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Int. J. Financial Stud., Volume 10, Issue 3 (September 2022) – 23 articles

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Article
The Consequence of Takeover Methods: Schemes of Arrangement vs. Takeover Offers
Int. J. Financial Stud. 2022, 10(3), 69; https://doi.org/10.3390/ijfs10030069 - 16 Aug 2022
Viewed by 107
Abstract
This paper examined the effect of two selling processes in the UK market: takeover offers and schemes of arrangement. The latter is argued to allow a bidder to acquire a target company more cheaply and easily because schemes provide a lower threshold of [...] Read more.
This paper examined the effect of two selling processes in the UK market: takeover offers and schemes of arrangement. The latter is argued to allow a bidder to acquire a target company more cheaply and easily because schemes provide a lower threshold of the target company’s shares before “squeeze-out” procedures may be used. To address potential self-selection bias arising from bidders’ ability to choose their acquisition method, the propensity score matching methodology was applied to 803 takeovers of listed-target firms from 1995–2018. The results showed that the scheme of arrangement significantly reduces the target shareholders’ gain relative to the takeover offer. Full article
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Article
The Effects of New Accounting Standards on Firm Value: The K-IFRS 1116 Lease
Int. J. Financial Stud. 2022, 10(3), 68; https://doi.org/10.3390/ijfs10030068 - 16 Aug 2022
Viewed by 95
Abstract
We examine how the implementation of the K-IFRS No.1116 Lease affects firm value. This new accounting standard mandates capitalization of all leases, resulting in changes in the key accounting leverage ratios and rates of return. The contracting costs hypothesis suggests that changes in [...] Read more.
We examine how the implementation of the K-IFRS No.1116 Lease affects firm value. This new accounting standard mandates capitalization of all leases, resulting in changes in the key accounting leverage ratios and rates of return. The contracting costs hypothesis suggests that changes in accounting techniques have economic consequences because lending contracts are expressed in terms of accounting numbers. We find that capitalizing operating leases, which were off-balance-sheet transactions prior to K-1116 implementation, increases the lease liabilities-to-assets ratio and lease liabilities-to-debt ratio significantly. While a firm’s business fundamentals do not change with the K-1116, we show that the value of firms that use high levels of operating leases decreased with the implementation of K-1116. The declines in firm value are significant for the subgroups of firms that are likely to raise external financing, suggesting that the implementation of K-1116 increased the level of financing frictions and decreased the value of future investment opportunities. Full article
(This article belongs to the Special Issue Frontiers in Corporate Disclosure Practice)
Article
Capital Preservation and Current Spending with Sovereign Wealth Funds and Endowment Funds: A simulation Study
Int. J. Financial Stud. 2022, 10(3), 67; https://doi.org/10.3390/ijfs10030067 - 11 Aug 2022
Viewed by 229
Abstract
We simulate the future performance of the Norwegian Government Pension Fund Global as a leading example of sovereign wealth funds intended both to preserve wealth and provide regular budget contributions. Withdrawals are limited to the fund’s expected real returns; however, deviations are allowed [...] Read more.
We simulate the future performance of the Norwegian Government Pension Fund Global as a leading example of sovereign wealth funds intended both to preserve wealth and provide regular budget contributions. Withdrawals are limited to the fund’s expected real returns; however, deviations are allowed to fund automatic stabilizers as well as discretionary fiscal policy. It also allows smoothing to avoid abrupt changes. Except for the fiscal policy part, many endowment funds are subject to similar rules. The main findings are: (i) Even if withdrawals matching expected returns maintain the fund’s value in expectation, the fund will be depleted eventually. (ii) Because the fund is invested in foreign currency, long-run purchasing power parity introduces an element of mean reversion and hence a negative serial correlation in the rates of return, so that the fund’s value is not even preserved in expectation. (iii) The use of the fund for fiscal policy introduces a substantial risk of depletion in finite time. (iv) Smoothing raises the risk of depletion after large negative financial returns, though only modestly so. Risk reduction and withdrawal rates below expected returns are explored as remedies. Risk reduction postpones the eventual depletion but does not eliminate it. Lower withdrawal rates help sustainability more fundamentally, but bounds on fiscal policy are needed for depletion risk to be eliminated. Full article
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Article
The Impact of Financial Literacy on Retirement Planning with Serial Mediation of Financial Risk Tolerance and Saving Behavior: Evidence of Medium Entrepreneurs in Indonesia
Int. J. Financial Stud. 2022, 10(3), 66; https://doi.org/10.3390/ijfs10030066 - 09 Aug 2022
Viewed by 233
Abstract
This research examined the gist of financial literacy on the medium entrepreneurs in Indonesia, impacting the retirement planning through some mediator and moderating variables. Implementing the prospect theory and theory of planned behavior to explore these interactions, a series of hypotheses were constructed, [...] Read more.
