Derivatives Usage in Emerging Markets Following the GFC: Evidence from the GCC Countries

In this article, we avail of International Accounting Standards IFRS 7 to investigate the usage and motivation of hedging by firms in the Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates). The results of our panel and cross-sectional data logistic regressions indicate a focus on foreign exchange exposure, interest rates risk, and commodity risk in this region. We find that the use of hedging instruments in this region is also influenced positively by the firm’s size and, to a lesser degree, positively by the firm’s gearing ratio and negatively by its propensity to growth. The level of activity, nevertheless, remains lower than is the case for firms globally.     

Pluralistic business ethics: the significance and justification of moral free space in integrative social contracts theory

Integrative social contracts theory (ISCT) has been an influential theory in normative business ethics for well over a decade, drawing attention both as an object of criticism and as a source of inspiration. In this paper I argue that, despite this attention, the fact that it is a genuinely pluralistic theory, in the tradition of pluralistic theories of political philosophy, is often overlooked. It is in the notion of moral free space that this pluralism is most clearly expressed. This oversight is unfortunate for two reasons. Firstly, it prevents the potential of ISCT, as a normative theory of business ethics, from being appreciated fully; secondly, it leads us to ignore resources that could help tackle its most problematic flaws. In this second respect, I show how some of these flaws could be addressed by paying closer attention to the similarities between ISCT and John Rawls' theory of Political Liberalism.     

How well do urban growth boundaries contain development? Results for Oregon using a difference-in-difference estimator

Urban containment policies, including urban growth boundaries (UGBs), are a common tool used by city planners to promote compact development. We analyze how well UGBs do in containing development using fine-scale GIS data on cities in Oregon. Earlier studies on UGBs yield mixed results, with some authors finding no effects of UGBs on housing market variables and urbanization rates and others finding significant effects. A challenge in measuring these effects is that the location of the UGB is unlikely to be an exogenous determinant of a land parcel's value for development. The panel structure of our dataset allows us to estimate the UGB's effect on the probability of development using a difference-in-difference estimator applied to a narrow band of plots along each city's UGB. This estimator controls for time-invariant unobservable variables and common temporal effects among plots, thereby mitigating the potential for biased estimates due to the endogeneity of the UGB's location. We also pursue a novel approach to controlling for time-varying factors that exploits our fine-scale data. We find that UGBs contain development in many of the Oregon cities we examine, although there are some cities in which development rates are the same inside and outside of the UGB. Our results reveal that, in most cities, the effect of the UGB is small relative to pre-existing differences in development probabilities. This suggests that it may be difficult to identify UGB effects with cross-sectional data, the approach commonly taken in previous studies.     

The Impact of Personal Taxes on the Firm's Weighted Average Cost of Capital and Investment Behaviour: A Simplified Approach Using the Dempsey Discounted Dividends Model

The discounted dividends model advanced by Dempsey (1996) is extended to provide a weighted average cost of capital (WACC) assessment of investment opportunities with irregular cash flows. Thereafter, the framework is extended to an assessment of the implications of government tax policy for the firm's investment behaviour. The developed framework is consistent with the empirical evidence of Poterba and Summers (1985) which — over the period of UK tax history 1950–1983 encompassing four major tax on equity reforms — observes how the related dividend and investment politics of UK firms appear to be influenced by the level of dividend taxes.     

Financial Opacity and Firm Performance: The Readability of REIT Annual Reports

We examine the capital market pricing implications of firm disclosure opacity as measured by the linguistic readability of REIT annual reports. The SEC has expressed concern that firms selectively manage the transparency of disclosures in order to hide adverse information. After controlling for other non-experimental factors that influence the readability of REIT financial statements, we find (1) financial opacity is negatively related to reported firm performance, and (2) the residual opacity that remains after controlling for other determinants of annual report readability has incremental explanatory power for returns beyond the Fama and French (1992, 1993) risk factors. The opacity risk-return premium persists after controlling for a (heretofore undocumented) stark monotonic decrease in annual report readability following the Sarbanes-Oxley Act of 2002.     

The association between dividend payout and firm growth: Australian evidence

We report that whereas firms with high earnings distributions tend to have low‐to‐moderate growth (consistent with conventional theory), firms with low earnings distributions run the range between high and low performers. We interpret our findings for firm growth and payout policy in relation to the firm's location on the Boston Consulting Group (BCG) matrix that combines high/low growth with high/low market share. Our findings suggest that the market has difficulty in distinguishing between these types of firms. A concern is that investor preferences as an outcome may be focussed on dividend‐paying firms at the expense of younger growing firms in need of retained earnings.     

Stock market volatility: friend or foe?

Although a good deal of research effort has been allocated to understanding the time-series volatility of stock returns – as both market (or systematic) volatility and idiosyncratic (or non-systematic) volatility – the relationship of such volatility with cross-sectional volatility or dispersion of outcomes is sparse. Nevertheless, the quest to understand one must involve the quest to understand the other. In this paper, we investigate the dispersion of returns in relation to inter-temporal volatility, as well as the dynamic of dispersion of returns in generating a portfolio’s return outcome. We find that the level of such dispersion is highly significant for portfolio performance and the notion of risk.