Do global factors impact BRICS stock markets? A quantile regression approach

This paper examines the dependence structure between the emerging stock markets of the BRICS countries and influential global factors. Using the quantile regression approach, our results for the period from September 1997 to September 2013 show that the BRICS stock markets exhibit dependence with the global stock and commodity markets (S&P index, oil, and gold) as well as changes in the U.S. stock market uncertainty (CBOE Volatility Index). This dependence structure is often asymmetric and affected by the onset of the recent global financial crisis. By contrast, the U.S. economic policy uncertainty has no impact on the BRICS stock markets.     

Does empathy matter in corporate social responsibility? Evidence from emerging markets

This paper explores how cross-country differences in empathy can explain variations in corporate social responsibility (CSR). We show that empathy is positively associated with overall CSR, as well as with its social and environmental components. Our results are robust to using the two components of empathy, empathic concern and perspective taking. Our findings are further corroborated by evidence from a quasi-natural experiment based on the 2004 Indian Ocean earthquake. We find that during the year of the disaster and the following year, firms located in countries with high levels of empathy donated more money than firms located in countries with less empathy.     

Does socially responsible investment equity indexes in emerging markets pay off? Evidence from Brazil

This paper explores the financial performance of a mainstream socially responsible investment equity index in emerging markets: the Brazilian Corporate Sustainability Index. The results indicate that investors in emerging markets could accommodate their ethical values while at the same time not scarifying their overall portfolio performance in bullish market periods. However, the financial crisis led ethical investors to take a riskier and less profitable portfolio. These results seem to be due to socially responsible investment in Brazil that, as with other emerging markets, is highly influenced by social and institutional factors.     

Do financial structures affect exchange rate and stock price interaction? Evidence from emerging markets

We investigated the relationship between stock prices and exchange rates in eleven emerging markets over the period of 1988 to 2014 using cointegration methodology and multivariate granger causality tests. We find that in emerging markets, the inner-financial structure, which reflects the proportion of direct financing and indirect financing, plays an important role in the link between exchange rates and stock prices. For ten out of the eleven emerging markets studied, the financial structure had a significant impact, either through the flow channel or stock channel. The effects of financial-economic structure (FIR) were much smaller.     

Does the spillover of China's economic growth exist? Evidence from emerging markets

This paper primarily investigates if China affects emerging markets economies triggered by its rapid economic growth and the trend of economic globalization over the world. Our results indicate that China's economic growth causes a significant spillover effect on the economic performances of emerging markets, varying across the detected structural break in 2006 and the degree of economic globalization between China and 25 emerging economies over the period 2000–2012. The results herein support the formation of an inseparable interdependence between China and those emerging economies.     

Does People's Bank of China communication matter? Evidence from stock market reaction

This paper tests whether the communication of the People's Bank of China affects market expectations and matters as a monetary policy tool. For that purpose, we first rely on a computational linguistic tool to measure the tone of PBC speeches and second, we use a high frequency methodology to estimate the effect of tone on stock price. Our results show that positive changes of the tone affect positively stock price in the Shanghai and the Shenzhen stocks markets. Additional extensions show that PBC communication still has a positive and significant impact on stock price even when controlling for all the monetary policy instruments implemented by the central bank, but that this impact is not persistent over time. One potential channel through which PBC tone affects stock prices is the risk-based channel of monetary policy.     

Does Corporate Taxation Deter Multinationals? Evidence from a Historic Event in Ireland

We use a unique exogenous corporate tax policy change in the Republic of Ireland to investigate how corporate taxation affects foreign direct investment at the extensive and intensive margin. To this end, we construct exhaustive sectoral and plant level panel data and use difference‐in‐differences strategies. Our results do not provide strong evidence that the increase in corporate tax rates for exporters did affect the entry or exit of plants from the US or UK in Ireland. Entry rates of German firms seem to be negatively affected, however. At the intensive margin, there is evidence that foreign plants in Ireland reduce the size of their operations in response to the tax change.     

