Issue #4 (Volume 19 2022)
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ReleasedDecember 27, 2022
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Articles25
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85 Authors
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130 Tables
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37 Figures
- anchoring bias
- annual statement
- ARDL
- asymmetric volatility
- asymmetry
- big-cap companies
- Bitcoin
- board gender diversity
- board’s composition
- bond
- borrowings
- BRICS
- capital market
- capital structure
- CAPM
- China
- clustering
- commodities
- commodity
- corporate governance
- corporate governance (CG)
- corporate social responsibility (CSR)
- corporate transparency
- cost of debt
- cost of equity
- cryptocurrency
- day of the week effect
- deadline
- derivatives
- digital financial literacy
- discretionary accruals
- dividend payout ratio
- earnings management
- earnings quality
- earnings response coefficient (ERC)
- econophysics
- efficient
- EGARCH model
- energy security
- environmental development
- equity market
- ESG
- event studies
- exchanges
- expected returns
- family-controlled firms
- FDI
- female directors
- FII
- finance
- financial assets
- financial behavior
- financial crises
- financial development
- financial instruments
- financial knowledge
- financially healthy firms
- financial performance
- financial reporting
- financial technology
- financial vulnerability
- firm growth
- foreign investment
- foreign investor
- forex
- FPI
- GARCH models
- Geweke test
- Granger causality
- IDX
- impulse response analysis
- index
- Indonesia
- inefficient investment
- information accounting
- interest rate
- internal capital markets
- internal control
- investor sentiment
- investor sophistication
- JASICA
- leverage
- market response
- market trader
- model comparison
- momentum
- natural gas
- network analysis
- over-investment
- pandemic
- panel approach
- panel data
- payment periods
- persistence
- price extremes
- principal component analysis
- pulp & paper companies
- R&D activities
- R&D investments
- random walk
- related party transactions
- remittances
- research and development
- return time series
- Rényi entropy
- savings
- SDGs
- sectoral indices
- SGX
- Shannon entropy
- short-term investments
- sovereign wealth fund
- stakeholder
- stock
- stock crash
- stock market
- stock markets
- stock market topology
- structural breaks
- sustainability
- TADAWUL
- TASI
- timeliness
- time series
- Tunisia
- under-investment
- univariate Generalized Autoregressive Conditional Heteroscedasticity models
- variance decomposition analysis
- vector autoregression
- volatility
- weak form
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Market efficiency and global issues: A case of Indonesia
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 1-13
Views: 1041 Downloads: 226 TO CITE АНОТАЦІЯThe efficient market hypothesis assumes that the stock prices fully reflect all relevant information. Under the weak form, the future prices are independent of current prices or in the other words, they follow the random walk hypothesis. Global issues tend to have an impact on capital markets around the world. Therefore, the objective of this study is to assess the effect of global issues on the movements of expected returns in the Indonesian capital market from January 1, 2022, to June 30, 2022. The sample of 755 listed firms is used to test whether the expected returns have a random pattern during the observation period. The results of runs tests and variance ratio test show that the expected return movements are not random. On those results, the weak form of the efficient market hypothesis is rejected, and it can be concluded that the capital market in Indonesia for this period is inefficient. The findings of this study imply that the information about global issues does not affect the market. The success of the Indonesian government’s strategy in dealing with global issues (including the Covid-19 pandemic) in the form of a vaccination program and also followed by excellent fiscal and monetary policies has led to more predictable returns in the capital market. Moreover, investors can set their portfolios to get extraordinary returns as the market is more predictable.
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Cost of capital and firm value: Evidence from Indonesia
Augustina Kurniasih, Muhamad Rustam , Heliantono , Endri Endri
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.02
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 14-22
Views: 1235 Downloads: 676 TO CITE АНОТАЦІЯCost and capital structure are needed to evaluate the feasibility of the investments made by a company. This study aims to estimate and analyze the effect of the component of cost of capital (COC) and capital structure (CS) on firm value. Pulp & Paper companies listed on the Indonesia Stock Exchange (IDX) became the research sample for the 2013–2020 period. The research method applied is a moderation regression analysis approach. The empirical findings of the study prove that firm value is not influenced by the cost of debt (COD), while the cost of equity (COE) has a negative effect, and COC is positive. COC is a combination of the use of debt and equity, modeling by adding a CS variable as a moderating variable; this leads to the conclusion that COD and COE have a negative effect on firm value, whereas COC and CS have a positive effect. The finding of the role of CS as a moderating variable reveals that CS is a quasi-moderator variable and plays a role in increasing.
