External Investment Research Articles

Does certification of corporate governance compliance pay off? Evidence from a unique regulatory setting

AbstractResearch Questions/IssuesUsing insights from agency and signaling theories, we examine the effect on companies' market‐based performance of a unique monitoring mechanism of compliance with a corporate governance (CG) code, that is, independent certification of compliance with a CG code and type of certification provider. Furthermore, we examine the impact of two boundary conditions, family company status and company‐level information asymmetry, influencing the effect of independent CG compliance certification and type of certification provider on the market‐based performance of companies.Research Findings/InsightsBased on 1110 Bangladeshi company‐year observations from 2006 to 2017, we firstly find that independent CG compliance certification is positively associated with companies' market‐based performance. Secondly, we show that CG compliance certification by a chartered secretarial firm is related to higher market‐based performance. Thirdly, we document that family companies attenuate both these associations. Finally, we find that, while company‐level information asymmetry reinforces the association between CG compliance certification and market‐based performance, it weakens the relationship between certification by a chartered secretarial firm and companies' market‐based performance.Theoretical/Academic ImplicationsOur findings are consistent with the agency and signaling theory that independent certification of CG compliance and this certification by a chartered secretarial firm reduce information asymmetry between managers and external investors by signaling enhanced credibility of reported CG compliance information. However, the roles of CG compliance certification and certification by a chartered secretarial firm to reduce agency conflict and provide credible signals are conditional on two boundary conditions: family company status and company‐level information asymmetry.Practitioner/Policy ImplicationsThis study's findings highlight the economic implications of a unique mechanism for monitoring compliance with an adopted CG code. The findings have significant implications for policy makers and regulators in emerging economies.

A simulation-based approach for assessing the innovation barriers in the manufacturing firms

One of the most important challenges organisations’ faces to innovate is dealing with different types of barriers. Particularly, the case of manufacturing firms confronts several barriers, such as demand uncertainty, product imitation, lack of employees, scarcity of government funding, absence of internal and external financing. This paper aims to provide new insights regarding to the innovation barriers faced by the manufacturing firms. To do this, we implemented a computational model for analysing the barriers to innovation in the Colombian case. In this model, product and processes innovation are studied. It was concluded that for the innovation of process, the highly important barrier is the shortcoming of internal financing, while for the innovation of product is the lack of employees. Results show that the government expenditure is scarce compared to private and external investment.

Post-Conflict Economic Recovery in Kosovo

Modern Kosovo faces many challenges in post-conflict economic recovery and development. The current international and regional agenda significantly complicate the recovery process. It is a combination of both chronic underdevelopment and post-conflict reconstruction. Such a mix produces limited state governance, a vast shadow economy and criminal networks, massive unemployment, and widespread poverty worsened by original Kosovo's problems such as gender disbalance in the labor force, ethnic discrimination, and unsettled rights of local property owners. The article highlights the current results of internal and external efforts to enhance the ability of Kosovo’s authorities to provide economic and physical security for local households and businesses. It focuses on international support through direct financial aid and external investments and argues that this support challenges the political independence and viability of this self-declared polity. Kosovo is still on the list of Europe's poorest and most vulnerable regions. Reforms are proceeding slowly. A large share of state-owned enterprises is unprofitable. The private sector is fragmented, and microenterprises dominate. Kosovo's economy relies heavily on imports and excessively depends on the trade sector. Financial discipline, efficiency, and transparency of the resource’s distribution, optimization of intersectoral interaction, fight against corruption – all these issues are still on the current economic and political agenda, as they were ten years ago, despite Kosovo’s ranking as one of the top twenty most improved economies in the world. Financial dependence becomes a formidable barrier to Kosovo's membership in the European Union.

