International Journal of Financial Studies — Open Access Journal

An attendance model is specified for the Canadian Hockey League (CHL), the top level of junior hockey in Canada with some teams located in the United States. The natural log of attendance is used as the dependent variable, with explanatory variables consisting of the timing of the game, team performance characteristics, uncertainty of outcome measures, and weather-related variables. Weekends and Mondays were the most popular days for games. Winning and fighting were shown to be popular team characteristics that drive attendance. Uncertainty of outcome plays little role, if any, in fan interest at this level, while precipitation significantly reduces attendance. Full article

In 1997 a review of the financial health of English county cricket highlighted strategic weaknesses within the professional game, principally an over-reliance by clubs on the annual grants provided to them by the England and Wales Cricket Board (ECB). Without such grants the teams, in general terms, would be insolvent. Using the financial statements of the First Class Cricket Counties, this paper explores how the financial position and performance of the county game has changed, 20 years on from the seminal study. A series of structural changes to the game had been made, yet financial problems are still evident. Counties are as reliant on central grant income as they were in 1997, although there are cases where clubs have made strategic enhancements and are becoming self-sustainable as going concerns. Rather than the ECB directly funding county revenue it should be working in collaboration with individual clubs to achieve developments in the game from the grassroots upwards, in order to help clubs grow their own revenue streams. Full article

This article visits the question of whether canceled warrants (CWs) have a positive effect on LME metal prices. To examine this question carefully, a regression model is applied. This paper finds a statistically significant positive link between CWs and LME metal prices, including aluminum, zinc, tin, and nickel. However, other metals such as copper and lead are not statistically significant. The second objective of the study is to identify the dynamic response of metal price returns for aluminum, zinc, tin, and nickel to an innovation in the CWs using VAR. It is found that the positive impact of the CWs on metal returns is transitory. Full article

This paper uses event study analysis to estimate the impact of the United States Federal Reserve Bank’s (Fed) quantitative easing (QE) announcements on the mortgage market during the zero lower bound (ZLB) period. A total of 35 QE announcements are identified and their effects are evaluated. The best-fitting integrated generalized autoregressive conditional heteroskedasticity (IGARCH) model with skewed t distribution is used to measure the QE announcement effects on daily changes of the 30-year mortgage rate, the 30-year Treasury rate and the spread between them. Announcements suggesting the start of a new round of QE reduced the mortgage rate tremendously, while the effects of further news diminished. Announcements of an increase in mortgage-backed security purchases decreased the mortgage rate more than the Treasury rate and reduced the credit risk of holding mortgage securities over Treasury securities. The delayed effects of QE announcements on the mortgage rate were less than short-run effects but persistent. We also find that the previous literature overestimates QE effects on interest rates in general. Full article

The debate on the UK leaving the European Union is still hot and ongoing today due to many economic, political, social, and other consequences on many different countries over the world. This paper focuses on the reactions of selected Central and Eastern European (CEE) and South and Eastern European (SEE) stock markets to the Brexit vote on 23 June 2016. Using daily data for the time span from January 2010 until July 2016 and the event study methodology (ESM), the return and volatility series are being tested for significant reactions to the Brexit event. The results indicate mixed results regarding the abnormal cumulative return series, but the volatility series were found to be significantly affected by the mentioned event. This is important for international investors and gives information on the reaction of mentioned markets to big political and economic events in order to tailor international portfolios in a way to hedge from risk. Full article

This paper assesses the performance of 355 actively managed Japanese Equity Mutual Funds between April 2011 and April 2016. The equal weight portfolio and Jensen’s alpha measures of active management provide strong evidence that Japanese Mutual Funds fail to outperform the benchmark four-factor capital asset pricing model. When it comes to market timing, the Treynor and Mazuy measure shows that 33 funds have significant positive market timing ability which is largely offset by 31 funds with significant negative timing ability. To ensure the statistical inference is robust to the non-normality found in 33 funds we employ Fama and French’s cross-sectional bootstrap. The results show that a large proportion of funds fail to outperform a hypothetical world with no skill. On the persistence of skill we find that there is stronger persistence for poor performing funds than for strong performing funds. Full article

There is a serious problem in international taxation today. Many United States (U.S.) multinational corporations have moved abroad to take advantage of a lower tax rate in a foreign country. As a consequence, the tax base in the U.S. has been seriously eroded. This practice is known as “corporate tax inversion”. This paper discusses the abuses and penalties of this phenomenon. It is rooted in some deficiencies in the U.S. tax law. This paper points out that the U.S. has the highest corporate tax rate in the world. It imposes tax on worldwide income. It permits deferral of tax on foreign-sourced income until dividends are repatriated back to the U.S. As a result, it creates tax loopholes. This paper reveals six actual cases of corporate tax inversion. This practice has triggered the Congress to enact §7874, the Internal Revenue Service (IRS) to issue Notices IR 2014-52 and IR 2015-79, and the U.S. Treasury Department to promulgate TD 9761. This paper investigates some details of these penalties. This paper further demonstrates an example in determining the amount of tax savings by engaging in a corporate tax inversion. It also offers many strategies. Full article