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A comparative analysis of the volatility nature of cryptocurrency and JSE market
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 23-39
Views: 761 Downloads: 296 TO CITE АНОТАЦІЯDespite the rapid growth of developing markets, aided by globalization, comparative studies of cryptocurrency and stock market volatility have focused on the developed markets and neglected developing ones. In this regard, this study compares cryptocurrency volatility with that of the Johannesburg Stock Exchange (JSE), a developing market. GARCH-type models are applied to daily log returns of Bitcoin, Ethereum, and the FTSE/JSE 4O in two ways. Firstly, the models are applied directly; secondly, structural breaks are tested and accounted for in the models. The sample period was from September 18, 2017, to May 27, 2021. The results show higher volatility and higher volatility persistence in cryptocurrency than in the JSE market. They also show that persistence is overestimated for cryptocurrencies when structural breaks are not accounted for. The opposite was true for the JSE.
Moreover, the two cryptocurrencies were found to have close to identical volatility plots that differ from that of the JSE. High volatility periods of cryptocurrency also did not coincide with that of JSE and those of JSE did not coincide with the cryptocurrency ones. There is also evidence of an inverse leverage effect in cryptocurrency, which opposes the normal leverage effect of the JSE market. -
The impact of ESG inclusion on price, liquidity and financial performance of Indian stocks: Evidence from stocks listed in BSE and NSE ESG indices
Suresha B., Srinidhi V. R.
, Dippi Verma
, Manu K. S.
, Krishna T. A.
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.04
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 40-50
Views: 1137 Downloads: 308 TO CITE АНОТАЦІЯIn recent years, investors have perceived that Environmental, Social, and Governance (ESG) practices significantly increase the value of companies’ stocks. This study investigates the impact of ESG inclusion on the price, liquidity and financial performance of stocks listed in the Indian ESG indices. Two major Indian benchmark ESG Indices, the BSE100 ESG and Nifty 100 ESG, were considered for the study. A total sample of 64 firms from the BSE100 ESG index and 86 firms from the Nifty100 ESG index were selected. The market model of the event study methodology was employed to measure AAR and CAAR and to demonstrate the effect before and after the inclusion of the stocks in the ESG indices. The empirical results show a highly significant negative AAR on the announcement day, i.e., on (day = 0) for BSE100 ESG index stocks and an insignificant positive AAR for Nifty100 ESG index stocks. In addition, the results also document a significant negative CAAR for BSE 100 ESG stocks and a positive insignificant CAAR for Nifty100 ESG stocks. Moreover, the liquidity test results revealed a considerable liquidity enhancement in the stocks posts their inclusion in the BSE100 ESG. At the same time, there were no significant changes in the liquidity ratio of stocks after being included in the Nifty100 ESG index. This study concludes that there will be a substantial improvement in the companies’ financial performance as indicated by EPS and market capitalization after their inclusion in the ESG indices.
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Analysis of foreign capital inflows and stock market performance in Nigeria
Onome Tite , Oluwatomisin M. Ogundipe, Adeyemi A. Ogundipe
, Mukail Aremu Akinde
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.05
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 51-64
Views: 465 Downloads: 155 TO CITE АНОТАЦІЯMost studies concentrate on the impact of only one constituent of the foreign capital influx on the stock market and economic performance, but only few studies simultaneously considered the unique impact of the duo of foreign portfolio investment (FPI) and foreign direct investment (FDI), and many of these studies were not undertaken in Nigeria.This study, therefore, assesses how foreign capital inflows (FPI and FDI) affect the stock market development in Nigeria. The foundations for the empirical study were built upon the dividend discount model, which formed the basis for the analytical framework. Going forward, the ARDL co-integration procedure was adopted to examine the long-run relationship between foreign capital and stock market performance. The results from the ARDL Bounds test suggest no evidence of a long-run equilibrium relationship between foreign capital inflows (FDI & FPI) and the stock market performance. Also, the short-run analysis indicates an insignificant relationship between FDI and stock market performance, whereas, a reversed relationship was obtained for FPI, as it exerts a positive and significant impact on stock market performance. The study recommends strengthening the institutional framework for the enlistment of multinational companies in the Nigerian stock market.
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Dynamic relationship between equity, bond, commodity, forex and foreign institutional investments: Evidence from India
Rajeev Matha, Geetha E.
