Net Equity Research Articles

Corporate social responsibility and the likelihood of external financing

<p style="text-align:justify"><span style="font-size:16px"><span style="font-family:Times New Roman,Times,serif"><span dir="ltr" lang="EN-US"><span style="color:black">This paper empirically investigates the relation between firm performance in corporate social responsibility (CSR) and the need and likelihood of external financing to test the predictions of agency and stakeholder theories. Empirical results from Logit, Linear Probability Model, OLS and Firm fixed effects regressions indicate that CSR is negatively related to the likelihood and level of external financing. Further analysis indicates that CSR has a negative and significant effect on both net equity issued (NEI) and net debt issued (NDI), the two components of external financing. Overall, the empirical results support the predictions of agency theory.</span></span></span></span></p>

Does Financial Derivative Hedging Reduce Firms’ Financial Constraints?

This study examines the relationship between the firms’ derivative risk management and its financial constraints. Firms face a wedge between their internal and external financing for their investments. I test whether this wedge reduces firms’ financial constraints when they hedge using interest rate, foreign currency, and commodity derivatives. Using an event study and a difference-in-differences framework around implementing Financial Accounting Standard (FAS) 123R, this study shows a strong causal relationship between derivative hedging and financial constraints. I find that net debt increases for the derivative hedging firms, on the other hand, cash holdings and net equity issuance decreases. When managers of non-financial corporations believe that their firm will face a liquidity shortage, they save more cash out of cash flow as a precautionary measure. Both cash flow-cash sensitivity and investment-cash flow sensitivity decrease. The analysis also shows that both the loan spread and the probability of covenant violation decrease after firms start derivative hedging. The main implication of the analysis is that risk management influences the asymmetric information between lenders and borrowers: the increase in risk management, the less the asymmetry.

Research on the Optimization of Enterprise Resource Economic Benefits and Management Costs in Cloud Computing Environment

Abstract Based on cloud computing technology, this paper constructs a benefit-optimal enterprise resource scheduling model and an enterprise cost management prediction model to maximize the economic benefits of enterprise resources and optimize the management costs, respectively. Combining the improved greedy algorithm and the benefit function, a cloud resource scheduling algorithm based on benefit optimization is proposed, defining the benefit function about time and cost, and taking the highest user satisfaction as the optimal resource scheduling objective. A mathematical model for management cost prediction is constructed by using the fireworks algorithm to optimize the number of trees and the number of leaf nodes in the random forest, and the Informatica software is used to manage and integrate the enterprise source data. The performance of the company’s operating conditions after optimizing resource management and cost savings is explored as a case study of Company S. In 2023, the total asset turnover ratio of Company S increased to 21.45 from 0.48 in 2022, and the overall asset operating efficiency improved. Working capital rose to 262,852,200 yuan. The current ratio, quick ratio, and cash ratio improved, while the gearing ratio, equity ratio, and equity multiplier showed a downward trend. The net operating margin achieved the maximum profitability in the last three years, net total assets margin, and net equity margin, with an increase of 25.42%, 20.65%, and 31.49%, respectively.

