Earnings management and issue characteristics: an empirical analysis of IPOs in India

PurposeThis study aims to examine earnings management around initial public offerings (IPOs) in India. It also explores the influence of issue characteristics on earnings management around the IPOs.Design/methodology/approachA sample of 511 IPOs that came during April 2003-March 2019 is studied for calculating earnings management for pre-issue, issue and post-issue years. Using Cross-Sectional Modified Jones Model, the paper presents earnings management on the basis of three proxies i.e. discretionary accruals, discretionary current accruals and discretionary long-term accruals. The influence of issue characteristics on earnings management practised around the IPOs is also observed through correlation and multiple regression analysis.FindingsThe paper finds that earnings management is abnormally high during the issue year compared with pre-issue and post-issue years. It also unveils that profitability, premium, age, and size of the issuer significantly determine the level of pre-issue and issue year earnings management practised by Indian IPO issuers.Research limitations/implicationsThe findings are useful to stakeholders (potential investors, analysts and regulators) to observe, assess and understand the quality of financial numbers that are based on fallacious disclosure of accounting figures. It provides insight into the possibilities of managed earnings around the issue that could influence investors' decision-making. Further, the study reflects the efficacy of Indian regulatory norms for IPOs.Originality/valueTo the authors' knowledge, it is the only Indian study that had used an extensive data set of about two decades to calculate earnings management during pre-issue, issue and post-issue years. The uniqueness of the study further lies in three proxies of earnings management representing short-term and long-term accruals. Moreover, it is the first study to observe the influence of IPO issue characteristics on earnings management.

Impact of Covid-19 Pandemic on the Investment Behavior of DIIs and FIIs on Indian Debt and Equity Markets

This paper aims to examine the impact of the Covid-19 pandemic on the investment behaviours of both Domestic Institutional Investors (DIIs) and Foreign Institutional Investors (FIIs) in the Indian debt and equity markets. The study is based on the daily time-series data from January 01,2015, to June 03, 2020. The study has constructed three Structural Vector Auto Regression dynamic models to compare the investment behaviors of FIIs and DIIs in both pre-and post-pandemic periods. The results indicate that the Institutional Investors' activities do not significantly impact the equity returns in the Indian markets, which has remained so in the wake of Covid-19. The debt purchases and sales for the DIIs are relatively more inelastic to market returns and reflect the risk-averse investment attitude of DIIs because of the negligible impact of Covid-19. There is a drop in the risk appetite of the FIIs due to a rise in the share of debt holdings in their portfolio in the wake of the Covid-19 pandemic.

The interconnectedness across risk appetite of distinct investor types in Borsa Istanbul

PurposeThis study aims to investigate the interconnectedness across the risk appetite of distinct investor types in Borsa Istanbul. This study also examines the causal impact of global implied volatility indices on the risk appetite of these investor groups.Design/methodology/approachThe authors use a novel time-varying frequency connectedness framework of Chatziantoniou et al. and a new time-varying Granger causality test with a recursive evolving procedure by Shi et al. over June 2008 and July 2022.FindingsThe results show a high level of interconnectedness across the risk appetite of different investor types. The sizable spillovers to domestic types of investors either occur from professional or foreign investors, indicating the long-term dominant effect of foreign and more qualified investors on the domestic investors in Borsa Istanbul. The authors provide significant evidence of causality from the global implied volatility to the Borsa Istanbul risk appetite indices, which are getting stronger after the COVID-19 outbreak.Originality/valueUnlike the previous studies, the authors analyze the risk appetite sub-indices of various types of investors to reveal behavioral distinctions and interconnectedness across them. The authors use a novel econometric framework to assess investors' risk appetite in different investment horizons in a time-varying system. Together with volatility index (VIX), the authors also use volatilities of oil (OVX), gold (GVZ) and currency (EVZ), considering the information transmission not only from stock markets but also energy, metals and currency markets. The present data set covers significant financial crises, socioeconomic events and the COVID-19 outbreak.