, Satish Kumar
, Raghavendra
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.06
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 65-82
Views: 849 Downloads: 192 TO CITE АНОТАЦІЯThe interrelationship between equity, bond, commodity and forex movements can provide investors with abundant trading opportunities regardless of whether one market is trending upward or downward. Hence, to understand the interlinkage between markets, this study examines the long-run and causal linkage between forex, G-sec bonds, oil prices, gold rates, foreign institutional investment (FII) flows, and equity market and sectoral index returns. Daily time-series data from August 2012 to August 2021 were considered for empirical analysis. Johansen’s cointegration test revealed that foreign exchanges like USD, Euro, GBP and Yen, oil and gold rates, G-bond returns and FII flows were significantly cointegrated with the stock market and sectoral indices in the long run. Further, Granger causality found a uni-directional relationship between forex rates (i.e., USD, Euro, Yen) and the market, as well as sectoral indices, except Nifty 50 and Nifty IT indices. Oil price movements were found to effectively predict future price changes of Nifty consumer durables, auto, IT indices. Gold prices are useful to predict Nifty-Auto, Bank, Financial Services, Oil & Gas and PSU. The study also found a bi-directional relationship from FII inflows to the stock market and sectoral indices. The findings suggest that forex rates, oil prices and FII flows significantly affect India’s stock market and sectoral performance. The study contributes to the existing literature by comprehensively examining the interlinkage between commodities such as oil and gold, foreign exchanges like USD, Euro, GBP and Yen, G-bond, FII flows and the stock market, and fourteen sectoral indices in the Indian context.
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Modeling a bi-directional sentiment-return relationship: Evidence from the Indian market
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 83-98
Views: 421 Downloads: 73 TO CITE АНОТАЦІЯIn the last two decades, the subject of investor sentiment has attracted the attention of researchers across the globe. This study attempts to examine the bi-directional relationship between investor sentiment and stock market returns in the Indian market by focusing on both contemporaneous and lagged relationships between investor sentiment and market returns. It also attempts to study the effect of lagged market returns on the current market returns. This study constructs an investor sentiment index for the Indian market using the principal component analysis technique. The results of the regression analysis between the investor sentiment index and stock market returns establish that current sentiment positively affects current market returns, and one-month lagged sentiment negatively affects current market returns. Further, it is found that a one-month lagged market return has a positive association with the current market returns. Moreover, using the VAR model, this study found the existence of a contemporaneous and lagged bidirectional relationship between investor sentiment and market returns. The results of impulse response analysis and variance decomposition analysis also support the presence of a sentiment-return bidirectional relationship but show that the effect of sentiment on market returns is more pronounced than the effect of market returns on investor sentiment.
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The effect of related party transactions on R&D investment: Evidence from Korea
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 99-112
Views: 354 Downloads: 64 TO CITE АНОТАЦІЯThis study aims to investigate the relationship between related party transactions and a firm’s investment in research and development (R&D), as well as the moderating effect of a firm’s financial health on such a relationship. The study applies a fixed-effect panel regression model with a sample of 13,619 Korean listed firms for the period from 2001 to 2020. The results indicate that related party transactions significantly and positively influence a firm’s R&D investment at the 1% level for the study period. Specifically, when related party transactions are divided into operating and non-operating, the results show that only non-operating related party transactions significantly and positively affect firms’ investment in R&D. Moreover, findings report that the effect of related party transactions is stronger for firms with financial distress, lower cash holdings, and in the high-tech industry. The results imply that related party transactions promote a firm’s R&D investment, which is one of the primary business investments that create a firm’s competitive advantage and value. Moreover, the results propose that related party transactions should be carefully evaluated when accessing the firm’s investment behavior.
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Financial literacy and SME loan repayments in South Africa during the COVID-19 era
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 113-121
Views: 703 Downloads: 167 TO CITE АНОТАЦІЯSmall and medium-sized enterprises (SMEs) are the primary victims of the COVID-19 outbreak because they lack adequate resources and are poorly prepared for such interruptions. For SMEs to expand, they need financial assistance such as loans and advances from financial service providers. However, they struggle to repay these loans and advances because they are small in size and do not make large turnovers, and owners lack adequate financial literacy. This study aims to investigate the relationship between financial literacy and loan repayment of SMEs. The study followed a positivist paradigm, and a quantitative approach was employed. A total of 110 self-completed Likert questionnaires were distributed, only 107 were filled correctly and analyzed using SPSS. The results from Pearson’s correlation coefficient showed a strong and significant relationship between financial literacy and SME loan repayments at r = 0.324, P < 0.0005. Regression analysis showed a significant linear relationship between financial literacy and SME loans repayments, F (1.152) = 17.806; P < 0.0005. P < 0.0005 is less than the independent variable (SME loans repayments), B = 0.324, P < 0.0005. The results imply that if SME owners are well-versed in finance, they will be capable of repaying outstanding loans and advances timely.
