Non-financial Sector Research Articles

Indirect Effect of Earnings Quality in the Linkage between Managerial Ability and Firm Performance: Evidence from an Emerging Economy

Purpose: This paper investigates the associations among managerial ability (MA), earnings quality (EQ) and financial performance of the firm (FP) in the context of Pakistani economy.
 Design/methodology/approach: For testing objectives, the research proposed panel data model based on three earnings quality attributes, such as predictability, smoothness, and conservatism, between the managerial ability and corporate financial performance. For estimation, the study analyzed an unbalanced panel of 219 non-financial listed firms on the Pakistan Stock Exchange (PSX) for 2008-2021. To address the concerns of heteroscedasticity and autocorrelation, the study applied fixed effect regression with robust standard errors clustered at the firm level, as suggested by Newey and West (1987).
 Findings: -The study provides that overall managerial ability enhances earnings quality and firm performance. In addition, it is observed that earnings quality plays a significant role in enhancing the firm financial performance. Furthermore, the findings also indicate that earnings quality partially mediates the linkage between managerial ability and firm performance. These results support the hypothesis that efficient managers enhance the earnings quality, reduce information asymmetries which translates into higher firm performance.
 Research limitations/implications: The current research is limited to the non-financial sector; however, the study findings are undeniably beneficial for corporate managers in the context of developing economies where the managerial skills, quality of earnings and regulatory control is poor.
 Originality/value: -The novelty of the study lies in the managerial ability and performance linkage considering earning quality as a mediator. Standard-setters and regulators can use the study's findings to understand how managerial skills affect corporate practices, accounting standards and behaviour.

Ownership concentration and cost of equity in Pakistan: the moderating role of disclosure and governance quality

PurposeThe purpose of this study is to examine the relationship between the ownership concentration and cost of equity of firms in Pakistan context. Moreover, this study also investigates how the presence of disclosure quality and governance quality affects the relationship between ownership concentration and the cost of equity of firms.Design/methodology/approachData are collected from six non-financial sectors listed on Pakistan Stock Exchange during the period of 2015–2019. This study uses pooled ordinary least square (OLS) method to validate the proposed hypothesis in STATA.FindingsThe study found a positive and significant relationship between ownership concentration and cost of equity. The results also show that better disclosure and governance quality negatively moderates the relationship between ownership concentration and cost of equity.Practical implicationsThe findings of this study will help firm managers to implement a high level of disclosure and governance quality in firms to reduce agency problems which will further help a firm in reducing the firm's cost of equity. Furthermore, this study is valuable for practitioners regarding thinking about the process of designing ownership structures to protect minority shareholders' rights, especially in emerging markets.Originality/valueThe novelty of this study is having better disclosure quality and more board independence members helps firms with higher ownership concentration in reducing the cost of equity.

Impact of economic policy uncertainty on financial flexibility before and during the COVID-19 pandemic

PurposeThis study examines the influence of economic policy uncertainty on financial flexibility before and during the coronavirus disease 2019 (COVID-19) pandemic. Few prior studies have examined this association specifically for debt and cash flexibility.Design/methodology/approachUsing quarterly data from 2016 to 2022, 1014 observations were collected from the S&P Capital IQ database for listed tourism companies in India. The pre-pandemic period is defined as 2016 Q1 to 2020 Q1, whereas the pandemic period is from 2020 Q2 to 2022 Q3. The data are analysed using ordinary least squares, probit, logit and difference-in-difference (DID) estimation.FindingsThe evidence of this study suggests a negative association of economic policy uncertainty with debt flexibility during the COVID-19 pandemic. The findings also suggest that COVID-19 induced economic policy uncertainty results in high cash flexibility. This meets the expectations for the crisis period, as firms are likely to hold more cash and less debt capacity to manage their operations. The results are robust for various estimation techniques.Research limitations/implicationsThis study is limited to one emerging country and is specific to one non-financial sector. Future research could extend to more emerging countries and include other non-financial sector companies.Practical implicationsThe findings of this research are useful for tourism sector managers as they can effectively manage their cash and debt flexibility during crisis periods. They will need to prioritise cash flexibility over debt flexibility to manage operations effectively. Policymakers need to provide clear and stable economic policies to help firms manage their debt levels during a crisis.Originality/valueTo the best of the author's knowledge, no existing studies have investigated the influence of economic policy uncertainty on the financial flexibility of tourism companies before and during the COVID-19 pandemic. Furthermore, this study establishes a novel set of critical determinants, such as economic policy uncertainty.

