Does political connectedness determine stock returns in Indonesia?

This study aims to investigate the influences of political connection on stock returns in Indonesia. We develop a comprehensive database of firm-level political connectedness among Indonesian firms from 2010 to 2017. Our sample is non-financial Indonesian listed firms that are selected in the Kompas 100 index for 16 consecutive periods, with a total of 448 firm-year observations. This study employs panel data regressions to estimate this relationship, then mitigate possible endogeneity issues using two-stage least square with fixed-effects. The finding of this study shows that political connectedness is associated with lower stock returns, more prominently in agriculture and consumer goods industries. Moreover, state-owned enterprises are more likely to earn lower stock returns. In summary, our result suggests that investing in politically connected firms could be a risky investment. The finding holds using alternative estimation methods

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

International Journal of Social Economics ◽

10.1108/ijse-11-2020-0769 ◽

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.

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State Control, Marketization, And Firm Value: Evidence From China

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v30i6.8875 ◽

2014 ◽

Vol 30 (6) ◽

pp. 1577 ◽

Cited By ~ 1

Author(s):

Kun Su ◽

Rui Wan

Keyword(s):

Panel Data ◽

Firm Value ◽

State Control ◽

Negative Effects ◽

Firm Level ◽

Listed Firms ◽

The Government ◽

High Degree

Using a firm-level panel data of Chinese listed firms, this paper examines the effects of state control on firm value and the different impacts that have under different degree of marketization deeply. The results show: compared with non-state controlled firms, state controlled firms are imposed by much policy burden and have more serious tunneling or expropriation behaviors. Therefore, firm values in state controlled firms are lower than in non-state controlled firms. For state controlled firms, the lower the government administrative ranks, the more serious the intervention or expropriation behaviors imposed by government, and thus the lower the firm value. Compared with low marketization regions, the negative effects of state control and low government administrative rank control on firm value is relatively smaller in regions with high degree of marketization.

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The determinants of profitability in Sharia-compliant corporations: evidence from Jordan

Journal of Islamic Accounting and Business Research ◽

10.1108/jiabr-05-2016-0055 ◽

2019 ◽

Vol 10 (4) ◽

pp. 546-564 ◽

Cited By ~ 1

Author(s):

Nizar Mohammad Alsharari ◽

Turki Raji Alhmoud

Keyword(s):

Panel Data ◽

Voluntary Disclosure ◽

Fixed Effects ◽

Management Style ◽

Least Square ◽

Return On Assets ◽

Content Type ◽

Return On Equity ◽

Independent Variables ◽

Internal And External Factors

Purpose The purpose of this paper is to examine the determinants of profitability of 28 Sharia-compliant corporations in Jordan over the three-year period of 2013-2015. Design/methodology/approach The two-stage least square (2SLS) regression analysis with fixed effects was conducted using two measures of profitability, namely: return on assets and return on equity. The empirical data were collected from 28 Sharia-compliant corporations in Jordan over the study period. A variety of internal and external factors was used to determine profitability. Findings In general, this analysis of the determinants of profitability for Sharia-compliant corporations confirmed previous findings. Regression findings revealed that previous year profitability, debt ratio, organizational structure, the size of the audit firm and voluntary disclosure to be important determinants of profitability of Sharia-compliant corporations in Jordan from 2013 to 2015. The independent variables of firm size, ownership ratio greater than 5%, liquidity ratio, percentage of non-Jordanian ownership or the age of the firm were not found to significantly influence the profitability of the corporations studied. Research limitations/implications The authors determined that the independent variables selected, with few exceptions, behaved according to expectations. Moreover, the current literature on the influence of management on performance, and thus, profitability, does not consider the philosophy under which business is conducted (a limitation with respect to the type of business conducted). For example, Sharia-compliant and non-Sharia-compliant firms operate under different sets of principles and rules. This variance in business philosophies may have an important bearing on management style, an aspect that has been neglected in the organizational management literature. The panel data from a three-year period was insufficient to validate the consistency of the results; future researchers may increase the length of the study periods to confirm results and increase the robustness of the data collection method. Practical implications The findings from the study have implications that may be functional for businesses, investors and policymakers in their focus on the Sharia-compliant business sector in Jordan. The factors influencing profitability may inform the setting of regulatory policy designed to stabilize and sustain the performance of Sharia-compliant corporations more broadly. Originality/value This study contributes to the growing body of literature on Islamic finance, and can be considered one of a very few that have examined the internal and external determinants of the profitability of Sharia-compliant corporations in a developing country such as Jordan, using panel data.

