Company-specific Factors Research Articles

Explaining the premium to NAV in publicly traded Australian REITs, 2008–2018

PurposeThe purpose of this paper is to explore the levels and determinants of net asset value (NAV) premiums/discounts for publicly traded Australian Real Estate Investment Trust (A-REIT) market during the last decade. A-REITs were severely affected by the global financial crisis as S&P/ASX 200 A-REIT index-listed property stocks experienced 47 per cent discount to NAV, on average, in 2008–2009 crisis. Since 2013, A-REIT sector has exhibited a strong recovery from the financial crisis and traded at high premiums to date. Understanding the relationship between pricing in the public and private real estate markets has taken on great importance as A-REITs continue to trade at significant premium to NAV unlike their counterparts in the USA and Europe.Design/methodology/approachThis paper follows a rational approach to explain variations in NAV premiums and explores the company-specific factors such as liquidity, financial leverage, size, stock price volatility and portfolio diversification behind the A-REIT NAV premiums/discounts. The study specifies and estimates a model of cross-sectional and time variation in premiums/discounts to NAV using semi-annual data for a sample of 40 A-REITs over the 2008–2018 period.FindingsThe results reveal that A-REIT premiums to NAV can be explained not only by the liquidity benefit of listed property stocks but also positive financial leverage effect. During the past decade, A-REITs have followed an aggressive approach in financing their growth by using borrowed funds to purchase assets as the income from the property offsets the cost of borrowing and the risk that accompanies it. Debt-to-equity ratio has to be considered as an important source of NAV premiums as highly geared A-REITs that favoured debt financing over equity financing traded at significant premiums to NAV of their underlying real estate assets.Practical implicationsThe paper includes implications for the REIT market investors. The regression analysis shows that specialty A-REITs with a focus on creative market niches traded at higher premiums compared with other property stocks, especially in the post-GFC recovery period. Specialty REITs are more highly valued by the market than their traditional specialised counterparts (e.g. office and retail REITs), and those pursuing a diversified strategy.Originality/valueThis paper presents an Australian case study as the A-REIT market provides a suitable environment for testing the effect of financial gearing on the REIT premium to NAV. The study provides empirical evidence supporting the importance of debt-to-equity ratio in explaining the variation in A-REIT NAV premiums.

Aplikasi Single Index Model dalam Pembentukan Portofolio Optimal Saham LQ45 pada Bursa Efek Indonesia

Single Index Model is a stock return model that divides the effect on returns into a systematic factor (as measured by yields on the market index) and company-specific factors. The shares used in the formation of the portfolio of the Single Index Model are stocks included in the LQ45 Index in the Indonesia Stock Exchange because this Index has always increased from year to year. However, not all shares in the LQ45 Index can be used, there must be a determination to get the most suitable shares to be used as a portfolio. Therefore, the author uses the Single Index Model Application in the Formation of the LQ45 Optimal Stock Portfolio on the Indonesia Stock Exchange so that investors know how to form an optimal portfolio using a simpler model of the single index model. This study aims to apply the application of a single index model in the formation of a stock portfolio registered in LQ45, determine the proportion of stock investment in the number of lots based on the proportion of stock portfolios, and determine the funds needed for stock investment based on the number of lots. Based on the results of data analysis using the Single Index Model Optimal Portfolio, the results show that out of 45 stocks in LQ45, 13 optimal stocks will be purchased by investors. Thirteen shares and market prices include LPPF Rp.3,400, INTP Rp20,025, LPKR Rp274, INCO Rp3,030, PTPP Rp.2,180, SCMA Rp1,615, TBIG Rp.3,850, AALI Rp.10,350, CTRA Rp1. 070, PWON Rp725, TAXI Rp50, WIKA Rp2,340, and WSKT Rp1,970. The proportion of shares is 9% LPPF, 7% INTP, 5% LPKR, 13% INCO, 19% PTPP, 12% SCMA, 9% TBIG, 7% AALI, 4% CTRA, 6% PWON, 3% TAXI, 4% WIKA , WSKT 2%. The funds to be invested are IDR 1,000,000, the total number of shares to be purchased is 1,271 sheets, or if in the lot lot there are around 12 lots.

