China and 'Grexit' risks weigh on EMs globally

2015 ◽  
Keyword(s):  
Stock Market ◽  
Euro Area ◽  
Emerging Market ◽  
Listed Companies ◽  
Equity Market ◽  
Foreign Investors ◽  
Content Type ◽  
Emergency Measures

Significance This month, 3 trillion dollars had been wiped off the value of all listed companies since a seven-year high on June 12, undermining confidence in the government's ability to steer the market. These developments along with the lingering risk of a Greek exit ('Grexit') from the euro-area, despite the provisional agreement reached on July 12, are taking a toll on emerging market (EM) asssets more broadly. Impacts The emergency measures aimed at stemming the sell-off in Chinese equities will help stabilise the stock market. Foreign investors' exposure to China's retail-based equity market is likely to remain limited. The renewed Brent crude price fall, down 14.2% since early May, will pressure oil exporters' currencies while benefiting oil importers.

Pre-poll investor jitters stress the US stock market

2020 ◽  
Keyword(s):  
Stock Market ◽  
Interest Rates ◽  
Euro Area ◽  
Emerging Market ◽  
Capital Inflows ◽  
Content Type ◽  
The Us ◽  
Bond Funds

Significance On September 3, the benchmark S&P 500 index suffered its sharpest fall since early June having gained more than 50% since March 23. Expectations for future volatility in the Nasdaq 100 index, a gauge that includes tech giants Apple and Amazon, this month hit a 16-year high relative to the rest of the stock market and remains elevated. Impacts The Federal Reserve’s move to target average inflation and tolerate periods of higher prices may keep interest rates ‘lower for longer’. The trade-weighted dollar has lost nearly 10% since March, helping the euro to surge and exacerbating euro-area disinflationary pressures. Capital inflows are starting to return to emerging market bond funds, which lost an unprecedented USD120bn earlier this year.

Foreign ownership and investment efficiency: new evidence from an emerging market

2020 ◽  
Vol 15 (6) ◽  
pp. 1185-1199 ◽  
Author(s):  
Quoc Trung Tran
Keyword(s):  
Stock Market ◽  
Firm Size ◽  
Emerging Market ◽  
Corporate Investment ◽  
Foreign Ownership ◽  
Business Environment ◽  
Investment Efficiency ◽  
Foreign Investors ◽  
Content Type ◽  
Investment Opportunities

PurposeThis paper investigates the effect of foreign ownership on corporate investment efficiency in an emerging market.Design/methodology/approachThis paper employs the investment-investment opportunities sensitivity to proxy for investment efficiency. Corporate investment and investment opportunities are measured by capital expenditure and Tobin's Q respectively. Control variables include state ownership, firm profitability, cash flow, financial leverage, firm size, bank debt, asset tangibility and financial distress. The research sample includes 5,502 firm-years from 621 firms listed in Vietnamese stock market from 2007 to 2017.FindingsWe find that foreign ownership negatively affects corporate investment efficiency. Furthermore, we continue to examine the effects of foreign ownership with financially unconstrained and constrained firms that are classified based on the annual medians of Kaplan and Zingales (1997) score, firm size and dividend payout ratio. We find that the negative relationship between foreign ownership and investment efficiency is stronger in financially unconstrained.Originality/valuePrior research shows that foreign ownership is positively related to corporate investment efficiency. However, in Vietnamese stock market, foreign investors may prefer safe business activities as a response to uncertainty in the business environment, ineffective legislations on corporate governance and their informational disadvantage. Therefore, in this paper, we argue that foreign ownership negatively affects Vietnamese firms' investment efficiency. Risk-adverse foreign investors make firms lose some profitable investment opportunities and thus decrease their investment efficiency.

Investors will diversify beyond usual ‘safe’ assets

2020 ◽  
Keyword(s):  
Euro Area ◽  
World Trade ◽  
Iron Ore ◽  
Emerging Market ◽  
Equity Market ◽  
Corporate Debt ◽  
Fiscal Stimulus ◽  
Content Type ◽  
The World ◽  
Investment Grade

Significance During September’s technology-led equity market sell-off, ten-year US Treasury yields barely budged, while gold fell by nearly 5% and has stagnated since. Investors are turning to less established hedges, including emerging market (EM) and investment grade corporate debt. Impacts The euro-area services PMI fell to a five-month low in October as measures to curb COVID-19 cases raise fears of a double-dip recession. China is leading the world trade recovery; the price of iron ore, the key steelmaking ingredient, has soared by about 50% since early May. The VIX Index, Wall Street’s ‘fear gauge’, has gained 10.2% since October 9, partly due to little progress passing more fiscal stimulus.

