Firm Investment Research Articles

Integrated Reporting and IFRS 3: an empirical study to Cost of Equity through Firm Risk and Investor Protection

This study examines the relation of cost of equity associated with the disclosure quality of IFRS 3 and the Integrated Reporting (IR) compliance. Employing an IR sample composed of 498 non-financial firms that use IR either mandatorily or voluntarily from 2011 to 2019, we investigate the impact of IR and IFRS 3 disclosure quality on the cost of equity. Based on Breuer et al. (2018) and Chava (2014) we suggest two distinct channels through which IR and IFRS 3 can influence the cost of equity: firm risk and investor base. In companies with strong legal, cultural, and political factors, our results show that the cost of equity falls when a firm invests in IR and at the same time provides high levels of IFRS 3 information. Moreover, we find that higher IFRS 3 disclosure score lowers firms’ risk in companies with high IR compliance. We interpret the negative relation at higher levels of disclosure as evidence that investors consider firms with low levels of IR informativeness to be riskier. Finally, we find that the negative impact of IFRS 3 disclosure quality and of IR compliance to cost of equity is more intense when firms’ risk is low.
 
 JEL Classification: C 33; G17; G32; L2; M14.
 Keywords: integrated reporting, IFRS 3, accounting disclosure quality, cost of equity, firm risk and investor protection

Caste, courts and business

We study the role of formal institutions of contract enforcement in facilitating investments in small and medium firms(MSME). In a framework where established entrepreneurs can enforce contracts informally using their network ties and hierarchical advantage, we argue that an efficient formal judiciary helps entrepreneurs without any ties to informal business networks, disproportionately more. We test our theoretical prediction using a novel administrative panel-data from Indian courts and the nationally representative MSME survey data. Empirically, we treat entrepreneurs from disadvantaged castes (SC-ST) as those without traditional business-network ties. We find that improvement in court quality has a disproportionately larger impact on the investment decisions of SC-ST entrepreneurs. On average, if the time taken for a court to clear all existing cases reduces by 1 year, the initial gap in the probability of investing, between SC-ST and other entrepreneurs, gets reduced by 0.6-0.7 percentage points.

Insights into UK investment firms’ efforts to comply with MiFID II RTS 6 that governs the conduct of algorithmic trading

PurposeThe purpose of this paper is to examine the effectiveness of UK investment firms’ implementation of the requirements in Commission Delegated Regulation 2017/589 (more commonly known as “Regulatory Technical Standard 6” or “RTS 6”) that govern the conduct of algorithmic trading activities.Design/methodology/approachA qualitative examination of 19 semi-structured interviews with practitioners working for, or with, UK investment firms engaged in algorithmic trading activities.FindingsThe paper finds that practitioners generally have a good understanding of the requirements in RTS 6. Some lack knowledge of algorithms, coding and algorithmic strategies but have used best efforts to implement RTS 6. However, regulatory fatigue, complacency, cost pressures, governance in international groups, overreliance on external knowledge and generous risk parameter calibration threaten to undermine these efforts.Research limitations/implicationsThe study’s findings are limited to the participants’ insights. Some areas of the RTS 6 regime attracted little comment from participants.Practical implicationsThe paper proposes the introduction of mandatory algorithmic trading qualification requirements for key staff; the lessening of the requirements in RTS 6 for automated executors; and the introduction of a recognised software vendor regime to reduce duplication and improve coordination between market participants that deploy algorithmic trading systems.Originality/valueTo the best of the author’s knowledge, the study represents the first qualitative examination of firms’ implementation of the algorithmic trading regime in the second Markets in Financial Instruments Directive 2014/65/EU.

The Influence of Institutional Single-Family Rental Investors on Homeownership: Who Gets Targeted and Pushed Out of the Local Market?

The emergence of institutional single-family rental investors in local housing markets is increasingly concerning to policymakers and planners. This study examines how their rising presence in the single-family housing market has impacted homeownership. Leveraging both granular spatial and temporal variations in large investment firms’ transaction activities over 800 neighborhoods in the Atlanta metropolitan area between 2007 and 2016, I find that their concentrated investment in single-family rentals weakened local homeownership, mainly for Black. In contrast, evidence does not support the claim that smaller scale corporate investors dampened homeownership. The institutional scale matters in explaining a significantly diminished homeownership during this period.

