Financial Firms Research Articles

Pengaruh Ketidakpastian Lingkungan dan Sistem Informasi Akuntansi Manajemen terhadap Kinerja Manajerial

The purpose of this study is to investigate and offer empirical data on the relationship between management accounting information systems and environmental uncertainty in relation to managerial performance. In this study, questionnaires were filled out as part of the survey method of data collecting. 50 middle and low level managers from banks and non-bank financial firms in Metro City and East Lampung made up the study's population. Purposive sampling was utilized during sampling. Structural Equation Model (SEM) with the Partial Least Square (PLS) application program version 4.0.m is the analysis method employed. The study's findings demonstrate that (1) there is no relationship between environmental uncertainty and managerial performance, contradicting the hypothesis. (2) The qualities of information integration significantly improve managerial effectiveness. Meanwhile, managerial performance is unaffected by the information qualities of broad scope, timeliness, and aggregation.

Examining the Relationship between Corporate Social Responsibility Practices and Firm Reputation in the Financial Services Sector in Brazil

Purpose: The aim of the study was to Examine the Relationship between Corporate Social Responsibility Practices and Firm Reputation in the Financial Services Sector in Brazil
 Methodology: The study adopted a desktop methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library
 Findings: The study examining the relationship between Corporate Social Responsibility (CSR) practices and firm reputation in the financial services sector in Brazil found a strong positive correlation between the two variables. Financial firms that actively engaged in CSR initiatives were observed to have significantly enhanced their reputation among stakeholders, including customers, investors, and the public. This positive reputation was attributed to the perception of ethical and socially responsible behavior, ultimately leading to increased trust and loyalty from clients and improved financial performance for the firms involved in CSR activities.
 Unique Contribution to Theory, Practice and Policy: The stakeholder theory, legitimacy theory and legitimacy theory may be used to anchor future studies on the examining the relationship between corporate social responsibility practices and firm reputation in the financial services sector in Brazil. Regular, detailed, and standardized reporting on CSR initiatives can improve stakeholder trust and help investors make informed decisions. Collaborate with regulators and industry associations to establish a comprehensive regulatory framework for CSR practices in the financial services sector.

The case for CASE: Estimating heterogeneous systemic effects

The Basel Committee and the Financial Stability Board require a consensus on the identification of characteristics that make a financial institution more prone than others to be severely hit by systemic shocks. This paper introduces a new tool to achieve this goal: a model for the Conditional Average Systemic Effects (CASE). The CASE quantifies the average effect of a system wide shock or market downturn on the profit and loss account of a bank, a firm or on the return of an asset. We propose a linear model for CASE with heterogeneous effects in observable characteristics. These models complement alternative measures of systemic risk and allow researchers to identify the determinants of the vulnerability of a given financial institution. We develop bootstrap inference that accounts for both estimation risk and model misspecification risk, and show the utility of our results in Monte Carlo simulations and an empirical application to 100 large U.S. financial firms.

Carbon emissions, fracking, and firm value of U.S. oil and gas firms

AbstractWe examine in this paper how firm value (market‐to‐book ratio, MTB) of U.S. oil and gas sector firms from 2010 to 2020 responds to carbon emissions intensity measures. We investigate three measures comprising total carbon emissions relative to assets, to market value of equity, and to net property, plant, and equipment. Our dynamic panel data approach separates the 82 firms into 35 fracking and 47 non‐fracking companies to address features underlying firm financing during the shale oil revolution. Concerned investors about the companies' large carbon emissions may have pulled out of the sector. These companies may also have overleveraged when expanding into new technologies of oil production or kept larger cash flow ratios. We report lower average carbon emissions for fracking firms, together with the larger size of fracking techniques: mean of assets of $46 billion for fracking versus $12 billion for non‐fracking companies. Using fixed‐effects and system generalized methods of moments (SGMM) models, we find that carbon emissions decrease MTB of fracking firms more than non‐fracking firms. Our dynamic panel approach provides a more accurate measure of the real effect of carbon emissions that is very robust to Tobin's q as alternative measure of firm value.