Accrual management and expected stock returns in India

2018 ◽  
Vol 8 (4) ◽  
pp. 426-441 ◽  
Author(s):  
Ajit Dayanandan ◽  
Jaspreet Kaur Sra
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Empirical Evidence ◽  
Emerging Market ◽  
Equity Market ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Market Prices ◽  
Content Type ◽  
For Profit

Purpose The purpose of this paper is to examine whether the stock market in India is efficient in the semi-strong form. Design/methodology/approach The study uses financial and stock market data of 1,135 listed Indian companies (non-financial) during 2003–2011 collected from Capital IQ to estimate discretionary accruals (DA) using modified Jones model (1995). The study also examines using the widely used Mishkin (1983) test to whether equity market prices accruals in India. The study is conducted for profit/loss-making firms separately as well as for a hedge portfolio of firms based on the lowest to highest accruals. Findings The empirical study of DA of 1,135 listed Indian companies (non-financial) during 2003–2011 shows that the estimated average DA of the corporate sector in India comes to 1 percent of the total assets of these firms. An empirical analysis whether equity market prices DA in India finds no evidence of investors/market pricing DA. Empirical evidence also finds that the results are invariant for profit/loss-making firms as well as portfolio of firms based on the lowest to highest accruals in the Indian context. The empirical evidence shows that the Indian equity market is inefficient with regard to the incorporation of accruals in expected returns of stocks. Research limitations/implications This study builds on the previous literature on accrual pricing in the context of the USA and developed markets. The study extends the empirics to the one of the largest emerging market economy – India. This issue is important not only to investors, but also to policy makers and researchers because the mispricing of accruals could potentially lead to misallocation of capital. The study has implications for stock/firm valuations and cost of equity/capital. Originality/value This is the first study for the pricing of accruals and test of semi-strong efficiency of the Indian stock market.

Investor sentiment antecedents

2019 ◽  
Vol 11 (1) ◽  
pp. 36-54 ◽  
Author(s):  
Ranjan Dasgupta ◽  
Rashmi Singh
Keyword(s):  
Decision Making ◽  
Stock Market ◽  
Emerging Market ◽  
Investment Decision ◽  
Investor Sentiment ◽  
Equation Modeling ◽  
Content Type ◽  
Investment Decision Making ◽  
Retail Investors ◽  
Specific Factors

PurposeThe determinants of investor sentiment based on stock market proxies are found in numbers in empirical studies. However, investor sentiment antecedents developed from primary survey measures by constructing an investor sentiment index (ISI) are not done till date. The purpose of this paper is to fill this research gap by first developing an ISI for the Indian retail investors and then examining the investor-specific, stock market-specific, macroeconomic and policy-specific factors’ individual impact on the investor sentiment.Design/methodology/approachFirst, the authors develop the ISI by using the mean scores of six statements as formulated based on popular direct investor sentiment surveys undertaken throughout the world. Then, the authors employ the structural equation modeling approach on the responses of 576 respondents on 40 statements (representing the index and four study hypotheses) collected in 2016 across the country.FindingsThe results show that investor- and stock market-specific factors are the major antecedents of investor sentiment for these investors. However, interestingly macroeconomic fundamentals and policy-specific factors have no role to play in driving their sentiment to invest in the stock market.Practical implicationsThe major implication of the results is that the Indian retail investors are showing a mixed approach of Bayesian and behavioral finance decision making. So, these implications can guide the investment consultants, regulators, other stakeholders in markets and overwhelmingly the retail investors to introspect their investment decision making across time horizons.Originality/valueThe formulation of ISI in an emerging market context and thereafter examining possible antecedents to influence retail investors in their investment decision making are not done till date. So, the study is unique in its research issue and findings and will have significant implication for the retail investors at least in emerging market contexts.