This research examined the gist of financial literacy on the medium entrepreneurs in Indonesia, impacting the retirement planning through some mediator and moderating variables. Implementing the prospect theory and theory of planned behavior to explore these interactions, a series of hypotheses were constructed, considering financial risk tolerance and saving behavior as mediator variables and herding behavior as moderator variables. The study examined partial least square-structural equation modelling (PLS-SEM) obtained by sampling data from 388 entrepreneurs of medium-scale in the Bekasi Regency, Indonesia. The study revealed (a) how financial literacy on retirement planning is serial mediated by financial risk tolerance and saving behavior, (b) herding behavior can strengthen financial literacy’s influence on retirement planning, and (c) saving behavior as a mediator does not influence the relationship between financial literacy and retirement planning. The study confirms how financial risk tolerance and herding behavior bridge a positive relationship between financial literacy and retirement planning. Full article
(This article belongs to the Special Issue Asset Pricing, Investments and Portfolio Management)
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Review
Taxing the Digital Economy through Consumption Taxes (VAT) in African Countries: Possibilities, Constraints and Implications
Int. J. Financial Stud. 2022, 10(3), 65; https://doi.org/10.3390/ijfs10030065 - 09 Aug 2022
Viewed by 331
Abstract
Owing to the Fourth Industrial revolution and digital transformation, the digital economy has grown substantially globally and in Africa. Despite the positive outcomes such as advancements in technology, improvements in business models and expansion in digital financial inclusion, negative implications include the erosion [...] Read more.
Owing to the Fourth Industrial revolution and digital transformation, the digital economy has grown substantially globally and in Africa. Despite the positive outcomes such as advancements in technology, improvements in business models and expansion in digital financial inclusion, negative implications include the erosion of tax bases due to the invisible nature of digital transactions. Although the digital economy is one of the biggest and quickest growing sectors in the African continent, its contribution to tax revenue is negligible. Developed and developing countries are grappling to find effective ways of mobilizing revenues from this hard to tax economy. African countries have turned to digital services taxes, value added taxes and withholding taxes in a bid to collect revenue from the digital economy to broaden their tax bases. There is intense debate among policymakers, governments, development bodies and tax bodies on the most effective way to tax the digital economy. Through a conceptual analysis based on a critical review of the literature, this article contributes to the ongoing debate by assessing the possibilities and constraints of taxing the digital economy in Africa using value added tax (VAT). The paper reviewed 55 articles, most of them current, published between 2014 and 2022, reflecting embryonic nature of the subject area. The findings on the opportunities include the existence of VAT regulation, increased revenue mobilization and efficiency gains, while challenges include ambiguities in legislation, capacity constraints and tax knowledge gaps. The implications of using VAT to collect tax from the digital economy encompass increased cost of digital services, decreased access, increased inequality and impediment on employment creation, poverty reduction, digital financial inclusion, and the realization of the sustainable development goals. Full article
(This article belongs to the Special Issue The Financial Industry 4.0 Part 2)
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Article
Markowitz Mean-Variance Portfolio Optimization with Predictive Stock Selection Using Machine Learning
Int. J. Financial Stud. 2022, 10(3), 64; https://doi.org/10.3390/ijfs10030064 - 08 Aug 2022
Viewed by 277
Abstract
With the advances in time-series prediction, several recent developments in machine learning have shown that integrating prediction methods into portfolio selection is a great opportunity. In this paper, we propose a novel approach to portfolio formation strategy based on a hybrid machine learning [...] Read more.
With the advances in time-series prediction, several recent developments in machine learning have shown that integrating prediction methods into portfolio selection is a great opportunity. In this paper, we propose a novel approach to portfolio formation strategy based on a hybrid machine learning model that combines convolutional neural network (CNN) and bidirectional long short-term memory (BiLSTM) with robust input features obtained from Huber’s location for stock prediction and the Markowitz mean-variance (MV) model for optimal portfolio construction. Specifically, this study first applies a prediction method for stock preselection to ensure high-quality stock inputs for portfolio formation. Then, the predicted results are integrated into the MV model. To comprehensively demonstrate the superiority of the proposed model, we used two portfolio models, the MV model and the equal-weight portfolio (1/N) model, with LSTM, BiLSTM, and CNN-BiLSTM, and employed them as benchmarks. Between January 2015 and December 2020, historical data from the Stock Exchange of Thailand 50 Index (SET50) were collected for the study. The experiment shows that integrating preselection of stocks can improve MV performance, and the results of the proposed method show that they outperform comparison models in terms of Sharpe ratio, mean return, and risk. Full article
(This article belongs to the Special Issue Asset Pricing, Investments and Portfolio Management)
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Article
Sustainability Performance and the Cost of Capital
Int. J. Financial Stud. 2022, 10(3), 63; https://doi.org/10.3390/ijfs10030063 - 05 Aug 2022
Viewed by 327
Abstract
This study examines the association between firms’ environmental, social, and governance (ESG) performance and the cost of capital for the largest European firms listed on the STOXX Euro 600 in a large panel from 2002 to 2018. We find that ESG is priced [...] Read more.