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Do daily price extremes influence short-term investment decisions? Evidence from the Indian equity market
Sarveshwar Kumar Inani, Harsh Pradhan
, R. Prasanth Kumar
, Ajay Kumar Singal
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.10
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 122-131
Views: 534 Downloads: 93 TO CITE АНОТАЦІЯFor short-term investments in equity markets, investors use price points, candlestick patterns, moving averages, support and resistance levels, trendlines, price patterns, relative strength index, and moving average convergence-divergence as reference(s) for making decisions. This study investigates whether investors use daily price extremes (highest and lowest prices for the day) for making short-term investments or trading decisions in the context of the Indian equity market. Using 6,902 observations of daily data of the NIFTY 50 index since its launch, it is observed that daily price extremes (high or low) have no impact on opening returns of the next trading day. Based on the dummy regression analysis, next-day opening returns were found to be statistically significant, which implies the presence of momentum behavior. However, insignificant coefficients for high or low-price extremes of the day mean that investors do not use them as an anchor or reference point for decisions. Results are consistent over time and robust to the rising or falling markets. Further, opening returns were seen to be more volatile than closing returns in the first half of the sample, and they are less volatile in the second half, implying that markets have become more efficient in the last few years.
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Determinant of earnings response coefficient on the Indonesian and Singaporean stock exchanges during the COVID-19 pandemic
Niswah Baroroh, Heri Yanto
, Muhammad Khafid
, Kuat Waluyo Jati
, Dinda Ayu Setyowati doi: http://dx.doi.org/10.21511/imfi.19(4).2022.11
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 132-145
Views: 607 Downloads: 193 TO CITE АНОТАЦІЯEarnings response coefficient (ERC) is one of the important things for companies and investors, as it reflects a company’s good value. The COVID-19 pandemic, which is happening globally, has greatly affected capital market conditions and companies in general. It is necessary to examine what factors affect ERC significantly to provide an overview to the company while maintaining the good name of the company. This study aims to analyze the effect of firm growth, leverage, information asymmetry, and systematic risk on ERC with dividend payout ratios as moderating on the Indonesia Stock Exchange and Singapore Stock Exchange. The study uses a quantitative approach with secondary data in the form of companies’ annual reports. Population was made up of food and beverage and tobacco manufacturing companies in 2018–2020. It consists of 38 JASICA index companies on IDX, and 33 SGX index companies on SGX. The results showed that, firstly, leverage and systematic risk had a significant negative effect on ERC. Second, firm growth and information asymmetry have no effect on ERC. Third, dividend payout ratio can weaken a positive influence of information asymmetry on ERC. Fourth, dividend payout ratio failed to moderate a positive effect of firm growth and a negative effect of leverage and systematic risk on ERC. All variables have no significant statistical difference between the two stock exchanges. These results indicate that a company must improve the performance and quality of information; pay attention to obligations, mitigate and manage risk to obtain optimal ERC.
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Market response and future performance of inefficient investment: Over-investment or under-investment
Juniarti Juniarti, Yulius Jogi Christiawan , Hendri Kwistianus
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.12
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 146-159
Views: 486 Downloads: 103 TO CITE АНОТАЦІЯThere have been many studies on the market response to investment spending, but only a few have examined the market response to the issue of over-investment or under-investment. This study examines the effect of the issue on market response and future financial performance. The sample includes large-cap companies listed on the Indonesia Stock Exchange (IDX) for 2016–2021. Samples must have at least 120 active trading days for each year. Two hundred and thirty-two observations meet the qualifications. This study adopts the investment inefficiency model developed by previous studies to measure over-investment or under-investment. Residual inefficient investment models are used as over-investment or under-investment scores, in addition to the dummy of the residual category. Market response is measured by cumulative abnormal returns (CAR), market capitalization (MCAP), and market-to-book value (MTB).
Meanwhile, a firm’s performance uses return on assets (ROA) and return on equity (ROE). The results show that the coefficient of the inefficient investment variable, using both the residual value and the dummy variable, shows a negative direction, which means the market responds negatively to over-investment or under-investment. However, the value of t is significant at the <0.01 level on the market response variable as measured by MTB, but not significant for the other two proxies. Thus, hypothesis 1 is supported, although not for all market response proxies. The value of the inefficient investment coefficient also shows a negative direction when testing hypothesis 2 and is significant at the <0.1 level. These results are consistent with future performance variables measured by ROA and ROE.Acknowledgment
The study was supported by PDUPT (Higher Education Primary Research Grant) from the Ministry of Education, Culture, Research and Technology, Government of Indonesia.