In an economy with a sovereign wealth fund (SWF), the government may draw on the fund to supplement other government revenues. If the fund is invested in risky assets, this introduces a new stochastic element into the government’s budget. We analyze the interaction between the draw from and risk taking in the SWF. Using non-expected utility preferences, we distinguish between intended changes and stochastic changes in the SWF draws over time. We show that the desire for smoothness in taxes and public services translates into smoothing of SWF draws and lower risk taking. It can even lead to procyclical rebalancing of the SWF portfolio. Future interest rates are associated with interest-rate risk. We show that this risk may lead to a higher optimal equity share in the SWF portfolio. Policy makers can use the draws from the SWF to smooth over time variation in risk-free rates. Full article

There is tremendous interest, in the economic literature, for the determinants of firms’ capital structure decisions. A rich body of empirical works now exists that purports to identify firm- and country-level factors affecting firms’ financing patterns. In addition, more recently, a new stream of studies has emerged that investigates cross-regional variation in small firms’ capital structure. While small firms’ leverage does seem to vary across regions, at least in countries where significant regional differences in economic and financial development and in the quality of institutions exist, not much yet is known about variation in debt maturity, in debt in relation to equity, and between different types of small firms. The present paper aims to fill this gap through an empirical analysis of cross-regional variation in the capital structure of a sample of about 30,000 Italian small firms over a 13-year period, including the aftermath of the credit crunch that followed the 2007–2008 global financial crisis. The findings confirm the view that small firms in underdeveloped regions are more financially constrained, but also amend some of the results shown in the literature, in particular by showing how small firms in Italy’s Southern regions have higher levels of equity and fixed assets than small firms in other regions. Full article

A political involvement in any organisation has often proved to be profitable for such firms that are seeking support and favourable regulatory conditions. Though many studies have investigated the effect of the corporate lobbying activities on the organisations, no clear results have been achieved. In this study, we have investigated the lobbying expenditure of some of the most famous United States (US)-based companies, which support the U.S. government during 2007–2016. Primarily, we tested the relationship between the corporate lobbying and the Corporate Financial Performance (CFP), with the help of a dynamic panel data analysis, which is based on the System Generalised Methods of the Moment (SYS-GMM). The results of this study indicated that the corporate lobbying did not increase the probability of gaining more support from the government in comparison to the firms that did not use any lobbying techniques. Furthermore, the findings showed that corporate lobbying is a component of the zero-sum political agenda that cannot be accurately evaluated and does not contribute towards the improvement of the CFP. This study introduced the important component of organisational slack and noted that the corporate lobbying could significantly destroy the CFP if the organisational slack was high. Full article

Due to the development of financial markets, products, financial and mathematical models, portfolio selection today represents a comprehensive set of activities. Investors take into consideration many different factors, such as the market factors, return distribution characteristics and financial statements information. This research applies a Grey Relational Analysis (GRA) approach to evaluate the performance on a sample of stocks by taking those different factors into consideration. The results based upon a sample of 55 stocks for the trading year 2017 on the Croatian capital market show that using GRA approach in portfolio selection provides useful guidance for investors when making investment decisions, and better portfolio results in terms of risk and return are reachable compared to an equally weighted portfolio benchmark. Full article

Understanding the behaviour of the equity yield and its relation to the bond yield is important for portfolio managers and those engaged in modelling the interaction between asset classes. During the mid-1900s, the equity yield—which was previously greater than the bond yield—declined, while the bond yield rose and became higher. Research, seeking to understand this, put forward the view that stock and bond return volatility is key. Evidence from the 2000s suggest that the relative values of the equity and bond yield have flipped again, with the former now greater. Empirical evidence presented here shows that during such periods, the hypothesised relation between the equity yield and the bond yield and the two volatilities also changes, with the signs reversed. Moreover, there is noticeable variation in the coefficient values. This paper argues that the relative equity and bond yield values are, to a large extent, driven by inflation volatility. High inflation volatility persisted during the first half of the twentieth century when the equity yield was higher. This was followed by more benign inflation volatility when the bond yield became higher. Evidence for a long span of US data, and shorter German, Japanese, and UK data, suggests the recent rise in the equity yield is accompanied by an uptick in inflation volatility relative to its recent tranquillity. Full article

