Description:
This paper tests both the short and long term relationship between the real GDP, the equity amounts outstanding, the corporate bond amounts outstanding and bank credit to the private sector for five emerging markets. In particular, the finance-growth nexus is analysed with data collected from China, Indonesia, the Philippines, South Korea and Thailand between 1994 and 2009 using panel VECM analysis. The cointegration technique is then used to examine the long run behavior based on the assumption that all the variables involved have the same degree of integration and the error correction model (ECM) and the Wald test are employed to determine the direction of causality. The empirical results suggest the existence of a stable relationship in the direction from economic growth to financial market development that is consistent with the information asymmetry arguments for emerging markets. The findings have implications for financial and economic policy makers and enable these stakeholders to determine which sectors should be encouraged to achieve overall economic growth and development. The results are also useful to investors as they show the level of the intensity of information asymmetry on which these relationships might vary in both the short and long run.
Description:
Purpose – The purpose of this study is to examine whether the influence of block ownership on firm performance depends on the identity of the largest investor. Design/methodology/approach – The authors analyse the data for New Zealand companies for the period from 2002 to 2007 and develop multiple regression models which test the influence of block ownership on firm performance subject to the identity of the investor. A two-stage least square approach is employed to test the effect of possible reverse causality between block ownership and firm performance on the relationship found in multiple regression models. Findings – The authors find that the concentrated ownership has a positive, albeit decreasing, association with firm performance. This relationship is conditioned on the identity of the largest investor. Those companies whose block investors were financial institutions performed better than their peers. The superior influence of financial investors on corporate performance did not disappear even when the endogeneity of this relationship was accounted for. Originality/value – The main contribution of this paper is the finding of a differential influence of various identities of block investors on firm performance. It questions the role that some domestic block investors play in the governance of New Zealand companies and the reason why the financial system has allowed corporate entities to be the main shareholders of the majority of firms when they underperform relative to their peers.
Description:
The design of consistent classifiers to forecast credit-granting choices is critical for many financial decision-making practices. Although a number of artificial and statistical techniques have been developed to predict customer insolvency, how to provide an inclusive appraisal of prediction models and recommend adequate classifiers is still an imperative and understudied area in credit default prediction (CDP) modeling. Previous evidence demonstrates that the ranking of classifiers varies for different criteria with measures under different circumstances. In this study, we address this methodological flaw by proposing the simultaneous application of support vector machine and probabilistic neural network (PNN)-based CDP algorithms, together with frequently used high-performance models. We fill the gap by introducing a set of multidimensional evaluation measures combined with some novel metrics that are helpful in discovering unseen features of the model’s performance. For effectiveness and feasibility purposes, six real-world credit data sets have been applied. Our empirical study shows that the PNN model is more robust than its rivals, and traditional performance evaluations are more or less consistent with their original counterparts. With these contributions, therefore, our investigations offer several advantages to practitioners of financial risk management.
Description:
National Natural Science Foundation of China [grant number 719010481] Liaoning Provincial Federation Social Science Circles of China [grant number 2019lsljdwtkt-008] Ministry of Education Project of Humanities and Social Sciences in China [grant number 18YJC790171]
Description:
We examine the pricing difference of Green Bonds (GB) and conventional bonds (CBs) in capital markets worldwide. Credit spread is used to observe whether investors would like to pay a premium for GBs over CBs. This study uses panel data regression with hybrid model to analyse daily observations over the period 2016 to 2017. We employ Option-Adjusted spread (OAS) to measure the credit spreads of bonds while controlling for bond specific, macroeconomic and global factors that influence the spread. With the hybrid model used in the panel data analysis, we were able to capture the fixed-effects of variables in a random effect model. We find that GBs are traded at a premium of 63 basis points (BPS), compared with a comparable corporate bond issue. We find that the green label provides issuers an incentive to raise funds through issuing GBs while providing investors an opportunity to diversify their investments returns. Our findings provide several implications to the major stakeholders driving the GB market to scale up the market to finance the required level of global green investment needs. We stress an urgent need to support the growth of the GB market to achieve sustainable development through mitigating climate change challenges. Abbreviation GB: Green Bond; CB: Conventional Bond; YS: Yield Spread; BPS: Basis Points; OAS: Option-Adjusted Spread; PCSE: Panels Corrected Standard Errors; CPI: Consumer Price Index; GBPs: Green Bond Principles; CBS: Climate Bond Standard.