1152. Quantifying the health equity related public health impact of national immunisation programmes

Abstract Background COVID-19 highlighted health inequities and the differential impact that vaccination can have on health, with respect to social advantage. While many national immunisation programmes (NIP) consider health equity as a key recommendation criterion, most lack robust frameworks and methods to quantify the impact of healthcare interventions on health equity. Equity strata can be defined by socioeconomic status, race/ethnicity, geographic location, etc… Methods The inclusion of equity in guidelines for vaccination recommendation was assessed. Vaccination policy experts and health economists were consulted on how to best capture the equity-related public health impact (PHI) of NIP. The framework of distributional cost-effectiveness analysis (DCEA) was selected to be further explored. A stepwise approach was applied to account for equity in PHI analysis i.e., the impact on health outcome distribution by equity strata, by estimating the distributional impact (step 1) and HE impact (step 2) of vaccination. A practical application of the method was illustrated through a case study on the meningococcal B (MenB) disease vaccination program in England. Results Impact of vaccination in health equity is formally captured in policy decision making in the US ACIP Evidence to Recommendation framework and the Canadian EEFA (Ethics, Equity Feasibility, Acceptability) Framework. In UK, France, Australia, Spain and Germany it is qualitatively included as part of the deliberative process, while it is not captured in the Netherlands. The DCEA framework was applied for health equity benefits of MenB infant vaccination in UK, with impact assessed across population subgroups categorised using a deprivation index. Nearly 80% of prevented cases were among the three most deprived groups. Additionally, MenB vaccination decreased inequity in the population, with positive net equity impact. Conclusion PHI of vaccination on health equity can be quantified and usefully considered in decision making. The case study demonstrates how the proposed framework could be applied to fully incorporate impact on equity in cost-effectiveness analysis. The health equity impact of vaccination can be captured in health economic evaluation although there is a need to improve the evidence base and its implementation Disclosures Eliana Biundo, PhD, GSK: employee|GSK: Stocks/Bonds Mariia Dronova, PhD, GSK: Grant/Research Support Annie Chicoye, PhD, GSK: Board Member|GSK: Grant/Research Support|GSK: Honoraria Richard Cookson, PhD, Genetech: Advisor/Consultant Nancy Devlin, PhD, GSK: Honoraria T. Mark Doherty, PhD, GSK: employee|GSK: Stocks/Bonds Antonio J Garcia-Ruiz, PhD, CHIESI: Advisor/Consultant|CHIESI: Grant/Research Support|CHIESI: Honoraria|Consumers and Users Organisations (CEACCU): Advisor/Consultant|Consumers and Users Organisations (CEACCU): Grant/Research Support|Consumers and Users Organisations (CEACCU): Honoraria|Foundation for Progress and Health (Andalusian Regional Government): Advisor/Consultant|Foundation for Progress and Health (Andalusian Regional Government): Grant/Research Support|Foundation for Progress and Health (Andalusian Regional Government): Honoraria|GSK: Honoraria|Ministry of Science and Innovation of Spain: Advisor/Consultant|Ministry of Science and Innovation of Spain: Grant/Research Support|Ministry of Science and Innovation of Spain: Honoraria|Official College of Physicians: Advisor/Consultant|Official College of Physicians: Grant/Research Support|Official College of Physicians: Honoraria|Royal Academy of Medicine and Surgery of Eastern Andalusia: Advisor/Consultant|Royal Academy of Medicine and Surgery of Eastern Andalusia: Grant/Research Support|Royal Academy of Medicine and Surgery of Eastern Andalusia: Honoraria|Sanofi Pasteur: Advisor/Consultant|Sanofi Pasteur: Grant/Research Support|Sanofi Pasteur: Honoraria|Sociedade Galega de Neuroloxía: Advisor/Consultant|Sociedade Galega de Neuroloxía: Grant/Research Support|Sociedade Galega de Neuroloxía: Honoraria|UCB: Advisor/Consultant|UCB: Grant/Research Support|UCB: Honoraria Louis P Garrison, PhD, GSK: Honoraria Terry Nolan, MD, PhD, Clover: Board Member|CSL Seqirus: Advisor/Consultant|CSL Seqirus: Grant/Research Support|Dynavax: Grant/Research Support|GSK: Advisor/Consultant|GSK: Board Member|GSK: Grant/Research Support|Iliad: Grant/Research Support|Moderna: Advisor/Consultant|Moderna: Grant/Research Support|MSD: Advisor/Consultant|MSD: Grant/Research Support|Novavax: Board Member|Pfizer: Advisor/Consultant|Sanofi: Advisor/Consultant|Sanofi: Grant/Research Support|SK Bio: Board Member Maarten Postma, Dr., Consumers and Users Organisations (CEACCU): Advisor/Consultant|Consumers and Users Organisations (CEACCU): Honoraria|Foundation for Progress and Health (Andalusian Regional Government): Advisor/Consultant|Foundation for Progress and Health (Andalusian Regional Government): Honoraria|GSK: Honoraria|Royal Academy of Medicine and Surgery of Eastern Andalusia: Advisor/Consultant|Royal Academy of Medicine and Surgery of Eastern Andalusia: Honoraria David M. Salisbury, CB FMedSci FRCP FRCPCH FFPH, Clover Pharmaceuticals: Advisor/Consultant|GSK: Advisor/Consultant|Moderna: Advisor/Consultant|Novavax Inc: Honoraria|Sanofi: Advisor/Consultant Hiral Shah, PhD, GSK: employee|GSK: Stocks/Bonds Jurgen Wasem, PhD, AstraZeneca: Advisor/Consultant|AstraZeneca: Honoraria|Clover: Advisor/Consultant|Clover: Board Member|GSK: Board Member|GSK: Honoraria|Merck: Advisor/Consultant|Merck: Honoraria|Sanofi Pasteur: Advisor/Consultant|Sanofi Pasteur: Honoraria|Seqirus: Advisor/Consultant|Seqirus: Honoraria|Serum Institute of India: Advisor/Consultant|Serum Institute of India: Board Member|Zeria: Advisor/Consultant|Zeria: Board Member Ekkehard Beck, PhD, GSK: employee|GSK: Stocks/Bonds

Firm-level political risk and external financing choices

This study investigates the association between firm-level political risk and external financing choices. We find that firm-level political risk is positively related to net equity issuance but is insignificantly associated with net debt issuance. The evidence shows that precautionary savings, market timing, and internal financial constraints could explain the positive relation between firm-level political risk and net equity issuance. Overall, our findings suggest that firms exposed to higher political risk issue more equity than debt as a source of external financing.

