Determinants of Foreign exchange exposure during the COVID-19 crisis: A Multi-country evidence

The research question of which firm-level factors make firms more vulnerable to exchange rate fluctuations during periods of crisis has rarely been explored by prior literature. Using a large sample of 1577 firms from 9 developed and 11 emerging countries, this study presents a comprehensive analysis of how firm-level factors affect firms' foreign exchange exposure before and during the COVID-19 crisis. The results provide evidence of a substantial increase in firms' linear exposure during the COVID-19 period. The cross-sectional analysis reveals that the effects of firm-level variables on exposure are more pronounced during crisis periods and are different from non-crisis periods. Firms that have effective asset utilization or large operating profit margins remain less exposed during times of stress. Contrary to hedging theory, firms that have high incentives to hedge such as firms with high financial leverage become highly exposed to currency fluctuations during crisis periods. The interaction analysis provides further evidence that firms with high leverage can limit their foreign exchange exposure during periods of crisis if they have high asset turnover or high operating profits. The results offer important practical implications to firms for risk management during periods of crisis.

The impact of Covid-19 on the capital structure in emerging economies: evidence from India

PurposeCapital structure is an important corporate financing decision, particularly for companies in emerging economies. This paper attempts to understand whether the pandemic had any significant impact on the capital structure of companies in emerging economies. India being a prominent emerging economy is an ideal candidate for the analysis.Design/methodology/approachThe study utilizes three leverage ratios in an extended market index, BSE500, for the period 2015–2021. The ratios considered are short-term leverage ratio (STLR), long-term leverage ratio (LTLR) and total leverage ratio (TLR). A dummy variable differentiates the pre-epidemic (2015–2019) and pandemic (2020–2021) period. Control variables are used to represent firm characteristics such as growth, tangibility, profit, size and liquidity. Dynamic panel data regression is employed to address endogeneity.FindingsThe findings point out that Covid-19 has had a significant, negative effect on LTLR, while the impact on STLR and TLR was insignificant. The findings indicate that companies based in a culturally risk-averse environment, such as India, would reduce the long-term debt to avoid bankruptcy in times of uncertainty.Research limitations/implicationsThe study covers the impact of the pandemic on Indian companies. Hence, generalization of the findings to global context might not be valid.Practical implicationsTo maintain economic growth in the post-crisis period, Indian policymakers should ensure accessibility to low-cost capital. The findings provide impetus to deepen the insignificant corporate bond market in India for future economic revival.Originality/valueDeveloping countries are struggling to revive the economies postpandemic. This is particularly true for Asian economies which are heavily reliant on banks for survival. This research finds evidence to utilize bond market as a source of raising capital for economic revival.

Disentangling prefectural similarities in the capital structure of Japanese SMEs through pairwise testing

We investigate the capital structure of small- and medium-sized enterprises in Japan during 2007-2019 to identify whether firm-specific determinants of leverage exhibit locational differences among Japanese prefectures. To do so, we propose a testing scheme that disentangles potential similarities across prefecture pairs. When we apply the proposed testing scheme by creating 1081 prefecture pairs, we find that the impact of the firm-specific determinants of leverage does not greatly differ between prefecture pairs in terms of both sign and magnitude in contrast to the significant difference found by conventional hypothesis testing. As a convenient tool for other geographical research, we also discuss that the proposed testing scheme is helpful for regional policy-making, specifically during period of external shocks, the latest of which could be regarded as the COVID-19 pandemic.