Herd behaviour in an emerging market: an evidence of calendar and size effects

PurposeThis study aims to examine investors' herd behaviour for various calendar events and size-based stock portfolios in Pakistan. The authors consider three calendar effects, crisis (COVID-19 and financial crisis 2018–19), announcement of political news and popular calendar anomalies (month-of-the-year and day-of-the-week), and investigate the impact of stock size on calendar effect in terms of investors' herd behaviour.Design/methodology/approachThe study uses non-linear specification to capture herd behaviour using firm-level daily data for 496 stocks listed on Pakistan Stock Exchange over the period 2001–2020.FindingsThe results indicate herd formation during periods of COVID-19, financial crisis, political news announcements and January (month-of-the-year). The authors also observe significant herding for the biggest and smallest size stocks over complete period. However, the authors find more pronounced herding in big stocks during January as compared to the more noticeable herding in small stocks over complete period. The findings suggest that herding in small stocks is not the main cause of January herding and hint on the prevalence of significant institutional herding during January.Practical implicationsThe stock prices destabilize because of the mimicking behaviour during crisis periods, days of political announcements and month of January. Implementation of insider trading laws and transparent information environment can help in reducing these effects and increasing market efficiency.Originality/valueThe authors consider the recent COVID period in our analysis. In addition, we provide new evidence on the possible impact of stock size on calendar effect in terms of herd behaviour, which, to the best of the authors' knowledge, has not yet been documented in literature.

2023 Outlook of Economy and Real Estate Markets in Japan

[...]the 2022 real estate transaction market in Japan was favorable in terms of both prices and transaction volume. Because the Overnight Index Swap ("OIS") 10-year rate of the Japanese Yen (not subject to the BOJ's YCC) is trading at a level close to 0.9%, and if the market is believed to consider the appropriate level of the long-term interest rate for the Japanese yen to be much higher than 0.5%, if JGB's yield continues to remain at around 0.5% level, the possibility of further policy revisions by BOJ will increase. The positive spiral of stable price increases with stable wage growth, which the government and BOJ assume as precondition for price stability, is not functioning, raising concerns about a downturn in the Japanese economy due to a decline in personal consumption. Because of this mixed economic picture, unless extreme conditions such as a sharp acceleration of price hikes occur, it is unlikely that a major change in monetary policy, i.e., a halt in monetary easing, will be implemented before the change of the BOJ Governor scheduled for April 2023. According to data disclosed by Sanko Estate, a major leasing broker in Japan, the vacancy rate for large-scale buildings (standard floor size: over 7,000 sqf) in the 23 wards of Tokyo, which was at its lowest level of 0.69% in the first quarter of 2020, has risen to 4.52% as of November 2022 due to cancellation of floors as a result of behavioral restrictions caused by COVID-19, reduction in corporate activities, and changes in the way offices are used due to the spread of work-from-home.

Risk hedging properties of infrastructure: a quantile regression approach

PurposeThis paper aims to examine the hedge, diversifier and safe haven properties of the global listed infrastructure sector and subsector indices against two traditional asset classes, stocks and bonds, and four alternative asset classes, including commodities, real estate, private equity and hedge funds during extreme negative stock market movements.Design/methodology/approachUsing dynamic conditional correlation and quantile regression, the authors analyze a data set of 12 indices comprising listed infrastructure and traditional asset classes from 2010 to 2019.FindingsOverall, the findings indicate that listed infrastructure acts as an effective diversifier but not as a strong safe haven or hedge when considered in a multiasset context. With minor exceptions, listed infrastructure cannot be concluded as a safe haven against other asset classes under investigation.Practical implicationsThe present study has implications for institutional investors looking to incorporate infrastructure in their multiasset portfolios for increased portfolio diversification benefits.Originality/valueDespite the increased influence of infrastructure as an asset class, to the best of the authors' knowledge, this is the first study to investigate the hedge, safe haven and diversifying properties of infrastructure in a multi-asset context.