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Changes to the trading calendar and the day of the week effect in returns and volatility of the Saudi Stock Exchange
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 160-170
Views: 333 Downloads: 75 TO CITE АНОТАЦІЯUntil June 29, 2013, the trading days of the Saudi Stock Exchange (TADAWUL) were from Sunday to Wednesday. From June 29, 2013, TADAWUL changed trading days and started trading from Sunday to Thursday. This paper investigates whether this change has impacted the day-of-the-week effect on returns and volatility of the Saudi Stock Exchange. After estimating several GARCH-type models, the EGARCH (2,2) model was selected for the analysis. The study found that the stock return on the week’s first trading day (Saturday) was positive during the previous trading calendar.
In contrast, the current trading calendar observed a positive stock return on the last trading day of the week (Thursday). Further, a negative volatility exists at the end of the week during the previous trading calendar. At the beginning of the week, there is a high degree of positive volatility during the current trading calendar. These results indicate that the behavior of stock returns is different between the two trading calendar regimes. In addition, the behavioral patterns on other trading days suggest that the Saudi stock market does not conform to the weak form of the efficient market hypothesis. The above findings indicate that investors in the Saudi stock market could devise trading rules to predict the market index and earn abnormal returns consistently. -
Effect of gender as a moderating variable on financial vulnerability using hierarchical regressions: Survey evidence from Indonesian traditional market traders
Dody Hapsoro, Julianto Agung Saputro
, Cahyo Indraswono , Atika Jauharia Hatta
, Muhammad Sabandi
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.14
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 171-182
Views: 747 Downloads: 181 TO CITE АНОТАЦІЯMarket traders have a significant contribution to GDP in Indonesia; however, their level of education is still low. This leads to a high level of financial vulnerability, so it is important to study this issue, and there is still not enough research on financial vulnerability. Market traders are considered to be more vulnerable to fraud and poor financial management, and this is more common among female traders who have a relatively high level of consumption and economic dependence on men. This study aims to determine the effect of financial behavior and digital financial literacy on financial vulnerability. In addition, the gender interaction between the two relationships was also tested to better understand whether gender weakens or strengthens the relationship. Using a survey method on 278 market traders in Indonesia and hierarchical regression analysis, the results show that digital financial literacy and financial behavior have a negative significant influence on financial vulnerability of market traders. This means that low digital financial literacy and poor financial behavior lead to high financial vulnerability of market traders. In addition, the results of the interaction test show that the negative effect of financial vulnerability is greater for men than women. This is because men usually provide for their families, so they will always try to improve their financial performance and productivity. An important implication of this study is to provide recommendations to the government and associations to further improve the digital literacy skills of market traders, especially female traders through training or mentoring.
Acknowledgment
This research was funded by the Directorate of Research, Technology and Community Service (DRTPM) of the Indonesian Ministry of Education and Culture in 2022 with the National Competitive Basic Research Grant scheme. -
The impact of financial performance and firm characteristics on earnings management: Case of Tunisian Companies
Saliha Theiri, Naziha Kasraoui , Nesrine Bouzaiene
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.15
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 183-192
Views: 711 Downloads: 166 TO CITE АНОТАЦІЯThe purpose of this study is to test the effect of financial performance on earnings management, with the presence of a firm’s specific characteristics, in a non-credible financial information context such as Tunisia. A panel data approach, namely multiple regression analysis, was applied on a sample of 30 firms operating in different sectors and observed over the period 2012–2021. Two estimation methods, the fixed effects and random effects models, are used. To choose the best estimation method, the Breusch-Pagan and Hausman tests were used.
The results indicate, on the one hand, the financial performance measured by Tobin’s Q and Marris’ ratio, positively affects earnings management. On the other hand, the variables of firm characteristics, such as financial leverage, asset structure, growth rate and sectoral affiliation, decrease earnings manipulation, and firm size and managers’ ownership have no effect on earnings management. This means that managers of Tunisian firms manipulate their results to improve the level of performance and their financial sate. This manipulation is driven by goals other than those observed in other contexts and related to the financial market. This finding contributes to the literature on the association between several features of earnings management and firm performance, with the effect of firm characteristics. -
Gas futures as a factor of the Ukrainian capital market development
Yevhen Bublyk, Oleksandra Kurbet
, Roman Yukhymets
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.16
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 193-206
Views: 395 Downloads: 83 TO CITE АНОТАЦІЯThe purpose of the paper is to analyze current trends in the gas futures market and the prerequisites for their spreading in Ukraine. The analysis is based on scientific research results, search query time series provided by Google Trends, and statistical databases of derivative markets. The paper reveals the trends in the reshaping of the commodity derivatives market after 2008 in favor of commodity derivatives and the fast-growing volume of gas futures in the EU after 2017. The dual reason for these trends comes from the growing energy challenges and the tightening of financial derivatives regulation. Both reasons depend on real economic activity. This determines the presence of economic prerequisites for the spread of gas futures in the world.
