Regional Stock Market Research Articles

Value relevance of accounting information in Morocco: impact of profitability and earnings management strategies

PurposeThis study examines the value relevance of accounting information for publicly listed Moroccan companies and analyzes how profitability affects stock market valuation. Additionally, the study explores earnings management strategies used to avoid losses and earnings decreases.Design/methodology/approachEmpirical tests use the Ohlson (1995) Price model to assess the extent to which accounting information explains variation in stock prices for the period 2012–2021. Moreover, the study applies the Burgstahler and Dichev (1997) approach to analyze earnings management strategies used by listed Moroccan companies.FindingsThe findings suggest a positive and significant relationship between the book value, net earnings and the market value of stocks. Additionally, profitability is identified as a crucial factor significantly influencing the relevance of accounting figures. Moreover, the analysis of the distribution of earnings reveals that listed Moroccan companies engage in earnings management to avoid losses and decreases in earnings.Practical implicationsThe findings hold practical significance for investors, corporate leaders, accountants and stakeholders relying on accounting information for decisions. They also offer insights for Moroccan stock market regulators to improve accounting quality and market efficiency.Originality/valueThe study shows the extent to which stock prices reflect the accounting information from an emerging country perspective, contributing to a predominantly unexplored area of literature regarding economies in transition. Moreover, the study offers crucial insights into the influence of profitability on the market value of listed Moroccan companies and sheds light on the utilized earnings management strategies.

Sanctions restrictions as a factor determining the development of regulation of the Russian stock market

The article discusses some issues of sanctions restrictions imposed by the countries of the collective West on the Russian financial market after the start of a special military operation in Ukraine. The article describes the impact of these sanctions on the functioning of the country’s stock market, as well as anti-sanctions measures taken by government agencies. Based on the identified issues, some conclusions and proposals for improving the legal regulation of the stock market in order to ensure the state sovereignty of the country are formulated and substantiated.

Analysis of the effect of Regional Stock Market on the Jakarta Composite Index using Markov Regime Switching Regression

Purpose: In the current era of information, global stock market interconnections significantly influence investment decisions. Changes in one market rapidly affect others. The co-movement of stock markets presents challenges and opportunities for investors, whereas volatility spillovers complicate risk management and investment strategies. Research Methodology: This study examines the influence of the Nikkei 225, Straits Times Index, and Shanghai Composite Index on the Jakarta Composite Index across the pre-pandemic, pandemic, and post-pandemic phases. Results: Utilizing the hidden Markov model with regime-switching regression, this study identifies changes in market behavior due to economic shifts during the pandemic, revealing two regimes: synchronization and desynchronization. Limitations: Pre-COVID-19, the Jakarta Composite Index shows strong synchronization with the Nikkei 225 and Straits Times Index, while the Shanghai Composite Index has an insignificant impact. During the COVID-19 pandemic, frequent desynchronization occurred due to high uncertainty and volatility, with only the Straits Times Index significantly influencing the Jakarta Composite Index. Post-pandemic, synchronization between the JCI and regional markets strengthened again. This study highlights the consistent influence of the Nikkei 225 and Straits Times Index, while the Shanghai Composite Index remains insignificant. Contributions: This study contributes significantly to the understanding of regional stock market relationships and offers valuable insights for academia and practice.

Does Regime-Dependent Volatility Drive Dynamism in Investor Herding?

The existing literature on herding often uses the static model to test herd behaviour in the Indian market context. Hence, the objective of this paper is to investigate the dynamic herd behaviour for S&P BSE 500 from 2009-2023 using the Markov Regime Switching model. Results exhibit the occurrence of three regimes, namely, high, low, and extremely volatile regimes. Findings suggest that the Indian market moves into the order of low, high, and extreme volatility (LHC), similar to other developed countries. This has implications for investors to either exit from the market or reframe their portfolio through hedging techniques before the market enters into extreme volatility. Moreover, the results exhibit anti-herding in high and low-volatile regimes. Our study discloses the presence of herding in crashes or extremely volatile regimes, showing that Indian investors start following each other during crash-like situations. This research is significant for individual investors, portfolio managers, and stock market regulators.