OBILJEŽJA NEFORMALNOG RIZIČNOG KAPITALA U ČEŠKOJ: KVANTITATIVNO ISTRAŽIVANJE

In this paper, the demographic and investment profiles of business angels operating in the Czech Republic are evaluated based on a sample of 78 angel investors. This is the first attempt to use data on investor activities from the Pitchbook database, which has become increasingly popular in academic research. Beyond the framework of descriptive statistical analysis, a multidimensional statistical investigation using cluster analysis was conducted. The results show that there are two groups of angel investors in the Czech Republic. The first group is represented by investors who predominantly have a large active portfolio, as well as the number of total completed investments. On the other hand, the second cluster is made up of investors who conduct a smaller number of investments and are also in the position of the founder of a start-up. Not surprisingly, there are two main locations of angel investors in the Czech Republic, Brno and Prague. Both categories of typical investors are united by some demographic characteristics; for example, the market is dominated by middle-aged men with a completed Master’s degree in Economics who invest in start-ups in the field of information and communication technologies. The main contribution of the paper consists in evaluating the demographic and investment profiles of angel investors operating in the Czech business environment. The results of the research have implications for upcoming research, the informal venture capital industry, and public policy beyond the Czech business environment, while developing tools for fostering an angel ecosystem. In today’s globalized world, the boundaries of angel investors are often blurred. Just as start-ups have ambitions to expand internationally, informal venture capitalists are increasingly making cross-border deals. From the perspective of both investee firms and policy makers, it is thus important to know the profiles of not only domestic but also foreign business angels, e.g. with regard to the setting of public support for foreign capital inflows.

Moderating effect of institutional environment on economic policy uncertainty: evidence from firms’ investments

Abstract This paper investigates the link between corporate investments, eco-nomic policy uncertainty and the quality of institutional environments. The corporate investments of private firms in 10 European countries from 2009 to 2018 were examined and a negative effect of economic policy uncertainty on corporate investments was identified. More importantly, it was determined that the higher-quality institutional environments reduced the negative impact of economic policy uncertainty on corporate investments, especially when economic policy uncertainty was high. We also demonstrate the effects of government stability, legislative strength, government cohesion and socioeconomic conditions that mitigate the negative effects of economic policy uncertainty on corporate investments.

Mafia risk perception: Evaluating the effect of organized crime on firm technical efficiency and investment proclivity

The presence of illegal organizations in economic development settings contributes to the Italian economy’s regional heterogeneity by exacerbating other inefficiencies. We aim to investigate how three indicators of awareness of criminal interest in a firm’s activities affect the latter’s efficiency, as well as examining a potential channel through which illegal activities could hinder firm performance, using a unique set of firm-level data. According to our findings, the presence of criminal network pressure in a firm’s environment reduces its technical efficiency and propensity to invest. This phenomenon is particularly strong in Italy’s underdeveloped regions, across all illicit considered and risk classes, with inefficiency doubling when the fear of crime becomes significant. A similar pattern emerges in terms of firm investment proclivity. The research findings are relevant for policymakers because they demonstrate that even the perception of a criminal threat has significant effects on a firm’s performance; consequently, enhancing legal protection could prevent significant economic and social costs.

Understanding Consumer Attitudes towards Sustainable Investments: A Qualitative Exploration

Sustainable investments, which integrate environmental, social, and governance (ESG) factors into investment decisions, are becoming increasingly popular as consumers become more conscious of the ethical impact of their financial choices. This study explores consumer attitudes toward sustainable investments, focusing on the key drivers, perceptions, and barriers that influence their decision-making process. Through a qualitative analysis based on interviews and case studies, the research uncovers how consumers balance financial returns with ethical considerations and the role of trust, transparency, and knowledge in shaping these attitudes. The study also provides insights into how investment firms can better cater to the growing demand for sustainable investment options.

Corruption, crime and investments by firms in emerging economies

PurposeThe study aims to investigate the effect of corruption and crime on the investments by firms in emerging economies (EEs).Design/methodology/approachThe study adopts the generalised methods of moments (GMM) estimator and data across 57 EEs.FindingsThe study shows that crime management, corruption and external quality assurance drive-up investments. Additionally, investments decline with firm age and crime incidence. Corruption and crime managements increase investments by exporting firms more than non-exporting firms investments. Also, external auditor services benefit investments by large firms more than small-medium firms.Originality/valueThere is a need for EEs to implement policies that will curtail corruption and create a level playing field and sustainable firm growth. EEs firms must be innovative to expand their productive investments and grow over time. Also, EEs firms should seek external quality certification, invest in internal security and monitor goods in transit.

