Thomson Reuters Database Research Articles

The Impact of Information Asymmetry on the Relationship Between Board Characteristics and Capital Structure

This paper explores the role of information asymmetry in the association between board characteristics and capital structure using OLS & GMM for 96 firms listed on the Egyptian stock exchange with 672 firm￾observation through the period 2014–2020 via the Thomson Reuters database. Results show that a large board size enhances strict control and forces increased debts to maximize firm value and higher board independence leads to the tendency to use less financial leverage to avoid raising risks. CEO duality leads to the use of small amounts of debt to avoid pressures and risks. Results show that Firms with high information asymmetry prefer high leverage. Finally, results clarified that board characteristics hurt capital structure in the case of countries that suffer from information asymmetry like Egypt.

Examining the Spillover Effects from Global Stock Markets to Indian Stock Market

Purpose: The study aims to examine the transmission of spillover effects from global stock markets to the Indian stock market. The chosen global markets are CAC-40, DJIA, FTSE 100, SMI, KOSPI, DAX, HANG SENG, and NIKKEI with respect to S&P BSE SENSEX.
 Design/Methodology/Approach: The study uses secondary data. The study period is from 1st January 2000 to 4th June 2021. The required data for the study has been collected from the Thomson Reuters database. Later the collected data has been tested for stationarity by running the ADF test. Since we found an arch effect in the collected time series data, we ran the GARCH model to investigate the spillover effect from developed stock markets to the Indian stock market by running all the three suggested models such as Normal Gaussian Distribution, Student t Distribution, and GED with fixed parameter. To capture the leverage effect, the researchers have run the EGARCH model to capture spillover asymmetry in the Indian stock market.
 Findings: The ARCH, GARCH, and EGARCH revealed that there was a significant information spillover effect from CAC-40, FTSE 100, SMI, KOSPI, HANG SENG, and NIKKEI on S&P BSE SENSEX. DJIA and DAX were not capable of spreading the spillover effect on BSE SENSEX. The EGARCH revealed that negative shocks in the foreign market created a significant spillover effect in the Indian stock market.
 Originality and Value: This study’s empirical analysis would help market participants in understanding the forecasted volatility of Sensex returns and can take this sign as an advantage to converting their holdings into returns. The market participants can also make a decision as to whether they can invest in the Indian stock market and diversify their portfolios.

Corporate ESG performance as good insurance in times of crisis: lessons from US stock market during COVID-19 pandemic

PurposeThe COVID-19 outbreak and its confinement resulted in an unexpected stock market crash, hence the interest in environmental, social and governance (hereafter, ESG) policies. This paper aims to examine the association between ESG performance and stock market volatility before and after the COVID-19 pandemic.Design/methodology/approachThis paper examined 500 US companies listed in the S&P 500. The window period volatility refers to March 18, 2020, when the US President signed into law the Families First Coronavirus Response Act. Here, the Thomson Reuters database was used to collect ESG data and daily market information.FindingsThe findings suggest that companies with high ESG performance have lower stock price volatility than companies with poor ESG performance. In other words, strong ESG performance reduces stock price volatility resulting from the COVID-19 shock and promotes resilience and stock price stability.Practical implicationsThis research contributes to current debates on emerging pandemics and unexpected risks and highlights the need to invest more in improving corporate sustainability.Originality/valueThe results have substantial implications for managers and investors, as it highlights the relevance of customer and investor loyalty to the durability of ESG stocks.

The determinants and effects of the early adoption of IFRS 15:Evidence from a developing country

Our study examines the determinants (especially governance and board characteristics) of the early adoption of the International Financial Reporting Standard 15 (IFRS 15) in a developing market—namely, the Egyptian Stock Exchange. Further, our study examines the difference in IFRS 15ʹs effects on the financial statement accounts between the early adopters and the non-early adopters. Based on the Egyptian Stock Exchange (EGX) 100 index, the study uses 79 firm-year observations for the early adoption period (2019–2020). We manually collected data from the Egyptian companies’ annual reports and the Thomson Reuters database and analysed them using logistic regression and t-tests. Out of the various examined governance mechanisms, we found that board size significantly negatively affects the early adoption of IFRS 15. In contrast, female directors have a significant positive effect on the early adoption of IFRS 15 in Egypt. Regarding the effects of firm characteristics, we found that firm age, firm size, and financial leverage have significant positive effects on the early adoption of IFRS 15. In contrast, profitability and audit quality have an insignificant effect on the early adoption of IFRS 15. Finally, we found a significant difference in profitability between IFRS 15 early adopting companies compared to non-early adopters. This result reflects the economic value of early embracing IFRS standards and their updates in emerging markets, such as Egypt. To the best of our knowledge, this is the first study that examines the determinants of IFRS 15ʹs early adoption and its effects on the financial statement disclosures in an emerging country. Our study turns the attention of investors in emerging markets such as Egypt to the changes and updates in IFRS related to revenues, which can enhance the transparency and accountability in these markets.