Modal Kerja Dan Struktur Modal Dalam Memprediksi Profitabilitas Perusahaan Sektor Barang Konsumsi

Profitability is one indicator that determines a company's ability to maintain continuity and carry out growth. There is no consensus regarding the factors that determine the profitability of the company. This study examines the factors that influence profitability, such as working capital and capital structure. The purpose of this study is to conduct empirical research using panel data regression methods to determine company-specific factors that affect profitability. This study uses a sample of 27 companies, which are listed on the Indonesia’s Stock Exchange (IDX) for the period 2013-2017. It was concluded that the capital structure cannot predict the company's profitability significantly. While working capital can predict a significant profitability of the company

A Research on Investment Behavior of Corporate and Individual Investors from Southern India

Current study aims to identify the factors affecting investment behavior of the corporate and individual investors, and also to make a comparative study of the investment behavior of both the corporate and individual investors from Southern India. The study was primarily based on the perception of the investors and the data was collected from 576 investors (304 individual investors and 272 corporate investors) from four major cities of South India namely; Bangalore, Hyderabad, Chennai and Visakhapatnam using questionnaire method. Researcher has identified total four factors which successfully represent the investment behavior of the corporate and individual investors. These factors are mainly; Investors related factors, Market or environment related factor, Investment related factors and Company specific factors. Further, it was found from the comparative analysis of the corporate and individual investors, that there is a significant difference in the investment behavior of the corporate and individual investors from Southern India.

Analysis of Price Differences Between A and H Shares

The price difference between A share trading in the Mainland and H share trading in Hong Kong of the same company has been prevailing since inception. Studying the differences could be useful in understanding dissimilarity between the two markets. This paper is devoted to analyze certain company specific and market factors that may influence premiums between A and H shares. An appropriate factor model is built based on a sample from 63 listed companies in both markets from January 2014 to June 2017. Our factors are useful to explain premium variations. In addition to typical market and company specific factors, it is found premium levels are significantly related to the industry sector in general. Meanwhile, it is observed that premiums of many shares are becoming narrower in recent years, which might pave the way to convergence after closer links between the Mainland and Hong Kong stock exchanges.

Job site weather index: an indicator for open environment construction projects

Purpose Many construction projects are implemented in open-environment job sites and can be significantly affected by various weather conditions. Evaluating the overall impacts of the weather conditions on a project can assist project managers to prepare effectively. Nevertheless, methods measuring the overall adverse impacts of the job sites’ weather condition on the project performance are still missing. This study aims to address this gap. Design/methodology/approach In this investigation, a survey-based method was proposed to evaluate the overall impacts of the weather conditions on the construction project resources through a new indicator called job site weather index (JWI). The target survey population includes practitioners directly involved in the on-site construction operations. Findings The JWI suggests the direction of the resource change in new construction projects based on the weather condition. The method was implemented in the road construction projects of Iran and successfully applied to four sample cities. In this experiment, construction workers were identified as the most susceptible resources to the unfavorable weather conditions. Hot temperature above 50°C and cold temperature below −10°C were ranked as the most influential factors for the workers. The results achieved showed high accordance with the trends currently followed in the country. Originality/value This research was the first structured method for capturing impacts of weather conditions on the performance of construction resources in open environment construction projects. Implementation of the method in road construction projects of Iran revealed new results that have not been previously identified. The impacts of the company-specific factors on the final productivity rate, however, were not investigated in the research. Investigations accounting impacts of various company-specific factors on the final productivity rate are required.

Variations as Activity Patterns: A Basis for Project Planning in PGE – Product Generation Engineering

The model of PGE – Product Generation Engineering describes the development of new technical products as follows: subsystems from one or more existing technical systems are the basis and starting point for every development. This is referred to as the “reference system”. It determines the structure and subsystems of a new product or serves as a basis for new development activities, respectively. Considering the role of the reference system, a new technical product is a new product generation. The development of each of its subsystems is one of three types of variation: carry over variation, embodiment variation and principle variation. The latter two are the share of new development.The iPeM – integrated Product engineering Model describes the development as a combination of activities, e.g. “detect ideas”, “verify and validate” or “built up prototype”. This contribution investigates the relation between the three types of variation and the activities of product engineering, by answering the following research questions:•Which activities of product engineering are necessary to implement the different variations in PGE?•Which factors influence this relationship between activities of product engineering and variations in PGE?Answers to these questions build up on interviews with eleven experts from development practice and two cases by authors of this contribution. The results show that the implementation of each variation in PGE includes several different activities of product engineering. Furthermore, this set of activities depends on the type of variation. Taking into account additional observations the idea of variations as company specific activity patterns is developed: each type of variation in PGE is related to a set of activities of product engineering where the characteristics of these relations depend on company-specific factors but can be similar across several development projects of this company. Hence, using those activity patterns process planning, including innovative potential, cost and risk estimation, is possible.