This study examines the association between firms’ environmental, social, and governance (ESG) performance and the cost of capital for the largest European firms listed on the STOXX Euro 600 in a large panel from 2002 to 2018. We find that ESG is priced by both debt and equity markets, although in different directions. While better ESG performance is associated with a lower cost of equity, the relationship is positive regarding the cost of debt. We also account for industry idiosyncrasies. The relationship with the cost of equity is penalized for firms lagging in ESG performance compared with industry peers, and the industry median corporate sustainability performance score is around optimal to balance the cost of equity and cost of debt. We also find that ESG is not influential in shaping firms’ cost of capital in periods of financial and sovereign crises. Overall, in the same research setting, we find that the channels of firms’ cost of capital composition behave differently in response to changes in sustainability performance. Full article
(This article belongs to the Special Issue Climate Finance and Energy Transition)
Article
Zero-Leverage Puzzle Revisited: Evidence from Acquisition Behaviors
Int. J. Financial Stud. 2022, 10(3), 62; https://doi.org/10.3390/ijfs10030062 - 05 Aug 2022
Viewed by 209
Abstract
The prevalence of zero-leverage firms is a puzzle in corporate finance. We analyze the acquisition behavior of zero-leverage firms and offer a new venue to the studies on zero-leverage puzzle and the interdependence of capital structures and investment decisions. The prior literature suggests [...] Read more.
The prevalence of zero-leverage firms is a puzzle in corporate finance. We analyze the acquisition behavior of zero-leverage firms and offer a new venue to the studies on zero-leverage puzzle and the interdependence of capital structures and investment decisions. The prior literature suggests three explanations regarding the zero-leverage puzzle: limited access to the debt market, managerial preference, and financial flexibility. While non-persistent zero-leverage firms show similar behavior as moderately leveraged firms, persistent zero-leverage firms are conservative in their acquisition behaviors. These firms are less likely to make acquisitions, acquire smaller targets, and are more likely to acquire zero-leverage targets than are moderately leveraged firms. Meanwhile, both persistent and non-persistent zero-leverage firms are not financially constrained, since they are likely to use cash in their offers, and they increase leverage post-acquisition. Overall, our evidence on persistent zero-leverage firms supports the managerial preference hypothesis, while the evidence on non-persistent zero-leverage firms is consistent with the financial flexibility hypothesis. Therefore, studies on corporate investment strategy should be aware of persistent firms’ unique behavior of debt and investment conservatism that differentiates these firms from other under-leveraged firms and non-persistent zero-leverage firms. Full article
Article
Quality of Work Life (QWL) and Its Impact on the Performance of the Banking Industry in Saudi Arabia
Int. J. Financial Stud. 2022, 10(3), 61; https://doi.org/10.3390/ijfs10030061 - 26 Jul 2022
Viewed by 374
Abstract
The quality of work life (QWL), job satisfaction, and individual work performance are the lynchpins of organizational performance and sustained business growth (SBG). Numerous researchers have recognized an association between QWL and SBG. Positive QWL dimensions ensure a workforce’s commitment to SBG. Like [...] Read more.
