Financial Firms Research Articles

So different and yet so alike: A comparative analysis of firms' connectedness in the stock and corporate bond markets

AbstractWe study firms' return and volatility connectedness in the stock and corporate bond markets. Our approach to capturing firm‐specific return and volatility time series in the corporate bond market is based on a repeat‐sales index at the firm level. Measuring the pairwise connectedness of firms, we show that the two markets share similar dynamics in the connectedness of their firms. Firms tend to cluster within their own sectors and ties between firms in the corporate bond market are proportionally weaker. Financial firms play a critical role in the propagation of shocks, but this role differs markedly in the two markets.

A regression model for determinants of foreign ownership ratio of listed financial firms: Evidence from the Vietnam stock exchange

Foreign ownership in financial enterprises is a crucial characteristic that impacts the activities of these enterprises. Therefore, the topic of foreign ownership ratio in these enterprises and factors that affect this ratio has drawn the attention of many researchers both domestically and internationally. Based on previous research findings along with qualitative research methods, this study provides an overview of theoretical foundations and practical considerations in order to propose a model to investigate the factors influencing the foreign ownership ratio in financial enterprises. The novelty of this research lies in its focus on listed financial enterprises in the Vietnam stock market, specifically in the context of significant fluctuation due to the impact of the COVID-19 pandemic. The proposed model serves as a premise and reference for future studies aiming to evaluate the influence of various factors on the foreign ownership ratio in listed financial enterprises on the Vietnam stock exchange.

Corporate Social Responsibility and Firm Financial Performance of Public Listed Company in Malaysia

Corporate Social Responsibility and Firm Financial Performance of Public Listed Company in Malaysia

A theory of debt maturity and innovation

The financing of innovative firms must balance two competing goals. First, the entrepreneur must be adequately protected from failure to encourage innovation. However, if the attempt to innovate fails, the entrepreneur's firm should be liquidated and its assets redeployed elsewhere. Meeting these two goals is inherently challenging when contracts are incomplete and shaped by ex-post renegotiation. I investigate how firms can choose the maturity of their debt to motivate innovation. The theory highlights a novel interaction between low-powered incentives, renegotiation, and debt maturity.

Leveraging intellectual property: The value of harmonized enforcement regimes

This paper examines the role of intellectual property (IP) law as a determinant for external debt financing of innovative firms. For identification, we exploit exogenous variation in patent right enforcement arising from the 2004 EU Enforcement Directive. This major policy reform strengthened IP rights and, thus, raised patent owners' asset position. We find that patenting firms significantly increase their use of debt and benefit from lower interest rates in response to the amendment, especially if they own valuable patent portfolios. These effects are most pronounced for relatively small and financially constrained firms, emphasizing the importance of the legal framework in fostering debt financing activities of innovation-oriented firms.

Unveiling the Determinants of Islamic Mobile Banking Adoption: Evidence from Pakistan

Mobile Banking is a cutting-edge technological innovation in the banking industry that has greatly increased banking efficiency and boosted the overall quality of life for individuals. Financial firms are increasingly attracted to systems that enhance the quality of client service. This study aims to further our understanding of the adoption of Islamic mobile banking by utilizing the Technological Acceptance Model (TAM). This study presents a research approach that utilizes the Technology Acceptance Model (TAM) to investigate the factors that influence consumers' adoption of Islamic mobile banking. Consequently, it offers insights into the crucial factors that banking professionals must take into account to promote the integration of mobile technology in Islamic banking services. The data for this study were collected by a questionnaire survey and then analyzed using SPSS and Smart PLS 3.0, utilizing structural equation modeling (SEM). The study sample comprised 350 individuals who were customers of various branches of five Islamic banks, namely Meezan Bank Limited, Dubai Islamic Bank, Al-Baraka Bank Limited, MCB Islamic Bank Limited, and Bank AlFalah Islamic. After conducting data screening procedures, a final sample of 300 respondents was selected for analysis. The findings indicate that characteristics such as Perceived Usefulness (PU) and Perceived Ease of Use (PEOU) have a positive influence on the Intention to Use (INT), supporting the notion that PU has a positive impact on PEOU according to the Technology Acceptance Model (TAM). The research findings suggest that customers' adoption of Islamic banking is positively influenced by their intentions to utilize it, and these intentions are further enhanced by social influence.