Does Executive Compensation Matter for the Risk of the Firm? Evidence from Non-financial Sectors of Pakistan

Large remuneration packages, according to critics, allegedly pushed managers to take on excessive risks, which in turn contributed to the bankruptcy. This study looked into how executive compensation affected the company's overall systematic risk. This study examined data from 170 non-financial enterprises registered on the Pakistan Stock Exchange for the years 2011 to 2020 to investigate the concern variables. For empirical purposes, this study used the OLS technique. The study's findings show a significant relationship between the explanatory and dependent variables. This finding implies that executives take greater risks to increase shareholder returns when they are paid more. This claim is supported by research control variables, including firm size and return on assets. Since firm size and return on assets significantly and favorably affect the firm's risk. TobinQ, annual holding return, and firm age have a negative impact on the systemic risk of the company as compared to the control variables. The findings of the study suggest that large compensation packages motivate executives to take more risks. Investors and policymakers can utilize this study's findings for decision-making.

Intellectual Capital Potency and Firm Value in Nigeria; Evidence from Listed Nonfinancial Firms in Nigeria

The objective of this paper is to investigate the influence of intellectual capital potency on firm value of non-financial firms in Nigeria. This study uses analysis technique to measure ICD. Secondary data were obtained from the Audited account reports of selected non financial firms and Nigerian exchange factbook for the period 2011-2020.This study selected 76 firms out of 107 quoted firms in non-financial sector of Nigerian economy using simple purposive sampling method. The 76 firms were analyzed using regression analysis. The results shows that there is negative influence of capital employed efficiency on firm value while human capital employed efficiency have positive but no significant influence on firm value. The moderating variables of firm size (FISZ) have negative and significant influence, while firm age (FIRA) has positive and non significant influence on firm value of non- financial firms in Nigeria. The findings enhanced the knowledge base of intellectual capital in emerging economies such as Nigeria. Based on the findings this study recommended that, the human capital component of intellectual capital should be trained and educated regularly, innovated, nurture capacity, creativity, know-how and previous experience, teamwork capacity, employee flexibility, tolerance for ambiguity, motivated, satisfied, so as to enhance the usefulness of its output to total input. Also firm specific growth and sustainability policy should strongly placed using corporate governance code and other enhanced internal structural innovative processed to ensure that the firm does not extinct.

Praktek Income Smoothing Ditinjau dari Cash Holding, Bonus Plan, Kepemilikan Institusional dan Profitabilitas

Purpose: This study aims to examine the effect of cash holding, bonus plans, institutional ownership, and profitability on income smoothing in financial sector companies listed on the Indonesia Stock Exchange. Methodology/approach: The research data is sourced from the Annual Report and Share Price Information of Finacial Companies Listed on the IDX (Indonesian Stock Exchange) 2017-2021. The analytical method uses logistic regression by SPSS 26. Findings: The results show that cash holding and bonus plan have no significant effect on income smoothing. Meanwhile, institutional ownership and profitability have signuficant effect on income smoothing Practical and Theoretical contribution/Originality: The implication of this research is expected to help investors and shareholders to understand the factors that can maximize management behavior to do income smoothing on financial statement. In addition, potential investors are expected to be able to use the findings of this study to help them assess the condition of the company before making investment decisions. Novelty of this research is focusing on the financial sector as a sample whereas previous research only focused on the non-financial sector. Research Limitation: Future studies may be useful to use other variables to income smoothing examined to provide a newly additional finding.