Choice between Sustainable versus Conventional Investments—Relative Efficiency Analysis from Global and Regional Stock Markets

We use the daily data from 1 October 2010 to 1 March 2021 on the stock prices of several global, regional, and country-specific ESG indices of the Dow Jones Sustainability Index family (DJSI) and MSCI family to analyse the relative performance of sustainable indices (ESG) and corresponding conventional benchmarks. In terms of classic risk and return characteristics and modern portfolio metrics, we report mixed evidence with some sustainability indices marginally outperforming the traditional benchmarks and others staying at parity. Regionally, the evidence is heterogeneous; the Pan Arab, the Middle East (including Israel), the United States, Emerging Markets, and Europe indices reported a slightly superior performance and those belonging to Asia Pacific, Emerging Africa, and Latin America marginally underperformed compared to their conventional counterparts. The findings of this study imply that sustainable investments appear to be an encouraging investment option, although their progress has not been substantial. For an appreciable outperformance of sustainable investments, a more conducive regulatory framework should be established, including robust incentivizing policies concerning tax rebates or low capital costs.

Capital market manipulation and regulatory compliance – a bibliometric analysis of scholarly research in the post-2000 era

Purpose The purpose of this paper is to systematically analyze the literature around regulatory compliance and market manipulation in capital markets through the use of bibliometrics and propose future research directions. Under the domain of capital markets, this theme is a niche area of research where greater academic investigations are required. Most of the research is fragmented and limited to a few conventional aspects only. To address this gap, this study engages in a large-scale systematic literature review approach to collect and analyze the research corpus in the post-2000 era. Design/methodology/approach The big data corpus comprising research articles has been extracted from the scientific Scopus database and analyzed using the VoSviewer application. The literature around the subject has been presented using bibliometrics to give useful insights on the most popular research work and articles, top contributing journals, authors, institutions and countries leading to identification of gaps and potential research areas. Findings Based on the review, this study concludes that, even in an era of global market integration and disruptive technological advancements, many important aspects of this subject remain significantly underexplored. Over the past two decades, research has lagged behind the evolution of capital market crime and market regulations. Finally, based on the findings, the study suggests important future research directions as well as a few research questions. This includes market manipulation, market regulations and new-age technologies, all of which could be very useful to researchers in this field and generate key inputs for stock market regulators. Research limitations/implications The limitation of this research is that it is based on Scopus database so the possibility of omission of some literature cannot be completely ruled out. More advanced machine learning techniques could be applied to decode the finer aspects of the studies undertaken so far. Practical implications Increased integration among global markets, fast-paced technological disruptions and complexity of financial crimes in stock markets have put immense pressure on market regulators. As economies and equity markets evolve, good research investigations can aid in a better understanding of market manipulation and regulatory compliance. The proposed research directions will be very useful to researchers in this field as well as generate key inputs for stock market regulators to deal with market misbehavior. Originality/value This study has adopted a period-wise broad-based scientific approach to identify some of the most pertinent gaps in the subject and has proposed practical areas of study to strengthen the literature in the said field.

Bankruptcy in the UK: Do Managers Talk the Talk Before Walking the Walk?

AbstractThis study examines whether managers employ annual report textual disclosures as a conduit to communicate the probability of future corporate bankruptcy or to intentionally mislead stakeholders owing to impression management incentives. We conduct various examinations around the information content of the tone conveyed by textual disclosures in unstructured UK annual reports and the probability of corporate bankruptcy. We document that firms that communicate a more net positive tone are associated with lower bankruptcy risk. Importantly, this association is found to be stronger for firms whose managers have a lower incentive to mislead investors owing to better board monitoring, stringent stock market regulation, and Big 4 audits. We also offer complementary evidence that firms conveying a more net positive tone exhibit higher future performance and earnings persistence, and lower future performance volatility. These firms are also less likely to exhibit extreme corporate policies and to receive a qualified auditor's opinion. Overall, this study sheds light on whether managers tend to inform or misinform (bury their heads in the sand) about corporate bankruptcy.