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Bias correction methods for dynamic panel data models with fixed effects

International Journal of Applied Mathematical Research ◽

10.14419/ijamr.v6i2.7774 ◽

2017 ◽

Vol 6 (2) ◽

pp. 58

Author(s):

Mohamed Abonazel

Keyword(s):

Panel Data ◽

Fixed Effects ◽

Generalized Method Of Moments ◽

Dynamic Panel Data ◽

Estimation Methods ◽

Time Dimension ◽

Dynamic Panel ◽

Cross Sectional ◽

Cross Sectional Dimension ◽

Ls Estimator

This paper considers the estimation methods for dynamic panel data (DPD) models with fixed effects, which suggested in econometric literature, such as least squares (LS) and generalized method of moments (GMM). These methods obtain biased estimators for DPD models. The LS estimator is inconsistent when the time dimension (T) is short regardless of the cross-sectional dimension (N). Although consistent estimates can be obtained by GMM procedures, the inconsistent LS estimator has a relatively low variance and hence can lead to an estimator with lower root mean square error after the bias is removed. Therefore, we discuss in this paper the different methods to correct the bias of LS and GMM estimations. The analytical expressions for the asymptotic biases of the LS and GMM estimators have been presented for large N and finite T. Finally; we display new estimators that presented by Youssef and Abonazel [40] as more efficient estimators than the conventional estimators.

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The effect of Islamic values on voluntary corporate governance disclosure

Journal of Islamic Accounting and Business Research ◽

10.1108/jiabr-09-2015-0046 ◽

2017 ◽

Vol 8 (2) ◽

pp. 182-202 ◽

Cited By ~ 20

Author(s):

Waleed M. Albassam ◽

Collins G. Ntim

Keyword(s):

Corporate Governance ◽

Fixed Effects ◽

Future Research ◽

Government Ownership ◽

Firm Level ◽

Content Type ◽

Listed Firms ◽

Alternative Measures ◽

Islamic Values ◽

Practical Implications

Purpose The study aims to examine the effect of Islamic values on the extent of voluntary corporate governance (CG) disclosure. In addition, the authors investigate the effect of traditional ownership structure and CG mechanisms on the extent of voluntary CG disclosure. Design/methodology/approach The authors distinctively construct Islamic values and voluntary CG disclosure indices using a sample of 75 Saudi-listed firms over a seven-year period in conducting multivariate regressions of the effect of Islamic values on the extent of voluntary CG disclosure. The analyses are robust to controlling for firm-level characteristics, fixed-effects, endogeneities and alternative measures. Findings The authors find that corporations that depict greater commitment towards incorporating Islamic values into their operations through high Islamic values disclosure index score engage in higher voluntary CG disclosures than those that are not. Additionally, the authors find that audit firm size, board size, government ownership, institutional ownership and the presence of a CG committee are positively associated with the level of voluntary CG disclosure, whereas block ownership is negatively associated with the extent of voluntary CG disclosure. Practical implications The study has clear practical implications for future research, practice and broader society by demonstrating empirically that corporations that voluntarily incorporate Islamic values into their operations are more likely to be transparent about their CG practices and thereby providing new crucial insights on the effect of Islamic values on voluntary CG compliance and disclosure. Originality/value This is the first empirical attempt at explicitly examining the effect of Islamic values on the extent of voluntary CG disclosure. The authors also offer evidence on the effect of traditional CG and ownership structures on the extent of voluntary CG disclosure.

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Firm-level agreements, employment strategies and temporary workers

Employee Relations ◽

10.1108/er-01-2019-0062 ◽

2020 ◽

Vol 42 (1) ◽

pp. 194-212

Author(s):

Saverio Minardi

Keyword(s):

