ESG Reporting: Empirical Analysis of the Influence of Board Heterogeneity from an Emerging Market

Firms are facing pressure to convincingly communicate to stakeholders their environment, society, and corporate governance (ESG) disclosure. In developing countries, where frictions among controlling and non-controlling shareholders are pervasive, the possible dissensus inside boards regarding ESG disclosure remains understudied. We investigate the ways in which boards’ heterogeneity between the interests of controlling groups and the interests of institutional investors influences ESG disclosure of firms in the Latin American context. Using social networks and logit panel data models, we analyze for 2015-17 the probability of ESG disclosure by 124 Chilean listed firms. Our evidence suggests that the influence of controlling shareholders through directorate interlocking has a negative relation with ESG disclosure. Additionally, we observe that the influence of institutional investors on ESG disclosure is not yet critical. Moreover, we find partial evidence of the presence of tension within the boards regarding ESG reporting between the directors that represent controlling shareholders and institutional investors. Considering the importance of institutional investors and the ubiquity directorate interlocking among Latin American’ firms, our results are relevant for regulators involved in advancing the rules of ESG disclosure practices, institutional investors focused on enhancing their ESG investment strategies, and firms engaged in improving the ESG decision-making within their boards.

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A value creation perspective on international business in Latin America: directions for differentiation between emerging market multinationals

Multinational Business Review ◽

10.1108/mbr-03-2020-0058 ◽

2020 ◽

Vol 28 (2) ◽

pp. 157-175 ◽

Cited By ~ 2

Author(s):

Michel Hermans ◽

Armando Borda Reyes

Keyword(s):

Decision Making ◽

Latin America ◽

International Business ◽

Latin American ◽

Value Creation ◽

Emerging Market ◽

Institutional Characteristics ◽

Content Type ◽

A Value ◽

Internationalization Strategies

Purpose This study aims to draw researchers’ attention to the need to differentiate within the emerging market multinational companies (EMNCs) category. This study focuses on international business in Latin America to argue that the region’s specific institutional characteristics have consequences for within-firm decision-making regarding internationalization strategies. Additionally, the study suggests that to develop a more specific understanding of international business in emerging markets, it is important to consider how decision-makers define value and how they can capture such value. Design/methodology/approach The approach used in this study draws on the bathtub analogy used in micro-foundations research in international business. It proposes a multilevel analysis in which micro-level variation in within-firm decision-making is considered, while accounting for the conditioning effects of macro-level contextual factors. Findings The study identifies characteristics of the Latin American institutional context that are relevant to international business strategies and that potentially differ from other emerging market contexts. These include the pendular shifts to and from pro-market economic reform, fragmented government intervention in business, underdeveloped capital markets, low competition among firms and polarized labor markets. The study explains how these characteristics shape the definition of value and firm strategies to capture value in international markets, and provides examples from firms in different industries. Originality/value This study applies a value creation and capture perspective to international business in Latin America, allowing for the simultaneous consideration of macrolevel institutional characteristics and microlevel variation in decision-making regarding internationalization strategies. This perspective not only helps to distinguish Latin American EMNCs from companies from other emerging market contexts, but also explains the considerable variation in the internationalization strategies of firms within the region.

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Institutional investors’ response to improved corporate governance: Evidence from the brazilian capital market

Contaduría y Administración ◽

10.22201/fca.24488410e.2018.1869 ◽

2018 ◽

Vol 64 (4) ◽

pp. 135

Author(s):

Eduardo Schiehll ◽

Melissa Gerhard ◽

Clea Beatriz Macagnan

Keyword(s):

Corporate Governance ◽

Capital Market ◽

Institutional Investors ◽

Stock Exchange ◽

Emerging Market ◽

Agency Cost ◽

Data Set ◽

Listed Firms ◽

Internal Governance Mechanisms ◽

Governance Quality

<p>This study examines whether normative pressures from stock market regulators to improve the governance quality of Brazilian listed firms influence the participation and activism of institutional investors. More specifically, we investigate the association between institutional investor’s ownership and firm’s voluntary adhesion to the São Paulo Stock Exchange (B3) differentiated levels of corporate governance quality. Empirical testing is performed on a ten-year (2002–2011) panel data set from a sample of 439 firms listed on the B3. Our findings suggest that firms in differentiated corporate governance levels, that is, with better level of transparency and commitment to monitoring, are more attractive to institutional investors. We interpret this result as evidence supporting the shareholder activism movement, attributed by several scholars to institutional shareholders. Our study contributes to the governance literature on the firm’s response to normative pressures and the ability of internal governance mechanisms to signal lower agency cost to capital market. Our evidence also contributes to the ongoing discussion about the role and influence of institutional investors in the functioning of capital markets, and more specific in emerging market like Brazil.</p>