Audit committee effectiveness and financial reporting timeliness

2018 ◽  
Vol 9 (1) ◽  
pp. 34-55 ◽  
Author(s):  
Ahmed Atef Oussii ◽  
Neila Boulila Taktak
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Emerging Market ◽  
Listed Companies ◽  
Audit Committees ◽  
Future Research ◽  
Governance System ◽  
Content Type ◽  
Financial Expertise ◽  
The Impact

Purpose The purpose of this paper is to investigate whether there is any relationship between the effectiveness of an audit committee and the financial reporting timeliness of Tunisian listed companies as proxied by external audit delay (AD). Analysis focuses on five audit committee characteristics: authority, financial expertise, independence, size and diligence. Design/methodology/approach Empirical tests address 162 firm-year observations drawn from Tunisian listed companies during 2011-2013. Findings Multivariate analyses indicate that audit committees with members who have financial expertise are significantly associated with shorter AD. Thus, the results suggest that audit committee financial expertise contributes to the improvement of financial statements’ timeliness. Research limitations/implications The audit committee attributes examined in this study were based on DeZoort et al. (2002) framework. There could be other aspects of audit committee effectiveness such as audit committee tenure and audit committee chair characteristics, which were not addressed in the present study. Thus, future research may consider and examine these other components of audit committee effectiveness. Practical implications Findings have managerial implications. Companies can re-look into how to further improve audit committee composition in order to enhance the timeliness of financial reporting. The issues of audit committee effectiveness and timely reporting also affect regulators and policy makers since they need to play a role in the establishment of effective audit committees and the improvement of financial reporting timeliness. Originality/value This study is one of few that have examined the impact of audit committee effectiveness on ADs in an emerging market country. Findings lend credence to the belief that audit committee members’ financial expertise enhances the quality of financial reporting by firms in a North African market criticized for the lack of maturity of its corporate governance system (Klibi, 2015; Fitch Ratings, 2009).

Effects of board characteristics, audit committee and risk management on corporate performance: evidence from Palestinian listed companies

2020 ◽  
Vol 13 (4) ◽  
pp. 691-706
Author(s):  
Sami R.M. Musallam
Keyword(s):  
Risk Management ◽  
Audit Committee ◽  
Corporate Performance ◽  
Emerging Market ◽  
Chief Executive ◽  
Least Square Method ◽  
Listed Companies ◽  
Least Square ◽  
Content Type ◽  
Board Characteristics

Purpose This paper aims to investigate the effects of board characteristics, audit committee and risk management on corporate performance. Design/methodology/approach Using a sample of 31 Palestinian non-financial listed companies from 2010 to 2016, this study uses a generalized least square method. Findings The results show that the effects of board ownership, board independence, audit committee meeting, audit committee size, audit committee financial expertise and risk management are positive and significant on corporate performance while the effects of chief executive officer duality and audit committee size are negative and significant on corporate performance. Practical implications The results of this paper are important to policymakers, shareholders and directors of companies to make appropriate choices about the board, audit committee characteristics and risk management to protect the interest of different stakeholders, increase the flow of capital and foreign investment into non-financial companies. Social implications This paper fills a gap in the corporate governance literature by investigating the effects of board characteristics, audit committee and risk management on corporate performance in Palestine as one of the youngest stock exchanges in a region that assists in testing the validity of agency theory in a young and small emerging market context. Originality/value This paper is the first to investigate the effects of board characteristics, audit committee and risk management collectively on corporate performance in Palestine as prior research on these topics has been investigated separately.

Determinants of corporate effective tax rates: evidence from the euro area

2020 ◽  
Vol 33 (3/4) ◽  
pp. 427-444
Author(s):  
Antonio Barbera ◽  
Paloma Merello ◽  
Rafael Molina
Keyword(s):  
Euro Area ◽  
Listed Companies ◽  
Tax Rates ◽  
Effective Tax Rates ◽  
Content Type ◽  
Individual Analysis ◽  
The Individual ◽  
The Impact ◽  
Generalized Moments ◽  
Positive Effect

PurposeThe purpose of this paper is to investigate the effect of the determinants of corporate effective tax rates (ETR) of listed companies in euro area.Design/methodology/approachWith a large and recent panel of 2,870 listed companies for the period 2005–2016, the authors use the generalized moments method (GMM) to estimate global models for three groups of countries and specific models for six selected countries: Germany, Spain, France, Italy, Belgium and Greece.FindingsThe results confirm that ETR have different determinants depending on the countries analyzed. There is a significantly positive relationship with leverage and negative with size and financial profitability. However, economic profitability shows a statistically positive effect in the new members, but negative effect on old ones. In the individual analysis, Germany and Spain maintain this negative association with return on assets (ROA), but Belgium and Greece show a positive effect. The effect of the economic cycle shows statistically relevant, negatively in Germany but positively in Belgium and Greece.Originality/valueThis paper makes a novel contribution to the current debate on the need for harmonization of corporate income tax in the European Union (EU). For the first time, the group of countries whose common currency is the euro is considered with a great level of detail. In addition, the impact derived from the enlargement of the euro area and the individual analysis of the main countries is included. The European authorities must take into account the specific differences found in the ETR determinants because it hinders to take measures that limit tax competition.