Dynamics of Trade Credit, Bank Credit Extension, Sustainable Economic Growth, and Imports: Evidence from the European Non-Financial Sector

This study investigates the relationship between trade credit and sustainable economic growth, bank credit extension, and imports in the context of 15 European non-financial sectors spanning 2005Q1 to 2019Q2. Furthermore, it attempts to unveil the nonlinear relationship between trade and bank credit extension. To achieve these aims, balanced panel data are constructed and second-generation panel data are used to analyze Panel AMG Estimation, and an improved panel causality test for heterogeneous panels is employed. To enhance the robustness of the study, the results are scrutinized on a country-specific basis. The findings revealed a positive relationship between trade credit and both sustainable economic growth and imports, whereas a negative correlation was found with bank credit extension. These divergent outcomes at the country level were thoroughly discussed. Finally, a bilateral causality is identified between trade credit and economic growth, bank credit extension, and total manufacturing production, whereas a unidirectional causality is found with import activities.

Repercussion of financial distress and corporate disclosure on the valuation of non-financial firms in India

Distressed companies create panic among the investors, and the overall effect comes on the economy and leads to a degraded image and value of the companies. Transparency and disclosure involve disclosing the operational as well as the financial performance and corporate governance practices employed by the firms. A corporation or person is said to be in a financial distress (FD) if they are unable to keep their pledge to make payments on time. The current study seeks to shed light on the effects of Financial Distress (FD) and Transparency and Disclosure (T&D) on the value of non-financial firms operating in India. The study makes use of panel data analysis (PDA). The authors of the study used secondary data of non-financial companies included in the S&P BSE 100 index for five fiscal years, from 2015–2016 to 2019–2020. Altman Zscore for FD measure and Tobin's Q, MCAP, and MTB for the firm's valuation is considered. Our study established that Financial Distress (FD) negatively impacts a firm's valuation because a positive association between Zscore (financial soundness) and a firm's value is found. However, Transparency and Disclosure (T&D) have no significant impact on the firm’s valuation. We also find evidence that financial distress significantly impacts the value of firms under the influence of T&D. With the help of information about financial distress provided in our study, companies can analyze and take required steps to minimize the probability of being in a state of insolvency or being bankrupt. Investors can also gain knowledge of the business factors and their effect on a company's valuation so that they can cautiously choose and include healthy companies in their targeted list of companies to invest in. No such study has been conducted till now in any of the developing countries that include finding the impact that (FD) as well as (T&D) have on the value of the firms in the non-financial sector.

HUMAN RIGHTS DISCLOSURE ON PANDEMIC REPORTING PERIOD IN INDONESIA

The study aims to explain the effect of the pandemic reporting period, non-executive board, audit committee, and family ownership on increasing human rights disclosure. The pandemic of COVID-19 has created an economic pandemonium globally, including in Indonesia. Indonesia's independent agency of the FSA issued a public notice in March 2020, extending the reporting period to May 2020, extending two months. This extension has created an opportunity for companies to announce their human rights practice disclosure facing the oncoming turbulent times. UNGP-BHR and the Indonesian State Law No. 39 of 1999 about Human Rights are used as the disclosure index checklist. Our study uses 345 non-financial sectors listed on the Indonesia Stock Exchange (IDX) with an observation period of 2017 - 2019. The data analysis technique is panel regression. The result shows that the pandemic reporting period, the non-executive board, and the audit committee have positively affected human rights disclosure. The 2019 annual report recorded that human rights disclosure was higher in the pandemic reporting period than in the 2017 and 2018 annual reports. This research implies that companies consider the oncoming turbulent times caused by the pandemic in disclosing last year's human rights disclosure. The non-executive board and the audit committee have a spirit of UNGPs that encourages companies to implement human rights in their operations.