How to Broke the Dependence on Debt and Strengthen Firms: the DEBRA Proposal Against the Tax-induced Debt Bias

Objective: This article assesses the impact of the debt-equity bias reduction allowance (DEBRA) proposal on the tax-induced debt bias. The tax-induced debt bias is present in most fiscal systems around the world that “subsidize” debt. Debt is more interesting than equity because its cost, the interest, is tax-deductible. As a result, firms tend to have more debt, which then generates negative externalities. To break this trend, the European Commission published a directive proposal comprising a DEBRA. Methods: The proposal includes both a notional deduction on growth in equity and an additional limitation on interest deduction for corporate income tax purposes. To evaluate the impact of the DEBRA proposal, Polish firms’ data from the BACH database over six years, from 2015 to 2020, are analyzed. Two criteria are analyzed: the impact on the ratio of total financial debt to net equity and on an Altman’s Z-score to estimate their solidity. Results: We observe that firms tend to keep a higher level of net equity and to reduce the level of debt. A stronger solidity of firms is also noted by a reduction in their likelihood of bankruptcy. Conclusion: The DEBRA should be an interesting fiscal tool in building an anti-fragility fiscal system. The proposal appears to be promising as it reinforces the stability of the firm in reducing the global level of its financial debt. Moreover, in improving the Z-score ratio, the DEBRA proposal tends to reduce the probability of firms going bankrupt.

Do capital inflows affect domestic bank credit? Empirical evidence from India

This paper studies multivariate dynamic analysis of capital inflows in relation with domestic bank’s credit which has not been investigated earlier adequately in the context of Indian economy. Using autoregressive distributed lag (ARDL) model, we find the existence of co-integration over the period 1991 Q3 to 2022 Q1. The long-run ARDL regression model results show net equity inflows, i.e. net foreign direct investment, and net non-equity inflows, i.e. foreign loan, are significant to influence domestic bank credit. Result also reveals that depreciation of exchange rate and current account (trade) deficit increase bank credit. Outcome of this research contributes significantly to frame effective monetary policy in the Indian context.

Coming back to life: How business families revitalize "dead money" through family foundations

This paper examines how business families use family foundations to revitalize "dead money" while increasing the reputation of the business family and its firms through charitable giving. The Wang & He (2018) model is applied from 2001 to 2019 to a sample of 100 US family foundations (two for each federal state) with about USD 1 million in assets. Results indicate that business families revitalize "dead money" through family foundations by investing it across different revenue sources, namely bonds, cash investments, and stocks, generating inflows in terms of dividends, interests, and net gains due to asset sales. However, family foundations hold much of these inflows as disposable net equity. Therefore, their administrative structure remains too basic, preventing operating margins from growing. Nonetheless, family foundations stay highly involved in charitable giving to do well to the reputation of the business family and its firms while doing good to society. Overall, we conclude that business families, through family foundations, partially succeed in revitalizing "dead money".

The role of uncertainty and affect in decision-making on the adoption of AI-based contact-tracing technology during the COVID-19 pandemic.

This study explores how negative affect, perceived net equity, and uncertainty influence the public's privacy decision-making regarding the adoption of contact-tracing technology based on artificial intelligence (AI) during the COVID-19 pandemic. Four hundred and eighteen adults in the US participated in the study via Amazon Mechanical Turk in August 2020. Statistical analyses were performed using the PROCESS macro. Indirect effects and their significance were estimated using bias-corrected bootstrap confidence intervals (CIs) with resampling set to n = 5000. Perceived net equity was positively associated with low levels of perceived uncertainty regarding a COVID-19 contact-tracing application and intention to adopt it. Low levels of perceived uncertainty were positively associated with intentions to adopt such an application, thereby suggesting that a perceived level of uncertainty mediates the association between perceived net equity and adoption intentions. Anxieties regarding AI technology and COVID-19 risks both moderate the associations among perceived net equity, perceived level of uncertainty, and intentions to adopt the contact-tracing technology. Our findings highlight how the differing sources of emotion influence the associations among rational judgment, perceptions, and decision-making about new contact-tracing technology. Overall, the results suggest that both rational judgments and affective reactions to risks are important influencers of individuals' perceptions and privacy-related decision-making regarding a new health technology during the pandemic.