Monitoring earnings management in emerging markets

2015 ◽  
Vol 31 (2) ◽  
pp. 86-108 ◽  
Author(s):  
Manel Hessayri ◽  
Malek Saihi
Keyword(s):  
South Africa ◽  
Earnings Management ◽  
United Arab Emirates ◽  
Ownership Structure ◽  
Emerging Market ◽  
Listed Companies ◽  
The Philippines ◽  
Content Type ◽  
Ifrs Adoption ◽  
Emerging Market Countries

Purpose – The purpose of this paper is to examine whether International Financial Reporting Standards (IFRS) adoption complements corporate governance factors (e.g. ownership structure) in monitoring managers’ discretional behavior in an emerging market context. Design/methodology/approach – The paper relies on a sample of listed companies in the United Arab Emirates, Morocco, South Africa and the Philippines during an eight-year period on average (four years of pre-adoption period and four years of post-adoption period). Findings – The authors find no evidence of lower earnings management after the switch to IFRS reporting, suggesting that managerial discretional behavior is insensitive to a firm’s IFRS adoption. However, the authors document effective monitoring role of a firm’s ownership structure on earnings management. More interestingly, institutional investors are effective in constraining earnings management when holding a high level of ownership. Moreover, the effect of blockholders and institutional blockholders varies as their ownership rises following a non-linear pattern. Research limitations/implications – First, the assumption that discretionary accruals are adequate measure of earnings management may be criticized in different ways. Second, the findings, performed on listed companies in the United Arab Emirates, Morocco, South Africa and the Philippines, should be interpreted with caution and cannot be generalized to all emerging market countries. Practical implications – Standards setters and market authorities should be aware of earnings management determinants to set adequate and fitting accounting standards limiting opportunistic behavior of managers and mainly to set up training programs to accounting professionals improving the IFRS implementation. Moreover, considering specific features of firms in emerging market countries related to ownership structure, international investors may rely on such criteria to evaluate firms. Finally, auditors should be aware of different incentives for earnings management in order to be able to detect eventual manipulation of accounting earnings. Originality/value – This paper provides a timely contribution to the continuous debate of the effect of IFRS adoption on earnings management in a poorly exploited setting, emerging market context. When investigating, additionally, the eventual non-linear effect of institutional ownership, block ownership, institutional block ownership and non-institutional block ownership on earnings management, a major contribution is that it brings to light the finding of a differential influence of ownership levels on earnings management.

Day Of The Week And Its Effect On Stock Market Volatility: Evidence From An Emerging Market

2013 ◽  
Vol 29 (6) ◽  
pp. 1727 ◽  
Author(s):  
Omar Farooq ◽  
Mohammed Bouaddi ◽  
Neveen Ahmed
Keyword(s):  
Stock Market ◽  
Stock Exchange ◽  
Emerging Market ◽  
International Markets ◽  
Conditional Variance ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Foreign Investors ◽  
High Volatility ◽  
Day Of The Week

This paper investigates the day of the week effect in the volatility of the Saudi Stock Exchange during the period between January 7, 2007 and April 1, 2013. Using a conditional variance framework, we find that the day of the week effect is present in the volatility. Our results show that the lowest volatility occurs on Saturdays and Sundays. We argue that due to the closure of international markets on Saturdays and Sundays, there is not enough activity in the Saudi Stock Exchange. As a result, the volatility is the lowest on these days. Our results also show that the highest volatility occurs on Wednesdays. We argue Wednesday, being the last trading day of the week, corresponds with the start of four non-trading days (Thursday through Sunday) for foreign investors. Fearing that they will be stuck up with stocks in case some unfavorable information enters the market, foreign investors tend to exit the market on Wednesdays. As a result of excessive trading, there is high volatility on Wednesdays.

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