Bank risk-taking and competition in developing banking markets: Does efficiency level matter? Evidence from Africa

We contribute to the existing literature on the nonlinear nexus between competition and risk-taking by exploring how differences in efficiency levels affect the risk-taking of banks when competition increases. Based on a sample of 430 African banks, this paper reveals that, banks with high and low efficiency tend to take more risk than those with average efficiency level. This study further suggests that bank specific characteristics and macroeconomic dynamics, play an important role in the competition-risk-taking nexus within African banking industry. Besides, while the penetration of African Cross-border banks does not stimulate risk-taking in the hosts domestic markets, an improvement of banking regulation (Basel 2.5, 3 and further) is mandatory to mitigate their possible adverse effects on the competition-financial stability nexus.     

Does it pay for firms in Asia's emerging markets to be market oriented? Evidence from Vietnam

The positive effects of market orientation (MO) on firm performance are empirically supported much more strongly by studies conducted in developed than in emerging markets. One commonly cited reason for this differential effect is that MO is affected by the cultural, economic and institutional characteristics of the economies in which it is applied. This study aims to determine whether or not MO is relevant in an Asian emerging market such as Vietnam and if so, how a firm in such countries can become more market oriented. Based on a survey of 300 firms and using structural equation modeling, the present study finds that MO has a significant effect on firm performance and that its adoption is driven by both internal organizational and external market forces. The study identifies these specific internal and external forces, including those that are unique to the emerging economies in Asia.     

Does technology make a difference? Evidence from Spanish hotels

Information and communication technologies (ICTs) have positively contributed to the hospitality industry. In Spain, the third tourism destination in the world, hotels have widely adopted computers and the Internet for the internal processes as well as in their relationships with their providers and customers. While some ICT solutions are common in hotels regardless of their category, others may allow to differentiate across upscale hotels and those of inferior level. This study identifies the most discriminating ICT solutions across 3-, 4-, and 5-star hotels, and discusses their potential for improving efficiency and service quality. In particular, digital technology, loyalty programs, and ambient intelligence are some of the most differentiating technologies, which may be implemented by 3- and 4-star hotels to improve the perceived quality of their processes and services.     

Does model fit matter for hedging? Evidence from FTSE 100 options

This study implements a variety of different calibration methods applied to the Heston model and examines their effect on the performance of standard and minimum‐variance hedging of vanilla options on the FTSE 100 index. Simple adjustments to the Black–Scholes–Merton model are used as a benchmark. Our empirical findings apply to delta, delta‐gamma, or delta‐vega hedging and they are robust to varying the option maturities and moneyness, and to different market regimes. On the methodological side, an efficient technique for simultaneous calibration to option price and implied volatility index data is introduced. © 2011 Wiley Periodicals, Inc. Jrl Fut Mark 32:609–638, 2012     

Do political connections matter in accessing capital markets? Evidence from China

We analyze the influence of political connections on firms' access to capital and the ensuing effect on the cost of raising capital. Using a dataset of 413 IPOs from 2009 to 2012, we exploit a research setting where government is still highly involved with the process. We find that firms rely on political connections to reduce IPO rejection risk as a firm's political connections are positively associated with the propensity of obtaining approval for an IPO. We further find that political connections are negatively associated with the cost of IPO and connected firms appear to perform better subsequent to their IPOs.     

Does government transparency shape firm decentralization? Evidence from a natural experiment in China

We take advantage of a recent pilot program of e-government reform in China to study whether and how government transparency affects firm decentralization. We construct a reasonable proxy of firm decentralization to reflect the allocation decision rights on the basis of China's unique setting of mandatory disclosure of financial statements of the parent firms and the entire corporation. We provide supports on the reliability of firm decentralization proxy and present strong evidence that the improvement of government transparency and accountability significantly enhances firm decentralization. A plausible mechanism is that such reform reshapes firms' external business environment and internal operating efficiency. Results are particularly pronounced for firms in areas with low social trust and high corporate attention. Overall, our findings contribute to the research on the effect of government quality on economic activities and organization delegation structure.     