Application for Machine Learning Methods in Financial Risk Management

Financial risk management has significant importance and implications for individuals, businesses, investors, and even the whole nation. As the financial markets and institutes grow complex so does the risk associated with financial management. The spectrum of financial risks includes market risk, liquidity risk, credit risk, and a range of others. With a multitude of portfolios and sophisticated products, financial firms require apt tools that can accurately measure the risk, returns, and exposure. The growing complexity has also made statistical and simulation tools ineffective and there is a growing emergence of machine learning. Machine learning is a sub-category of artificial intelligence that uses algorithms. These algorithms analyze data and then learn from it so that a decision based on a certain experience or criteria can be made. Machine language tools provide data protection as the information is only accessible to the key decision-makers. Deep learning is modeled like a human brain and therefore it operates using multiple layers of artificial networks and can process and use a very vast amount of data.

The UK financial firms’ textual risk disclosure and market liquidity

The informativeness of textual risk disclosure (TRD) of financial firms is unexplored in the extant literature. Employing a sample of UK FTSE all-share financial firms, this paper fills this gap in the literature by providing the first empirical evidence on the relationship between TRD and market liquidity. Consistent with the convergence argument for TRD, we find that TRD decreases the financial firms’ market liquidity. However, consistent with the divergence argument for TRD, our further analysis shows that TRD increases the market liquidity of large financial firms. Overall, our results suggest that financial firms’ TRD is informative to market participants. In addition to the practical and policy implications of our results, this paper opens avenues for future research to use our textual method to measure the determinants and use risk information of financial firms in different contexts.

Tracking the sun: exposing India’s solar dispossessions

ABSTRACT Utility-scale solar development in India has dispossessed peasants of land and livelihoods. Smallholders alienated from land have not been equitably remunerated, rehabilitated, nor offered employment at new solar parks. Yet it remains unclear which modalities of dispossession are used across solar sites. Drawing on mixed methods fieldwork from the Gujarat Solar Park and the Kurnool Solar Park, this study advances research on the processes of land dispossession by examining the following research questions: 1) Which constellation of actors and institutions facilitate land dispossession for solar development in India; 2) Through which modalities do these actors and institutions conduct solar-induced land dispossessions? We find actors and institutions behind solar park development in India function as agents of dispossession. Wielding coercive inscription devices that include land acquisition laws, wasteland categorizations and iterative titling, they seize peasant land in service of private and financial firms to underwrite the rollout of large-scale solar interventions.

Does XBRL adoption increase financial information transparency in digital disclosure environment? Insights from emerging markets

The eXtensible Business Reporting Language (XBRL) is one of the global-level business reporting standards that accommodates all firms to report financial affairs in a convenient manner. The main objective of this study is to explain the impact of XBRL adoption on the transparency of financial information disclosure in Jordanian financial companies. The current study used a sample of 124 respondents including accounting managers, auditors, and financial managers with a background in XBRL who are working in Jordanian financial firms. The findings confirmed that the adoption of XBRL in Jordanian financial firms increases financial information transparency in the digital disclosure environment which leads to more relevant, reliable, and transparent financial statements disclosure. One main implication the current study heightened is the importance of turning to the implementation of the XBRL will support the process of decision making which will support and enhance both the performance and decision-making process. Lastly, this research effort is the first of its kind that examined the impact of XBRL on the transparency of financial information from the financial firms' perspective in Jordan as a developing country.