Устойчивое социально-экономическое развитие регионов Южного федерального округа в условиях внешних санкций

In recent years Russia has been going through drastic changes in the structure of socio-economic processes due to the external sanctions introduction. Under modern conditions is it important to find out whether the imposed sanctions have affected the development of the country’s regions and what development prospects should be expected in the future. The changes in the nature of the socio-economic development of the regions of the Southern Federal District, namely the Krasnodar Territory, Volgograd and Rostov regions, caused by sanctions, are investigated; measures to promote regional development in the conditions of external sanctions are proposed. In the context of global economic changes and political constraints that have had an impact on the country᾿s macroeconomic situation, regional development is of particular importance. The regions of the Southern Federal District are facing a number of complex problems, including a decrease in the external investment flow, limited access to international markets, an imbalance in the economic structure, as well as the deterioration of social indicators, which together create challenges for achieving sustainable socio-economic development. A statistical analysis of the socio-economic situation of the Krasnodar Territory, Volgograd, Rostov regions in dynamics is carried out. Possible consequences of sanctions are considered. The main socio-economic indicators of the three regions of the Southern Federal District are analyzed, as a result of which it is possible to assess their condition and further development prospects in the conditions of sanctions. It is concluded that in order to overcome the consequences of sanctions, it is necessary to introduce integrated approaches. Important strategic steps are economic diversification, stimulating innovation and research, supporting small and medium-sized businesses, as well as strengthening interregional partnerships. It is recommended to focus on human capital development providing access to education, health care and high-quality employment.

Debt Structure and Future Financing and Investment. Evidence from Oil and Gas Sector of Pakistan

Purpose: This study aims to investigate the link between debt structure and future external financing and investment, existing empirical literature suggest various features of debt structure such as maturity structure, seniority and security profile might affect firms’ future financing and investment opportunities. However, literature is vague as to which way these characteristics of debt are actually related to observed financing and investment; this is partly due to the fact that the assumptions in theoretical predictions lack in terms of channels they consider relating to debt structure and future external financing and investment. This study investigates how debt structure is associated to financing and future growth opportunities in terms of fund raising, whether debt structure of oil and gas sector of Pakistan.
 Design/Methodology/Approach: Dynamic analysis were used to analyze the data
 Findings: The results provide interesting insights, as traditional positive relationship in between short-maturity of debt external financing has revealed negative relation, which is in conflict with existing literature from agency cost but supports the rollover risk. The sector might be better off if it opts out to equity financing, which will open up new investment avenues for future financing and investment. Interestingly secured-debt does not appear to be beneficial owing to differing leveraging patterns within the sector.
 Implications/Originality/Value: The paper provides new insights in terms of investment and financing patterns particularly in context of maturity structure of debt.

The Smart Communication within Crowdy Streets – Intelligent Parking of Romania

According to our studies carried out in the time interval 2021-2022 in the cities of Timișoara and Bucharest, we found that local public administrations can manage more efficient resources called "Public Parking". In the two cities, more than 30% of the traffic is generated by people looking for a parking space. Moreover, statistics show that from 30% to 70% of parking spaces on public roads are occupied without payment. ZTE's smart parking solution aimed to solve such problems by reducing traffic congestion and increasing revenue to the local budget. The big metropolises are "forced" to apply scientific methods to face the new challenges of the third decade of the 21st century by directing investments in the "intelligence of cities". This happens through an assumed policy regarding the digitization of work processes and here we refer in particular to land communication routes, vehicles and parking spaces but we do not neglect traffic and its safety, logistics, the city's energy system, citizens and not in lastly environmental protection. Information technology is the key to success in transforming a poorly effective management policy through its rigidity to an era of integrating the component subsystems of a big city alongside a perception that includes, above all, attracting external funds and investments. Keywords: Bucharest Smart Parking solution, Smart City of Romania, Smart City, parking management.

Investigation on the Factors Influencing Stock Prices

This article focuses on the impact of financial data of some companies that can be found from financial websites n the company's stock price. This is because investors always lack trust in financial analysts because they are suspicious of their motives. Therefore, this article discusses the impact of some financial data on stock prices in addition to the traditional models such as dividends, ROE and other factors. For example, profit, solvency, forward P/E ratio, etc. The intention is to help external investors to judge the change of stock price more accurately by using basic financial data. This will ensure their interest as much as possible.