Board of directors’ attributes and capital structure: evidence from Pakistani-listed non-financial firms

PurposeThis study aims to explore the effect of the board of directors on the capital structure of listed non-financial firms on the Pakistan Stock Exchange (PSX).Design/methodology/approachUsing a panel data set of 208 financial Pakistani enterprises from 2015 to 2020, regression analysis is employed to examine the data utilizing independent variables such as board size, outside directors, directors' remuneration and managerial ownership to evaluate board characteristics and the total debt ratio for capital structure.FindingsThe results show that the board size positively impacts the debt ratio. However, outside directors, directors' remuneration and managerial ownership are negatively connected with the capital structure. The empirical findings indicate that corporate governance mechanisms play an important role in the capital structure decision of Pakistani non-financial companies.Practical implicationsThis research contributes to the literature by addressing the function of the board of directors in the governance of Pakistani enterprises.Originality/valueFew studies in Pakistan focus on board characteristics and those that do utilize different variables. This research aims to fill a critical gap by investigating the effect of the board of directors' attributes and the capital structure of the listed non-financial sector of Pakistan.

Asymmetric effect of renewable and non-renewable energy consumptions on corporate cash holdings: new panel data evidence from BRICS economies

PurposeIn the recent wake of environmental sustainability, more attention has been paid to the consumption of specific energy types. However, how the consumption of such energy alternatives influences multiple corporate-level decisions has not yet been well explored in the literature. The current analysis bridges this deficiency in literature by exploring the empirical relationship between energy alternatives and cash holdings.Design/methodology/approachFor empirical analysis, the authors sample the non-financial sector enterprises founded in five BRICS economies and employ the system GMM and fully modified ordinary least square techniques to establish the regression. The selection of econometric techniques is subject to the existence of endogeneity and cointegration.FindingsThe estimated coefficients reveal a significant negative effect of renewable energy (REC) while a significant positive impact of non-renewable energy consumption (FFE) on cash holdings. Referring to low pollution emissions, less operational risk and a cheap source of energy, the more consumption of renewable energy reduces the motives of cash holdings. Primarily, the current analysis advocates an important policy regarding the utilization of renewable energy as industrial fuel inputs because it has a material impact on cash holdings and also ensures environmental sustainability.Practical implicationsThis study has equal policy outputs for industry officials, policy regulators and environmental economists. Corporate managers should do more focus on transforming the energy needs from non-renewable to renewable as such transformation can benefit in terms of both, i.e. environmental sustainability and low cash holdings.Originality/valueContemporary literature mainly highlights the determinants of energy consumption. However, it is less known how the consumption of specific energy sources affects the firm's cash-holding decisions. Thus, this study enriches both energy economics and financial economics literature by offering cutting-edge evidence on the sustainable role of REC in declining cash holdings.

Pengaruh Rasio Keuangan dan Kebijakan Dividen terhadap Perubahan Laba Perusahaan di Indonesia pada Masa Pandemi Covid-19

This study aims to determine the effect of financial ratios and dividend policy on changes incorporate profits in Indonesia during the COVID-19 pandemic. The financial ratios used asvariables in this study are profitability ratios, liquidity ratios, and solvency ratios, which aremeasured by Net Profit Margin, Current Ratio, and Debt to Asset Ratio. While the Dividend Policyis measured by the Dividend Payout Ratio. This study makes all non-financial sector companieslisted on the Indonesia Stock Exchange (IDX) in 2020 as the population. The sample in this studyamounted to 113 companies obtained through purposive sampling technique. The analyticaltechnique used in this study is multiple linear regression analysis, with secondary data typesprocessed using the IBM SPSS version 25 application. The results of this study indicate that NetProfit Margin has a positive effect on changes in company profits, Current Ratio and Debt to AssetRatio has no effect on changes in company profits, while Dividend Policy has a negative effect onchanges in company profits.