The quality of work life (QWL), job satisfaction, and individual work performance are the lynchpins of organizational performance and sustained business growth (SBG). Numerous researchers have recognized an association between QWL and SBG. Positive QWL dimensions ensure a workforce’s commitment to SBG. Like SERVQUAL, the QWL has several dimensions, and the most common are: (1) job satisfaction, (2) autonomy, (3) physical working environment, (4) remuneration, (5) career growth, (6) collegial relationships, and (7) relationship with management. A career in the banking industry has always been considered a symbol of prestige, prosperity, job security, and job satisfaction. To understand this, we present the WRKLFQUAL model to measure QWL and its impact on job security and satisfaction (JSS) and individual work performance (IWP). The dimensions and subdimensions of WRKLFQUAL are different from the dimensions and subdimensions of SERVQUAL; however, mechanisms measuring service quality and QWL have similar approaches. Accordingly, this study applied gap analysis to find what workforces expected from their work environments, as well as what they have actually experienced. Many researchers have argued that gaps in service quality significantly influence business performance. In this regard, our research found that almost all dimensions of WRKLFQUAL have negative gaps, meaning poor QWL causes job dissatisfaction and hampers IWP. Regression analysis also shows that average gaps have a significant relationship with job satisfaction. Finally, research proves that job security and satisfaction plays a mediating role in average gap scores and individual work performance. This study was carried out with reference to the banking sector’s performance in the Kingdom of Saudi Arabia, as follows. Cronbach’s α score suggests that 95% of the sample is free of error. To apply WRKLFQUAL on the same lines those of SERVQUAL, we developed seven dimensions and 28 subdimensions. Based on these dimensions, seven factors were extracted, all with factor loading between 0.745 and 0.835, confirming that all components had quite a high level of common variance. Accordingly, gaps in QWL, ranging from −0.997 to −1.149, also show that almost all the dimensions and subdimensions need improvements. Carrying this analysis further, we also compared QWL between Saudi and non-Saudi multinational banks and found that the QWL of the Saudi banking system has a slight edge over non-Saudi multinational banks. A correlation among seven predictors, ranging from 0.625 to 0.812, suggests that all seven predictors are highly correlated. Similarly, regression analysis with R2 0.704 shows that we have a good-fitting model. Hence, we argue that JSS depends on QWL and conclude that negative QWL causes job dissatisfaction and insecurity. We also examined the mediating impact of JSS on QWL and IWP and conclude that the Sobel test, in most cases, provided results higher than 1.98, which is the minimum criterion of having Sobel be significant and effective. Hence, we prove that JSS has a mediating role in QWL and IWP. Finally, we conclude that poor QWL causes job dissatisfaction and eventually reduces organizational efficiency. Full article
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Article
The Role of Internal Audit to Reduce the Effects of Creative Accounting on the Reliability of Financial Statements in the Jordanian Islamic Banks
Int. J. Financial Stud. 2022, 10(3), 60; https://doi.org/10.3390/ijfs10030060 - 26 Jul 2022
Viewed by 275
Abstract
The purpose of this study is to look into the role of internal audit (IA) in reducing the effects of creative accounting (CA) on financial statement reliability in Jordanian Islamic Banks. The research study used the survey methodology to examine the role of [...] Read more.
The purpose of this study is to look into the role of internal audit (IA) in reducing the effects of creative accounting (CA) on financial statement reliability in Jordanian Islamic Banks. The research study used the survey methodology to examine the role of internal audit (including independence and objectivity, verifiability, professional care, and neutrality) to reduce the effects of CA on the reliability of financial statements in Jordanian Islamic Banks. The population consists of all practicing auditors in Jordanian Islamic Banks, with a sample of 100 practicing auditors chosen from the total population of 143 auditors using a simple random selection approach. The questionnaire was distributed to the internal auditors working in these banks. Moreover, the primary data were analyzed using the partial least squares (3.3.3) software. The results showed that there was a role for IA (including independence objectivity, verifiability, professional care, and impartiality) in limiting the effects of CA on the reliability of financial statements in Jordanian Islamic Banks. Full article
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Article
How Does Economic Policy Uncertainty Affect Momentum Returns? Evidence from China
Int. J. Financial Stud. 2022, 10(3), 59; https://doi.org/10.3390/ijfs10030059 - 22 Jul 2022
Viewed by 396
Abstract
Economic policy uncertainty has been identified as a new macroeconomic risk factor that harms the stock market’s profitability. This paper examines the impact of the Chinese EPU levels on one of the most famous financial anomalies—momentum returns. A new EPU index based on [...] Read more.
Economic policy uncertainty has been identified as a new macroeconomic risk factor that harms the stock market’s profitability. This paper examines the impact of the Chinese EPU levels on one of the most famous financial anomalies—momentum returns. A new EPU index based on mainland China newspapers is used to obtain more accurate EPU–momentum relations. We selected 3958 Chinese listed companies’ stocks from 2011 to 2022 to establish time-series (TSM) and returns signal momentum strategies (RSM). Although the momentum effect in the Chinese stock market is weak, the EPU-based dynamic-threshold RSM strategies yield significant positive excess returns: eight times more excess returns than conventional fixed-threshold strategies. We used the ordinary least squares regression model (OLS), and the event study method only identified robust negative EPU–momentum relationships in the Chinese stock market during high-EPU stages. Surprisingly, the negative relationship between EPU and momentum returns turns positive during expansion cycles. We explain this phenomenon as follows: expansions increase Chinese investors’ confidence, and uncertainties reduce market manipulations. Full article
(This article belongs to the Special Issue Asset Pricing, Investments and Portfolio Management)
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Article
Asymptotic Dependence Modelling of the BRICS Stock Markets
Int. J. Financial Stud. 2022, 10(3), 58; https://doi.org/10.3390/ijfs10030058 - 22 Jul 2022
Viewed by 317
Abstract
With the use of empirical data, this paper focuses on solving financial and investment issues involving extremal dependence of 10 pairwise combinations of the 5 BRICS (Brazil, Russia, India, China, and South Africa) stock markets. Daily closing equity indices from 5 January 2010 [...] Read more.