The paper identifies the main institutional prerequisites for the spread of gas futures in Ukraine: an active gas exchange with growing volume of the spot trading and a situational factor of the energy market reforming. Initiatives of the gas market liberalization in Ukraine correspond to the energy market reform in EU. The identified trends, prerequisites, advantages and obstacles for the spread of gas futures allow to generalize proposals for state regulation, such as organizing the Ukrainian energy market as a hub to attract participants from other countries, as well as supporting the spread of gas futures on the capital market through the implementation of clearing mechanisms.Acknowledgment
The paper was funded as part of the “Determination of institutional conditions for the development of the exchange segment of the gas market” research project (No. 0122U002205), conducted at the State Institution “Institute for Economics and Forecasting of the NAS of Ukraine”. -
Do family-controlled and financially healthy firms manage their reported earnings? Evidence from Indonesia
Agus Joko Pramono, Zulhawati Zulhawati
, Rusmin Rusmin
, Emita Wahyu Astami
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.17
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 207-217
Views: 364 Downloads: 89 TO CITE АНОТАЦІЯThis paper examines whether family-controlled and financially healthy firms practice earnings management. The data collection focuses on non-financial firms listed on the Indonesia Stock Exchange for the fiscal year 2017–2019. Family and financially healthy firms are key predictor variables for predicting earnings management behavior. Jones’s (1991) modified cross-sectional model measures discretionary accruals (the earnings management indicator). This study reveals a negative relationship between family entities and earnings management practices, suggesting that family-controlled firms are more likely to report a higher quality of earnings. This study also documents that family entities with financial difficulties have more incentive to practice earnings management. Additionally, the study indicates that the involvement of a family member in executive positions leads to lower financial reporting quality. Finally, this study reports a nonlinearity association between family share ownership and the magnitude of earnings management. The study’s findings may assist policymakers in considering the costs and benefits associated with various levels of ownership concentration, especially in the hands of family members.
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The sustainability transparency index of sovereign wealth funds: their asset size, SDG country rankings and cross-region comparison
Stefano Cavagnetto, Inna Makarenko
, Václav Brož
, Lucie Rivera
, Hanna Filatova
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.18
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 218-231
Views: 671 Downloads: 274 TO CITE АНОТАЦІЯSovereign wealth funds accumulate the largest resources to bridge the financial gap under the Sustainable Development Goals. The basic mechanism for accelerating sustainability progress is the effort of sovereign wealth funds to incorporate environmental, social, governance and ethical criteria and targets of these Goals disclosed in their sustainability reports. This study aims to develop a methodology for assessing the Sustainability Transparency Index in a sample of sovereign wealth funds, as well as to investigate how this transparency is influenced by the size of funds’ assets and sustainability progress with a cross-regional comparison. Five groups of sustainability disclosure metrics, such as the main pillars of novel Sustainability Transparency Index, were tested and analyzed for 91 funds using binary variables and normalization method. Three hypotheses regarding the statistical association of funds’ sustainability transparency index with the size of the funds’ assets, countries’ sustainability progress, and the region of a fund were checked for 87 funds using multiple regression. The overall results of the Sustainability Transparency Index show an insufficient level of funds’ transparency. Sustainability disclosure in 57% of funds surveyed should be fully enhanced in terms of greater sustainability transparency. There is strong evidence of the correlation between the volume of funds’ assets and sustainability transparency as well as the leadership of European funds in a cross-regional comparative study. However, data on the progress of the country’s sustainability and the funds’ Sustainability Transparency Index are limited and can be used as evidence of the insufficient role of fund transparency in promoting sustainability.