Target for campaign success: an empirical analysis of equity crowdfunding in Japan

This study investigates campaign success in equity crowdfunding, using campaigns listed on a leading Japanese equity crowdfunding platform with an all-or-nothing rule. We examine how campaign success depends on campaign- and firm-specific characteristics, including the campaign target amount. We find that patenting positively affects campaign success and the campaign target amount. The results indicate that innovative firms have a higher probability of campaign success, while they set a higher target amount. We also provide evidence that campaigns that have already provided services and products have a lower probability of success, although not always significant, and firms tend to set a lower target amount. Moreover, campaigns launched by venture capital-backed firms are more likely to succeed than others. Furthermore, campaigns launched by firms eligible for the Angel Tax System, introduced in Japan as a tax incentive for investment in young and small firms, have a higher tendency to succeed in equity crowdfunding. Our findings suggest that the Angel Tax System attract more crowd investors and such tax incentives help raise funds on equity crowdfunding platforms for new businesses.

Biopharmaceutical Financialization and Public Funding of Medical Countermeasures (MCMs) in Canada During the COVID-19 Pandemic.

Analysing the Canadian government's efforts to support the development of COVID-19 "medical countermeasures" (MCMs), this article seeks insights into political economy as a driver of pandemic response. We explore whether Canadian public funding policy during the pandemic involved departures from established practices of financialisation in biopharmaceutical research and development (R&D), including the dominance of private sector involvement in an intellectual property (IP) intensive approach to innovation underscoring profit, and governance opacity. We interrogate public funding for MCMs by analyzing how much the Government of Canada (GoC) spent, how those funds were allocated, on what terms, and to whom. We identify the funding institutions, and the funds awarded between February 10, 2020, and March 31, 2021, to support the research, development, and manufacturing of MCMs, including diagnostics, vaccines, therapeutics, and information about clinical management and virus transmission. To collect these data, we conducted searches on the Internet, public data repositories, and filed several requests under the Access to Information Act (1985). Subsequently, we carried out a document-based analysis of electronically accessible research contracts, proposals, grant calls, and policy announcements. The GoC announced CAD$ 1.4 billion for research, development and manufacturing of COVID-19 MCMs. Fully 68% (CAD$ 959 million) of the announced public funding was channelled to investment in private sector firms. Canadian public funding showed a consistent focus on early and late stage development of COVID-19 MCMs and the expansion of biopharmaceutical manufacturing capacity. Assessing whether Canada's investments into developing COVID-19 MCMs safeguard affordable and transparent access to the products of publicly funded research, we found that access policies on IP management, sharing of clinical data, affordability and availability were not systematic, consistent, or transparent, and few, if any, mechanisms ensured long-term sustainability. Beyond incremental change in policy goals, such as public investment in domestic biomanufacturing, the features of Canadian public policies endorsing financialization in the biopharmaceutical sector remained largely unchanged during the pandemic.

Over-investment and ESG inequality

PurposeThis study aims to test whether over-investment is associated with environmental, social and governance (ESG) variation (i.e. inequality) across its dimensions, which, if so, would imply the prioritization of the interests of some stakeholders over those of others.Design/methodology/approachDrawing on a global sample of 29,428 observations across nine sectors and 41 countries between 2003 and 2019, the authors executed a country-industry-year fixed-effects regression analysis. In the robustness tests, this study also used the entropy balancing and propensity score matching approaches.FindingsThe authors found that while firm over-investment increases social pillar inequality, it reduces environmental pillar inequality. Further analysis revealed that the over-investment strategy decreases (increases) ESG inequality in low (high) environmental and social performers. This outcome could be of relevance to internal governance mechanisms and policymaking as ESG inequality might raise legitimacy concerns and hamper the long-term sustainability of firms.Practical implicationsThe outcome of the study could be of relevance to internal governance mechanisms as well as policymaking. Considering financial constraints, firms should maintain a balanced strategy between firm investment and addressing stakeholder interests. Otherwise, over-investment might reduce environmental and social engagement in some dimensions, which could prompt criticisms and legitimacy concerns about firms and some stakeholders.Originality/valuePast research has intensively focused on whether ESG – rather than ESG inequality – is associated with investment (in)efficiency. In addition, it has mostly formulated the causality running from ESG to firm investment, and hence, the literature lacks heterogeneity in this respect. Nevertheless, the authors believe that the potential effect of firm investment on ESG is of critical importance and has implications for determining whether over-investment causes variations across ESG engagement. Thus, the authors addressed this gap in the literature by investigating the relationship between over-investment and ESG inequality.