With the use of empirical data, this paper focuses on solving financial and investment issues involving extremal dependence of 10 pairwise combinations of the 5 BRICS (Brazil, Russia, India, China, and South Africa) stock markets. Daily closing equity indices from 5 January 2010 to 6 August 2018 are used in the study. Unlike previous literature, we use bivariate point process and conditional multivariate extreme value models to investigate the extremal dependence of the stock market returns. However, it is observed that the point process was able to model many more extreme observations or exceedances that contribute to the likelihood estimation. It gives more information than the threshold excess method of the CMEV model. This study shows varying levels of low extremal dependence structure whose outcomes are highly beneficial to investors, portfolio managers and other market participants interested in maximising investment returns and financial gains. Full article
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Article
Basel III Capital Regulations and Bank Efficiency: Evidence from Selected African Countries
Int. J. Financial Stud. 2022, 10(3), 57; https://doi.org/10.3390/ijfs10030057 - 18 Jul 2022
Viewed by 454
Abstract
The core function of a commercial bank is the provision of credit facilities to its customers and to keep the flow and cycle of economic and financial resources balanced. Banks can only perform these functions if they are well regulated and efficient. The [...] Read more.
The core function of a commercial bank is the provision of credit facilities to its customers and to keep the flow and cycle of economic and financial resources balanced. Banks can only perform these functions if they are well regulated and efficient. The main focus of this study is to analyse the efficiency of African banks, most importantly after the 2008 global financial crisis when the Basel III regulations were popularly adopted by banks globally. The research focus was examined in two ways, the first part focused on investigating the impact of the Basel III capital regulations on the operational and investment efficiency of African banks by using the random effects and pooled ordinary least square panel data regression models. The second part examined if the African banks are indeed efficient by analysing their level of efficiency using the input-oriented DEA approach. The study used audited bank-level data from 45 listed banks operating in six African nations, namely, South Africa, Nigeria, Kenya, Tanzania, Uganda and Malawi, that have adopted the Basel III Accord for the period from 2010 to 2019. The bank-level data were obtained from the IRESS database. The findings revealed that capital buffer premiums significantly affect the operating and investment efficiency of African banks positively. This relationship implies that the capital buffer premium does not only serve as cushion capital against financial, market and economic shocks but also improves the banks’ efficiency by influencing the banks’ decisions and perspective on cost containment strategies. Another key finding is the positive influence the liquidity coverage ratio has on banks’ operational efficiency. The implication of this relationship may simply mean that African banks with well-performing liquidity ratios are efficient in their operations with the ability to meet their short-term obligations such as meeting customers’ credit needs, unannounced depositors’ withdrawals and creditors’ repayments, amongst others. This result could well be interpreted that adopting stricter liquidity requirements creates a liquidity buffer for African banks, giving them cushion confidence to undertake profitable and high-yielding projects, which invariably lead to increased profitability and operational efficiency. Furthermore, the DEA results showed that the sampled banks are operationally efficient with an aggregate of 84.8%, and for their investment efficiency, an aggregate of 94.9%. These findings suggest that African banks are largely efficient and can survive any possible financial or economic crisis. It can be put forward that it is probable that banks that are yet to adopt the Basel III Accord or strengthen their capital and liquidity base, are less efficient and might fail during a global crisis. The current work suggests some appropriate policy-based recommendations. Full article
Article
Lessening Effects of SOX on the Relationship between Executive Compensation Components and Cost of Equity Capital
Int. J. Financial Stud. 2022, 10(3), 56; https://doi.org/10.3390/ijfs10030056 - 17 Jul 2022
Viewed by 411
Abstract
The Sarbanes–Oxley Act of 2002 (SOX) imposed stringent requirements on corporate executives to hold them more accountable for their management decisions. This act has ramifications for executive pay as well. This study investigates the lessening effects of SOX on the association between executive [...] Read more.