Dual Class Stock Companies: Global Experience and Russian Practice

Companies with complex equity structures formed by issuing shares of different types are a common phenomenon in developed and developing economies, including Russia. However, the causes and consequences of companies choosing such equity structures are not well understood. In particular, neither theory nor empirical studies give a clear answer to the question of the impact of such equity structures on companies' behavior and performance. This article has two goals: first, to characterize the segment of Russian public companies with dual-class stock, including the question of their genesis, and second, to assess the impact of complex equity structures on company performance. The empirical analysis draws on a database of all Russian public companies whose shares were traded on the Moscow Exchange in 2011-20. Using the tools of descriptive, statistical and econometric analysis, we show that the share of dual-class stock companies on the Russian stock market has been high and stable over time, that the overwhelming majority of such companies were created during the processes of privatization and/or reorganization of industries, and that they are characterized by a significant concentration of ownership and control rights in the hands of the largest shareholder. We find that the issue of dual-class stock does not lead to a decline in company performance. However, company performance is inversely related to the wedge between the control and ownership rights of the largest shareholder. Specifically, it is a decreasing function of the shareholder's control rights and an increasing function of her ownership rights, with almost identical absolute values of these effects. The academic significance of this study stems from the confirmation of a negative effect of the control-ownership wedge on company performance in a quasi-experimental setting of the Russian economy, where the majority of dual-class stock companies emerged as a result of government decisions on privatization/reorganization of industries. The results can be used by stock market participants and regulators, which highlights the practical value of this study.

Analyzing factors shaping stock market development and regulation in emerging markets: Exchange rates, industrialization, press freedom, and capital flight

The research delved into the determinants of stock market development across nine Southern African Development Community (SADC) nations. The study employed seemingly unrelated regression (SUR) and system generalized methods of moments (SGMM) for comprehensive analysis. By building upon the research conducted by Bala and Hassan (2018) and Nyasha and Odhiambo (2020), this study applied El-Wassal’s (2013) four-factor framework to investigate the impact of capital flight, exchange rate regimes, industrialization, and press freedom on the development of the stock markets. Press freedom was identified as a catalyst for enlarging and enhancing liquidity in the stock market. Conversely, industrialization exhibited a negative impact on market size, while capital flight adversely affected market development, size, and liquidity. The study revealed that the pegged, crawling, and managed exchange rate regimes positively influenced stock market growth and capitalization while a floating exchange rate system detrimentally affected the same. This paper contributes to the extant body of theory and educates policymakers in the region regarding the criticality of selecting regimes that facilitate stable exchange rates, support unrestricted press, encourage industrialization, and mitigate capital flight.

ОБЕСПЕЧЕНИЕ ДИАГНОСТИКИ ПАТТЕРНОВ ФОНДОВОГО РЫНКА ИНСТРУМЕНТАМИ ИСКУССТВЕННОГО ИНТЕЛЛЕКТА

The work focuses on the analysis of instruments and mechanisms of stock market regulation on the basis of the use of artificial intelligence (AI) for forecasting and making investment decisions. The article also studies various patterns of technical analysis and their impact on the process of forecasting trends in stock markets. It provides an overview of effective AI tools used in financial markets, as well as examples of successful AI applications in the financial industry.

АНАЛИЗ ВЛИЯНИЯ ИНСТРУМЕНТОВ ФОНДОВОГО РЫНКА НА РАЗВИТИЕ РЕГИОНОВ

This article examines the impact of the stock market on the economic development of the regions. The current economic situation is more atypical, but nevertheless creates a space of opportunities for the use of stock market instruments in order to ensure regional development. Also, the impetus for the development of the regional stock market was the massive influx of private investors to the exchange, whose degree of confidence in the securities of regional issuers distinguishes such securities from all those on the market.

Regional Stock Market Efficiency at Weak Form after the Covid-19 Vaccination Approval

The contradiction in the previous results provides a deep avenue for researchers to take more interest in the stock market efficiency and conduct more studies. Therefore, the study objective is to decide whether the Arab Federation of Exchanges (S&P AFE 40 Index Return) is efficient at weak-form based on normality and random walk hypothesis using several statistics such as the Jarque-Bera test as a parametric technique to check the normality and the Augmented Dickey-Fuller test as a parametric method to test the random walk hypothesis. Moreover, the results are reinforced by six non-parametric techniques to test the normality hypothesis such as the Kolmogorov-Smirnov test, Shapiro-Wilk test, Lilliefors test, Cramer-von Mises test, Watson test, Anderson-Darling test, and four non-parametric techniques such as run test, variance ratio test, Phillips-Perron test, and autocorrelation test to check the random walk hypothesis for daily data after the Covid-19 vaccination program over the period from 31 March 2020 to 31 March 2023, the results of all tests indicated that the market index return is non-efficient at the weak form, and concluded that the investors could analyze the Arab Federation of Exchanges’ past stock prices or other historical data as opportunities to predict future stock prices and earn unusual profits; therefore, Policymakers may further improve access to information to prevent investors from having opportunities to predict stock movements to obtain abnormal returns.