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The effect of the COVID-19 epidemic on Moroccan sectoral indices: The entropy approach
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 232-243
Views: 294 Downloads: 82 TO CITE АНОТАЦІЯThe current study investigates the impact of the Coronavirus 2019 (COVID-19) pandemic on the volatility of Moroccan stock market sectoral indices. Shannon entropy with multiple estimators and Rényi entropy for different scales were calculated from February 1, 2019 to May 1, 2022, to measure volatility in the Banking, Oil and Gas, Construction and Building Materials, Beverage, Food Producers and Processors, Distributors, and Mining sector’s indices. In this regard, this study uses three periods to quantify the uncertainty in Moroccan sectoral indices before, during, and after the first year of the COVID-19 pandemic in Morocco. The empirical results from Shannon and Rényi entropies indicated higher volatility during the COVID-19 pandemic for all sectoral indices except Oil and Gas. However, the consumer staples sectors have shown a form of resilience compared to other sectors. Indeed, the impact of COVID-19 on the consumer staples sectoral indices’ volatilities was negligible compared to other sectors. In addition, investing in a portfolio composed of Mining or Construction and Building Materials stocks was risky due to the increased volatility before and during the epidemic. However, after the COVID-19 pandemic, the entropy level corresponding to all sectors has rearranged except the Beverage sector, which kept the lowest entropy during the three periods. Thus, it seems that the Beverage sector was a safe investment for the three periods. The findings are crucial for governments, businesses, private and public authorities, and investors to create recovery action plans for sensitive sectors and give investors trust to make smarter investment decisions.
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Modeling asymmetric volatility of financial assets using univariate GARCH models: An Indian perspective
Neenu Chalissery, Mosab I. Tabash
, Mohamed Nishad T.
, Maha Rahrouh
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.20
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 244-259
Views: 404 Downloads: 163 TO CITE АНОТАЦІЯIn recent years, numerous models with various amounts of variance have been developed to estimate and forecast important characteristics of time series data. While there are many studies on asymmetric volatility and accuracy testing of univariate Generalized Autoregressive Conditional Heteroscedasticity models, there are no parallel studies involving multiple financial assets and different heteroscedastic models and density functions. The objective of this study is to contrast the forecasting accuracy of univariate volatility models with Normal and Student-t distributions in forecasting the volatility of stock, gold futures, crude futures, exchange rate, and bond yield over a 10-year time span from January 2010 through December 2021 in Indian market. The results of exponential, threshold and asymmetric power models show that the volatility stock (–0.12047, 0.17433, 0.74020 for Nifty, and –0.1153, 0.1676, 0.7372 for Sensex), exchange rate (–0.0567, 0.0961,0.9004), crude oil futures (-0.0411, 0.0658, 0.2130), and bond yield (–0.0193, 0.0514 and –0.0663) react asymmetrically to good and bad news. In case of gold futures, an inverse asymmetric effect (0.0537, –0.01217, –0.1898) is discovered; positive news creates higher variance in gold futures than bad news. The Exponential model captures the asymmetric volatility effect in all asset classes better than any other asymmetric models. This opens the door for many studies in Indian financial market.
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Effect of foreign direct investment on domestic investment in BRICS
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 260-273
Views: 323 Downloads: 112 TO CITE АНОТАЦІЯThis study investigated the effect of FDI on domestic investment in BRICS using pooled ordinary least squares (pooled OLS), fixed effects, and fully modified ordinary least squares (FMOLS). Panel data spanning from 1988 to 2020 were used in this study. Mixed results, conflicting findings and divergent views on the FDI-domestic investment nexus prompted the paper to contribute to the existing literature on the subject. The study produced results that show that domestic investment was significantly enhanced by the inflow of FDI. The positive effect of savings on domestic investment was also noted to be positively significant. Results on personal remittances-domestic investment were mixed, (1) significantly positive under the pooled OLS (models 1, 2 and 3) and FMOLS approaches (model 1) and (2) non-significantly positive under the fixed effects (models 1, 2 and 3) and FMOLS (models 2, 3). The complementarity between savings and FDI had a significant positive influence on domestic investment, whilst the positive impact of a combination of FDI and personal remittances on domestic investment was not significant. BRICS nations are therefore encouraged to implement FDI inflow enhancing measures, strategies and policies to increase individual country’s domestic investment levels.
Acknowledgment
Kunofiwa Tsaurai gratefully acknowledges the moral support from the University of South Africa. -
Moroccan Stock Exchange market topology in crisis and non-crisis periods
Cherif El Msiyah, Jaouad Madkour
, Younes Berouaga
, Ayoub Kyoud
, Ali Ait Lahcen
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.22
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 274-284
Views: 541 Downloads: 133 TO CITE АНОТАЦІЯThis paper seeks to investigate the dynamics within the Moroccan Stock Exchange (MSE) market topology in crisis and non-crisis periods using daily historical log returns of sectoral indices covering the period from January 4, 1993 to September 9, 2021. The study applies the Agglomerative Hierarchical Clustering (AHC) implemented on the Dynamic Time Warping (DTW) distance matrix over ten sub-periods covering numerous crises, from Subprime mortgage crisis to European debt crisis and finally COVID-19 crisis. The obtained clustering results are gathered into a network to display the cumulated interconnections between the sectoral indices. The findings showed that the Casablanca Stock Exchange (CSE) market clusters composition is dynamic during the studied period. Indeed, some sectoral indices demonstrated evidence of strong similarities by gathering in the same cluster over numerous sub-periods as the couples Electrical & Electronic Equipment and Transport or as Banks and Construction & Building Materials sectoral indices. Moreover, the interconnections of CSE sectoral indices are trend dependent. According to the obtained network, the Oil and Gas demonstrated its centrality.