Equity Crowdfunding and Offering Page Disclosure

ABSTRACT This paper provides descriptive evidence about how startup firms communicate with investors on their Regulation Crowdfunding offering page. I find evidence, consistent with prior theory about processing costs and information salience, that a firm’s prior revenues relate strongly to the discussion of financial information on its offering page. This runs counter to indications from Reg CF founders that they think financial information is of less importance to these investors than other information about the company. Consistent with founder beliefs that investors place little weight on firm financials, I find no consistent relation between financial disclosure and a firm meeting its offering goal. Offering success appears more closely related to other elements of disclosure that tell the “story” of the company. The results of this paper can help inform future research in the crowdfunding space, as well as contribute to the literature on how investors process information and disclosure. Data Availability: Publicly available from Regulation Crowdfunding filings on SEC Edgar. JEL Classifications: G23; G24; M13; M41.

Information asymmetries and debt financing: New evidence from the 2007-2008 financial crisis

Purpose: Focusing on the 2007-2009 financial crisis, this study investigates how firms' and debtholders' information sensitivity jointly shape corporate debt financing. According to the pecking order theory, opaque firms prefer bank loans over more information-sensitive sources like bonds and equity. When external conditions worsen, firms face difficulties accessing bank loans and look for alter-natives. Yet, as bondholders are more information-sensitive than banks, the substi-tution effect may not occur especially for firms with lower financial reporting qual-ity (FRQ). Design/methodology/approach: A matching difference-in-differences ap-proach is used to compare the debt financing of firms with and without access to corporate bond markets before and after the onset of the financial crisis. A sample of quarterly data of US-listed firms is analyzed for the 2006Q3-2009Q2 period. Findings: The reduction in debt financing due to the crisis was greater for firms with access to bond markets. The effect is more pronounced for firms with lower FRQ. These firms also looked more for alternatives such as equity and cash re-sources.

The flip side of the coin: how entrepreneurship-oriented insolvency laws can complicate access to debt financing for growth firms

The flip side of the coin: how entrepreneurship-oriented insolvency laws can complicate access to debt financing for growth firms

Sustainability reporting and financial performance of listed financial firms in Kenya

Financial sector stability is vital for the realization of economic development. Failure to incorporate environmental, social and governance (ESG) elements into corporate strategies can lead to corporate failure. Through the adoption of a descriptive research design, this study aims to determine the relationship between sustainability reporting and the financial performance of financial companies listed on the Nairobi Securities Exchange (NSE) in Kenya. Through the census method, the study population of twenty-three listed financial firms was obtained, and secondary data for the period from 2015 to 2021 was extracted through content analysis. Data on predictor variables were obtained through a document check index utilizing a non-refined exploratory factor analysis, while data on the response variable were obtained directly from annual reports. The data were analyzed through descriptive and inferential statistics. Modelling was further adopted through feasible generalized least squares (FGLS) to counter the problem of first order serial correlation. The findings indicate a positive and significant relationship between ESG reporting and the financial performance of listed financial firms in Kenya. The results imply that firms should embrace sustainability since ESG drives corporate strategies and will help firms to improve their performance, which will bring improved resilience. Focus on the triple bottom line enables value maximization for the three Ps – profit, people, and planet – thus facilitating sustainable development. The harmonization of reporting guidelines which is process-driven rather than content-driven will minimize greenwashing by firms. Lastly, industry players should ensure the availability and quality of ESG data.

Bank capital buffers and lending, firm financing and spending: What can we learn from five years of stress test results?

We use bank-firm matched data to study how the capital buffers that large U.S. banks must satisfy to “pass” the Federal Reserve's stress tests impact banks’ lending and firms’ loan volumes, overall debt, investment, and employment. We find that larger stress-test capital buffers lead to reductions in banks’ lending, modest increases in loan rates and spreads, and reductions in new loan originations. However, we do not find an impact of higher capital buffers on firms’ overall debt, investment, and employment, suggesting that firms find other credit sources to substitute for the reduction in loans from banks that participate in the stress tests.