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Does underconfidence matter in short-term and long-term investment decisions? Evidence from an emerging market

Management Decision ◽

10.1108/md-07-2019-0972 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Maqsood Ahmad

Keyword(s):

Decision Making ◽

Stock Exchange ◽

Emerging Market ◽

Investment Decision ◽

Investment Decisions ◽

Investment Strategies ◽

Short Term ◽

Content Type ◽

Investment Decision Making

PurposeThe purpose of this article is to clarify the mechanism by which underconfidence heuristic-driven bias influences the short-term and long-term investment decisions of individual investors, actively trading on the Pakistan Stock Exchange.Design/methodology/approachInvestors' underconfidence has been measured using a questionnaire, comprising numerous items, including indicators of short-term and long-term investment decision. In order to establish the influence of underconfidence on the investment decisions in both the short and long run, a 5-point Likert scale questionnaire has been used to collect data from the sample of 203 investors. The collected data were analyzed using SPSS and AMOS graphics software. Hypotheses were tested using structural equation modeling technique.FindingsThis article provides further empirical insights into the relationship between heuristic-driven biases and investment decision-making in the short and long run. The results suggest that underconfidence bias has a markedly negative influence on the short-term and long-term decisions made by investors in developing markets. It means that heuristic-driven biases can impair the quality of both short-term and long-term investment decisions.Practical implicationsThis article encourages investors to avoid relying on cognitive heuristics, namely, underconfidence or their feelings when making short-term and long-term investment strategies. It provides awareness and understanding of heuristic-driven biases in investment management, which could be very useful for finance practitioners' such as investor who plays at the stock exchange, a portfolio manager, a financial strategist/advisor in an investment firm, a financial planner, an investment banker, a trader/broker at the stock exchange or a financial analyst. But most importantly, the term also includes all those persons who manage corporate entities and are responsible for making its financial management strategies. They can improve the quality of their decision-making by recognizing their behavioral biases and errors of judgment, to which we are all prone, resulting in more appropriate investment strategies.Originality/valueThe current study is the first to focus on links between underconfidence bias and short-term and long-term investment decision-making. This article enhanced the understanding of the role that heuristic-driven bias plays in the investment management and more importantly, it went some way toward enhancing understanding of behavioral aspects and their influence on the investment decision-making in an emerging market. It also adds to the literature in the area of behavioral finance specifically the role of heuristics in investment strategies; this field is in its initial stage, even in developed countries, while, in developing countries, little work has been done.

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Do behavioral biases differ among institutional and individual investors?

Accounting and Finance ◽

10.33146/2307-9878-2021-2(92)-61-73 ◽

2021 ◽

pp. 61-73

Author(s):

Roshani Chamalka Gunathilaka ◽

◽

J. M. Ruwani Fernando ◽

Keyword(s):

Decision Making ◽

Institutional Investors ◽

Emerging Market ◽

Investment Decisions ◽

Equation Modeling ◽

Disposition Effect ◽

Individual Investors ◽

Behavioral Biases ◽

The Individual ◽

Overconfidence Bias

Purpose: The purpose of this paper is to investigate how does the behavioral biases differ among the individual and institutional investors based on Colombo Stock Exchange. The study considers the effect of four behavioral biases; overconfidence bias, representativeness bias, disposition effect and herd mentality bias on the financial investment decision making of individual investors and institutional investors. Design / methodology / approach: A questionnaire was utilized to collect the data and the final sample consisted with 104 individual and 71 institutional respondents. The data of 175 investors was analyzed by using Partial Least Square-Structural Equation Modeling approach. Findings: The study revealed that disposition effect make an impact on the investment decisions of both individual investors and institutional investors whereas overconfidence bias has impact only on the individual investors’ investment decisions. Originality: This study is one of the pioneering studies examining the behavioral biases differences of individual and institutional investors’ decision making. Thus, this study expands the existing literature in the field of behavioral finance particularly in emerging market context. In this sense, the findings of this study could draw important inferences for researchers, investors and policy makers to ensure that they make rational investments decisions.

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ESG Disclosure in an Emerging Market: An Empirical Analysis of the Influence of Board Characteristics and Ownership Structure

Sustainability ◽

10.3390/su131910498 ◽

2021 ◽

Vol 13 (19) ◽

pp. 10498

Author(s):

Jaime F. Lavin ◽

Alejandro A. Montecinos-Pearce

Keyword(s):