Dynamic Maintenance of Solvency of the Russian Insurance Companies: the Evidence from Russian Insurers

The Russian economy is facing sanctions pressure, resulting in weakening business relations with foreign insurers. Medium-sized insurance companies, targeting regional economic entities, play a crucial role in the insurance market. To improve the efficiency of Russian insurance, the number of medium-sized companies operating in regional markets must increase. To regulate their capitalization, special conditions must be developed, focusing on capital adequacy requirements and financial stability parameters. While earlier research has examined what factors might impact profitability growth, the investment income factor in maintaining corporate financial stability has been underexplored. This paper aims toexplore conditions for improving insurers' financial soundness through growth of a company's internal capitalization. Medium-sized insurance companies often struggle to meet regulators' minimum capital requirements (a core variable linked with companies’ capitalization) leading to potential market shrinkage. Our hypothesis is that it possible to create a financial reserve that meets the regulator’s increasing equity requirements without raising additional external investments. This study examined the factors which impacted the growth of medium-sized insurance companies operating in the emerging markets. Operating results of seven randomly selected medium-sized insurance companies in 2014–2022 were used forthe analysis. The paper suggests that institutionalization of insurance companies' capitalization is crucial to minimize the risk of capital inadequacy. The study contributes to our understanding of how medium-sized insurance companies can be governed and suggests a way to increase their capitalization.

External Debt, Investment, and Financial Development in Botswana and South Africa: A Multivariate Causal Analysis

This paper employs a multivariate Granger-causality model to evaluate the causal relationship between external debt, financial development, and investment in Botswana and South Africa from 1980–2020. The study includes savings, trade, and economic growth as intermittent variables. Using the autoregressive distributed lag (ARDL) bounds testing approach; empirical results reveal that, for both Botswana and South Africa, there is no distinct short- and long-run Granger-causality relationship between external debt and either financial development and/or investment. However, for Botswana, there is a short-run unidirectional causal relationship from investment to financial development. While for South Africa, the opposite is true. That is, there is a short-run and long-run unidirectional causal relationship from financial development to investment. The policy implication for Botswana is to stimulate the real sector in the short run; immense efforts in promoting investment are recommended. Other results for Botswana support the concurrent promotion of investment, savings, and economic growth because these variables are found to have a short-run and long-run bidirectional causal relationship. For South Africa, it is primarily financial development that drives investment and economic growth. Therefore, policy should promote financial development to stimulate investment, both in the short and long run.

CAPITAL INVESTMENT: TREATMENT AND REGULATION FOR ACCOUNTING AND AUDIT PURPOSES IN POST-WAR UKRAINE

Despite the considerable number of studies of capital investments, the question of the actual definition of this definition for the purposes of accounting and auditing, taking into account the post-war development of Ukraine, still remains open. The purpose of the article is to generalize the main problems of identification and legal regulation of capital investments for the purposes of their accounting and auditing from the point of view of finding ways to solve them. The article analyzes the interpretation of the term “capital investment” in the scientific debate, the international and domestic regulatory framework, and its influence on the organization of effective accounting and auditing. It was established that the definition of the concept of “capital investment” in national legislation is ambiguous, and it is absent in international accounting regulations, which creates a problem of managing capital investment at the enterprise level. To solve this problem, it is proposed to use definitions of capital investments from the point of view of economic interpretation and for accounting purposes. The work identifies the problems of capital investment management, for the solution of which the development of a standard is proposed, which will prescribe the elements of regulation at the state and enterprise levels. The presence of such regulation, on the one hand, will create confidence in the national economy on the part of external investors, on the other hand, it will allow to organize effective accounting, reliable reporting, and independent audit of capital investments of enterprises. The directions of further research are defined elements of the accounting policy in terms of accounting, internal control, and audit of capital investments, which will allow to take into account the peculiarities of the activities of domestic business entities.

Attaining environmental sustainability amidst the interacting forces of natural resource rent and foreign direct investment: Is Norway any different?