Do ESG Risk Scores Influence Financial Distress? Evidence from a Dynamic NDEA Approach

Financial distress is a research topic in finance that has attracted attention from academia following past financial crises. Although previous studies associate financial distress with several elements, the relationship between distress and ESG has not been broadly explored. This paper investigates these issues by elaborating a Dynamic Network DEA model to address the underlying connections between accounting and financial indicators. Thus, a model that includes profit and loss, balance sheet, and capital and operating expenditures indicators is demonstrated under the dynamic network structure to compute financial-distress efficiency scores. Then, the impact of carryovers is considered for the accurate calculation of efficiency scores for the three substructures. The influence of contextual variables, such as socioeconomic and macroeconomic variables, and whether the firm owns an ESG Risk Score or not, is assessed through a stochastic non-linear model that combines three distinct regression types: Simplex, Tobit, and Beta. The results indicate that firms that hold an ESG Risk Score are less prone to be in financial distress, and Governance Score is negatively associated with financial distress efficiency.

Operating performance during the COVID-19 pandemic: Is there a business group advantage?

In this paper, we study whether firms belonging to business groups (BG) have superior operating performance relative to stand-alone firms during the ongoing COVID-19 (COVID) pandemic. Our research is motivated by mixed empirical evidence on the performance of BG-affiliated firms. Using return on equity as a measure of operating performance and a sample of Indian firms, we first show that BG firms have lower ROE than stand-alone firms, on average. We disaggregate ROE into operating profitability (return on net operating assets – RNOA) and financial policy decisions (net borrowing costs – NBC and financial leverage – FFLEV) and show that while BG firms do not experience a significant change in NBC and FLLEV during the pandemic compared to stand-alone firms, relative to pre-COVID times, they experience a significant drop in RNOA. This is driven by much lower sales during the pandemic. Further, the relative decline in BG performance during the pandemic is driven by firms affiliated with smaller BGs, younger BGs, and less diversified BGs. © 2023

Effect of subprime crisis on financing decisions and capital structure of Indian firms: a pre- and post- crisis study using system GMM methodology

Purpose: The subprime crisis (SPC) (2007–2008) has severely affected the economies across the globe. The Indian economy was also troubled because the SPC led to a sharp reduction in foreign trade and investment, a rise in the exchange rate volatility and disproportionate foreign-currency reserves. The present paper analyzes the financing pattern of Indian listed companies during the SPC. This study aims to ascertain the impacts of the SPC-2008 on the long-term and short-term financing decisions of Indian listed companies using novel data set and appropriate robust methodology. Design/methodology/approach: The study uses fixed effect model autoregressive of order 1 (FEM AR (1)) and system generalised method of moments (GMM) methodology on a sample data of 1,032 Indian non-financial listed companies on the Bombay Stock Exchange (BSE) for the period 1999 to 2019 to analyze the financing pattern during the crisis. Findings: The study finds that the Indian firms opted for de-leveraging, shortening the maturity of debt and short-term borrowing. This significant decline in the leverage and maturity of debt indicates that the companies in India generally followed the "rat race” model of the financing mix in the crisis. After the crisis, the firms have re-leveraged and expanded the maturity of debt up to 90%. This considerable expansion in leverage and maturity implies that the Indian firms are exposed to the "rollover risk.” This re-leverage risk is asymmetrically distributed for manufacturing and services firms. Manufacturing firms are found to be more exposed to this risk. Furthermore, tangibility, free cash flows and the liquidity available within the firms are the compelling elements of the financing decision during the crisis. Research limitations/implications: The study has not included the private firms and unorganized sectors in India. Moreover, the study has not analyzed disasters such as the Asian liquidity crisis, the information technology (IT) bubble crisis, the euro bond crisis and coronavirus disease 2019 (COVID-19) pandemic. Practical implications: The study finds that Indian firms are exposed to higher risk during the financial crisis and this risk is further aggravated by the rollover risk. Therefore, investors and creditors should consider these additional risks in the financial decisions and take more precautions. The study suggests that the regulators should make necessary adjustments in lending policy, corporate restructuring and tax policy to deal with the menace of a financial crisis. Social implications: Indian firms should avoid following the rate race financing model. Originality/value: This study aims to ascertain the impacts of the SPC-2008 on the long-term and short-term financing decisions of Indian listed companies using novel data set and appropriate robust methodology. © 2023, Emerald Publishing Limited.

