Monetary Policy and Corporate Risk-Taking: Evidence From an Emerging Market

PurposeThis paper investigates the relationship between corruption and corporate risk-taking in emerging markets where corruption is considered as “public enemy number one.”Design/methodology/approachThe study measures corruption based on Corruption Control Index annually published by World Bank and examines how corruption affects corporate risk-taking in emerging markets covered in MSCI Emerging Market Index.FindingsWith a sample of 75,338 observations from 8,326 firms across 20 emerging stock markets during the period 2005–2016, the author finds that corruption negatively affects corporate risk-taking. Robustness checks with a reduced sample without China and India, alternatives of corruption measures, various measures of risk-taking and Generalized method of moments (GMM) estimator also show consistent results. Moreover, additional analysis shows that information disclosure mitigates the effect of corruption on risk-taking.Originality/valueThe extant literature implies that corruption may decrease corporate risk-taking behavior through two channels including operational cost and debt financing cost.

Download Full-text

Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets

Financial Innovation ◽

10.1186/s40854-021-00299-1 ◽

2021 ◽

Vol 7 (1) ◽

Author(s):

Zekeriya Yildirim ◽

Mehmet Ivrendi

Keyword(s):

Monetary Policy ◽

Financial Markets ◽

Risk Taking ◽

Large Scale ◽

Emerging Market ◽

Spillover Effects ◽

International Financial Markets ◽

Quantitative Easing ◽

Unconventional Monetary Policy ◽

The Us

AbstractThis study investigates the international spillover effects of US unconventional monetary policy (UMP)—frequently called large-scale asset purchases or quantitative easing (QE)—on advanced and emerging market economies, using structural vector autoregressive models with high-frequency daily data. Blinder (Federal Reserve Bank of St. Louis Rev 92(6): 465–479, 2010) argued that the QE measures primarily aim to reduce US interest rate spreads, such as term and risk premiums. Considering this argument and recent empirical evidence, we use two spreads as indicators of US UMP: the mortgage and term spreads. Based on data from 20 emerging and 20 advanced countries, our empirical findings reveal that US unconventional monetary policies significantly affect financial conditions in emerging and advanced countries by altering the risk-taking behavior of investors. This result suggests that the risk-taking channel plays an important role in transmitting the effects of these policies to the rest of the world. The extent of these effects depends on the type of QE measures. QE measures such as purchases of private sector securities that lower the US mortgage spread exert stronger and more significant spillover effects on international financial markets than those that reduce the US term spread. Furthermore, the estimated financial spillovers vary substantially across countries and between and within the emerging and advanced countries that we examine in this study.

Download Full-text

The performance and corporate risk-taking of firms: evidence from Malaysian agricultural firms

Journal of Agribusiness in Developing and Emerging Economies ◽

10.1108/jadee-11-2020-0267 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Hanis Hazwani Ahmad ◽

Adilah Azhari

Keyword(s):

Firm Performance ◽

Risk Taking ◽

Agricultural Sector ◽

Management Practice ◽

Emerging Market ◽

Random Effect ◽

Least Square ◽

Content Type ◽

Agriculture Sector ◽

Corporate Risk

PurposeThis study explores the effects of the performance and corporate risk-taking behaviour of agricultural firms. Despite its importance in mitigating climate change, the agricultural sector also faces global competition, market liberalisation, rapid technological advances and the starter of stricter quality and safety procedures, all of which require firms to take greater risks.Design/methodology/approachThis study explores this relationship by applying generalised least square (GLS), random effect methodologies (REM) and generalised method of moments (GMM).FindingsThe findings report a favourable relationship between firm performance and corporate risk-taking using a sample of firms from an emerging market.Research limitations/implicationsThe effects of these results for management practice and recommendations for further research were examined.Originality/valueWhile this empirical study used a sample focused on a single industry, most previous studies focused on multiple industries. The originality of this study is its analysis of how firm performance affects corporate risk-taking in the Malaysian agriculture sector.

Download Full-text