The Sarbanes–Oxley Act of 2002 (SOX) imposed stringent requirements on corporate executives to hold them more accountable for their management decisions. This act has ramifications for executive pay as well. This study investigates the lessening effects of SOX on the association between executive compensation and cost of equity capital. The regression analyses are based on 11,649 firm-year observations of publicly listed companies in the United States from 1998 to 2014. The results show that bonuses and shareholdings are associated with a lower cost of equity capital, while the stock options are not related to the cost of equity capital. In addition, the findings indicate that SOX weakens the association between the cost of equity capital and executive bonuses, stock options for all top five executives. However, SOX lessens the association between the cost of equity capital and shareholdings, only for the three non-CEO and non-CFO executives. This is the first study to investigate how the change in regulatory environment invoked by SOX impacts the association between executive compensation and cost of equity capital. Moreover, this study examines the impacts on all top five highly paid executives and focuses on the three components of executive compensation that are involved with SOX. Full article
Article
Working Capital Behavior of Firms during an Economic Downturn: An Analysis of the Financial Crisis Era
Int. J. Financial Stud. 2022, 10(3), 55; https://doi.org/10.3390/ijfs10030055 - 14 Jul 2022
Viewed by 355
Abstract
In times of crisis, cash and liquidity play an essential role. This paper analyzes the working capital measures over the course of a business cycle. We examine (1) how companies behave in economic downturns regarding their working capital components and (2) whether firms [...] Read more.
In times of crisis, cash and liquidity play an essential role. This paper analyzes the working capital measures over the course of a business cycle. We examine (1) how companies behave in economic downturns regarding their working capital components and (2) whether firms with higher financial constraints behave differently in economic downturns regarding their working capital components. The analyses were conducted with descriptive statistics and generalized linear mixed-effects modeling. Our dataset consists of 2111 stock-listed firms and 10,555 observations spread over the period of five years during the financial crisis era. The findings indicate that days sales outstanding and shorter days inventory held are related to better financial performance while days payable outstanding had no observable effect. Furthermore, financially constrained firms have shorter days sales outstanding than average firms. In economic downturns, firms seem to reduce both working capital and fixed investments to asset ratios. The financially constrained firms pushed down their fixed investments ratio more aggressively than average firms while, in contrast, the financially strongest firms pushed down the working capital to asset ratio in comparison to average firms. Interestingly, neither the cash conversion cycle, days payable outstanding, nor company performance or fixed investments to asset ratios fully returned to the pre-shock level. The behavior of non-financially constrained firms, which also perform better, indicates a stronger supply chain orientation than that of average firms. This might indicate that the supply chain-oriented view of working capital management could provide a more favorable and resilient alternative to the prevailing self-orientation. Full article
Article
A Deep Learning Approach to Dynamic Interbank Network Link Prediction
Int. J. Financial Stud. 2022, 10(3), 54; https://doi.org/10.3390/ijfs10030054 - 12 Jul 2022
Viewed by 406
Abstract
Lehman Brothers’ failure in 2008 demonstrated the importance of understanding interconnectedness in interbank networks. The interbank market plays a significant role in facilitating market liquidity and providing short-term funding for each other to smooth liquidity shortages. Knowing the trading relationship could also help [...] Read more.
Lehman Brothers’ failure in 2008 demonstrated the importance of understanding interconnectedness in interbank networks. The interbank market plays a significant role in facilitating market liquidity and providing short-term funding for each other to smooth liquidity shortages. Knowing the trading relationship could also help understand risk contagion among banks. Therefore, future lending relationship prediction is important to understand the dynamic evolution of interbank networks. To achieve the goal, we apply a deep learning framework model of interbank lending to an electronic trading interbank network for temporal trading relationship prediction. There are two important components of the model, which are the Graph convolutional network (GCN) and the Long short-term memory (LSTM) model. The GCN and LSTM components together capture the spatial–temporal information of the dynamic network snapshots. Compared with the Discrete autoregressive model and Dynamic latent space model, our proposed model achieves better performance in both the precrisis and the crisis period. Full article
(This article belongs to the Special Issue Financial Econometrics and Machine Learning)
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Article
Gender Diversity in Leadership: A Bibliometric Analysis and Future Research Directions
Int. J. Financial Stud. 2022, 10(3), 53; https://doi.org/10.3390/ijfs10030053 - 12 Jul 2022
Viewed by 366
Abstract
Gender diversity in management has become of increased interest to academics and researchers in the last decades since women and men have different personal and psychological characteristics that affect their decision-making process in management actions and leadership. A female presence has been under-represented [...] Read more.
Gender diversity in management has become of increased interest to academics and researchers in the last decades since women and men have different personal and psychological characteristics that affect their decision-making process in management actions and leadership. A female presence has been under-represented on companies’ boards of directors, which affects management decisions and leadership style. This article aims to contribute to the analysis of gender diversity and leadership state of knowledge, conducting a bibliometric review of the existing literature. In this context, we analyze the evolutional research studies published in the Scopus digital library, considering a period of five years, from 2017 to 2021. We focus our analysis on the top 24 cited articles after a wider review of articles published relating to the explored topic (402 articles). Considering the bibliometric analysis done, we then present scrutiny of the state of knowledge on this subject, a summary of the existing gaps, and suggestions for future research. Full article
(This article belongs to the Special Issue Diversity in Global Finance)
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Article
Corporate Governance and Performance of Pension Funds in Ghana: A Mixed-Method Study
Int. J. Financial Stud. 2022, 10(3), 52; https://doi.org/10.3390/ijfs10030052 - 11 Jul 2022
Viewed by 412
Abstract
This paper assesses the relationship between corporate governance practices and the performance of pension funds in Ghana, which is an emerging market. Data for this study came from two sources: surveys of pension fund managers and annual financial reports of pension funds. Data [...] Read more.