Covid-19 and informational efficiency in Asian emerging markets: a comparative study of conventional and Shariah-compliant stocks

PurposeThis study aims to provide a comparative insight into the level of informational efficiency and irregularities of Shariah-compliant stocks and conventional stocks in three emerging markets, namely, China, Malaysia and Pakistan. The empirical evidence is provided for pre-crisis and crisis periods caused by the Covid-19 pandemic.Design/methodology/approachInformational efficiency is measured using the variance ratio (VR) Test developed by Kim (2006). The Approximate Entropy (ApEn) Metrics is used to investigate the level of irregularities in stock prices caused by the pandemic.FindingsAll the three emerging markets in the sample are not immune to the crisis caused by Covid-19 pandemic. The level of informational efficiency of both the Shariah-compliant and conventional stock is affected by the crisis. However, the former exhibits relatively high level of informational efficiency and stability in returns as compared to more volatility of conventional stocks.Practical implicationsThis study provides market agents and policy makers with a robust assessment of the impact of the Covid-19 pandemic on informational efficiency of Shariah-compliant and conventional stocks. Relatively high informational efficiency of Shariah-compliant stocks indicates that they are more transparent and that investors can trust the Shariah-compliant stocks more. This higher level of transparency and trust leads to more steady returns and lower levels of risk even during turbulent time like Covid-19. Investors can gain superior returns by conducting fundamental analysis and investing in index funds.Originality/valueTo the best of the authors' knowledge, this is the first study that highlights the difference in informational efficiency of conventional stocks and Shariah-compliant stocks in the crisis period caused by Covid-19. Unlike previous studies, this study uses firm level data which enables firm-wise assessment of informational efficiency.

The Case for A Global Excess Profits Tax: A Response to Dr. Tarcísio Diniz Magalhães & Professor Allison Christians

In striving to slow the spread of the COVID-19 pandemic, governments across the globe acted quickly to implement various "stay-at- home" orders and bans on all "non-essential activities." While these actions were likely effective in slowing the spread of the virus, the economic impacts were felt almost immediately. The US deficit rose to $3.1 trillion following massive spending to aid individuals and small businesses. Internationally, governments have been increasing their debt loads to combat both the health and financial impacts of the pandemic. Indeed, by the end of 2020, the international debt load increased to a record-breaking $281 trillion. Almost as quickly, various proposals have been offered regarding how to mitigate this pandemic-fueled deficit. One solution offered is the return of a historical tax scheme-an excess profits tax. Excess profits taxes have historically been applied both domestically and internationally during times of war. Although there are variations in how an excess profits tax is calculated, traditionally, an excess profits tax is applied to those companies who earn returns in excess of a set "normal" rate of return.

Leverage points to address climate change risk in destinations

Transformational system change is required to respond to the current climate emergency and the COVID-19 induced structural break presents an opportunity to progress such change. While the tourism industry accepts the need for change, how this may look like remains unclear. This article contributes to identifying pathways by presenting critical reflections on the research process and findings from a three-year research project on reducing climate change risk in Vanuatu. The approach is anchored in systems thinking and draws on the concept of leverage points. Seven points are identified for intervening in the tourism system to reduce climate change risk and achieve varying levels of systemic change. Each is explored in the context of Vanuatu before its broader relevance is discussed. The findings highlight the importance of engaging with deeper influences of risk and unsustainable system outcomes. This has implications for how decision-makers approach crisis management and what ‘tourism recovery' means, especially when considering that system resilience might stand in the way of more profound transformational change required to address long-term risks.Alternate :中文摘要为了应对当前的气候突发事件, 需要进行转变性的制度变革。新型冠状肺炎引发的结构性突破为推动这种变化提供了机会。虽然旅游业接受了有必要进行改变, 但这可能会变成什么样子仍然是未知数。该文通过对一项为期三年的关于减少瓦努阿图气候变化风险研究项目过程和结果的批判性反思, 提出对气候变化进行转变性制度变革的路径。本文方法以系统思维为基础, 并借鉴杠杆点的概念, 提出对旅游系统进行干预的七个要点, 以减少气候变化风险, 实现不同程度的系统性变化。每个要点都是先在瓦努阿图的范围内进行探讨, 然后再讨论其更广泛的启发意义。研究结果强调应对风险和不可持续系统的更深层次影响因素的重要性。该研究结果对决策者如何处理危机管理和理解"旅游业复苏”的意义有启发, 尤其当决策者考虑到系统的弹性可能会阻碍解决长远风险所需要的更深远的转变性变革。