Companies Identified as Having the Greatest Returns to Capital in Emerging Markets During a Worldwide Pandemic

The COVID-19 pandemic of the year 2020 resulted in high unemployment, business closings, property loss and decimation of individual wealth, disruption of global supply chains, and illness and deaths everywhere, but most intensely in countries classified as emerging markets. However, during this year, cash flow from investors in established markets to emerging markets has been of immense magnitude. While many companies, in emerging markets, reported very high risk-adjusted rates of return, many others reported so low rates during this period. This study aims to establish a unique profile of risk-return characteristics of the companies in emerging markets that have constantly reported the highest risk-adjusted returns to total capital during the pandemic. The statistical results of our study suggest that such unique profile can be used as a tool to forecast which companies, in such markets and during such disturbances in the future, will maintain high returns to capital providing an invaluable tool for investors, investment counselors and financial researchers tasked to determine firm's intrinsic value in such an environment.

Explaining the Gamestop Short Squeeze using Ιntraday Data and Google Searches

This article examines the recent short squeeze of the GameStop (GME) stock in early 2021. This event, although not the only case of short squeeze, has some idiosyncratic features that makes it extremely interesting, mainly because it was organized by non-institutional investors through social media like Reddit. Using intraday data during the period 4/1/2021-26/3/2021, we conclude that volume and Google searches provide useful information which enable us to explain the GME performance. Moreover, we show that information on volume and Google searches can provide investors with valuable data, but the faster investors have access to this information, the greater the advantages. This analysis could be very useful for scholars and practitioners who examine profitable investment strategies when such conditions emerge in the markets, and it also provides some thoughts for regulators regarding the impact of networks, social or not, on the stability of the financial markets.

Fund style drift and stock price crash risk – analysis of the mediating effect based on corporate financial risk

PurposeThis paper aims to identify the direct impact of fund style drift on the risk of stock price collapse and the intermediary mechanism of financial risk, so as to better protect the interests of minority investors.Design/methodology/approachThis paper takes all the non-financial companies on the Chinese Growth Enterprise Market from 2011 to 2020 as study object and selects securities investment funds of their top ten circulation stocks to study the relationship between fund style drift and stock price crash risk.FindingsFund style drift is likely to add stock price crash risk. Financial risk is positively correlated with stock price crash risk. Fund style drift affects stock price crash risk via the mediating effect of financial risk, and fund style drift and financial risk have a marked impact on the stock price crash risk of non-state enterprises, yet a non-significant impact on that of state-owned enterprises.Originality/valueThis paper links fund style drift with stock price crash risk in an exploratory manner and enriches the study perspectives of relationship between institutional investors' behaviors and stock price crash risk, thus enjoying certain academic value. On the one hand, it furnishes a new approach to the academic frontier issue concerning financial risk and stock price crash risk, and proves that financial risk is positively correlated with stock price crash risk. On the other hand, it regards financial risk as a mediating variable of fund style drift for stock price crash risk and further explores different influencing mechanism of institutional investors' behaviors.

One in the Same? Unpacking Corporate Social Responsibility (CSR) and ESG in South Korea

Substantial growth in global ESG investments has led to calls to better understand regional trends. To this end, this paper provides three major contributions with respect to the Korean market. First, it provides a comprehensive overview of the local ESG landscape. While drivers include aggressive ESG allocation and disclosure requirements, initial growth may have been propelled by a relabeling of existing investments rather than channeling of new capital. Second, this study unpacks ESG and corporate social responsibility (CSR) as presented in the literature. While prior studies have often used ESG and CSR interchangeably, clearer distinctions between the two terms may be called for. Third, this paper investigates ESG and CSR in South Korea through unique news data analysis of 88,946 articles. Unlike the academic literature to date, we see clearer distinctions between ESG and CSR via news analysis. Specifically, related terms for ESG focus on corporate governance and investors, while CSR retains a focus on social contribution and social responsibility.