Corporate social responsibility reporting and capital structure: Does board gender diversity mind in such association?

AbstractThis research aims to shed light on the effect of corporate social responsibility (CSR) disclosure on capital structure, a significant strategic policy for all listed companies. Furthermore, it aims to explore the moderating effect of the presence of female directors on corporate boards on the relationship between CSR disclosure and capital structure. We use an international sample of 48 countries for the years 2007–2019 collected from the Thomson Reuters database. This study uses the GMM procedure to estimate the model of the association between the disclosure of CSR information and capital structure and the moderating effect of board gender diversity in such relationship. Drawing on agency theory, the results support the negative relationship between CSR disclosure and capital structure. Moreover, our findings also reveal that board gender diversity does not moderate the association between CSR disclosure and capital structure.

Does Corporate Social Responsibility Fuel Firm Performance? Evidence from the Asian Automotive Sector

Corporations are now expected to self-regulate in order to uphold their social obligations to society. This is known as the social responsibility of corporations or corporate social responsibility. CSR helps a business to be mindful of the impacts it has on the economy, society, and environment. The most important CSR component for the automotive industry is unquestionably environmental responsibility. Despite the fact that many businesses still place a strong emphasis on economic responsibility, it is widely acknowledged that all three CSR elements are essential for the success of a firm. This study’s objective is to look into the effects of corporate social responsibility (CSR) on business performance in the automobile sector, with an emphasis on Asian nations. Sample companies were selected from the Thomson Reuters database according to the data availability on corporate social performance and firm performance for more than 10 years. Data analysis was performed using the software STATA. Fixed and random effects panel regression models were used to analyse the relationships. The findings of this study are consistent with the idea that corporate social responsibility considerably improves the performance of automobile companies. The study concludes that companies need to focus more on CSR spending, as it improves the financial performance of the company. The study contributes to the existing literature as it validates the strong relationship between CSR components and firm performance in the automobile sector, which has not been much explored in the extant literature. The results of the panel data regression demonstrated that not only the environmental score is significant in determining the firm performance; other components such as social and governance scores are also equally important in achieving the desired firm performance, which is totally against the common notion that since automobile firms cause much damage to the environment, they need to focus only on environmental aspects through their CSR initiatives.

Impact of Bank Efficiency on the Profitability of the Banks in India: An Empirical Analysis Using Panel Data Approach

This study aims to determine the impact of banking efficiency on the profitability of the Indian banking division. The ratios (key variables) used in the study are mentioned by the Reserve Bank of India—RBI (Central bank of India). Through a quantitative approach, pooled panel regression, univariate analysis, correlation, and descriptive statistics models are used by taking annual data of the Indian banking division from 2001 to 2020 available on the Thomson Reuters (Refinitiv) Database. Unbalanced cross-sectional data (panel data) comprising 527 bank-year observations for 33 Indian banks were studied. It was decided to evaluate the impact of efficiency (cost to income ratio and staff expenses to total expenses ratio) on the profitability (return on assets and net interest margin ratio) of the banks from the Indian banking division. The results revealed that the cost to income ratio has a significant negative impact on the bank return on assets and net interest margin ratio. The staff expenses to total expenses ratio has a significant positive impact on the bank return on assets and a positive nonsignificant impact on the bank net interest margin ratio.

Factors that influence CEO narcissism on financial statement

This study aims to empirically examine the effect of CEO narcissism on the disclosure of Environment, Social, and Governance (ESG) by companies. CEO narcissism was measured using an unobtrusive indicator and ESG disclosure was measured by an ESG score from the Thomson Reuters database. The test was carried out on 100 samples of non-financial companies in 10 ASEAN companies obtained through purposive sampling technique with the research period 2019-2021. Observation points in this study amounted to 400 years of the company. The results showed that the CEO's narcissism had a positive effect on ESG disclosure.