Debt Sustainability Assessment in the Biogas Sector: Application of Interest Coverage Ratios in a Sample of Agricultural Firms in Italy

The biogas sector in Europe and Italy is attracting growing investment, combining agricultural activity, the circular economy, and renewable energy production. Firms in the sector widely use debt capital and, for this reason, there is a need to evaluate the structure of investments, financing, and debt service capacity calculated by applying interest coverage ratios (ICRs). ICRs are widely used by banks in granting loans, and calculation of ICRs allows managers and policy makers to correctly evaluate firms’ performance in the sector. In this research, based on a sample of 160 observations, the structure of investments and sources of financing of firms in the biogas sector, operating in northern Italy, are analyzed. ICRs are calculated with different approaches to establish which ICRs provide the most reliable results in the application. The research analyzes the correlations and highlights significant differences between ICRs. The research highlights some important findings: (a) the NWC is negative in 109 out of 160 observations and, therefore, constitutes a source of financing in the majority of observations; (b) ICRs based on EBITDA and CF are above the threshold value of “1” in 143 and 145 observations, respectively, while ICRs based on EBIT, OCF, and UFCF are above the threshold value of “1” in 132, 133, and 122 observations, respectively. The research allows the conclusion that the ICRs based on EBITDA and CF tend to overestimate results; ICRs based on EBIT, OCF and UFCF are preferable, and can therefore be applied by managers, banks, and policy makers and be used as debt covenants. For the calculation of the repayment of the NFP, the research has highlighted that ICRs in which the cost of the debt is deducted from the numerator are preferable. The research can thus be usefully applied and expanded to other territories, or by considering a larger sample with the aim of inferring conclusions of general validity.

Reducing carbon emissions at the expense of firm physical capital investments and growing financialization? Impacts of carbon trading policy from a regression discontinuity design

This study examines the effects of China's carbon trading policy on firm emissions and explores its impact mechanisms through financial and physical asset investments. The empirical analysis utilizes a fuzzy regression discontinuity design based on a sample of 427 industrial firms in China between 2014 and 2019. The results indicate that China's carbon trading policy incentivized firms to increase their financial investments while simultaneously discouraging physical capital investments. These shifts in investment patterns helped firms achieve their emission reduction targets. The study reveals that carbon trading policy in China has contributed to the financialization of firms, resulting in the erosion of firm assets and a decline in their overall competitiveness. Based on these findings, some policy recommendations are put forward.

Tax Sheltering and Corporate Investment Expenditure of Listed Financial Firms in Nigeria

Tax Sheltering and Corporate Investment Expenditure of Listed Financial Firms in Nigeria

“Impact of ESG disclosure on firm performance and cost of debt: Empirical evidence from India”

Despite several research evaluating the connection between sustainability and the bottom line of firms, the existing research is inconclusive. In addition, most studies focus on multinational firms based in the United States or Europe, while research in the context of emerging economies is scant. This paper endeavours to investigate the strength of the association between Environment, Social and Governance (ESG) disclosure scores and the financial performance of 272 Indian firms listed on National Stock Exchange for the period 2015 to 2021 by employing panel data regression techniques. The results indicate that organisations having better ESG performance outperform their industry peers financially and are valued more by the market. Moreover, the data indicates that financial markets for lenders consider ESG disclosure when determining creditworthiness. In accordance with this, businesses can examine their operations and become more aligned with eco-friendly methods. Even though ESG disclosure appears to be associated with improved financial success, this is not the case across all industries and during COVID-19 pandemic. This study is relevant due to the growing significance of sustainability and the role of emerging nations in international commerce. It helps managers prioritize resource allocations to ESG-related activities that may affect financial performance differently across industry sectors, thus adding to the literature on the financial effects of ESG disclosures, particularly industry-specific aspects. This research represents a pioneering effort by assessing the impact of ESG disclosure on the profitability, market value, and cost of financing of Indian firms using both aggregation and disaggregation methods.