The impact of firm leverage on investment decisions: The new approach of hierarchical method

This paper investigates the impact of firm leverage on its investment activities. Especially, the research is conducted in the context of the Vietnamese emerging market, an incomplete market in South East Asia with the existence of inefficient market problems such as information asymmetry and agency conflicts which are the root cause of the relationship between corporate leverage and investment. Regarding methodology, we build the two main types of econometric models: traditional multiple regression and multilevel model (also called hierarchical, mixed, or nested data model). The purpose of employing the multilevel model is to observe the hierarchical structure of data and the effect of each data level in the hierarchy on firm investment that the traditional regression model may fail to achieve. We construct three-level predictors (three levels of leverage) for investment: observation unit, firm level, and industry level. We find that debt used in a firm can harm or reduce its investment activities. All three hierarchical levels of leverage show negative and significant effects on investment. Especially, the impact of leverage at the first level of data clustering on investment gets stronger under the moderation of industry leverage. In this case, the multilevel model is a more appropriate estimation method than the traditional regression.

The Effect of Training and Development on Productivity of Employees in Listed Investment Firms in Kenya

The objective of this research was to assess how training and development impact employee productivity in investment companies listed in Kenya. Maslow's Hierarchy of Needs, Hawthorne Effect, and Expectancy Theory were the guiding principles of this study. A literature review was conducted to define the variables of the study. The research was conducted using a descriptive design, and the target population was made up of 72 participants, consisting of 15 human resource managers and 57 human resource staff from the 15 listed investment firms on the Nairobi Stock Exchange. The study utilized the census sampling technique, with all 72 individuals participating. To gather primary data, questionnaires were distributed after being tested for reliability and validity. The data collected was analyzed using descriptive statistics such as standard deviation and means, as well as inferential statistics using the Statistical Package for Social Sciences (SPSS) version 25.0 software. Correlation coefficients were employed to assess the relationship between the variables in the study. The data findings were presented using tables and pie charts to facilitate the interpretation of results and draw conclusions and recommendations. According to the research conducted in Kenya on investment firms, it was discovered that training and development have a substantial and direct impact on employee productivity. The study showed that training and development had a beta coefficient of 0.490 and a p-value of 0.000. The regression model analysis revealed that training and development is a strong predictor of employee productivity. According to the study, training and development has a considerable impact on the performance of employees working in listed investment firms in Kenya, as evidenced by the adjusted R-square value of 0.793. The research suggests that companies should focus on all aspects of training and development as they have a significant and positive impact on employee performance in this sector.

Corporate real estate investment and firm performance: empirical evidence from listed non financial firms of Pakistan

PurposeThis study aims at testing the relationship between corporate real estate (CRE) investment and firm performance of nonfinancial firms in the context of an underdeveloped market, Pakistan.Design/methodology/approachThis study uses a sample of 307 nonfinancial firms listed at the Pakistan Stock Exchange from 2010 to 2020. This study adopts a rigorous methodological approach and employs ordinary least square, fixed effect, generalized method of moments system regressions and the propensity score matching technique to account for potential heteroskedasticity, effects of unobserved variables and endogeneity.FindingsThis study finds that as the investment in CRE increases, the firm’s performance decreases. The findings are robust to alternative proxies of CRE investment and alternative methodologies. Furthermore, the findings hold for financially constrained and financially unconstrained firms, high- and low-growth firms and safe and financially distressed firms.Research limitations/implicationsThis study extends the evidence about CRE investment in an underdeveloped market and suggests potential avenues for future research.Practical implicationsThe findings of this study warrant investors, managers and directors be cautious about CRE investment in firms.Originality/valueThis study uses a new proxy of CRE investment, which is more inclined toward the asset management and financial perspective of CRE investment. Furthermore, to the best of the authors’ knowledge, this is the first attempt to investigate the role of CRE investment in an underdeveloped market.

Information sharing and security investment for substitutable firms: A game-theoretic analysis

There are several types of relations between information assets of two firms, among which substitutable relation is such that even when one of the firms is successfully breached by one hacker, both firms would incur loss and the hacker gets benefit. This paper examines security investment and information sharing of two substitutable firms through constructing a game-theoretic model between these firms and one hacker. We derive the following interesting results: (a) the firm with more efficient security investment suffers weaker cyber-attack from the hacker because the rational hacker would switch its emphasis to the less efficient firm; (b) one firm’s aggregate defense increases with its unit investment cost for the positive interdependence when this cost remains high due to more shared information and enhanced security investment from the other firm; (c) although a widely-used compensation mechanism can urge the firms to invest more when security loss remains low, it increases their expected costs because of the excess investment; (d) unlike simultaneous game, each firm’s aggregate defense always increases with the unit cost of cyber-attacks under sequential game since the hacker has an advantage of learning the firms’ security decisions. These results give fresh managerial guidelines to security experts of firms.