The Impact of the Tone of a Prospectus on IPO Underpricing: Evidence from China

AbstractA prospectus is an essential disclosure document requested by stock market regulators and used by potential investors to acquire necessary information about the fair value estimate of an initial public offering (IPO) and subsequent investment decisions. Using IPO firms in China during the period 2007 to 2017, this study provides novel evidence for the impact of the tone of a prospectus on IPO underpricing. The results show that the tone of a prospectus is positively associated with underpricing. Supplementary analyses show that the positive effect of prospectus tone on IPO underpricing is more pronounced for IPO firms having CEO duality and large board size, lower managerial shareholding and institutional shareholding, and big audit firms and prestigious underwriters. Finally, the results indicate that the positive tone of a prospectus is able to predict negative operating performance in future.

Analysis of the Australian Stock Market: Organization, Players, Challenges, and Opportunities

The Australian stock market is discussed in this report because of its importance as a financial hub. In Australia, the primary market operator is the Australian Securities Exchange Ltd (ASX), which is increasingly utilizing technology to develop novel approaches to maximizing shareholder value. Several aspects of the Australian stock market and its participants are discussed using the existing literature as a basis for this paper. The report provides context for ASX's technology deployment. Secondly, it draws attention to the ASX's significant participants. The article's third section discusses the opportunities and threats that participants in the Australian stock market face. Problems have arisen in the regulation and operations of the Australian stock market due to recent changes, such as the transfer of regulatory authority to ASIC, the introduction of new rules regarding the disclosure of information regarding securities lending and short sales, and the introduction of novel market integrity rules. Investing in Australia's financial markets makes sense for several reasons, including the country's rapidly growing domestic market, sophisticated corporate infrastructure, pension-friendly government, and highly educated, multilingual workforce.

Do auditors respond when listed firms pledge shares? Evidence from China

PurposeThis paper investigates whether the audit fees of Chinese listed firms are associated with the share pledging practice of the firm’s controlling shareholders.Design/methodology/approachThis study uses the audit pricing model to estimate the association between the share pledging of listed firms and audit fees. Cross-sectional analysis is conducted on a large sample of Chinese listed firms during the period 2004 to 2019. The authors further test the moderating effects of listing on the Main Board, state ownership and abnormal audit report lag on the association between share pledging and audit fees. The results remain robust to various endogeneity tests including two-stage least squares instrumental variable analysis, entropy balancing analysis and difference-in-difference analysis.FindingsThe study finds that audit fees are positively associated with the proportion of shares pledged by the listed firm’s controlling shareholder in China. The results also provide new evidence that the positive association between audit fees and the share pledging of controlling shareholders could be mitigated if the firm is listed on the Main Board and/or it is a state-owned enterprise. In contrast, pledged firms with abnormal audit report lag are found to have higher audit fees than their pledged counterparts without the excessively long audit delay.Practical implicationsFindings of this study have important practical implications to those charged with governance, as boards need to comprehensively understand the adverse consequences of share pledging when pursuing it as the firm’s major source of financing. The study also has policy implications for stock market regulators such as the China Securities Regulatory Commission in China. Regulators could consider developing a threshold-based share pledging disclosure and pledge ratio requirements based on factors such as a firm’s listing status and ownership structure.Originality/valueThis study provides new evidence on the audit-related consequences of share pledging in a significant capital market. Findings of this study also enrich the existing audit literature by introducing the share pledging activities of controlling shareholders into the audit pricing decision-making model.

Dissecting the listing gap: Mergers, private equity, or regulation?

The abnormal decline in the number of U.S. public firms is often blamed on merger activity, private equity investments, and stock market regulations. We compare the effects of these channels in a unified framework. In the U.S., an extra 100 mergers is associated with 22.01 additional missing public firms, whereas an extra 100 PE deals is associated with 3.62 fewer missing public firms. Regulatory changes contribute to the decline of U.S. listings too. We also specify the types of deals that most strongly affect listings. Finally, we document that similar listing gaps emerge in other developed economies.