Home country digital finance development and post-entry internationalization speed of emerging market SMEs: Empirical evidence from China

Digital finance development (DFD) has profoundly impacted various aspects of our society. This study investigates how home country DFD affects the post-entry internationalization speed (PIS) of small and medium-sized enterprises (SMEs) in emerging markets. Using data on Chinese manufacturing SMEs from 2011 to 2020, we find that home country DFD exerts a significantly positive impact on emerging market SMEs' PIS. In particular, this positive impact is especially pronounced for SMEs led by CEOs with overseas experience, those in high-tech industries, and those in home country regions with a high level of traditional finance development. The mechanism analysis demonstrates that home country DFD enhances SMEs' PIS through two channels: easing firm financing constraints and improving firm productivity. Our findings advance the knowledge about the economic effects of DFD and the determinants of PIS.

Financial network structure and systemic risk

For systemic risk, the impact of the financial network's characteristics remains imperfectly understood at best, even if the view that network structure is closely related to systemic risk has become a broad consensus. By choosing S&P 500 constituents as the research sample, we investigate the structural characteristics of the Engle-Granger networks and explore the impact of network centrality on one-quarter-ahead systemic risk. We find that a firm's network centrality is positively related to both dimensions of its systemic risk (i.e. the firm's vulnerability to, and contribution to, system-wide downturns). The results remain robust after we consider the potential endogeneity and various sensitivity checks. An examination of potential channels reveals that centrally located firms in the network have a high extent of co-movement with the market, and are likely to trigger systemic market failures caused by stock price crashes in clusters once they fall into a downturn. We further show that the positive relation between network centrality and future systemic risk is more salient for financial firms and more pronounced during recessions.

Navigating Financial Evolution: Business Process Optimization and Digital Transformation in the Finance Sector

Purpose: This study presents a thorough analysis of the financial industry's digital transformation environment with a particular emphasis on business process improvement. Financial institutions are navigating a changing environment where cutting-edge technology is being employed widely. Financial operations are changing as a result of advances in cloud computing, blockchain, as well as artificial intelligence (AI), which enable scalability, and cost-efficiency, along with improved consumer experiences. However, this change is not without its difficulties, such as the complexity of regulatory compliance, worries about data security, including the necessity of talent acquisition. The purpose of the study is to develop an in-depth assessment of the alternations in numerous financial aspects, where there has been a rise in process optimization and digital transformation. With the help of the study, the examination of the various measures included with the aid of digital technology for the intensification of company processes optimization has been achieved.
 Methodology: The methodology implemented in the development of the study is that of secondary analysis. Through the application of interpretivism, addressing the issues have been provided, where deductive reasoning has been inculcated for reaching the expected outcome. The collection of information had been enabled from academic journals and other data sources from PubMed, IEEE Xplore, and Google Scholar. The application of literature analysis has been enabled for assessing the various concepts.
 Findings: As per the findings of the study, it has been noted that digital revolution has been extremely fruitful for the growth of financial services. A harmonic balance between technological innovations including compliance needs to be attained via cooperative efforts between financial institutions and regulatory organizations. Efficiency gains, particularly in risk assessment procedures, are being driven by robotic process automation (RPA) and AI-based algorithms. This study highlights the necessity of constant flexibility inside financial institutions to be robust as well as competitive in the rapidly changing digital ecosystem. AI has helped in increasing data security within the financial firms and increased the rates of customer satisfaction.
 Unique Contribution to Theory, Policy and Practice: The unique contribution of the study towards the theory, policy and practices relates to the betterment of theory of digital disruption for increasing the overall potential of the digital services.