Can corporate Social Responsibility Contribute to Bankruptcy Prediction? Evidence from Croatia

Abstract Background/Purpose Companies are becoming aware of the fact that corporate social responsibility (CSR) is becoming the imperative of their sustainable business model despite the potential costs it could generate. Researchers are mostly focused on estimating the relationship between CSR and financial performance where most of the findings indicate their positive relationship. This paper expands existing research and focuses on the relationship between CSR and the risk of bankruptcy using the data from 102 midsize and large companies from non-financial sectors using the data for four years. Research expands existing studies on the EU level according to the fact that most of the existing studies are performed among US companies. Method Descriptive statistics and SEM-PLS methodology was used to compare and analyze financial data with data collected from 7 groups of stakeholders. Results Research results indicate that the relation between CSR and the risk of bankruptcy is negative. Conclusion: Becoming a socially responsible company is in the best interest of all stakeholders because CSR activities contribute to financial stability and maintenance of going concern assumption.

COMPARING VALUE - BASED AND TRADITIONAL MEASURING TOOLS. EVIDENCE FROM PAKISTAN

This paper's primary goal is to evaluate the assertion that value-based measures are preferable to traditional accounting based financial-performance measures, such as profit after tax (PAT), earnings per share (EPS), return on assets (ROA), return on equity (ROE), and return on investment (ROI), in the non-financial sector of Pakistan, while also providing empirical evidence to support the claim. Additionally, it evaluates and tests the informational value of different performance measures and how they relate to stock return. The sample of 97 non-financial Pakistani companies included in this study was obtained from the Pakistan Stock Exchange (PSX) between 2016 and 2021. The information richness of value-based measurements and conventional performance measures in explaining shareholders' returns is investigated using a variety of regression models. Relative information content tests shows that traditional accounting-based measures such as EPS, ROE and ROA performed better than value based measures in explaining the returns of Pakistan non-financial companies. Incremental information content of value based measures doesn’t have any contribution to information content above traditional performance measures. The claim of superiority of value based measures over accounting-based measures in association with shareholder returns is proved invalid in Pakistan non-financial companies. According to the study's findings, value-based financial performance indicators are not any better at explaining stock returns of Pakistani non-financial enterprises than traditional accounting-based financial performance measures. Panel data are tested using the Hausman's test for fixed and random effects, the variance inflation factor (VIF) test for multicollinearity, and the Durbin-Watson test for autocorrelation in order to ensure substantial results.

Features and Scope of Regulatory Technologies: Challenges and Opportunities with Industrial Internet of Things

Regulatory Technology (RegTech) is an emerging set of computing and network-based information systems and practices intended to enhance and improve regulatory compliance processes. Such technologies rely on collecting exclusive information from the environment and humans through automated Internet of Things (IoT) sensors and self-reported data. The key enablers of RegTech are the increased capabilities and reduced cost of IoT and Artificial Intelligence (AI) technologies. This article focuses on a survey of RegTech, highlighting the recent developments in various sectors. This work identifies the characteristics of existing implementations of RegTech applications in the financial industry. It examines the critical features that non-financial industries such as agriculture must address when using such technologies. We investigate the suitability of existing technologies applied in financial sectors to other industries and the potential gaps to be filled between them in terms of designing information systems for regulatory frameworks. This includes identifying specific operational parameters that are key differences between the financial and non-financial sectors that can be supported with IoT and AI technologies. These can be used by both producers of goods and services and regulators who need an affordable and efficient supervision method for managing relevant organizations.

THE EFFECT OF DEBT TO EQUITY RATIO, RETURN ON ASSETS AND COMPANY SIZE ON BOND RATINGS OF NON-FINANCIAL COMPANIES RATED BY PT PEFINFO.

One form of funding by the company is by issuing bonds. This study aims to examine the effect of debt to equity ratio, return on assets and firm size on bond ratings of non-financial companies ranked by PT Pefindo during the 2015-2019 period. The type of data used is secondary data from each non-financial sector company obtained from the official website of the Indonesia Stock Exchange and the website of PT Pefindo. The sampling technique was carried out by purposive sampling. The sample used in this study is a total of 11 companies. The data analysis technique used is logistic regression analysis test. The results showed that the debt to equity ratio had a significant negative effect, return on assets had a nonsignificant negative effect and firm size had an insignificant positive effect on bond ratings. The results of the coefficient of determination show a value of 0.206, which means that the variables of debt to equity ratio, return on assets and firm size are able to explain the bond rating variable of 20.6%.