The Impact of Inflation and Operating Cycle on the Corporate Cash Holdings in South-East Europe

Determining optimal cash holding is one of the most crucial issues in the corporate financial management aiming to maximise the shareholder value. The optimum of corporate cash amount is not only dependent on many company-specific factors, but it is also associated with both the corporate governance structure and the institutional and macroeconomic environment. Earlier research papers showed that at the macro level, companies adjust their cash holdings to the changes in the level of the inflation and, at the micro level, to the changes of the operating cycle linked to the turnover of the corporate cash flow.
 This paper investigates the determinants of corporate cash holdings for a sample of 868 firms from ten South-East European countries (Bosnia and Herzegovina, Bulgaria, Montenegro, Croatia, Greece, Romania, Macedonia, Slovenia, Serbia and Turkey). More specifically, we investigate the influence of the inflation and the corporate operating cycle on the corporate cash holdings. Using company financial data and the country CPI for the period 2006-2015, we apply a balanced panel regression model involving the yearly change of the cash ratio as a dependent variable, and country CPI, operating cycle and other firm-specific control variables as explanatory variables.
 Results confirm that both the inflation rate and the operating cycle have substantial influence on the change of the corporate cash holdings also in the region. The relationship of the change in cash and the inflation is non-linear and best described by a U-shaped curve. That means that corporate cash holdings decrease as the level of inflation increases to a critical point but beyond that, the cash holdings start to increase. At the same time, we identified a straight linear relationship between the change in cash holdings and the length of the operating cycle. Also, we found that the change in the corporate cash holdings is positively related to the size of the company, the operating cash flow and the capital expenditures. In addition, it is inversely associated with both the change of the net working capital and the change of short and long-term debt.

An institutional theory perspective on non-financial reporting

Purpose The paper aims to explore the impact of institutional factors on non-financial reporting in the Baltic countries. The vast majority of research in the scientific literature references practices of sustainable disclosures in developed countries with a focus on legal factors and their effect on corporate reporting. Meanwhile, there is a lack of in-depth empirical data for identifying correlations between institutional (mandatory, normative and company-specific) factors and non-financial reporting in developing countries. Design/methodology/approach The theoretical framework of neo-institutional theory was applied to explore how the external environment affects practices of non-financial reporting in developing countries. The approach used in the paper is quantitative. Findings The research results reveal that if companies are likely to disclose voluntarily one of non-economic aspects in their reports, they are also likely to disclose more about the other non-economic issues. However, no significant correlations were detected between the disclosure of voluntary (non-economic) and mandatory (economic) aspects. Mandatory factors promote both – economic and non-economic reporting – while normative and company-specific factors promote non-economic reporting more. Practical implications The authors contribute to the foreign investors and practitioners by helping to better understand corporate non-financial reporting practices in post-communistic countries. Originality/value The research adds to the growing body of research on non-financial reporting practices with particular reference to the developing Baltic context. This study also contributes to scientific literature by exploring the impact of different institutional factors to non-financial reporting in developing countries.

The role of standards in the policy debate on the EU-US trade agreement

In the context of the public policy debate, we explore firm-level characteristics that influence firms’ preferences related to alternatives to harmonize standards within the Transatlantic Trade and Investment Partnership (TTIP). The options are the implementation of common standards, developed internationally or bilaterally, and mutual recognition. The empirical analysis is based on data from the German Standardization Panel. We identify three dimensions that determine firms’ preferences regarding the various harmonization solutions: (1) company-specific factors, such as size, industry and motives to apply standards, (2) the competitive environment, i.e. the position vis-à-vis other market participants, and (3) the technological environment, i.e. the dynamics of the market the company operates in.