Fixed Effects ◽

Selection Process ◽

Temporary Employment ◽

Least Square ◽

Temporary Workers ◽

Firm Level ◽

Data Set ◽

Content Type ◽

Collective Agreements ◽

The Impact

Purpose The purpose of this paper is to investigate the impact of two-tier firm-level collective agreements on firms’ propensity to use temporary employment, accounting for the process of self-selection of firms into different bargaining levels in the Italian context. It further examines which firm-level characteristics drive this process of selection. Design/methodology/approach The empirical analysis uses a panel data set of Italian firms for the years 2005, 2007, 2010 and 2015. Estimations are produced and compared through ordinary least square regression, random-effects and fixed-effects models. Findings Results show that enterprises adopting two-tier firm-level agreements (TTFA) are associated with lower levels of temporary workers. However, a longitudinal analysis suggests that introducing a TTFA does not impact firms’ propensity to employ temporary workers. This novel finding highlights the presence of a selection process based on firm-level time-constant characteristics. The paper argues that these characteristics refer to management orientation toward high-road rather than low-road employment strategies. Further evidence is brought in support of this claim, showing that firms’ propensity toward the provision of training for their labor force partially explain the process of selection. Originality/value The study is the first to analyze the impact of secondary-level collective agreements on firms’ reliance on temporary employment, offering new evidence on the causes of the expansion of temporary employment. It further highlights the relevance of employers’ strategies in shaping the impact of the bargaining structure.

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Stock returns and volatility dynamics in China

China Finance Review International ◽

10.1108/cfri-08-2014-0041 ◽

2015 ◽

Vol 5 (2) ◽

pp. 103-131 ◽

Cited By ~ 6

Author(s):

David G McMillan ◽

Pornsawan Evans

Keyword(s):

Stock Returns ◽

Portfolio Management ◽

Stock Markets ◽

Negative Relationship ◽

World Trade Organisation ◽

State Ownership ◽

Lower State ◽

Firm Level ◽

Content Type ◽

Listed Firms

Purpose – The purpose of this paper is to examine the nature of equity ownership of state-owned enterprises (SOEs) for over 2,000 listed firms in China. The paper examines both the pattern of state ownership and the dynamics of stock returns and volatility. Firms under the control of SOEs dominate the Chinese stock markets and currently account for over three-quarters of total market capitalisation. Central SOEs are focused in strategic industries, while Local SOEs concentrate on pillar industries relating to consumer goods and services. Design/methodology/approach – The authors obtain firm-level data from the Shanghai and Shenzhen stock markets and using panel estimation techniques examine the dynamics of returns, volatility and their relationship. Findings – The authors report an increase in state control among listed firms compared to earlier reported figures. This is contradictory to the expectation of a lower state influence following China joining of the World Trade Organisation in 2001. In examining the behaviour of stock returns the authors find evidence of daily and monthly autocorrelations that are larger and of a different sign to that reported for western markets. The authors also report evidence of volatility persistence but little evidence of volatility asymmetry, again in contrast to that often reported for other markets. Finally, the authors find evidence of either no or a negative relationship between returns and volatility (risk) that differs from our usual view of risk aversion. Originality/value – It is hoped, knowledge of these dynamics will increase the understanding of the Chinese equity market, which in turn is important for those engaged in international portfolio management and micro-structure modelling.

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Analisis Pengaruh Variabel-Variabel Makroekonomi terhadap Tingkat Pengembalian di Pasar Modal Periode 2000 -2011 dengan Membandingkan Hasil Estimasi OLS, GLS dan MLE

Binus Business Review ◽

10.21512/bbr.v5i1.1215 ◽

2014 ◽

Vol 5 (1) ◽

pp. 267

Author(s):

Sari Minjari Damayanti

Keyword(s):

Stock Market ◽

Stock Returns ◽

Consumer Price Index ◽

Ordinary Least Squares ◽

Least Square ◽

Rate Of Return ◽

Estimation Methods ◽

Estimation Accuracy ◽

Macroeconomic Variables ◽

Macro Variables

The factors in macroeconomic gives enormous influence on the fluctuation rate of return on stocks that is reflected in the stock price movement in the stock market. Movements in excess of the normal state, such as those caused by the global economic crisis, from the macro variables will create specific shocks on the capital markets, which will affect the value of the return on stocks in the capital market. To determine the effect of the factors or macroeconomic variables on the return of the index shares on BEI, empirical tests are accurately performed on these variables. This study has two main objectives: first to test how much the influence of macroeconomic variables on the return of the shares in the Indonesian Stock Exchange (BEI). Second, empirical research testing of variables using three different estimation methods, namely, Ordinary Least Squares (OLS), Generalized Least Square (GLS) and Maximum Likelihood Estimation (MLE) to find out how much the estimation accuracy of the three methods. The empirical result shows that there is a significant relationship between composite stock returns BEI and three macroeconomic variables, the consumer price index (inflation rate), exchange rate and interest rate of SBI. These results indicate that the three macro variables that affect the rate of return on the stock market.