AbstractThis is a study of Norway's sustainable environment development amidst the interactions of natural resources, external investment (FDI) and economic development. Much has been done with respect to the study of Norway's economic performance in relation to the link between the natural resources and FDI with little emphasis on the environmental performance of the resource‐based economy. Also, Norway is classified as among the top countries in Europe with a greater percentage of adopting renewable energy, and no study has done a critical review of the impact of natural resources and FDI which are part of drivers of carbon emission that can counter the positive impact of renewable energy towards the Norway's sustainable environment. On this basis, this study adopts a time series data of Norway, 1970 to 2018 to study its environmental performance. Approaches such as structural break analysis, Autoregressive Distributed Lag (ARDL)‐bound testing and Granger causality estimations are utilised in this study for in‐depth analysis of the subject. Findings from ARDL confirmed a positive association between fuels and carbon emission, other indicators (economic growth and natural resources) are improving the quality of the country's environment. FDI even though shows positive sign remains insignificant in impacting the environmental performance in the short run reverted to a significant negative relationship with carbon emissions. This confirms the pollution halo hypothesis and rejects the pollution haven hypothesis (PHH) for Norway, and this trend can be sustained with the constant implementation of environmental rules in the country. Granger test confirms, a one‐way transition from fossil fuels to carbon emission, from carbon emission to growth, and from economic growth to fossil fuels. Also, a two‐way transmission is found between fossil fuels and FDI. These findings from Granger causality are consistent with the findings from ARDL, hence, two ways interactions between FDI and fossil fuel energy source consumption from Granger causality and the two variables (fossil fuels and FDI) are seen impacting on Norway's environmental performance. Findings from the estimates suggest that natural resources and FDI are mitigating pollution, hence, Norway's policy is expected to be resources and FDI driven in sustainable environment development.

Determinants of external debt, export-import, FDI, exchange rate, to foreign exchange reserves through balance of payments as intervening variables

Foreign exchange reserves are interpreted as part of national savings and are a very important monetary indicator to show the strength or weakness of the country's economic fundamentals. Foreign exchange reserves is influenced by various factors, including; external debt, exports, imports, investment, and balance of payments. The purpose of this study is to analyze the determination (degree of influence) of factors of foreign debt, import exports, FDI, exchange rates, on foreign exchange reserves through and balance of payments (BOP). The research method used is a quantitative research method with secondary data types in the form of data series with a period of 12 years (2011-2022). The data analysis method used is path analysis. With the help of E-views software. The results of the analysis p there is a structure/path I obtained that the exchange rate variable has a real effect on the BOP (balance sheet), In the structure/path I it is obtained that the exchange rate variable has a real effect on the BOP. While simultaneously (together) it is known that the variables X1, X2, X3, X4, and X5 not significant effect on Y1 (balance of payments). The results of the structure/path II analysis found that the external debt variable had a real effect on the country's foreign exchange reserves, and simultaneously (together) it was known that the variables X1, X2, X3, X4, X5 and X6/Y1 had a real effect on Y2 (foreign exchange reserves). In addition, it was also found that the balance of payments /BOP variable as an intervening variable did not have a real effect on foreign exchange reserves.

Protecting Investors from the Repercussions of Unregistered Indigenous Property

Land registration is classified as a high priority in the pursuit of economic growth and development. However, many countries still operate under customary law, resulting in limited access to credit. External investors may be ignorant of the wide range of property rights. This article highlights the difference between indigenous and Westernised property rights and transfer processes, and the effect of indigenous property acquisition on initiatives for land development. Several international case studies are discussed. The study concludes that there is a need for indigenous properties to be recorded in the national land administration system. It is recommended for the current electronic registration system project in South Africa to investigate how the incorporation of indigenous property may occur. Recommendations for future studies are made.

We are watching you: Are you ready to pay dividends?

This study investigates the relationship between media visibility and dividend policy. We argue that this media activity affects how dividend policy is determined, as it might impact agency conflicts, information asymmetry, and the firm's dependence on investors' preferences. Using a sample of 93 Spanish listed firms over the period 2004–2019, we show that media coverage has a positive effect on dividends and that the scrutiny from media coverage can encourage managers and dominant owners to pay dividends in an effort to boost their public image and reputation. Consequently, the results indicate that media exposure leads to dividend smoothing as a way to build a good reputation, which is conducive to attracting funds from external investors. Our results are robust to the use of alternative measures of media visibility and dividends as well as different procedures to address endogeneity issues.

Private equity and healthcare firm behavior: Evidence from ambulatory surgery centers

Healthcare firms regularly seek outside capital; yet, we have an incomplete understanding of external investor influence on provider behavior. We investigate the effects of private equity investment, divestment, and an initial public offering (IPO) on ambulatory surgery centers (ASCs). Throughput is unchanged while charges grow by up to 50% for the same service mix. Affected ASCs witness declines in privately insured cases and rely more on Medicare business. Private equity increases physician ASC ownership stakes, and both simultaneously divest when the ASC is sold. Our findings appear more consistent with private equity influencing the financing of ASCs, rather than treatment approaches.