Fraud detection using fraud triangle theory: evidence from China

PurposeThis study aims to explore the relationship between fraud triangle theory (FTT) and the accounting fraud phenomenon in all listed companies in China.Design/methodology/approachThe CSMAR database is used as the sample, including 16,063 data of all listed companies in Shanghai and Shenzhen markets for the 2010–2020 period. The authors also use quantitative methods, such as regression analysis, to investigate the relationship between five variables (cover three elements of FTT) and fraud occurrence.FindingsResults show that leverage and liquidity ratios positively affect fraud detection, whereas return on net equity, audit size and independent director percentage negatively affect fraud detection.Originality/valueThis study enriches theoretical research on the causes of accounting fraud in China and is of great significance to the sound development of China’s capital market.

TRADING BEHAVIOUR OF FOREIGN INSTITUTIONAL INVESTORS IN INDIA: AN EMPIRICAL STUDY

The study is about the investment behaviour of “Foreign Institutional Investors” (FII) in the Indian stock market w.r.t their trading behaviour and its impact on stock market movements. We have collected the daily data of investment of FII net equity investments and NIFTY 50 index in Indian stock markets for a long time period from the year 2000 to 2022. The paper used trend analysis and the relationship between FII net equity investments and NIFTY 50 index. The paper found a significant relationship and causality in the direction of NIFTY to FII investments. The FII are found to invest with consistency in the Indian stock market and are also responsible to contribute significantly to the development of the Indian stock market.

Peranan Struktur Modal, Net Financing, Profitabilitas dan Likuiditas pada Kualitas Laba Perusahaan Properti

This study aims to examine and analyze the effect of capital structure, net financing, profitability, and liquidity on earning quality. This study uses data from property companies in Indonesia for the period 2013-2018 with 20 samples of companies. In this study, capital structure is calculated based on the capital structure using financial leverage measure with the formula debt to equity ratio. Net financing is measured using net equity in the current period less current debt to total assets in the previous period. Profitability is measured using return on equity, current asset ratio is used for liquidity. Earnings quality is calculated based on the earnings response coefficient. The results show that capital structure has a positive effect on earnings response coefficient, net financing has no effect on earnings response coefficient, profitability has a positive effect on earnings response coefficient and liquidity has no effect on the earnings response coefficient. Capital structure and profitability have a positive effect on earnings quality, with this condition company needs to focus on how to manage capital structure and focus on profitability to keep maintain earnings quality. Net financing and liquidity have no effect on earnings quality, have a meaning the company that has a good capital structure and profitability, will impact to a good capability to cover the liquidity and manage asset, debt, and net worth.

Political corruption, trust, and household stock market participation

We study how political corruption affects stock market participation among households in China. Our identification strategy exploits recent anticorruption campaigns that reduce households’ exposure to political corruption and within-province variation in lifetime exposure to local corruption. We find that households with higher corruption exposure participate less in the stock market at both the extensive and intensive margins. Removals of top provincial officials during the anticorruption campaign increase the probability of stock market participation by 3 percentage points and households’ net equity purchases and equity share percentage by 13.2 and 0.2 percentage points, respectively. The effect is predominantly driven by the nonpecuniary effect of corruption on households’ trust and perceptions of institutional quality rather than on households’ accumulation of wealth. Our work highlights the negative externalities of political corruption on financial markets.

The asymmetric impacts of international portfolio flows on Australian dollar returns

ABSTRACT This study investigates how equity portfolio flows affect the transition processes of exchange rate returns in Australia by employing a Markov-switching AR-GARCH-Jump model with time-varying transition probabilities. Three interesting findings are observed. Firstly, both GARCH and jump effects are totally different in the high-volatility and low-volatility states. Secondly, the net equity portfolio inflows increase exchange rate market fluctuations. Thirdly, the marginal effect of net equity flows is stronger in low-volatility state than in high-volatile state.

Exchange Rate Sensitivity and the Net Foreign Asset Composition

AbstractMany currencies, especially from countries with negative net foreign assets, depreciate during financial turbulence. Using a panel of 26 currencies for the period April 2002 to December 2019, I show that the net foreign asset composition is related to the exchange rate sensitivity to global financial market uncertainty changes. Net foreign debt is associated with a higher sensitivity, whereas net equity and FDI are not. Ownership matters too, as this association is stronger for private net liabilities. In emerging markets, this vulnerability arises from net other investments, while G10 currencies are more sensitive the more private net portfolio debt the countries have.