Liquidity Risk and Its Determinants': A Study on Manufacturing Industry of Oil and Gas (Rosneft) in Russia

Liquidity risk management is an important aspect in an organisation. It is important for an organisation to manage liquidity risk efficiently. Hence, this study attempted to investigate the influence of the company factors and macroeconomic factors affecting liquidity risk of the Russia crude oil company. This study conducted the analysis about the company (Rosneft) located at Russia from the year 2012 until 2016. The analysis shows that company specific factors such as average collection period and corporate governance index score and macroeconomic factors such as company beta that influence the liquidity risk. This study suggest that the firm should manage their account receivable efficiently by establishing clear credit policy and incorporate more corporate governance elements which four pillars.

The International Entry Choices of Italian SMEs in Emerging Markets: a Case-based Analysis

The paper addresses the factors influencing the SMEs’ entry choices in international markets and explores two factors: one related to the external environment and one dependent on firms. The first factor is the institutional context as the whole of formal and informal rules of the country target. The second is the market commitment, intended as resources committed in a particular market area: the experience firms get in foreign markets and a general attitude to maintain the international presence for a long period are the main sources of market knowledge.The aim of the study is to understand the effect of company-specific factors and of context-specific factors, namely the market commitment and institutional context, on SMEs’ entry choice mode in foreign markets. The paper develops a multiple case study analysis of four small international Italian firms. Built on the institutional theory and on the market commitment construct, the paper offers a conceptual model that shows that the institutional context strongly influences the amount of resources involved in the internationalization process, while the market commitment affects more the complexity – and intensity – of the process.

Developing the Requirements of a PLM/ALM Integration: An Industrial Case Study

The digitization of the industry requires smart products and services. Smart products are mechatronic products with an increasing amount of software. To get high quality smart products to the market quickly, manufacturers need to reshape their product lifecycle processes. They need to apply system engineering-based methods to enable smooth cross-domain developments with a special focus on the software domain. One significant challenge faced by manufacturers is the harmonization of product lifecycle management (PLM), which addresses the hardware lifecycle, with application lifecycle management (ALM), which addresses the software lifecycle.To support manufacturers in this challenging activity, this paper demonstrates a proven process for developing use cases and requirements associated with a PLM/ALM integration. This process has been elicited during an industrial case study in a manufacturing company. This paper explains this process in detail. A generally applicable approach for developing the requirements of a PLM/ALM integration is extracted by removing the company-specific factors.

Determinants of Credit Rating Actions: Evidence from International Maritime Companies

This study aims to analyze the relevant factors in determining credit rating agency (CRA) rating actions for international maritime companies. The public disclosures regarding the credit rating actions within annual reports and the credit rating agencies’ websites are analyzed by applying a content analysis for the period 2000-2017. The results of the content analysis indicate that the factor of “market conditions” has been disclosed as the main credit rating action determinant by the CRAs. This finding is in line with the argument that due to the high costs of obtaining the new and confidential information, CRAs tend to rely solely on the market risk in most rating actions, rather than company-specific risk. Moreover, we determine that, after the 2008 financial crisis, CRA disclosures on company specific factors decrease dramatically. Furthermore, opacity prevails in observations regarding company-specific factors as “financial profile” and “corporate business profile”.

The Cross-Section of Expected Stock Returns in Nepal

The CAPM asserts that market betas are sufficient to explain the cross section of expected stock returns. However, beta showed either no relationship or a weak relationship with the expected stock returns when other company specific variables affecting stock returns are used. This study aims at examining the ability of beta and other company specific factors such as firm size, book to market ratio, sales to price ratio, dividend yield and earning price ratio to explain cross section of stock returns in Nepal. The study reveals that the beta has a very weak relation with stock returns in Nepal. The coefficient of beta is not significant and hence there is no evidence that beta explains variation of stock returns. The study showed that size, dividend yield, and book to market ratio has been found to be significant factors affecting stock returns in Nepal while beta, earning price ratio, and sales to price ratio do not explain the variation in stock returns.