Are sustainable firms more profitable during COVID-19? Recent global evidence of firms in developed and emerging economies

PurposeThis paper investigates whether sustainability performance (SP) protects financial performance (FP) for firms in both developed and emerging economies during the COVID-19-induced economic downturn.Design/methodology/approachUsing a recent sample of firms in 34 countries between 2003 and 2021, the authors employ ordinary least squares regressions, moderations and the Heckman two-step method to test the hypotheses.FindingsFirms with strong SP have higher FP in developed and emerging economies in the upcoming year. During the COVID-19 crisis in 2020–2021, the impact of sustainability on FP is pronounced in developed but not in emerging economies. Furthermore, cross-listings expose firms in emerging economies to high-standard institutional mechanisms in developed economies. Thus, sustainable firms in emerging economies cross-listed on European stock exchanges are more profitable.Practical implicationsFor regulators and standard setters, the global-level comparative analysis helps them find solutions that may assist firms in improving SP globally (e.g. mandatory reporting) and enduring crises resiliently. For institutional investors, the study reveals the relatively different impact of sustainability risk for firms in developed and emerging economies. For practitioners and private sector firms, this study contributes to the dialogue on what makes firms more resilient in COVID-19. Although COVID-19 might be temporary, the lessons learned could protect firms from future crises.Originality/valueThe authors contribute to the contingency perspective between sustainability and financial performance by providing recent empirical evidence in a global setting during the COVID-19 pandemic. The authors demonstrate how different external institutional mechanisms (rule-based governance and relation-based governance) and cross-listing affect the SP-FP relationship during a crisis. The authors extend the knowledge in crisis management literature with a comparative study and fill the research gap on how SP affects FP for firms in emerging economies compared to developed economies.

Green Banking for Sustainable Development: An Empirical Study on Customers' Perspective During the Covid-19 Pandemic

Green banking is an umbrella term that refers to policies and principles that help banks to be more sustainable in terms of their economic, environmental, and social impacts. Its goal is to make banking procedures, as well as the usage of IT and physical infrastructure, as efficient and effective as possible while having zero or little environmental impact. Due to the Covid-19 pandemic, businesses across the globe were badly hit. This paper is an attempt to show the awareness of green banking initiatives, regularity of usage of green services and the perceived benefits of using such services during the pandemic among customers of selected public and private sector banks in Karnataka, India. It was found that the nationwide lockdown had an impact on respondents accomplishing banking services. The results disclosed the level of awareness about green banking concept. Debit card, mobile banking and Internet banking were the most widely used green products. The findings showed three main benefits of green banking, namely, increase in UPI transactions using mobile banking, secure transactions and environmental benefits. The outcomes of this study can help the banking institutions to market their green banking services and work on their implementation.

Effects of Global Pandemic on Stock Liquidity in the Nigerian Stock Exchange

Stock liquidity plays important role in investors' participation in any nation's stock market. The global pandemic shock created market illiquidity especially among developing stock market like Nigerian stock market. However, the emergence of global pandemic via COVID-19 pandemic triggered declined market turnover (stock liquidity) which in turn created lack of confidence among stock investors in Nigeria. This study therefore examined the effects of Global pandemic on stock liquidity in the Nigerian stock market using stock turnover and COVID-19 pandemic as measure for stock market liquidity and global pandemic. The study employed expost facto research design using weekly data of both corona-virus pandemic and stock market turnover within the period of March, 2019 to February, 2022. The study employed Exponential GARCH (EGARCH) model and found a considerable negative consequence of Global Pandemic (Covid-19) on stock liquidity, implying that corona-virus pandemic has brought bad information (bad news) which deteriorate the liquidity in the stock exchange market. The study concluded that COVID-19 pandemic shock reduces stock liquidity in Nigerian stock exchange market. The study however recommended that government should put in place more palliative policies such as tax incentive and lowest interest rate on loan to individual and institutional investors which will cushion effect of COVID-19 pandemic and increase investors' participation in the Nigerian stock market. Also, Nigeria stock market regulators should put in place sound measures that will enhance availability of stock information so as to arouse the interest more and new investors to the Nigerian Stock Market.

