disclosures by high-tech IPO firms.

Corporate sustainability performance and informativeness of earnings

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jagjit Singh Saini ◽  
Mingming Feng ◽  
Jim DeMello
Keyword(s):  
Stock Returns ◽  
Voluntary Disclosure ◽  
Stock Price ◽  
Corporate Sustainability ◽  
Ordinary Least Squares ◽  
Mediating Effect ◽  
Price Informativeness ◽  
Content Type ◽  
Sustainability Performance ◽  
Stock Price Informativeness

PurposeWith the growing awareness about the environment and climate, sustainability has gained increased attention of investors. Many investors now factor in the long-term sustainability of successful and responsible companies when making their investment choices. The purpose of this paper is to investigate whether or not the sustainability performance of a company affects the informativeness of its earnings by exploring the mediating effect of sustainability performance on the association between stock returns and earnings changes.Design/methodology/approachUsing a sample of firms for the period 2009–2016 with available sustainability data from TruValue Labs' database, the authors investigate how the sustainability performance of a firm mediates the relationship between stock returns and earnings (changes). The authors use ordinary least squares (OLS) regressions to test their hypotheses.FindingsConsistent with the voluntary disclosure and environmental, social and governance (ESG) performance literature, the authors find that higher sustainability performance improves the stock price informativeness of earnings. The authors find evidence in support of increased earnings response coefficient with increased sustainability performance.Research limitations/implicationsThis study adds to the literature supporting the notion of sustainability investing indicating that sustainability performance of a firm affects the stock price informativeness and predictability of earnings (changes) of the firm.Originality/valueThis study has value for, both, investors and managers regarding the importance of sustainability performance of the firm. Sustainability performance of the firm sends signals to market participants, increasing the informational content of the reported earnings as well as predictability of future earnings.

The impact of executives’ perceptions of environmental threats and organizational slack on innovation strategies

2016 ◽  
Vol 7 (2) ◽  
pp. 216-230 ◽  
Author(s):  
Chengyuan Wang ◽  
Biao Luo ◽  
Yong Liu ◽  
Zhengyun Wei
Keyword(s):  
Cognitive Theory ◽  
Environmental Changes ◽  
Ordinary Least Squares ◽  
Organizational Slack ◽  
Least Squares Regression ◽  
Content Type ◽  
Environmental Threats ◽  
Innovation Strategies ◽  
The Impact ◽  
The Relationship

Purpose The paper aims to study the relationship between executives’ perceptions of environmental threats and innovation strategies and investigate the moderating effect of contextual factor (i.e. organizational slack) on such relations. It proposes a dualistic relationship between executives’ perceptions of environmental threats and innovation strategies, in which different perceptions of environmental threats will lead to corresponding innovation strategies, and dyadic organizational slack can promote such processes. Design/methodology/approach The paper is based on a survey with 163 valid questionnaires, which were all completed by executives. Hierarchical ordinary least-squares regression analysis is used to test the hypotheses proposed in this paper. Findings The paper provides empirical insights about that executives tend to choose exploratory innovation when they perceive environmental changes as likely loss threats, yet adopt exploitative innovation when perceiving control-reducing threats. Furthermore, unabsorbed slack (e.g. financial redundancy) positively moderates both relationships, while absorbed slack (e.g. operational redundancy) merely positively influences the relationship between the perception of control-reducing threats and exploitative innovation. Originality/value The paper bridges the gap between organizational innovation and cognitive theory by proposing a dualistic relationship between executives’ perceptions of environmental threats and innovation strategies. The paper further enriches innovation studies by jointly considering both subjective and objective influence factors of innovation and argues that organizational slack can moderate such dualistic relationship.

Personality, risk tolerance and social network use: an exploratory study

2016 ◽  
Vol 42 (6) ◽  
pp. 536-552 ◽  
Author(s):  
Shaista Wasiuzzaman ◽  
Siavash Edalat
Keyword(s):  
Social Networks ◽  
Social Network ◽  
Online Social Networks ◽  
Financial Risk ◽  
Ordinary Least Squares ◽  
Risk Tolerance ◽  
Network Activity ◽  
Least Squares Regression ◽  
Content Type ◽  
Financial Risk Tolerance

Purpose – The vast amount of information available via online social networks (OSN) makes it a very good avenue for understanding human behavior. One of the human characteristics of interest to financial practitioners is an individual’s financial risk tolerance. The purpose of this paper is to look at the relationship between an individual’s OSN behavior and his/her financial risk tolerance. Design/methodology/approach – The study uses data collected from a sample of 220 university students and the backward variables selection ordinary least squares regression analysis technique to achieve its objective. Findings – The results of the study find that the frequency of logging on to social network sites indicates an individual who has higher financial risk tolerance. Additionally, the increasing use of social networks for social connection is found to be associated with lower financial risk tolerance. The results are mostly consistent when the sample is split based on prior financial knowledge. Originality/value – To the authors’ knowledge this is the first study which documents the possibility of understanding an individual’s financial risk tolerance via his/her social network activity. This provides investment/financial consultants with more avenues for gathering information in order to understand their current or potential clients hence providing better services.