Unconventional monetary policy and international equity capital flows to emerging markets

AbstractThis paper examines the relationship between monetary policies pursued by three major central banks (U.S. Federal Reserve, European Central Bank and Bank of Japan) and net equity capital flows to emerging markets (EMs) by global investment funds. We focus on two aspects of central bank policy: The growth of central bank assets and the surprise element of asset growth. We find, first, positive, economically large and statistically significant spillovers from the U.S. Federal Reserve asset growth to EM equity inflows following the adoption of unconventional monetary policies. Second, U.S. Federal Reserve and (to a lesser extent) European Central Bank asset growth surprises are negatively related to EM capital flows.

Do Lower Foreign Flows and Higher Domestic Flows Reduce Indian Equity Market Volatility?

This study examines the relationship that both domestic and foreign institutional net equity flows have with the India stock markets. The motivation behind is the study to examine whether increased net equity investments from domestic institutional investors has reduced the influence of foreign equity flows on the Indian stock market volatility. Our results indicate that only during periods in which domestic equity inflows surpass foreign flows by a significant margin, as seen during 2015–2018, is the Indian stock market volatility not significantly influenced by foreign equity investments. However, during periods of re-emergence of strong foreign net inflows, the Indian market volatility is still being impacted significantly, as has been observed since 2019. Furthermore, we find that both large-scale net buying and net selling by domestic funds increased the stock market volatility as observed during 2015–2018 and COVID-impacted year 2020 respectively. The implications of this study are multi-fold. First, the regulators should discuss with industry bodies before enforcing major structural changes like reconstituting of mutual fund investment mandate in 2017 which forced domestic funds to quickly change portfolio allocation amongst large-cap, mid-cap and small-cap stocks resulting in higher stock market volatility. Second, adequate investor educational and awareness programmes need to be conducted regularly for retail investors to minimize herd behaviour of investing during market rise and heavy redemptions at times of fall. Third, the economic policies should be stable and forward-looking to ensure foreign investors remain attracted to the Indian stock markets at all times.

Taking a local government perspective for economic evaluation of a population-level programme to promote exercise

BackgroundIn order to tackle the issue of physical inactivity, local governments have implemented population-level programmes to promote exercise. While evidence is accumulating on the cost-effectiveness of these interventions, studies have typically adopted a health sector perspective for economic evaluation. This approach has been challenged as it does not allow for key concerns by local governments, which are primary stakeholders, to be addressed. ObjectivesTo show how taking a local government perspective for economic evaluation can be implemented in practice and this may affect the economic conclusions. MethodsBased on data from a case study, the health equity impact of the intervention and its opportunity cost from a service provider viewpoint were assessed. The cost-effectiveness implications of a change in perspective were subsequently estimated by means of scenario analysis. FindingsThe intervention was found to provide adult residents living in the most deprived city areas with greater health benefits compared with the rest of the population. However, a negative net equity impact was found in the short-term. The opportunity cost of the intervention was estimated to be substantially lower than its financial cost (£2.77 per person/year), with significant implications for decision-making. ConclusionsTaking a local government perspective can affect the conclusions drawn from the economic evaluation of population-level programmes to promote exercise, and therefore influence decision making.

Volatility spillover impact of FII and MF net equity flows on the Indian sectoral stock indices: recent evidence using BEKK-GARCH

Volatility spillover impact of FII and MF net equity flows on the Indian sectoral stock indices: recent evidence using BEKK-GARCH

Portfolio flows – exchange rate volatility: is there a puzzling relationship?

PurposeThis study investigates possible shock transmission and volatility spillover effects among the exchange rate changes and international portfolio flows for United States vis-à-vis two fast-growing emerging country groups: the BRICS (Brazil, Russia, India, China and South Africa) and MINT (Mexico, Indonesia, Nigeria and Turkey).Design/methodology/approachApplying VAR-BEKK-GARCH model, the evidence indicates that exchange rate fluctuations have a negative impact on net equity flows in Brazil, Russia, India and Turkey; thus, supporting the view that exchange rate uncertainty is an important driver of equity home bias.FindingsAs for the comparison of the pre- and post-crisis period, the findings support the evidence that the post-crisis period witnessed a greater number of cases of significant shock and volatility spillovers among exchange rate uncertainty and portfolio flows.Originality/valueOverall, the empirical results provide fresh insights and policy implications for domestic and international investors through investment activities, and for policymakers through maintaining economic and financial stability.