Description:
Highlights► We examine the nexus between the financial system and tax revenue collection in Malaysia. ► We found that unidirectional causality running from stock market to direct tax revenue. ► The impact of the financial system on direct tax revenue is more profound in the short run than in the long run. ► Banking and non-banking financial activities play a vital role in determining direct tax revenue. ► Tax incentives contributed more towards increased revenue collection from stock market than corporate debt market. We provide new empirical evidence on the relationship among direct tax revenue and banking and non-banking activities in Malaysia's financial system, utilising monthly data for the period 1997–2008. The existence of the long run equilibrium relationship between tax revenue and the financial system was investigated using the autoregressive distributive lag (ARDL) bounds testing approach to cointegration. We find a long-run equilibrium relationship between the financial system and tax revenue in Malaysia. The short-run dynamic relationship between direct tax revenue and financial system was investigated using the vector error correction model (VECM). The estimated ECTt−1 coefficient indicates a relatively fast speed of adjustment from short-run disequilibrium to long-run equilibrium. The Granger causality tests reveal unidirectional causality running from stock market towards direct tax revenue, indicating that an increase in stock market activities is likely to improve the collection of direct tax revenue. Overall, we show that the impact of the financial system on direct tax revenue is more profound in the short run than in the long run.
Description:
Using public, private and subsidiary acquisitions, we examine whether abnormal returns to bidders depend on the organisational form of the target acquired. The evidence supports two main hypotheses: (i) bidders on private and subsidiary targets earn higher abnormal returns than bidders on public entities and (ii) bidders on private targets earn higher abnormal returns when the method of payment is stock. Acquisitions of unlisted public targets, privately negotiated acquisitions of private targets and acquisitions of subsidiaries from listed parents for cash are associated with higher abnormal returns. •Wealth effect of acquisition announcements depends on target's organisational form.•Acquirers of private and subsidiary targets earn higher abnormal returns.•Bid and firm characteristics systematically influence the market reaction.•Influence of break fees on excess return differs across target categories.•Acquisitions of private targets during GFC are rewarded by the capital market.
Description:
•Wealth effect of Chinese PE announcements can be seen on application, approval, and completion.•No significant price response on announcements of withdrawal or rejection of applications.•Market discount, proceeds from private placements, and private-institutional buying systematically influence market reaction.•Influence of announcement effect differs across changes in ownership of investor categories.•Results are consistent with the information and ownership structure hypotheses. In response to the China Securities Regulatory Commission's regulation of private equity placements (PEP) in 2006, this study investigates the impact of the announcements of PEP applications, withdrawals, rejections, approvals, and completions on the returns of the firms that issue private equity (PE) and the factors that influence market reactions to these announcements. The results show that issuing firms experience stock price responses only to the announcements of PE applications, approvals, and completions. The announcement effect is positively related to the market discount, proceeds from private placements, and private institutional buying and ownership changes; and negatively related to government or government institutional buying and changes in the ownership of management buyers.
Description:
Purpose: The purpose of this paper is to empirically investigate the impact of two monitoring mechanisms: family ownership (FO) and financial reporting quality (FRQ) on investment efficiency (IE) over the period of 2007–2014 for listed firms on the Pakistan Stock Exchange. Design/methodology/approach: The authors employ two-dimensional pooled OLS cluster at the firm and year level, two-stage least square regression and feasible generalized lease square regression regression methods. Findings: The findings suggest that higher FRQ and FO are associated with higher IE. Further, the authors report that higher FRQ and FO mitigate over- and under-investment. The impact of FRQ on IE is stronger (weaker) for family-controlled businesses. The results for these particular estimates are robust for alternative estimation techniques and measures of FRQ and FO. Originality/value: The study draws on both agency and behavioral agency theories and therefore contributes to the literature in the following ways. First, the authors examine a relationship between FRQ and IE. Second, the authors test the impact of FO on IE. Third, the authors test the moderating impact of FO on the relationship between FRQ and the IE of family and non-family firms in relatively less regulated emerging market.