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Analysis of capital structure stability of listed firms in China

China Finance Review International ◽

10.1108/cfri-05-2018-0044 ◽

2019 ◽

Vol 10 (2) ◽

pp. 213-228 ◽

Cited By ~ 4

Author(s):

Kelvin Henry Kyissima ◽

Gong Zhang Xue ◽

Thales Pacific Yapatake Kossele ◽

Ahmed Ramadhan Abeid

Keyword(s):

Panel Data ◽

Capital Structure ◽

Fixed Effects ◽

Structure Stability ◽

Individual Investors ◽

Content Type ◽

Corporate Managers ◽

Listed Firms ◽

Financing Decisions ◽

Corporate Capital Structure

Purpose The purpose of this paper is to analyze the corporate capital structure stability of listed firms in China during the period 1990–2013. Design/methodology/approach The study uses panel data from a sample of 716 firms that have been listed in China for at least 15 years. A fixed-effects panel data regression model with time effects is used in the estimation. Findings The findings show that size, profitability and investment opportunities have a significant influence on capital structure, whereas the tangibility of assets is not found to be significant. Few industries show significance in explaining differences and variation in leverage ratios. Social implications It is recommended by this study that corporate managers of listed firms in China should consider leverage ratios variation while choosing the capital structure. Originality/value This study can be helpful in assisting companies to make financing decisions and setting up strategies relevant in their growth and profitability. The study will also have a significant assistance to bring to light corporate issues to policy makers, especially in the areas of both equity and debt financing, particularly the bond market. To the society, this study will show the nature of Chinese-listed companies, and it can assist individual investors in making decisions regarding companies in which they hold investments and in making meaningful comparisons with other companies. The paper also aims at contributing to the existing literature on the empirical study on capital structure.

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The Effect of Institutional Ownership on Firm Performance: Evidence from Jordanian Listed Firms

International Journal of Economics and Finance ◽

10.5539/ijef.v7n12p97 ◽

2015 ◽

Vol 7 (12) ◽

pp. 97 ◽

Cited By ~ 4

Author(s):

Dana AL-Najjar

Keyword(s):

Firm Performance ◽

Panel Data ◽

Fixed Effects ◽

Panel Data Analysis ◽

Institutional Ownership ◽

Nominal Exchange Rate ◽

Risk Level ◽

Lagrangian Multiplier ◽

Management Decisions ◽

Listed Firms

Last decade witnessed successive corporate scandals for various firms that points to a failure of corporate control. Expertize and interested parties all over the world proposed to focus on monitoring the management decisions to reduce such failure in firms. Therefore, the structure of ownership became more and more as an important issue to increase both efficiency and effectiveness of management decisions. This study seeks to investigate whether institutional ownership affects the firm’s performance for one of the emerging markets; Jordan. Firm’s performance is measured through applying two accounting measures Return on Assets (ROA) and Return on Equity (ROE), with 6 explanatory variables. Our sample is unique and contains 82 non-financial Jordanian firms listed at Amman Stock Exchange (ASE) for the period of 2005-2013, by applying panel data regression analysis. It depends on building three OLS models: Pooled, Fixed Effects Model and Random Effects Model. In addition, a test for Breusch and Pagan Lagrangian multiplier (LM), and Hausamn test to choose among the three models which model is most suitable for our data. A main finding of the panel data analysis is that; fixed effect regression is the most convenient model. As a result, there is no strong evidence that there is a relationship between both institutional ownership and firm performance for Jordanian listed firms. This conclusion can be due to the fact that institutional ownership has its own pros and cons, therefore, their existence and influence could affect materially the types and risk level of investment decisions taken by the management which in return will affect the firm’s performance as a whole. ociation with external reserve and net credit to the economy. Based on these results; it is recommended that, the Nigeria government should designed programmes and incentives to boost industrial capacity utilization in the country. Markets determine nominal exchange rate should prevail in the economy. The country should regulate its foreign reserve policy by setting a threshold, above which excess deposit should be plough back to the domestic economy inform of investments rather than support excessive importation.

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