The impact of Shanghai–Hong Kong Stock Connect policy on A-H share price premium

This paper empirically investigates the A-H share premium puzzle in the perspective of the effect of Shanghai–Hong Kong Stock Connect policy using a panel data of 55 dual-listed companies from January 4th, 2013 to December 31st, 2015. After controlling factors measuring company-specific factors, market performance and investor preferences, the empirical results show that the Shanghai–Hong Kong Stock Connect policy can significantly reduce the A-H share premium for the dual-listed companies in Shanghai and Hong Kong markets. Better corporate governance is also found to reduce the A-H share premium.

Independent work, modern organizations and entrepreneurial labor: Diversity and hybridity of freelancers and self-employment

AbstractThe paper deals with self-employment of one-(wo)man-firms as the smallest units of entrepreneurial companies and focuses at the blurred boundaries between dependent work and self-employment. We call the overlapping identities hybrid entrepreneurs. Based on the collected data it can be shown that the hybrid self-employed differ significantly from non-hybrid ‘regular’ entrepreneurs with respect to selected socio-demographic characteristics, professional, as well as company-specific factors. The paper takes up several of the findings and tries to discuss them in a framework of (micro) organizations, institutions and self-employment. Taking the case of hybrid employment fosters crucial and provoking questions for an appropriate understanding of the division of enterprises and occupations.

Discretion in accounting for pensions under IAS 19: using the ‘magic telescope’?

We use a panel data set of UK-listed companies over the period 2005–2009 to analyse the actuarial assumptions used to value pension plan liabilities under IAS 19. The valuation process requires companies to make assumptions about financial and demographic variables, notably discount rate, price inflation, salary inflation and mortality/life expectancy of plan members/beneficiaries. We use regression analysis to analyse the relationships between these key assumptions (except mortality, where disclosures are limited) and company-specific factors such as the pension plan funding position and duration of pension liabilities. We find evidence of selective ‘management’ of the three assumptions investigated, although the nature of this appears to differ from the findings of US authors. We conclude that IAS 19 does not prevent the use of managerial discretion, particularly by companies whose pension plan funding positions are weak, thereby reducing the representational faithfulness of the reported pension figures. We also highlight that the degree of discretion used reflects the extent to which IAS 19 defines how the assumptions are to be determined. We therefore suggest that companies should be encouraged to justify more explicitly their choice of assumptions.

Trend of Risk Components among Malaysian Stocks: Evidence from 2008 to 2014

This study examines the nature of risk among Malaysian stocks from January 2008 to July 2014. The paper applies the concept of risk decomposition as stipulated by the single index model (SIM) in which the total risk is partitioned into two main components, i.e. systematic and unsystematic risks. Forty-five companies were randomly selected as the sample for this study. The results show that the unsystematic risk is greater than the systematic risk for all three different time periods used in the study. The level of both types of risk changed over the two sub-periods. The portion of systematic risk has decreased and the unsystematic risk component has increased considerably. This suggests the need for analysts and investors to focus on the company-specific factors when evaluating the risk associated with Malaysian stocks given the greater influence that the unsystematic risk has on total risk.

Macro stress test for credit risk

Purpose – The purpose of this study is to analyze the benchmark model and offer a practical implementation of the macro stress test. The emergence of complicated instruments such as securitized products has rendered the risk management methodologies used in non-crisis periods insufficient. The macro stress test has become prominent as both an internal risk management tool for financial institutions and a way for supervisory authorities to maintain financial stability. However, no practical model is available for transforming macro stress scenarios into the risk parameters of an institution’s internal model. Design/methodology/approach – This study presents a model for assessing a company’s default risk through a multi-level regression based on simultaneous estimates of the impacts of company-specific, macroeconomic and sector-specific risk factors using panel and time series data. Findings – Equity capital, EBITDA, the current ratio and the fixed assets to fixed liability ratio are selected as the company-specific factors, while the CPI core rate, overall unemployment rate, overnight call rate and JGB yield to subscribers are selected as the macroeconomic factors. The correlation coefficients among the latent sector factors are significant at 5 per cent. In addition, the accuracy ratio values prove that the presented model has more default prediction power than do models without them. Originality/value – This study is the first to provide a benchmark model for incorporating macroeconomic variables into a credit risk model for use in a bottom-up macro stress test.