Family ownership and speed of adjustment towards targeted capital structures: A study of ASEAN firms

AbstractUtilising a sample of ASEAN firms, we examine the effects of family ownership on firms' speed of adjustment to targeted capital structure. We find that family firms adjust their capital structure more slowly than non‐family firms. This is due to the higher costs of adjustment associated with high information asymmetry and agency conflicts between family owners and external investors. The effect of family ownership on capital structure adjustment speed is more pronounced when family firms have a higher level of family board involvement and higher ownership concentration. There is also an asymmetric effect of family ownership on capital structure adjustment speed at different levels of debt, by the distance from the targeted capital structure, and between overleveraged and underleveraged firms. Overall, evidence in our study suggests that family ownership is a key determinant on how quickly ASEAN firms may adjust their capital structure towards targeted levels.

State Capacity, Property Rights, and External Revenues: Haiti, 1932–1949

External revenues blunt investments in fiscal capacity. But how do external revenues affect investments in legal capacity? In a simple model of state capacity investment, external revenues should be positively correlated with investments in legal capacity. But this implication could flip if fiscal capacity lowers the cost of legal capacity investments. I test the model by looking at Haiti in 1942 when U.S. mobilization caused a negative shock to external revenues. Contrary to the basic model, the shock led to an increase in legal capacity. This puzzle is explained by institutions that tied fiscal and legal capacity investments.

Promise not fulfilled: FinTech, data privacy, and the GDPR

This article analyzes how the General Data Protection Regulation (GDPR) has affected the privacy practices of FinTech firms. We study the content of 276 privacy statements respectively before and after the GDPR became binding. Using text analysis methods, we find that the readability of the privacy statements has decreased. The texts of privacy statements have become longer and use more standardized language, resulting in worse user comprehension. This calls into question whether the GDPR has achieved its original goal—the protection of natural persons regarding the transparent processing of personal data. We also link the content of the privacy statements to FinTech-specific determinants. Before the GDPR became binding, more external investors and a higher legal capital were related to a higher quantity of data processed and more transparency, but not thereafter. Finally, we document mimicking behavior among FinTech industry peers with regard to the data processed and transparency.

Does the threat of enforcement of financial regulations affect the cost of equity in weak institutional environments?

Using the imposition of annual on-site inspections of publicly listed firms by local China Securities Regulatory Commission (CSRC) offices as a quasi-natural experiment, we examine how the threat of potential enforcement of financial regulations affects firms' implied cost of equity in weak institutional environments. In a staggered difference-in-differences (DID) framework, we show that compared with firms subject to the lottery of prospective on-site inspections, firms that are exempt from on-site inspections for three consecutive years display an average increase of 210 basis points in the cost of equity. This effect is more pronounced for firms with regulatory penalty records, firms domiciled in jurisdictions with more actions imposed on listed firms as a result of on-site inspections in the past, firms located closer to their respective local CSRC offices and state-owned firms (SOEs). Further analysis suggests that the exemption from on-site inspections increases firms' cost of equity through the channels of increased tunnelling activities from controlling shareholders, reduced financial reporting quality and more severe information asymmetry faced by external investors. Thus, the valuation of exempt firms decreases. Our findings suggest that in weak institutional environments, the threat of financial regulators' enforcement ex ante increases firm value by reducing external investors' estimation of firms’ long-term risks.

How FinTech improves financial reporting quality? Evidence from earnings management

This study investigates financial technology’s (FinTech) power in shaping financial market informativeness regarding corporate financial reporting quality. Since FinTech development assists financial sectors’ credit screening and monitoring, it may further shape firms’ cost-benefit considerations of information disclosure. Using manually collected data on FinTech patents, we characterize regional FinTech development and examine its effect on real earning management, representing corporate financial disclosure’s reliability for external investors. We find that regional FinTech development curbs firms’ real earnings management. Mechanism analyses suggest that FinTech development enhances information production and external monitoring, elevating the costs of misreporting; it also improves credit accessibility, reducing the external financing motives for earnings management. Alternative explanations of substitution for accrual-based earnings management and economic fundamentals are excluded. Our findings can serve as possible guidelines in facilitating the information environment via FinTech applications, as financial development increasingly relies on close integration with technological advances.