The conditional impact of market conditions, volatility and liquidity shocks on the arbitrage opportunities during pre‐COVID and COVID periods

AbstractThe study examines the effects of market conditions, volatility and liquidity shocks on the arbitrage profits during pre‐COVID and COVID periods. The study uses a conditional quantile regression and finds no significant difference in the impact of market conditions on the arbitrage profits during pre‐COVID and COVID crisis periods. The increase in volatility combined with low liquidity during the COVID period makes arbitrage non‐viable. However, the decline in volatility during the COVID period encourages investors to initiate arbitrage. The results are useful to fund managers and market analysts to develop suitable trading strategies and stock market regulators to take necessary steps to improve price discovery mechanisms and market efficiency.

The Ramadan effect on commodity and stock markets integration

PurposeThis study aims to investigate the dependence structure and volatility spillovers among two strategic commodities (crude oil and gold) and a set of Islamic and conventional regional stock market indices, while examining the Ramadan effectDesign/methodology/approachThe empirical strategy consists of two complementary measures of dependence and connectedness. This study first uses copulas to examine the dependency between the markets considered, then spillovers compute the magnitude of the connectedness among them.FindingsThe copulas analysis shows that Frank’s copula appears to better capture the relationship between most asset returns and highlights the almost absence of extreme dependence and, therefore, the existence of diversification opportunities. Moreover, the connectedness analysis suggests that gold is a net volatility receiver and provides, thereby, greater diversification benefits compared to crude oil. In addition, the high levels of time-varying connectedness support strong integration among the financial markets studied, specifically during the COVID-19 crisis period. Furthermore, the connectedness among the markets studied increases during the Ramdan subperiods, supporting shift contagion among financial markets considered during this religious holiday.Practical implicationsThe results provide investors with a better understanding of the nature as well as the magnitude of the interdependences between commodity markets and a set of Islamic and conventional regional stock markets. Indeed, it is of paramount importance for investors to clearly understand how Islamic and conventional markets are segmented or integrated during stress and stress-free periods, as well as the effect of the month of Ramadan on the interdependence among markets, to better assess risks, diversify portfolios and implement more effective hedging strategies.Originality/valueWhile a considerable body of literature examines financial contagion and volatility transmission between financial markets, there is still much to be said regarding connectedness among commodity and stock markets, particularly when it comes to studying the effects of religious holidays on the interaction between conventional and Islamic assets. This paper fills in this gap by focusing on the dependence structure as well as the connectedness between Islamic stock indices, conventional stock indices, gold and crude oil for six different regions, while examining the Ramadan effect.

Determining audit fees: evidence from the Egyptian stock market

PurposeThis paper aims to empirically examine the determinants affecting audit fees in the Egyptian context concerning different organizational forms and governance mechanisms.Design/methodology/approachThis study adopts financial and non-financial data from 62 Egyptian firms listed on the Egyptian Stock Exchange from 2015 to 2020. The proposed audit fees model is developed by adopting panel data analysis to examine the effect of auditee, auditor and engagement attributes on audit fees. The validity of the proposed equation for determining audit fees on an annual basis was established by applying the fixed effect model results for the year 2020.FindingsThe results revealed that the most significant determinants that affect audit fees are liquidity, audit committee independence, audit report lag and the status of the audit firm. Audit fees of 95.7% are determined by these factors. The validation test proved that the proposed model was more accurate and closer to the estimated data at nearly 90.2%.Practical implicationsThe results of this paper would send early signals to audit firms, stakeholders and regulators regarding the determinants of audit fees, and provide an objective standard for fee-setting to be used by stock market regulators and professional bodies, in determining a minimum amount of audit fees that ensure a reasonable level of audit quality.Originality/valueTo the best of the authors’ knowledge, for the first time, this paper empirically examines the determinants of audit fees in an emerging market like Egypt and presents evidence for a period of six years.

A Study on the Regulation of Price Manipulation in the Chinese Stock Market

China's stock market was formally established in late 1990, and the regulation of market manipulation began in 1993. Both the formation of the stock market and the regulation of manipulation have a relatively short history, and there is great room for improvement. In the Chinese stock market, there is a general perception of the existence of main forces, which play a decisive role in the manipulation of stock market prices. Obviously, the existence of the principal phenomenon is extremely detrimental to the healthy development of the Chinese stock market. For the sake of market regulation and market development, market regulators wish to recognise the phenomenon of main force. Therefore, this paper examines market price manipulation and analyses its impact on the stock market so as to make recommendations in improving stock market regulations and restraining market price manipulation.