This paper assesses the relationship between corporate governance practices and the performance of pension funds in Ghana, which is an emerging market. Data for this study came from two sources: surveys of pension fund managers and annual financial reports of pension funds. Data analysis techniques include mean score ranking and panel regression. The results showed that corporate governance practices such as upholding the rights of shareholders to know the capital structure of the pension funds, equitable treatment of all shareholders, effective internal controls, and timely supervisory functions of audit committees influence the performance of pensions funds. In addition, ensuring proper board composition, the ethnic and gender diversity of board members affect the success of pension funds in the country. The study indicates that the current challenges facing pension funds in the country include poor investment decisions and market volatilities in the investment market. This study provides insight into the governance practices of pension funds. It is relevant for policies and corporate practices to be strengthened to enhance the performance of the firms. Full article
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Article
Cryptocurrencies Intraday High-Frequency Volatility Spillover Effects Using Univariate and Multivariate GARCH Models
Int. J. Financial Stud. 2022, 10(3), 51; https://doi.org/10.3390/ijfs10030051 - 08 Jul 2022
Viewed by 474
Abstract
Over the past years, cryptocurrencies have drawn substantial attention from the media while attracting many investors. Since then, cryptocurrency prices have experienced high fluctuations. In this paper, we forecast the high-frequency 1 min volatility of four widely traded cryptocurrencies, i.e., Bitcoin, Ethereum, Litecoin, [...] Read more.
Over the past years, cryptocurrencies have drawn substantial attention from the media while attracting many investors. Since then, cryptocurrency prices have experienced high fluctuations. In this paper, we forecast the high-frequency 1 min volatility of four widely traded cryptocurrencies, i.e., Bitcoin, Ethereum, Litecoin, and Ripple, by modeling volatility to select the best model. We propose various generalized autoregressive conditional heteroscedasticity (GARCH) family models, including an sGARCH(1,1), GJR-GARCH(1,1), TGARCH(1,1), EGARCH(1,1), which we compare to a multivariate DCC-GARCH(1,1) model to forecast the intraday price volatility. We evaluate the results under the MSE and MAE loss functions. Statistical analyses demonstrate that the univariate GJR-GARCH model (1,1) shows a superior predictive accuracy at all horizons, followed closely by the TGARCH(1,1), which are the best models for modeling the volatility process on out-of-sample data and have more accurately indicated the asymmetric incidence of shocks in the cryptocurrency market. The study determines evidence of bidirectional shock transmission effects between the cryptocurrency pairs. Hence, the multivariate DCC-GARCH model can identify the cryptocurrency market’s cross-market volatility shocks and volatility transmissions. In addition, we introduce a comparison of the models using the improvement rate (IR) metric for comparing models. As a result, we compare the different forecasting models to the chosen benchmarking model to confirm the improvement trends for the model’s predictions. Full article
(This article belongs to the Special Issue Financial Econometrics and Machine Learning)
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Article
Towards Financing System of Integrated Enterprise Development in the Time of COVID-19 Outbreak
Int. J. Financial Stud. 2022, 10(3), 50; https://doi.org/10.3390/ijfs10030050 - 04 Jul 2022
Viewed by 468
Abstract
The development of an enterprise under current conditions requires an integrated approach and an appropriate financing system. The purpose of this study is to justify the replication model of financing the integrated enterprise development. The research methodology suggests that each enterprise has its [...] Read more.