Latin American ◽

Ownership Structure ◽

Developing Economies ◽

Emerging Market ◽

Gender Diversity ◽

Integrated Reporting ◽

Listed Firms ◽

Corporate Transparency ◽

Corporate Decisions ◽

And Gender

In the context of greater demand for corporate transparency, there is a growing pressure on boards to produce and communicate information to their investors and stakeholders. The current literature on integrated reporting shows that the provision of ESG information is a crucial factor that improves corporate governance by reducing agency problems. This issue is also critical in emerging economies, and particularly among Latin American firms. The concentration, opacity, and lack of evidence about ESG disclosure in less developed financial markets provide a promising environment to study the implications of board heterogeneity and ownership structure on strategic corporate decisions such as the disclosure of ESG indicators in developing economies. Using Tobit panel data models, we study how these factors affect the extent of ESG disclosure by Chilean listed firms. Our main results suggest that a board’s independence and gender diversity positively influence the extent of disclosure of ESG indicators. Our evidence helps firms concerned with strengthening their board’s features, investors that require screening firms’ ESG risk factors, and supports regulators’ decisions on setting norms regarding the extent of disclosure of ESG information by firms.

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Corporate Governance and Stock Price informativeness: Evidence from an Emerging Market

Journal of Accounting and Finance in Emerging Economies ◽

10.26710/jafee.v6i2.1279 ◽

2020 ◽

Vol 6 (2) ◽

pp. 593-605

Author(s):

Muhammad Shahid Rasheed ◽

Shahzad Kouser

Keyword(s):

Corporate Governance ◽

Institutional Investors ◽

Stock Price ◽

Emerging Market ◽

Investor Protection ◽

Cash Flows ◽

Governance Mechanism ◽

Price Informativeness ◽

Controlling Shareholders ◽

Stock Price Informativeness

Emerging markets usually have weaker legal and governance environment. The weaker enforcement of investor protection laws leads to a poor information environment. Using data of all the listed non-financial firms from Pakistan stock exchange (PSX), we document the relationship between corporate governance variables and stock price informativeness. The results from two-stage least squares (2SLS) reveal that controlling shareholders in the form of block holding plays an effective role in improving informativeness. Due to the presence of these block ownership, the institutional investors remain largely short term investors and act passively. This behavior of institutional investors encourages managers to extract more cash flows leading to higher synchronicity. These findings suggest market regulators develop such a corporate governance mechanism that not only ensures investor protection but also advise firms to reduce information asymmetry by better disclosure and transparency. More specifically, in the Pakistani context, traditional corporate governance mechanisms through board room regulations may not improve informativeness, and regulators need to regulate the ownership regulations, including family ownership and controlling shareholders.

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The Extent to Which Obesity and Population Nutrition Are Considered by Institutional Investors Engaged in Responsible Investment in Australia - A Review of Policies and Commitments

Frontiers in Psychology ◽

10.3389/fpsyg.2020.577816 ◽

2020 ◽

Vol 11 ◽

Author(s):

Ella Robinson ◽

Christine Parker ◽

Rachel Carey ◽

Gary Sacks

Keyword(s):

Decision Making ◽

Institutional Investors ◽

Social Issues ◽

Investment Decision ◽

Investment Decisions ◽

Relevant Information ◽

Annual Reports ◽

Investment Strategies ◽

Corporate Accountability ◽

Responsible Investment

IntroductionResponsible investment (RI), in which environmental, social and governance (ESG) considerations are incorporated into investment decision making, is a potentially powerful tool for increasing corporate accountability and improving corporate practices to address broad societal challenges. Whilst the RI sector is growing, there is limited understanding of the extent to which pressing social issues, such as obesity and unhealthy population diets, are incorporated within RI decision making. This study aimed to investigate the extent to which obesity prevention and population nutrition are considered by Australian institutional investors engaged in responsible investment.MethodsA desk-based review was conducted of investment approaches of prominent Australian asset managers and superannuation funds identified as engaged in responsible investment. Relevant information on the incorporation of ESG issues related to obesity and population nutrition was extracted for each investor, drawing on websites, published policy documents and annual reports. Strategies were categorized as: (1) negative/exclusionary screening; (2) positive/best-in-class screening; (3) norms-based screening; (4) ESG integration; (5) sustainability-themed investing; (6) impact/community investing; and (7) corporate engagement and shareholder action. These strategies were compared across investors and by themes related to obesity and population nutrition.ResultsEighteen of the 35 investors indicated that they applied investment strategies that considered issues related to obesity and population nutrition. The most commonly identified strategy was ESG integration (n = 12), followed by sustainability-themed investing (n = 6), and positive screening (n = 4). The ways in which obesity and population nutrition were considered as part of these approaches included relatively high-level general health considerations (n = 12), considerations around the healthiness of food company product portfolios (n = 10), and consideration of specific company nutrition policies and practices (n = 4). The specificity and depth to which RI strategies were disclosed varied.ConclusionThere is significant potential for investment decisions to contribute to efforts to address key social issues, such as obesity and unhealthy diets. Some institutional investors in Australia have recognized the potential importance of incorporating obesity- and population nutrition-related issues into decision-making processes. However, the extent to which these considerations translate into investment decisions and their impact on companies in the food sector warrant further exploration.