Os Determinantes do Crédito Comercial Durante e Após a Crise Financeira Internacional de 2008

This work analyses the determinants of trade credit granted and received and the effect of the 2008 financial crisis on it. Using a sample of 96,417 Portuguese SMEs from the non-financial sector for the period 2010–2019, we found that trade credit plays an important role in firms' financing policies. Firms with better access to the credit market act as financial intermediaries and grant financing to firms that have difficulty accessing credit. Moreover, the use of trade credit seems to be a substitute for bank financing. We also found that firms use trade credit as a marketing tool to increase their sales. Finally, we found a slump in credit granted to customers after the 2008 financial crisis, which seems to mimic the contraction in aggregate bank credit.

Inter-industry risk spillover, role reversal, and economic stability

This study employs a DY spillover index based on the time-varying parametric vector autoregressive (TVP-VAR) model to analyze inter-industry risk spillover, identify intertemporal reversals of industry risk roles, and test the stability of Chinese economic networks. Our results indicate that China's industries can be divided into three types: risk absorption, risk amplification, and risk adjustment. The risk spillover direction of the adjustment industry reverses with the change in economic conditions. Systemic risks arise from both the financial and non-financial sectors. Economic networks can remain stable at different times if risk-absorbing industries have advantages over risk-intensive industries.

THE ROLE OF AUDIT COMMITTEES IN OMANI BUSINESS CONTEXT: DO THEY AFFECT THE PERFORMANCE OF NON-FINANCIAL COMPANIES

In this research, the Muscat Securities Market (MSM) non-financial sector's business profitability is examined in relation to specific audit committee features. Cross-sectional information from 40 non-financial companies' annual reports from 2022 was examined. To test hypotheses and investigate the effects of audit committee characteristics on business profitability, the study used Smart-PLS for data analysis. The findings show that the audit committee's size and independence have a considerable detrimental impact on financial performance. Yet, there is no connection between the quantity of audit committee meetings and the company's success as indicated by the management accounting metric ROA. Mainly, the present research examines the link between the characteristics of independent variables and their impact on the firm financial performance, making it particularly important for Arab Gulf Countries, especially in the period after COVID-19 crisis. The study's contributions have both theoretical and practical implications, offering professionals, legislators, scientists, and scholars working in fields relevant to business performance useful information. To the best of my knowledge, until now, no previous study has done could give evaluation about the impact of audit committee characteristics on the firm financial performance in the Arab Golf Countries, especially in Oman Context after the events of COVID-19. Thus, this research fills the call for the current literature in the field of accounting, management, finance and economy via testing the overall characteristic of the audit committee and their effectiveness on firm financial performance in the context of Arab Golf Countries.

Is Oil Prices Volatility Taking Toll: Sectoral Analysis of Pakistan Stock Exchange

Oil is a crucial non-renewable power resource for a country, indicating its financial stability. Oil prices' stability, directly and indirectly, impacts inflation, economic conditions, and trade stability. The present study examines the relationship between oil price volatility and firm profitability. It also studied the effect of the fluctuation of oil prices on different sectors. The scope of the study includes all the non-financial sectors of Pakistan. The data was extracted from the Financial Statement Analysis of the State Bank of Pakistan (SBP) from 2015 to 2020. The fourteen (14) sectors selected for this research include 292 firms. The ordinary least squares method (OLS) was used to evaluate the oil price volatility-profitability relationship. The results indicate that oil volatility negatively and weakly affects the firm's profitability. In addition, it negatively impacts firm profitability in the textile, motor vehicles, trailers and auto parts, coke and refined petroleum products, and electrical machinery and apparatus sectors. However, a significant positive relationship exists in industries like chemicals, chemical products, pharmaceuticals, mineral products, fuel, and energy sectors. Overall, it is also found that oil price fluctuations significantly impact different sectors. The study has important implications for bankers and managers. Firm managers must reduce the negative consequences of oil price volatility and reconsider forming early warnings to improve organizational performance.