Corporate financialization and the long-term use of short-term debt: Evidence from China

Using data from Chinese A-share listed companies from 2007 to 2022, we investigate the impact of financialization on the long-term use of short-term debt (LUSD). The results indicate that greater financialization leads to increased utilization of LUSD. The rise of financialization has reduced equity financing and long-term bond financing for firms, pushing them towards using short-term loans instead of long-term investments. Furthermore, the impact of financialization on LUSD is amplified by both rising financing costs and a higher degree of financing constraints. Our study additionally establishes that enterprises with smaller scale, shorter operating periods and greater operational risk are more likely to be impacted by financialization and, hence, show an increased utilization of LUSD.

Does environmental information disclosure promote or prohibit financialization of non-financial firms? Evidence from China

This study investigates whether and how corporate environmental information disclosure influences financialization in non-financial companies. Using data from Chinese listed firms, we find that environmental information disclosure significantly reduces the financialization of nonfinancial firms. Based on signalling theory and resource constraint theory, additional analysis shows that environmental information disclosure boosts firms’ operating income and drives corporate research and development input, which inhibits corporate financialization. Furthermore, the heterogeneous results indicate that the impeding impact of environmental information disclosure is more pronounced for firms located in the eastern region and non-state-owned companies.

Accounting for Equity Financial Instruments Under IFRS 9: Determinants and Usefulness

This oral presentation aims to discuss the results of my study regarding the determinants and usefulness of accounting for equity financial instruments after the effect of the new accounting standard: International Financial Reporting Standard (IFRS) 9 Financial Instruments. The prohibition of recycling fair value gains or losses (FVGL) on equity instruments from other comprehensive income (OCI) to profit or loss when derecognition and the default fair value through profit or loss (FVTPL) presentation with alternative fair value through OCI (FVTOCI) option are some major changes for equity financial instruments accounting in IFRS 9. Motivated by the International Accounting Standards Board (IASB)’s continuing monitoring implementation evidence on equity instruments classification and measurement, I examine firms’ accounting choices in presenting FVGL on EFA either at FVTOCI or at FVTPL under the framework of Positive Accounting Theory (PAT) and whether the presentation location matters to investors in ASX 500 firms. I find that firms’ EFA holdings are not changed after IFRS 9 in terms of whether to hold an EFA or EFA holding amount. FVGL on EFA presentation location choice is not used opportunistically in firms to smooth earnings or increase profitability. However, information asymmetry for FVTOCI presentation choice increased after IFRS 9 adoption in non-financial firms. EFA amount in financial firms provides incremental value relevance to the market regardless of IFRS 9 adoption, and the EFA presentation location matters to investors. The results of this study provide evidence to standard setters to understand the determinants and usefulness of EFA under IFRS 9, which has implications for further revisions. I contribute to the debate around whether to recycle FVGL from OCI or not. Moreover, I extend accounting choice and value relevance literature in financial instruments accounting that is of value to a broad constituency, such as managers, investors, and various financial statement users.

Does Asia’s Financial Intermediation of China’s Solar Industry during the 2020s Exhibit a “California Effect”?

What explains the rise of certain cities as international financial centers—and not others? Increasingly, authors have pointed to a supposed “California effect”—where financiers must geographically locate neither too close nor too far from the companies they serve. However, the successes and failures of Hong Kong’s financial firms to provide finance to China’s solar (photovoltaic) “sunrise industry” paint a far more nuanced picture than the simplistic California effect portrays. We find using new research—financial services firms intermediate or disintermediate the value chains of the client companies they provide finance for. Financial centers can exist thousands of miles—or literally half a world way—from their clients if they develop competencies that let them opportunistically seize market opportunities in sunrise industries, such as the Chinese solar industry. As financial firms actively seek to penetrate new markets, their collective action can make their urban centers hotbeds of novel finance. Such a competencies-based approach to understanding the geography of which we develop helps us understand why certain places emerge as (international) financial centers, and others do not.