기업규모와 지분가치에 대한 투자효

The purpose of this study is to examine the relative influence of investment expenditure and equity value according to firm size. However, according to previous studies, there is a difference in management decision making and various management policies depending on the size of the company, and the response in the capital market also suggests that there is a difference in the size of the company. The larger the size of the firm and the higher the market dominance, the more likely it is to realize economies of scale, so it is clear that the market response to the investment of these large firms will be different from the market response to the investment of small firms. Therefore, this study focuses on the difference in the size of these companies and examines the relationship between investment and equity value by each size. In addition, it is divided into alternative investment and adaptive investment according to the attributes of investment, and it is intended to compare and examine how these investments affect equity value. Forecasts related to this study are expected to differ in the relationship between investment expenditure and equity value depending on the size of the company, and to differ depending on investment properties. In order to empirically analyze this, this study analyzed the large and small sized companies, and as a result of the analysis, there was a difference in the response of the market in both the large and small sized companies. In other words, investment expenditure, alternative investment, and adaptive investment of large companies showed positive effects on equity value, but small companies showed non－significant effects. The results of this study are expected to provide important implications for research on investment decisions and decision making.

Driving Forces: Generational Differences on the Purchasing Behavior of Investment Assets among Gen Y and Gen Z

With the rising numbers and interest in the financial literacy of Filipinos, more and more people are delving into investment assets. In this case, investment firms in the Philippines must discover new methods to address the current demand for investment assets better and plan effective strategies. This study aims to identify the purchasing behavior and factors influencing investment intention among Gen Y and Z investors. In order to assess the generational differences in behavioral patterns, the researchers used a quantitative approach using the convenience sampling technique for data collection. The data was analyzed using Partial Least Square-Structural Equation Modeling (PLS-SEM). The data collected in this research will help the firms know the behavior of their target market. Thus, acquiring the right strategies would increase sales of the said investment firms and help them determine the appropriate target market. This research shows that only financial literacy has a significant relationship with the investment purchasing behavior of both Gen Y and Gen Z investors, and there is no significant difference between their investment intentions. In order to influence both generations, marketing promotions of investment firms must appeal to the investors' prior investment knowledge. The results of this study will help the firms know the behavior of their target market, and thus, acquiring the right strategies would lead to the increase of sales of the said investment firms and would help them determine the appropriate target market.

EXTERNAL FINANCING AND INVESTMENT IN FIRMS IN NIGERIA

The study examined the relationship between external financing and investment in firms in Nigeria for the duration of 1990-2019. In order to achieve the main objective of the study, investment in firms which is the dependent variable was proxy with Industrial Growth (INDG) while the external financing as the independent variable was measure with External Debt Stock (EDS), Foreign Direct Investment (FDI), Official Development Assistance (ODA) and Foreign Portfolio Investment (FPI). This study made use of Ex-post facto research design and secondary source of data (time series data), from the CBN statistical bulletin and Annual Report for the period 1990-2019. The study adopted a number of techniques of data analysis such as descriptive statistics, correlation and multiple regression tool of analysis with the aid of E-VIEW 9.0 statistical package was used to analyze the data because this technique was used in order to establish the kind of relationship that exists between the independent variables and the dependent variable used in the study. The findings revealed that EDS, FDI, ODA has significant effect on INDG in Nigeria while FPI does not have significant effect on INDG in Nigeria. Thus, the study concluded that external financing significant influence on investment in firms in Nigeria. The study therefore recommends that, the channels of full implementation of external financing needs to be pursued vigorously through government institutions to ensure that funds meant for investment in infrastructures and firms are not diverted to other uses.
 Keywords: External Financing, Industrial Growth, External Debt Stock and Foreign Direct Investment, Official Development Assistance and Foreign Portfolio Investment.

Pandemic uncertainty and firm investments

Exploiting the World Uncertainty Index, we analyze the real impact of pandemic-related uncertainty on firm investments in a cross-country setting. Our findings show that high levels of pandemic uncertainty are negatively associated with firm investments. The adverse effect of pandemic uncertainty is substantially greater in financially constrained firms or small ones.