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Are the shareholding and trading behaviors of diverse investors affected by the relaxation of day trading?

PLoS ONE ◽

10.1371/journal.pone.0250121 ◽

2021 ◽

Vol 16 (4) ◽

pp. e0250121

Author(s):

Wan-Hsiu Cheng ◽

Yensen Ni ◽

Ting-Hsun Ho ◽

Chia-Jung Chiang ◽

Paoyu Huang ◽

...

Keyword(s):

Institutional Investors ◽

Trading Volume ◽

Stock Exchange ◽

Individual Investors ◽

Investment Strategies ◽

High Turnover ◽

Listed Firms ◽

Day Trading ◽

Taiwan Stock Exchange ◽

Foreign Institutional Investors

The day trading in Taiwanese stock market expands considerably at the beginning of 2016, which increases the transactions of stocks consequently and sparks our interest in exploring the issue of day trading. In this study, we use the data of Taiwan Stock Exchange listed firms to investigate whether the day trading volume over total trading volume (hereinafter referred to as the day trading ratio) and the turnover ratio enhanced by the increase of day trading volume would affect the shareholding and trading behaviors of diverse institutional and individual investors. Unquestionably, we bring out several impressive findings. First, foreign institutional investors would not prefer holding or trading the stocks with high day trading ratios, whereas individual investors would prefer holding these kinds of stocks. We infer that this finding might result from the fundamental and the speculative concerns of these various investors. Second, domestic institutional investors and security dealers would prefer trading the stocks with high turnover ratios, but foreign institutional investors still lack of interest in trading these stocks, implying that the investment strategies would be dissimilar among various institutional investors. Since foreign institutional investors are regarded as the successful institutional investors in Taiwan, we argue that our revealed results may help market participants trace the behaviors of diverse investors, especially the foreign institutional investors, after day trading relaxation in Taiwan.

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On The Impact Of Family Versus Institutional Blockholders On Dividend Policy

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v31i4.9320 ◽

2015 ◽

Vol 31 (4) ◽

pp. 1329 ◽

Cited By ~ 2

Author(s):

Raoudha Djebali ◽

Amel Belanes

Keyword(s):

Institutional Investors ◽

Dividend Policy ◽

Ownership Concentration ◽

Independent Directors ◽

Dividend Payout ◽

Controlling Shareholders ◽

Listed Firms ◽

Empirical Results ◽

Large Panel ◽

The Impact

This paper investigates the effect of not only the controlling shareholders but also their identity on dividend policy. For a large panel of French firms during the period 2006-2010, we find that the dividend payout ratio increases with the ownership concentration. However, this result changes with the identity of the largest shareholder. Family-controlled firms are more tempted to distribute lower dividends while firms dominated by institutional investors likely distribute higher dividends. Empirical results also reveal that firms with more independent directors are associated with higher dividend payout in contrast to US cross-listed firms.

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Pricing models of shares of Russian companies and their practical application

Voprosy Ekonomiki ◽

10.32609/0042-8736-2019-3-48-76 ◽

2019 ◽

pp. 48-76 ◽

Cited By ~ 1

Author(s):

Alexander E. Abramov ◽

Alexander D. Radygin ◽

Maria I. Chernova

Keyword(s):

Stock Market ◽

Institutional Investors ◽

Factor Model ◽

Investment Strategies ◽

Pricing Models ◽

Foreign Portfolio Investment ◽

Market Portfolio ◽

Stock Market Performance ◽

Long Time ◽

Russian Stock Market

The article analyzes the problems of applying stock pricing models in the Russian stock market. The novelty of the study lies in the peculiarities of the methodology used and the substantive conclusions on the specifics of the influence of fundamental factors on the pricing of shares of Russian companies. The study was conducted using its own 5-factor basic pricing model based on a sample of the most complete number of issues of shares of Russian issuers and a long time horizon, from 1997 to 2017. The market portfolio was the widest for a set of issuers. We consider the factor model as a kind of universal indicator of the efficiency of the stock market performance of its functions. The article confirms the significance of factors of a broad market portfolio, size, liquidity and, in part, momentum (inertia). However, starting from 2011, the significance of factors began to decrease as the qualitative characteristics of the stock market deteriorated due to the outflow of foreign portfolio investment, combined with the low level of development of domestic institutional investors. Also identified is the cyclical nature of the actions of company size and liquidity factors. Their ability to generate additional income on shares rises mainly at the stage of the fall of the stock market. The results of the study suggest that as domestic institutional investors develop on the Russian stock market, factor investment strategies can be used as a tool to increase the return on investor portfolios.

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