Disposition Effect: Brazilian Investors' Behavior during the Covid-19 Pandemic

This study investigates the disposition effect with regard to Brazilian investors, with focus on the year 2020. The database is composed by more than 12,000 trades by 274 investors. We follow the method of Odean (1998) to estimate the proportions of gains and losses realized and test the null hypothesis of equality of these proportions in each portfolio. The results suggest that Brazilian investors behave in line with the disposition effect. They sell winning stocks too early and hold losing stocks too long. A stock that is gaining value is more likely to be sold from day to day compared to a stock that is losing value. The disposition effect was not found in March, which suggests that investors employed a loss-limit during periods of market stress, no matter if the stock went up or down.

A paradigm shift in corporate social responsibility: India's transition from mandatory regime to the COVID-19 era

Purpose>This study aims to examine the pattern of corporate social responsibility expenditure (CSRE) incurred by Indian companies after the inception of Companies Act 2013. It also highlights the resultant change brought in the corporate social responsibility (CSR) spends of the companies because of COVID-19 pandemic.Design/methodology/approach>The CSR index provided by the Ministry of Corporate Affairs under Companies (CSR Policy) Rules 2014, is adopted to measure the extent of CSRE made by top 30 Indian companies listed on Bombay Stock Exchange. To study the pattern of CSRE in various domains mentioned in the CSR index, the study is conducted over four points of time. Three alternative years since the commencement of the Companies Act 2013 i.e. 2014–2015, 2016–2017 and 2018–2019 have been taken up. Additionally, the financial year 2019–2020 is included as it marks the inception of the COVID-19 pandemic.Findings>The findings show that the CSRE made by companies is increasing every year over all points of time taken in the study. In addition to this, Indian companies have voluntarily contributed a substantial amount towards COVID-19 relief over and above the required mandatory limits.Practical implications>The gradual increase in CSR contributions even above the mandated amount and voluntary contribution towards COVID-19 relief by Indian companies implies that the nature of CSR in India is still philanthropic.Originality/value>The study contributes to the CSR literature after the implementation of the mandatory CSR provisions in India and in the wake of the global pandemic caused by COVID-19 as so far there is no such study available in the extant literature.

Impact of Institutional Investors on Indian Stock Market Performance

The paper analyzes the impact of Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs), as these are the two primary institutions on which the Indian stock market is dependent. The research design and statistical tools used in the study are: Vector Error Correction Model (VECM), Granger Causality, Variance Decomposition Analysis, and Impulse Response Function. During the Covid-19 pandemic, high volatility was witnessed in the global markets, so it is important to evaluate the behavior of the Indian stock market with respect to the inflows and outflows of institutional investors on a daily basis. The paper concludes that Indian stock market return (Nifty 50) has more significant impact on FIIs, as compared to DIIs (mutual funds).

ESG Controversies: A Quantitative and Qualitative Analysis for the Sociopolitical Determinants in EU Firms

Environmental, Social, and Governance (ESG) criteria are novel and exciting tools of corporate disclosure for decision making. Using quantitative and qualitative analyses, the present study examined the key characteristics and trends of ESG controversies in the European market. At the same time, it identified the controversies’ determinants. A bibliometric analysis was the qualitative method employed on the data derived from Scopus using Biblioshiny software, an R package. The quantitative analysis involved an international sample of 2278 companies headquartered in Europe from 2017–2019 being studied using a Generalized Linear Model. The findings of this research highlighted the role of the “S” and the “G” dimensions of the ESG controversies as the most crucial in affecting controversies. Women are under-represented in the business hierarchy, but their natural characteristics such as friendliness and peaceability lead to a low level of illegal business practices. However, independent of gender, executives have personal gains that they want to satisfy. Thus, executives may become involved in unethical practices and harm their colleagues and the business’s reputation. On the other hand, democracy emerged as one of the most disputed factors. Democracy gives people the voice to express themselves and publicly support their ideas without restrictions. Although, the regression results showed that democracy is not always operated as the “pipe of peace” and can affect, to some extent, controversies.