The Effect of Market Asset Returns, Economic Conditions, and Firm Fundamentals on Net Lease Capitalization Rates

This study fills a void in the literature by examining real estate capitalization rates for single-tenant net lease (STNL) properties. First, we examine cap rate variation in relation to market and firm-level fundamentals using individual transaction data in a multistage regression approach. Second, our single-tenant dataset, which allows us to control for characteristics such as industry and tenant credit ratings, gives us unique insight into not only the pricing of cap rates, but also their underlying drivers and their relationship to market fundamentals and returns on alternative assets. Using this unique dataset of more than 8,000 single-tenant net lease retail property transactions, we develop a quarterly cap rate index controlling for Metropolitan Statistical Area (MSA) and industry fixed effects, property and lease characteristics, and localized influences such as population density and household income. Third, we examine the effect of excess corporate bond spreads, excess stock returns, stock market indicators, firm financials, and economic and demographic indicators. Finally, we examine the effect on cap rates of MSA characteristics such as size, wealth, poverty, crime, gross domestic product, and growth. The findings show that, besides the systematic risk from stock and bond returns, national and metropolitan economic forces and firm fundamental factors explain variation in cap rates.

Grey Directors and Earnings Management of Selected Quoted Non- Financial Firms in Nigeria

This study examined the effect of grey directors on earnings management of selected non- financial firms in Nigeria. Earnings management was used as dependent variable while grey director’s presence, grey director’s size, grey director’s gender diversity and grey director’s stock holding were used as independent variables. A sample of 44 selected non-financial firms were used for the period of ten years spanning 2012 to 2021. The study employed ex-post facto and cross-sectional research design. The secondary sources of data were collected from annual reports of the selected non-financial firms and four (4) specific objectives and hypotheses were subjected to some preliminary data tests like descriptive statistics, Pearson correlation analysis and Variance Inflation factor (VIF) were analyzed using panel regression analysis after taking cognizance of hausman effect tests. Using a sample of 440 firm-year observations, the result revealed that grey director’s presence and grey directors gender diversity have a negative and significant effect on earnings management of selected quoted non-financial firms in Nigeria which was statistically significant at 5% level of significance respectively while grey directors stock holding has negative but insignificant effect on earnings management of quoted non- financial firms in Nigeria. Based on the findings above, the study recommends among others, that shareholders of non-financial firms in Nigeria should ensure that there is presence of grey directors in their team of management to help curtail the opportunistic behavior of managers and contend earnings management practices. Again, having more women as grey directors in top management should be the priority of every non-financial firms in order to reduce earnings management practices of the firms.

Audit Committee Characteristics and Financial Restatement of Quoted Non-Financial Firms in Nigeria

This study investigates whether there is any relationship between audit committee characteristics and financial restatement. Using secondary data over the period from 2005 to 2020 of 76 non- financial firms, the results of the generalized methods of moments (GMM) reveal that audit committee independence, audit committee diversity, audit committee meetings and audit committee expertise are positively significant with financial restatement while total audit committee size is negatively insignificant with it. The overall results shows that although most of the audit committee characteristics significantly influenced financial restatement, none of them helped in reducing managers tendencies to reduce the practices of restating previously reported financial statements. The study concludes with some recommendations for better performance reporting

Do decreases in Distance-to-Default predict rating downgrades?

Credit rating agencies have long been criticized for being slow to downgrade ratings, when the financial health of the firm deteriorates. This stands out in sharp contrast to how security market prices of the firm respond more rapidly, during the same time. In this paper, we ask whether this disparity between the two indicators can be bridged. We estimate a logit model for the probability of a rating downgrade, using a large dataset of firms in India which combines both high frequency market price data and lower frequency accounting data. We find that changes in measures such as the Distance to Default, in combination with firm characteristics such as ownership structure, can predict a higher probability of ratings downgrades, before they are announced. This will be particularly useful for regulated financial firms, which have to re-weight their portfolios to satisfy micro-prudential requirements, based on downgrades in credit ratings.