Shaping the climate transition: Multistakeholder networks, elites, and sustainable finance policy in Europe

Abstract As sustainable finance has entered the mainstream, it has become an area of contestation among civil society, political and business. In response, policy makers seek to resolve stalemates and enhance legitimacy by utilising multistakeholder, consensus-driven approaches to policymaking. In this paper, we examine these emergent ‘cooperative’ structures from a network analytic perspective. Our structural analysis is based on six national and three EU policy spaces. We conduct compositional analyses to explore the makeup of the network(s) and use a range of centrality measures to capture emerging elites. We find an increase in civil society participation in these policy spaces over time; however, financial firms and pro-business voices remain dominant players. We also find a small cluster of elite actors from a range of stakeholder groups. We conclude that the increasing structural balance of stakeholder interests, however, does not translate into power for civil society to alter the direction of policymaking, but appears to serve enhancing the legitimacy of a policy process that departs from the priority and aspirations of civil society organisations.

The story of dividend payment and corporate cash flow in Ghana

AbstractThe thorny issue and contradictory conclusions on dividend payments and firm value are not ending any time soon. The existence of a divergence of findings in the literature suggests the need for further empirical studies on this subject matter. Therefore, this study focuses on how a firm's cash flow influences dividend payments in Ghana. Using data from 2015 to 2020, pooled ordinary least squares and random effects estimation, this study provides evidence of dividend payments in Ghana. The results show that dividend payments are influenced by a firm's net cash flow from operations, free cash flow to equity, firm size, and age. The relevant macroeconomic variables for dividend payments are inflation and gross domestic product growth. Another finding is that the more nonfinancial firms take on the characteristics of financial firms, the less dividends they pay. Managers of listed firms in Ghana should grow the size of their firms; however, this should be done in a manner not to expropriate value to managers as predicted in the Jensen agency problem associated with free cash flow.

Estimating scope 3 greenhouse gas emissions through the shareholder network of publicly traded firms

Accounting for scope 3 emissions from investments remains a challenge due to a lack of adequate data and guidelines that do not accommodate the systemic role of firms in the financial chain. Here, we use network analysis to estimate investment-associated scope 3 carbon emissions of public firms. Using shareholder data from publicly traded firms listed on the Tokyo Stock Exchange, we identified the most influential firms by their ownership share values. Environmental responsibility can then be assigned by distributing the carbon footprint in the network to each of these influential firms. The industrial services, including trading and manufacturing, and financial services industries were found to be the largest source of scope 3 emissions in the investment network. In particular, the influential role of financial firms is reflected by having the largest increase in carbon allocation after the adjustment. This research contributes to ongoing efforts to improve carbon disclosure through methods that accommodate complex interactions among firms and to quantitatively reveal the overlooked responsibility of investors in carbon emissions.

Assessment of Financial Information Quality: Evidence from Tunisian Context

The present paper aims at assessing the financial information quality within Tunisian firms. We analyzed a sample annual data of 78 financial and non-financial Tunisian listed companies. We use the level of discretionary accruals and if the firm restate its financial statement or not as proxies of financial information quality. Our main results show that the financial information quality is globally low. We note a high level of discretionary accruals within financial firms compared to non-financial pears. We also find that financial firms are less likely to restate their financial statements compared to those of non-financial firms.

Can Human Capital Explain Income-Based Disparities in Financial Services?

Abstract Research shows that access to high-quality financial services varies with local income and wealth. We study how financial firms’ internal allocation of human capital contributes to these disparities. Using a near-comprehensive panel of over 350,000 U.S. mortgage loan officers, we document large and persistent differences in productivity and performance. We find that firms’ hiring and promotion practices allocate workers with less experience or poor track records to branches serving low-income customers. Further, the consequences of poor performance differ by location: low sales, bad loans, and misconduct are more tolerated in low-income branches, exacerbating income-based disparities in financial services.

Green credit policy and the cost of equity: evidence from China

ABSTRACT This paper examines the impact of green credit policy on the cost of equity for firms by focusing on the 2012 Green Credit Guidelines (GCG2012) in China. Employing a standard difference-in-differences (DID) method and utilizing panel data from 2009 to 2018, we document that the implementation of GCG2012 leads to a higher cost of equity for treated firms identified as ‘two high and one surplus’. Additional analysis confirms the robustness of the finding. This paper adds to the literature by offering micro-level evidence on the implications of green credit policy on firm financing.