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Testing the influence of factors on the timeliness of financial reporting – Empirical evidence of Vietnamese listed enterprises
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 285-293
Views: 660 Downloads: 184 TO CITE АНОТАЦІЯFinancial reporting of enterprises has important implications for information users. The timely provision of financial reporting by enterprises helps investors to make appropriate business decisions. The purpose of the paper is to test the influence of the factors on the timeliness of financial reporting of the Vietnamese listed enterprises. The timeliness of financial statements is determined by the total number of days of difference between the date of signing the audit report and the end of the financial year. The sample includes the top 100 best-listed enterprises of the Vietnamese stock market. The paper uses time series with panel data. The data are collected from annual and financial reports for the period from 2016 to 2020. The paper performs quantitative research to test the hypotheses. The results verify two factors, such as return on equity and audit type, have a negative effect on the timeliness of financial reporting. Audit type has the most influence on timeliness. Research also shows some listed enterprises have not yet complied with regulations on timely information disclosure. The paper proposes some appropriate policies for Vietnamese listed enterprises to ensure the timeliness of information.
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Does female representation on corporate boards boost the strengthening of internal control in socially responsible firms?
Oleh Pasko, Yang Zhang
, Viktoriia Tkachenko
, Nelia Proskurina
, Iryna Pushkar
doi: http://dx.doi.org/10.21511/imfi.19(4).2022.24
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 294-308
Views: 650 Downloads: 144 TO CITE АНОТАЦІЯThis study examines the relationship between corporate social responsibility and the effectiveness of internal control, while simultaneously examining board gender diversity to check whether female directors contribute to corporate transparency or not. The sample of the study comprises 15,231 firm-year observations of companies listed on the Shanghai and Shenzhen stock exchanges from 2013 to 2018. The raw data for variable calculation come from authoritative and reputable sources, such as China Stock Market and Accounting Research (CSMAR), DIB Internal Control database, and RKS CSR score. The empirical study shows that socially high-performing firms possess a more effective internal control mechanism. However, the paper failed to find a positive association of gender diversity on the board with internal control effectiveness, and failed to attest reinforcing effect of female directors on internal control in socially responsible firms. This study suggests that in China’s institutional environment, female directors are unlikely to contribute to increased corporate transparency. This study is useful for both regulators and company management to establish a master plan and tactics for board composition to improve corporate transparency, taking into account the effect of the investigated phenomena within the jurisdiction under study.
Acknowledgment
This paper is co-funded by the European Union through the European Education and Culture Executive Agency (EACEA) within the project “EMBRACING EU CORPORATE SOCIAL RESPONSIBILITY: CHALLENGES AND OPPORTUNITIES OF BUSINESS-SOCIETY BONDS TRANSFORMATION IN UKRAINE” 101094100 — EECORE — ERASMUS-JMO-2022-HEI-TCH-RSCH-UA-IBA / ERASMUS-JMO-2022-HEI-TCHRSCH https://eecore.snau.edu.ua/
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Firm-specific investor sentiment and stock price crash risk: The role of foreign investors in Korea’s stock market
Investment Management and Financial Innovations Volume 19, 2022 Issue #4 pp. 309-326
Views: 345 Downloads: 182 TO CITE АНОТАЦІЯBuilding on a prior study that documents that stock price crashes are positively associated with firm-specific investor sentiment (hereafter, the sentiment), this study further investigates the moderating effect of foreign investors on Korea’s stock market. This study hypothesizes that foreign investors as sophisticated participants are indifferent of the significant relationship between the sentiment and the stock price crashes. For firms listed on the KSE over the period of 2011–2019, the analysis findings show that the high stock crash risk attributable to the high sentiment is attenuated for firms with high foreign ownership. However, such moderating effect of foreign ownership disappears when taking foreign investment horizon into consideration. This implies that future stock crash risk reduction under the high sentiment is due to the corporate monitoring role of foreign investors, who are targeting a long-term investment horizon. This study adds to the literature on the role of foreign investors by suggesting that foreign investors act as a rigorous monitor helpful for managing stock price, rather than a price maker who is rational under the high sentiment.