In previous works, the importance of risk management implementation was addressed with regard to the problem of bankruptcy threat, with the explanation of risk impact on higher bankruptcy costs or the underinvestment problem. However, the evaluation of the impact of risk outcomes is technically linked to risk frequency and risk severity as the two dimensions of the risk map. The purpose of our study is to advocate two additional dimensions that incorporate liquidity and/or debt capacity constraint in the aftermath of risk occurrence. In the conceptual dimension, we propose a model that may support the appropriate design of risk management methods, by scaling a company’s ability to self-resist the risk outcomes. The study provides the empirical illustration of the frequency of the distinguished patterns of risk self-resistance. It was found that most frequently companies face the limited ability to self-resist risk outcomes, due to high debt capacity and high liquidity constraints. We also found statistically significant interdependencies between the company’s sector and the risk self-resistance. It supports the conclusion that the level of liquidity and debt capacity constraints and thus the ability to retain risk outcomes is sector-specific. It has important implications for the effective design of risk management methods. Full article

UEFA’s Club Licensing and Financial Fair Play Regulations (FFP) have impacted European club football. After five distinct applications of the break-even requirement, which represents the cornerstone of these regulations, it is time for an assessment. How has the situation in European top-division football changed since the FFP regulation? The most recent financial data show that European club football is characterized by significant financial recovery and further polarization. How has the FFP regulation presumably affected this development? This article discusses plausible reasons why FFP has contributed to financial recovery but has not aggravated polarization. Understanding the drivers of polarization is essential before taking further regulatory steps. Full article

In uncertain food safety environments, the suppliers of food raw materials (FRM) are facing crucial food safety issues. Therefore, this article aims to probe the risk-averse attitude of FRM suppliers in the face changing marketing environments, in order to establish a decision-making theory as a standard reference for optimization methods to satisfy the maximum expected profit and utility function for the optimal order quantity of FRM suppliers’ decision-making. We assume that urgent orders are permitted when products are out of stock, and surplus products will be sold at discounted prices, as based on the food safety circumstances and the differences of market acceptance (optimistic/normal/pessimistic), in order to affect the procurement costs and selling prices. The results of sensitivity analysis for the maximum expected profit show that the probability of imported FRM having no food safety problems when the external environment has no food safety problems is the most important parameter, with the importers fulfilling their responsibility for FRM source quality control. Meanwhile, a responsible attitude toward handling a crisis will reduce losses, transform the crisis into an opportunity, and win the trust of consumers, thereby, fostering corporate sustainability. Sensitivity analysis identifies the significant parameters that influence suppliers’ maximum utility function, and provides a reference by which food-related companies may formulate sustainable business policies. Full article

This paper analyzed the most important aspects for the success of crowdfunding projects observing the Kickante platform, an important crowdfunding Brazilian platform. We found that the total value per project increased with the number of investors. The value per investor increased with the minimum value invested with rewards and with certain types of promoters (like informal groups or new companies) or with startups. Full article

Rule 144A allows a firm to issue securities without a public registration statement with the Securities and Exchange Commission, and only qualified institutional investors can purchase such securities. In this study, focusing on corporate bonds issued under Rule 144A, we empirically investigate the relationship between the corporate social responsibility (CSR) of issuing firms and the bond yield spread at issuance. We document a significant and positive relation between CSR concerns, whereas CSR strengths seem to play an insignificant role in determining bond yield spread. Our main findings are robust to the instrumental variable approach and simultaneous equation estimation to address the potential endogeneity issues. We further explore the time-series changes in issuing firms’ CSR profiles, and report that institutional investors demand a higher bond yield spread when issuing firms’ exposure to higher social, environmental, and stakeholder concerns. Our analyses reveal that the main sources of such risk exposure are stakeholder conflict and concerns from primary stakeholder groups. Full article

This study analyzes the firm-specific factors affecting the dividend payout decisions of the companies whose shares are traded on the Borsa Istanbul stock exchange. To this end, the dynamic panel regression is applied to 853 observations of yearly average of 106 companies listed on the Borsa Istanbul between 2009 and 2015. According to results from the Arellano–Bover/Blunder-Bond two-step system generalized method of moments, a statistically significant positive effect on dividend payout was found in the relationship between the dividend payout of the previous year, the company’s return on equity and the market value/book value ratio, liquidity and the company’s size. The demonstration of a positive relationship between dividend payout and return on equity supports the free cash flow hypothesis and the positive relationship with the previous year’s dividend payout ratio supports the dividend smoothing hypothesis for Turkey. Full article