MODELLING PROFITABILITY FOR STOCKS ON ZAGREB STOCK EXCHANGE

In a market economy, one of main goals for every company is to maximize the wealth of the shareholders, which is a result of maximizing the market value of the company. There are various profitability measures for company, butfrom ownership perspective most used measure of profitability is Return on equity (ROE) ratio. This ratio relates to the earnings left over for equity investors after debt service costs for company has been deducted from total capital invested in the asset. Numerous studies have been conducted with numerous factors examined to determine factors that have impact on business performance. In this paper, the authors intention was to explore studies so far done on profitability of companies and to find an area that hadn't been yet examined, and to give substantiation ofprofitability determinants grounded on dynamic panel data. For this purpose, this paper explored variables that have impact on profitability of companies whose shares were most traded on Zagreb stock exchange (one of criteria for share to be included in market index). Variables included in research are: Net Financial Debt (NFD)/ EBITDA ratio, yearly revenue percent change, Enterprise Value (EV)/ EBITDA ratio, dividend yield, operating margin ratio, debt to equity ratio and current liquidity ratio. Analysis was done on data of companies included in the official stock index of the Zagreb stock exchange, Crobex from 2010 to 2019 (before Covid-19 pandemic). The data was taken from the Thomson Reuters database where all data for selected companies necessary for this paper were collected.

Does bank affiliation affect firm capital structure? Evidence from a financial crisis

PurposeThis study aims to assess the determinants of corporate debt with a particular focus on bank-affiliated and non-bank-affiliated firms during the global financial crisis.Design/methodology/approachThe authors analyse the data of 395 listed manufacturing firms from Pakistan with 2,370 firm-year observations. The sample is divided into subsamples, namely bank-affiliated, non-bank-affiliated and stand-alone firms. Fixed and panel effect regression models are applied to determine the during, pre-crisis and post-crisis effects on corporate capital structure.FindingsThe robust results of the study reveal that non-bank-affiliated firms have different leverage determinant behaviours with a greater reliance on size, tangibility and profitability. However, bank-affiliated firms seemed to show greater immunity from a crisis compared to other firms. Simultaneously, the stand-alone firms remained at a disadvantage subject to internal financial ties of group-affiliated firms and form a base of market imperfection.Practical implicationsThis study's findings imply that financial managers should contain better ties with financial institutions to enhance financial immunity in worse time of financial crisis or COVID-19 global calamity. On the regulation front, these findings call for critical policy regulations to govern the internal ties with financial institutions to create a level playing field for the corporate sector.Originality/valueTo the best of the authors' knowledge, this study is the first to investigate determinants of corporate debt with a particular focus on bank-affiliated and non-bank-affiliated firms. This work is also novel to explore corporate debt of bank-affiliated and non-bank-affiliated firms during the financial crisis.