The development of an enterprise under current conditions requires an integrated approach and an appropriate financing system. The purpose of this study is to justify the replication model of financing the integrated enterprise development. The research methodology suggests that each enterprise has its own development “genome”, which makes it possible to apply the replication of its directions based on a justified financing system of such an integration. The proposed replication model is augmented by regression analysis, which made it possible to carry out scenario forecasting of alternative options for the company’s development. The conduction of the study is based on 16 textile enterprises. The formed map of the integrated enterprise development enabled the determination of their points to replicate resources in four directions (environmental and economic, innovative, informational, and organizational). The interaction of companies on the basis of strengths diffusion (exchange of potential) with the application of financial netting is considered an alternative to replication. The research proved that an alternative option can solely be recommended for developed companies and requires the identification and minimization of risks. The strong link between the level of integrated and overall development of companies was acknowledged. Asymmetry of business development in the context of a replication model of its integration enables the achievement of high results while minimizing financial resources. Enterprises implementing the replication model of integration considerably improve their prospects and increase overall development performance. The application of the replication model of financing integration under the crisis and the COVID-19 pandemic fosters efficient use of financial resources and the overall enterprise development. Full article
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Article
Dependence Structure between Bitcoin and Economic Policy Uncertainty: Evidence from Time–Frequency Quantile-Dependence Methods
Int. J. Financial Stud. 2022, 10(3), 49; https://doi.org/10.3390/ijfs10030049 - 01 Jul 2022
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Abstract
In this study, the dependence between Bitcoin (BTC) and economic policy uncertainty (EPU) of USA and China is estimated by applying the latest methodology of quantile cross-spectral dependence. Daily data comprising a total of 1947 observations and covering the period of 1 October [...] Read more.
In this study, the dependence between Bitcoin (BTC) and economic policy uncertainty (EPU) of USA and China is estimated by applying the latest methodology of quantile cross-spectral dependence. Daily data comprising a total of 1947 observations and covering the period of 1 October 2013 to 31 January 2019 are used in this study. The findings indicate that a positive return interdependence between BTC and EPU is high in the short term, and this dependence decreases as investment horizons increase from weekly to yearly. The information on the time-varying and time–frequency structure of interdependence is also extracted by applying wavelet coherence analysis. The estimated results of wavelet coherence suggest that the correlation between BTC and EPU is positive during a short-term investment horizon. Finally, the frequency domain Breitung and Candelon causality test is applied, and results show the evidence of insignificant causality between Bitcoin and EPU. Overall, the findings highlight the diversification benefits of Bitcoin during the period of uncertainty. Full article
(This article belongs to the Special Issue Digital and Conventional Assets)
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Article
Does Managerial Ability Lead to Different Cost Stickiness Behavior? Evidence from ASEAN Countries
Int. J. Financial Stud. 2022, 10(3), 48; https://doi.org/10.3390/ijfs10030048 - 01 Jul 2022
Viewed by 403
Abstract
This study aims to test cost stickiness behavior under different managerial ability levels. Managerial ability plays an important role in resource-related decision making. Previous cost stickiness research assumes that managers exhibit similar abilities to manage resources. However, managers with different managerial abilities may [...] Read more.
This study aims to test cost stickiness behavior under different managerial ability levels. Managerial ability plays an important role in resource-related decision making. Previous cost stickiness research assumes that managers exhibit similar abilities to manage resources. However, managers with different managerial abilities may make different resource decisions, which leads to different cost stickiness levels. More able managers can manage resources efficiently and deal with resource shortages. This study also tests the effects of environmental uncertainty on cost stickiness under different managerial ability levels. Managers’ resource decisions must consider environmental uncertainty to generate optimal returns. More able managers are more willing to take risks and manage resources efficiently to deal with uncertainty. Meanwhile, less able managers tend to retain resources to cope with environmental uncertainty. We ran the panel regression analysis of 19,612 listed firm-year observations in ASEAN countries from 2013 to 2019. The results show that firms led by less able managers exhibit cost stickiness. Less able managers cannot manage resources efficiently and are more likely to retain resources than make costly adjustments. Further, the effect of environmental uncertainty on cost stickiness is stronger in firms led by less able managers. Less able managers tend to retain resources when sales decline. Full article
Article
Inward FDI, IFRS Adoption and Institutional Quality: Insights from the MENA Countries
Int. J. Financial Stud. 2022, 10(3), 47; https://doi.org/10.3390/ijfs10030047 - 22 Jun 2022
Viewed by 504
Abstract
The adoption of International Financial Reporting Standards (IFRS) by 166 countries since 2004 has been a major achievement in the international standardization of accounting regulations. The present paper draws on the Eclectic Paradigm as the analytical framework to investigate the effects of IFRS [...] Read more.
The adoption of International Financial Reporting Standards (IFRS) by 166 countries since 2004 has been a major achievement in the international standardization of accounting regulations. The present paper draws on the Eclectic Paradigm as the analytical framework to investigate the effects of IFRS adoption on foreign direct investment (FDI) inflows. The analysis is conducted based on panel data from 22 Middle Eastern and North African economies (MENA) between 1996 and 2019. The findings indicate that FDI inflows are positively associated with IFRS, and countries implementing the accounting standards receive a higher increase in FDI inflows. Furthermore, the results show that institutional quality plays an important role in attracting FDI. These results remain robust using lag and time-fixed effect estimation methods. The findings have several implications for policymakers. Full article
(This article belongs to the Special Issue Islamic Finance Performance during Pandemic and Future Agenda)
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