Quality financial inclusion and its determinants in South Africa: evidence from survey data

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kudakwashe Joshua Chipunza ◽  
Ashenafi Fanta
Keyword(s):  
South Africa ◽  
Survey Data ◽  
Financial Services ◽  
Ordinary Least Squares ◽  
Financial Inclusion ◽  
Least Squares Regression ◽  
Content Type ◽  
Demographic Groups ◽  
Financial Products ◽  
Data Limitations

PurposeThe study measured quality financial inclusion, a more comprehensive measure of financial inclusion, and examined its determinants at a consumer level in South Africa.Design/methodology/approachThis study leveraged on FinScope 2015 survey data to compute a quality financial inclusion index using polychoric principal component analysis. Subsequently, a heteroscedasticity consistent ordinary least squares regression model was employed to assess determinants of quality financial inclusion.FindingsThe empirical findings indicated that gender, education, financial literacy, income, location and geographical proximity determine quality financial inclusion. These findings could inform policymakers and financial services providers on how quality financial inclusion can be promoted through tailoring financial products for various socio-demographic groups.Research limitations/implicationsDue to data limitations, the study was confined to South Africa and did not capture digital financial inclusion. Hence, future studies could replicate the study in Sub-Saharan Africa's context and compute an index that captures digital financial inclusion.Practical implicationsThese findings could inform policymakers and financial services providers on how quality financial inclusion can be promoted through tailoring financial products for various socio-demographic groups.Originality/valueThis study proposed a more comprehensive measure of quality financial inclusion from a demand-side perspective by accounting for important dimensions that include diversity, affordability, appropriateness and flexibility of financial products and services.

Does the second wave of COVID-19 undermine corporate immunity? International evidence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Huy Viet Hoang ◽  
Cuong Nguyen ◽  
Khanh Hoang
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Fixed Effects ◽  
Management Strategies ◽  
The United States ◽  
Least Square ◽  
Content Type ◽  
The Impact ◽  
Second Wave ◽  
Practical Implications

PurposeThis study compares the impact of the COVID-19 pandemic on stock returns in the first two waves of infection across selected markets, given built-in corporate immunity before the global outbreak.Design/methodology/approachThe data are collected from listed firms in five markets that have experienced the second wave of COVID-19 contagion, namely the United States (US), Australia, China, Hong Kong and South Korea. The period of investigation in this study ranges from January 24 to August 28, 2020 to cover the first two COVID-19 waves in selected markets. The study estimates the research model by employing the ordinary least square method with fixed effects to control for the heterogeneity that may confound the empirical outcomes.FindingsThe analysis reveals that firms with larger size and more cash reserves before the COVID-19 outbreak have better stock performance under the first wave; however, these advantages impede stock resilience during the second wave. Corporate governance practices significantly influence stock returns only in the first wave as their effects fade when the second wave emerges. The results also suggest that in economies with greater power distance, although stock price depreciation was milder in the first wave, it is more intense when new cases again surge after the first wave was contained.Practical implicationsThis paper provides practical implications for corporate managers, policymakers and governments concerning crisis management strategies for COVID-19 and future pandemics.Originality/valueThis study is the first to evaluate built-in corporate immunity before the COVID-19 shock under successive contagious waves. Besides, this study accentuates the importance of cultural understanding in weathering the ongoing pandemic across different markets.

Audit committee characteristics and the moderating effect of Malaysian code of corporate governance on IPO liquidity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amal Mohammed Al-Masawa ◽  
Rasidah Mohd-Rashid ◽  
Hamdan Amer Al-Jaifi ◽  
Shaker Dahan Al-Duais
Keyword(s):  
Corporate Governance ◽  
Initial Public Offerings ◽  
Audit Committee ◽  
Ordinary Least Squares ◽  
Moderating Effect ◽  
Least Squares Regression ◽  
Content Type ◽  
Code Of Corporate Governance ◽  
The Impact ◽  
The Relationship

Purpose This study aims to investigate the link between audit committee characteristics and the liquidity of initial public offerings (IPOs) in Malaysia, which is an emerging economy in Southeast Asia. Another purpose of this study is to examine the moderating effect of the revised Malaysian code of corporate governance (MCCG) on the link between audit committee characteristics and IPO liquidity. Design/methodology/approach The final sample consists of 304 Malaysian IPOs listed in 2002–2017. This study uses ordinary least squares regression method to analyse the data. To confirm this study’s findings, a hierarchical or four-stage regression analysis is used to compare the t-values of the main and moderate regression models. Findings The findings show that audit committee characteristics (size and director independence) have a positive and significant relationship with IPO liquidity. Also, the revised MCCG positively moderates the relationship between audit committee characteristics and IPO liquidity. Research limitations/implications This study’s findings indicate that companies with higher audit committee independence have a more effective monitoring mechanism that mitigates information asymmetry, thus reducing adverse selection issues during share trading. Practical implications Policymakers could use the results of this study in developing policies for IPO liquidity improvements. Additionally, the findings are useful for traders and investors in their investment decision-making. For companies, the findings highlight the crucial role of the audit committee as part of the control system that monitors corporate governance. Originality/value To the authors’ knowledge, this work is a pioneering study in the context of a developing country, specifically Malaysia that investigates the impact of audit committee characteristics on IPO liquidity. Previously, the link between corporate governance and IPO liquidity had not been investigated in Malaysia. This study also contributes to the IPO literature by providing empirical evidence regarding the moderating effect of the revised MCCG on the relationship between audit committee characteristics and IPO liquidity.

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