Guest editorial: Corporate social responsibility and COVID-19 global crisis: managerial and financial perspectives in developed and emerging countries

[...]management behavior plays a crucial role in developing CSR strategies. [...]with the development of new theoretical constructs and new models, it is necessary to better understand the dynamics and critical factors of the relationship between CSR and company performance as well as the context in which they operate (Lin et al., 2019;Surroca et al., 2010). In developed countries, CSR has become an important element for firms, as CSR strategies enhance their competitiveness and corporate reputation (e.g. Becker-Olsen et al., 2006;Aguilera et al., 2007). [...]of particular interest – in terms of context influences – are also countries considered as fastest-developing, such as BRICS, CIVETS, Next Eleven, and MINT, in which different cultural and social aspects can influence CSR strategies in different ways compared to developed countries (e.g. Aguinis and Glavas, 2019;Sardana et al., 2020). [...]this special issue aimed to attract rigorous research studies from scholars all over the world, contributing to enrich theoretical and practical knowledge about CSR, helping scholars – as well as executives of small and medium-sized enterprises (SMEs), emerging market SMEs, multinationals enterprise (MNEs) and emerging market MNEs (EM-MNEs) – to navigate through, overcome and learn from the COVID-19 global crisis.

A Study on Impact of Dividend Policy and Stock Price Volatility on Health Care Market

Our target to be reached through this research to measure the impact of the strength of electronic rumours circulating through social networking sites on the demand of the consumer for foodstuffs in light of the COVID-19 pandemic. For which purpose, analysis has been made for the dimensions of both electronic rumours and social networking sites, in addition to the demand for foodstuffs in light of the COVID-19 pandemic. Besides, based on the field study using the questionnaire that has been distributed to a specific sample consisting of 394 consumers using one of the social networking sites, the study demonstrated the existence of a statistically significant effect of the electronic rumours on the consumer demand for foodstuffs in light of such pandemic. More to the point, this study attributed that effect to three factors pertaining to the nature of the electronic rumours and the means of their distribution, in addition to factors relating to the consumer personality, and other factors associated with the environmental conditions created by the pandemic in terms of economic, social and psychological aspects. Furthermore, amongst the most important of such factors, we uncover: the relative importance of rumours with regards to the consumer, and the degree of ambiguity that distinguished the crisis period about the measures taken by government to cope with the crisis, along with the degree of credibility and confidence that the consumer allocates to those rumours, in addition to the spread of anxiety and stress resulting from the crisis in question.

Do Investor Overconfidence and Loss Aversion Drive Saudi Firm Market Performance? The Moderating Effect of Corporate Governance

sThis study investigated the impact of investor psychological bias on a firm’s market value. In detail, we examined the effect of investor overconfidence (optimism) and loss aversion (pessimism) on firm market value. We also aimed to investigate the moderating effect of corporate governance on the relationship between investor behavior biases and firm market value. This study used a sample of 143 firms listed on the Saudi Stock Exchange over the period from 2012 to 2021. The results suggest that investor overconfidence affects a firm’s value positively. On the other hand, loss aversion is negatively associated with the firm’s market value. Furthermore, we find that corporate governance (measured by board size and board independence) enhances the positive association between overconfidence and firm market value. In contrast, we find that corporate governance seems to marginally mitigate the negative effect of loss aversion.