Does trade size restriction affect trading behavior? Evidence from Indian single stock futures market

Algorithmic traders use their advantage of speed to execute a large number of small-sized trades in a very short time. In the presence of a minimum trading unit (MTU) restriction, they are forced to trade at the smallest possible sizes, often restricted by the MTU. Using a novel data set of single stock futures market obtained from the National Stock Exchange of India, we show that the MTU restriction acts as a binding constraint for traders while optimizing trade sizes. Contrary to expectation, we find weak evidence that liquidity is positively impacted by the contract size revision.     

Does quality of innovation,culture and governance drive FDI?: Evidence from emerging markets

This study examines how technology, culture and corporate governance drive inward FDI in emerging economies. A study of 22 emerging economies shows that technology is the major attractive factor influencing inward FDI. Further, FDI increases as technology absorption and innovation capacity increase. The greater the quality of country governance, the greater the influence of corporate governance on FDI. Cultural dimensions such as individualism, masculinity and uncertainty avoidance exhibit a weaker influence on inward FDI, while power distance and indulgence have a stronger influence on inward FDI. Our results support the leapfrogging approach of emerging economies towards promoting innovation and enhancing technology adoption to drive FDI. Interaction effect of country governance further highlighted that the better the governance of a country the impact of technology, innovation, corporate governance and culture in attracting inward FDI also increases.     

Does corporate diversification create value in emerging markets? New evidence from Chile

Using a sample of 85 Chilean firms listed in the Santiago Stock Exchange from 2005 to 2013, we analyze the impact of corporate diversification on firm value. We consider voting rights of the main shareholder and institutional investors’ influence on firm value. We report firm‐value destruction for diversified firms. Regarding ownership concentration, we report a negative relation between the largest shareholder ownership and firm value. Separation between voting rights and cash flows rights of this shareholder is negatively related to firm value. While Pension Fund Administrators (AFP) mitigate firm value destruction in diversified firms, other institutional investors do not play an active role in controlling value destruction. Finally, if the largest owner is a family, we report firm‐value creation in diversified firms. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

Does Size Matter in Firm Performance? Evidence from US Public Firms

This paper reexamines the determinants of firm performance and, in particular, the role that firm size plays in profitability. A fixed‐effects dynamic panel data model for over 7,000 US publicly‐held firms during the period 1987–2006 provides evidence that profit rates are positively correlated with firm size in a non‐linear manner, holding an array of firm‐ and industry‐specific characteristics constant. In addition, industry‐specific fixed effects play a negligible role in the presence of firm‐specific fixed effects.     

Does going public imply short-termism in investment behavior? Evidence from China

Adopting a large panel of Chinese manufacturing firms together with the data of listed firms for the period 1998–2007, this paper aims to examine whether Asker et al.'s (2015) argument on the short-termism demonstrated in the investment behavior of listed firms holds for China. We document that listed firms engage in more investments and respond more to changes in investment opportunities as compared to unlisted ones with similar size and age in the same industries, and Asker et al.'s (2015) short-termism argument only holds for firms facing sufficiently low financing constraints.     

Does reputation of sponsors matter in IPO? Evidence from Hong Kong

Contrary to other markets where underwriters perform a combined role of underwriting and sponsoring in an Initial Public Offering (IPO), IPO issuers in Hong Kong must appoint at least one sponsor in addition to the underwriters. The splitting of the single role of underwriters into two separate ones offers an ideal setting to disentangle the effects of the two roles and to examine which of the two roles—sponsor or underwriter—is more important in explaining IPO underpricing and initial volatility in the Hong Kong equity market. Interestingly, our findings provide supportive evidence that the sponsor reputation does matter in an IPO and it is even more significant than the underwriter reputation in explaining the IPO underpricing phenomenon. Given the recent high-tech fervor, our research goes deeper to examine specifically the role of sponsors on high-tech firms, with results indicating that the reliance on sponsors is higher for traditional issuers than for technology firms. We further discover that sponsors and underwriters are playing substitution roles rather than complementary roles. In order to examine the regulatory policy impact, our research also compares the role of IPO sponsors before and after the launch of the new sponsor regulatory regime in 2013. The empirical findings lend support to our argument that after the launch of the new regulations, public awareness of sponsors is raised, respect towards more reputable sponsor increases, and thus, the role of sponsors becomes more important than before.