Assessment of Banking Conditions on Financial Distress During the Period of COVID-19 in Indonesia

This study was conducted to analyze the effect of liquidity ratios (LDR), profitability (ROA), and leverage (CAR) on the financial difficulties of banking companies listed on the Indonesia Stock Exchange (IDX) for the 2020-2021 period, moderated by credit risk during the COVID-19 pandemic. 19. Financial Distress was measured using the Altman Z-Score model, and compared with conditions before the 2016-2019 pandemic, so that the research data was taken from the annual report for the 2016-2021 period. The samples collected were 27 companies. This study uses quantitative analysis techniques with linear regression and processed using SPSS 22. The results of this study indicate that during the pandemic period and before COVID-19 in Indonesia, liquidity, profitability and leverage ratios have a significant effect on financial difficulties. Credit risk as a moderating variable can only strengthen the influence of the liquidity ratio and profitability ratio. Meanwhile, the leverage ratio cannot be moderated by credit risk. In the pre-pandemic period of 2016-2019, it showed that the ratio of liquidity, profitability, and leverage could not be moderated by credit risk. The findings in this study explain that banking conditions are not in financial difficulty during the pandemic, but profits for companies are low. This anomaly is caused by over-liquidity from credit that is not widely distributed to the business sector. © 2023, World Scientific and Engineering Academy and Society. All rights reserved.

Modelling asymmetric sovereign bond yield volatility with univariate GARCH models: Evidence from India

Does Indian sovereign yield volatility reflect economic fundamentals, or whether it is a self-generated force flowing through markets with little connection to such fundamentals? To answer the question, this research explores the volatility dynamics and measures the persistence of shocks to the sovereign bond yield volatility in India from 1 January 2016, to 18 May 2022, using a family of GARCH models. The empirical results indicate the high volatility persistence across the maturity spectrum in the sample period. However, upon decomposing the markets into bull and bear phases, our results support the existence of weak volatility persistence and rapid mean reversion in the bear market. This shows that the economic response policies implemented by the government during the pandemic, including fiscal measures, have a restraining effect on sovereign yield volatility. For a positive γ, the results suggest the possibility of a "leverage effect” that is markedly different from that frequently seen in stock markets. Results further indicate that the fluctuations in Indian sovereign yields cannot be dissociated from inflation and money market volatility. Our findings herein provide valuable information and implications for policymakers and financial investors worldwide. © 2023 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license.

Essays on the behavior and performance of retail investors

In recent years, retail trading in stocks, cryptocurrencies and other assets has become significantly more popular, and since the onset of the Covid-19 pandemic and the shift to a work-from-home regime, it has in many ways become a mainstream activity. In this dissertation, I utilize a proprietary dataset obtained from an international broker to produce new insights about the behavior and performance of this important group of traders.In the first essay, I study the use of leverage by retail traders. Utilizing a major regulatory intervention that limited the amount of leverage that retail brokers may offer on certain financial derivatives, I deploy a difference-in-differences research design and report that leverage is highly detrimental to the wealth of retail traders. I further show that overconfidence and an insufficient understanding of leverage are important contributors to this result. These findings portray a situation in which retail traders make a financial mistake that is so extreme that it may justify a regulatory intervention even in the absence of an apparent market failure.In the second essay, I investigate the implications of the recent shift to a work-from-home regime on retail trading. Exploiting the changes in work-from-home policies within and across countries, I demonstrate that, upon working from home, retail traders pay more attention to their brokerage accounts, trade more and perform better. These findings not only illustrate important changes in the behavior of retail traders but also provide causal support for the literature aiming to link traders' attention to their performance. (PsycInfo Database Record (c) 2022 APA, all rights reserved)

The effect of COVID 19 on risk-taking of small and medium-sized, family and non-family firms

PurposeThis study aims to assess the effect of the COVID 19 on small and medium-sized family firms' risk-taking in Iraq.Design/methodology/approachData was collected by distributing the questioners. The statistical population consists of 600 employers and small and medium-sized family and non-family firm managers. Hypothesis analysis was carried out after evaluating the questionnaire's validity and reliability using the structural equation method.FindingsThe results indicate that COVID 19 influences small and medium-size family and non-family firms' risk-taking.Originality/valueSince no study carried out so far on the effect of COVID 19 on risk-taking of family and non-family Iraqi small- and medium-enterprise firms and since the political-economic condition of Iraq has been affected recently due to the presence of ISIS, its effects, as well as the civil war that taken place before COVID 19, assessing such a topic can contribute to the development of science and knowledge in this field.

