Board composition,monitoring and credit risk: evidence from the UK banking industry

This paper examines the effects of board composition and monitoring on the credit risk in the UK banking sector. The study finds CEO duality, pay and board independence to have a positive and significant effect on credit risk of the UK banks. However, board size and women on board have a negative and significant influence on credit risk. Further analysis using sub-samples divided into pre-financial crisis, during the financial crisis and post crisis reinforce the robustness of our findings. Overall, the paper sheds light on the effectiveness of the within-firm monitoring arrangement, particularly, the effects of CEO power and board independence on credit risk decisions thereby contributing to the agency theory.     

Does public expenditure management matter for education outcomes?

This paper examines the significance of public expenditure management for primary education outcomes in public schools in two South African provinces (Gauteng and North West). Using cross-sectional data from 175 public primary schools and 13 local education offices, the analysis finds that while misappropriation of education funds (leakages) is not strongly associated with poor education outcomes, delays on the part of the government in disbursing funds to schools are correlated with Grade 5 dropout rates. The paper finds no evidence that public expenditure and total resource wealth (including public and private contributions) are significantly associated with education outcomes. Increased spending on learning and teaching support materials is associated strongly with lower Grade 1 and Grade 7 repetition rates. The paper also finds that repetition rates are driven strongly by poverty indicators at the district level, while dropout rates are driven strongly by district and school inefficiency.     

Commercial bank ownership and performance in China

This study examines the determinants of bank performance based on proxy variables that assess the quality of assets, profitability, liquidity and overall performance. Using a sample of 111 Chinese commercial banks over the period of 2000–2012, we find that foreign banks appear to have better asset quality and overall performance although lower profitability compared to domestic banks. In contrast, the state-owned banks tend to be more profitable and have better liquidity position compared with other domestic banks and foreign banks. At bank level, equity/liability ratio exerts significant influence on overall bank performance, while at the macroeconomic level, per capital GDP, GDP growth, inflation and unemployment rates appear to have a bearing on bank performance.     

Internal Market Efficiency,Market Co-movement,and Cross-Market Efficiency: The Case of Hong Kong and Shanghai Stock Markets

We examine the effects of the 2008 financial crisis on the cross-market efficiency of the Hong Kong and Shanghai stock markets. Our results show a sharp decline in the cross-market efficiency during the financial crisis. We investigate whether this is due to lower internal market efficiency or higher market co-movement. The results show no evidence that the internal market efficiency dropped in Hong Kong or Shanghai during the crisis. In contrast, we document a strong increase in the market co-movement during the crisis. These results suggest that the decline in cross-market efficiency during the financial crisis is due to increased market co-movement and not a decline in internal market efficiency.     

Financial reforms and credit growth in Nigeria: empirical insights from ARDL and ECM techniques

In the last 37 years, Nigeria has undergone several stages of financial reforms with different impacts on the economy. This paper analyses the impact of these financial reforms on credit growth in Nigeria using annual data from 1980 to 2016. The research work hinges on the theoretical underpinning of McKinnon-Shaw hypothesis on the relevance of financial reforms in a lagging economy. Analysing the data with autoregressive distributed lag error correction representation and bounds testing techniques, we find evidence supporting this hypothesis, and specifically that at higher real interest rates there is increased financial intermediation evidenced by credit growth. Other findings are that in the long-run, financial system deposits, inflation rate and per capita GDP are strong asymmetrical predictors of credit growth and real interest rates (the financial reform indicator), while the short-run relationships are indicator-specific. We further show that a long-run cointegration relationship exists between domestic credit and other covariates and likewise between the real interest rate and its regressors.     

Dividends and price momentum

Stock market evidence shows that momentum profits are lower among dividend-paying firms than their non-paying counterparts due to differences in losers’ returns. Additionally, dividend maintenance is associated with higher returns for losers but not for winners. Finally, buying winners that increased their dividends and shorting losers that decreased their dividends enhances momentum profits. Consistent with the evidence, the behavioral models suggest that investors underreact to the losers’ positive dividend-maintaining news, reducing their return momentum and shrinking the payers’ momentum profit. Also, underreaction to positive news from winners’ dividend-increasing announcements as well as to negative news from losers’ dividend-decreasing announcements explains the higher momentum profits for strategies based on these stocks. The results do not appear consistent with risk-based explanations.     

The abnormal return associated with consecutive dividend increases

Several studies conclude that dividend changes that are seemingly predictable on a calendar basis attract abnormal returns. We study the abnormal returns associated with consecutive dividend increases to understand this puzzle. We use regression techniques to study the relation between the number of consecutive dividend increases and the abnormal return associated with the events. Further, we study whether this relation is sensitive to firm characteristics by partitioning the regressions by the characteristics that influence the abnormal return. Our results show that the abnormal returns associated with consecutive dividend increases decline at a diminishing rate and they do not disappear, consistent with the puzzle. In addition, the decline in returns is slowest among firms that are unprofitable, small, or have high payouts. These findings suggest that the abnormal returns persist because firms that are not expected to continue a dividend-increase streak based on their characteristics do so, surprising the market and perpetuating the abnormal return.     

What drives outward FDI of Chinese firms? Testing the explanatory power of three theoretical frameworks

This study examines the forces driving outward FDI of emerging-market firms. Its contribution lies in integrating and testing insights from institutional theory, industrial organization economics and the resource-based view of the firm. This approach enables us to consider three different levels of analysis – firm, industry and country – and, thus, to distinguish between different sources of variation. Using a large firm-level Chinese dataset, we offer new evidence indicating that government support and the industrial structure of the home country of the investing firm play a crucial role in explaining outward FDI. By contrast, technological and advertising resources tend to be less important. The findings have important implications for theorizing. Although some firm-specific idiosyncrasies still play a role in explaining variations across firms in the same industry, the theoretical analysis and empirical results consistently indicate that foreign investment of Chinese firms is largely driven by their distinctive institutional and industrial environment.