A resilient public health in 2030: #buthow?

Game changers in public health are traditionally seen as specific in(ter)ventions, but contemporary public health challenges warrant acknowledging complexity instead. Our game changer is a compass to deal with this complexity. In our vision of 2030, system beliefs, goals, structures and events line up to create a society that balances health, climate, social cohesion and economy. To reach this desired system, a resilient public health sector actively interacts with public discourse, political windows of opportunity are seized for institutionalizing health for all policies, and research is intertwined with the policy process, without the merging of the two.

Curriculum, instruction, and assessment: A snapshot of world language education in Massachusetts

This large-scale study used a survey to collect data on K-12 world language classrooms in Massachusetts public schools, focusing on core instructional practices, curriculum, and assessment. The study resulted in 383 individual teacher completed responses, representing 188 districts, which was analyzed using descriptive statistics. Results indicate encouraging signs in the adoption of core proficiency-based instructional practices, thematic curriculum design, and the use of performance-based assessments. Further support for teachers in how to implement these practices is needed, along with attention to school leaders who may have no background in world language education but are tasked with supporting and evaluating world language teachers. Survey data were collected at the beginning of school closures due to COVID-19, capturing a picture of K-12 world language education and a point of comparison for future research.

Modified degree of operating leverage risk measure

Unlike the conventional Degree of Operating Leverage (DOL), we propose a modified DOL measure (MDOL) that considers both the exogenous shock to the demand function, and the volatility of the firm's asset as part of the idiosyncratic risk. Our model indicates that at times of turbulence such as the COVID-19 pandemic, global and local financial crises, MDOL can be much larger than the conventional DOL. The model supports the contention according to which, non-well diversified investors, who are commonly found in family firms, tend to underinvest to reduce their exposure to idiosyncratic risk. © 2022 Elsevier Inc.

Does Financial Leverage Fit Firm Performance During the COVID-19 Pandemic: Evidence From Vietnam

The paper aims to determine the effect of financial leverage on the performance of Vietnamese small and medium enterprises during the COVID-19 pandemic. Based on the agency theory and pecking order theory, combined with the quantitative method, the financial leverage and COVID-19 are statistically significant factors affecting the performance of small and medium enterprises in Vietnam. Significantly, the author emphasizes that financial leverage has a positive effect on the performance during the pandemic. Furthermore, there is the existence of homoscedasticity and no-autocorrelation in the model when using feasible general least squares. It confirms that the model estimation is unbiased and reliable. © 2022 IGI Global. All rights reserved.

Influence of Board Characteristics and Ownership Concentration on Corporate Sustainability Growth among Listed Manufacturing Companies in Nigeria

The influence of corporate governance on the manufacturing firms' sustainable growth during the financial crisis period cannot be overemphasized. Hence, this study was carried out find out the kind of influence the corporate governance mechanisms have on the corporate sustainable growth in Nigeria. The population of the study consists of listed manufacturing companies, and a sample size of 30 manufacturing firms was selected using a purposive sampling technique based on convenience, covering a time period of five financial years (2011 to 2020). The regression method was used to analyze the data collected through secondary sources. The result showed that board size, board composition, ownership concentration, board independence, and firm size had a positive relationship with corporate sustainable growth while leverage had a negative relationship with corporate sustainable growth. Thus, the study showed that corporate governance exercises a positive influence on corporate sustainable growth and the study recommended that listed manufacturing firms put in place a larger board structure that encompasses people of different backgrounds, skills, and experience in order to help the companies move forward during difficult times;and a good board structure that makes provision for the presence of independent directors needs to be maintained, to checkmate the management so that all the decisions taken by the management will be the ones to achieve the company's ultimate goal