The Effects of Prıvate Equıty on the Fınancıal Performance of Fırms

The research Private equity investing has risen to prominence in the modern business world. The purpose of the study is to determine whether private equity influences the financial performance of a company. This study uses a quantitative approach to attain its primary purpose. In order to determine the effect of private equity on the financial performance of a company, this study uses data from the Thomson Reuters database for the years 2012 to 2020 . There are 54 companies in the database that are supported by private equity. The study is limited since Thomson Reuters lacks financial data for the remaining companies. For the purpose of determining the effects of private equity on firm financial performance, the panel regression of the pooled OLS and random model is employed. return on investment of private equity funds as the dependent variable. The study covered independent factors such as private equity fund size, stakes, number of transactions, and capital invested. In the investment industry, these characteristics are essential for explaining private equity. According to the findings of our study, several the explanatory variables have a statistically significant impact on the firm's financial performance. This shows that the private equity fund has a positive effect on the firm's financial success, while the other independent factors have no effect on the return on private equity.

ESG Performance and Ownership Structure on Cost of Capital and Research & Development Investment

This study aims to determine the effect of ESG performance, institutional ownership, insider ownership, block holder ownership, and foreign ownership on the cost of capital and investment of research and development (R&D). The sample of this study is companies listed on the Indonesia Stock Exchange (BEI) for 2016-2020. The sample selection uses the purposive sampling method and collects through the Thomson Reuters Database and annual report. The results of this study indicate that ESG performance, institutional ownership, and foreign ownership have a negative significant effect on the cost of capital, insider ownership has a positive significant effect on the cost of capital, but block holder ownership does not show a significant relationship to the cost of capital. As for the relationship to research and development investment, only ESG performance, institutional ownership, and foreign ownership have a positive significant effect, the other two types of ownership have a negative and significant effect.

Analisis good corporate governance terhadap pengungkapan ESG di Indonesia tahun 2016-2020

The purpose of this study was to measure the effect of board size, women on the board, independent commissioners, remuneration committee, and audit quality on environmental, social, and governance (ESG) disclosures by companies in Indonesia. The ESG disclosure data used in this study comes from the Thomson Reuters database for a period of five years, from 2016-2020. The sampling method used was purposive sampling method, so that 39 sample companies were obtained for five years of observation (2016-2020) with 75 units of analysis. Data analysis used multiple linear regression analysis. Based on the results of the study, it can be concluded that independent commissioners and remuneration committees have an effect on ESG disclosure, while board size, women on the board and audit quality have no effect on ESG disclosure.

Board attributes and social and environmental performance. Evidence from the energy sector

Research Question: Does corporate governance have an impact on the social and environmental performance of companies in the energy industry? Motivation: Companies have been oriented in recent years to obtain not only financial performance, but also other aspects, such as social and environmental performance, which are important in the activity of attracting new investors. The environmental and social performance of companies is critical in the activity of attracting new investors, with investors drawn to companies that report more information about how the company participates in social campaigns and how it considers environmental issues. From this perspective and considering legislation relating to reducing the impact of waste and emissions on the environment and the way companies respect the workforce, human rights and society in general, board decisions may be influenced. Data: Data were collected from the Thomson Reuters database for a sample of 266 companies during the period 2016-2020, consisting of 1.330-year observations. Tool: The SPSS statistical program was used to run the regression models for the selected sample. Findings: The results show that the size of the board has a positive and significant impact on environmental performance, while for social performance it has an insignificant positive impact. Additionally, gender diversity and board independence have a significant negative impact on social and environmental performance. Practical implications: This study complements and supports the existing literature on this relationship in the energy sector. The study has practical implications for investors in their decision making and for board members.

Voluntary adoption of integrated reporting, effective legal system and the cost of equity

PurposeIntegrated reporting (IR) provides integrated financial and nonfinancial information about companies based on the integrated thinking principle. This study aims to investigate how the cost of equity relates to IR disclosure and the impact of an effective legal system on this relationship. Effective legal system (“enforcement”) represents the strength of the legal system of a country. Although voluntary initiatives are essentially not based on regulations, the authors expect that the effective legal system will influence the implementation of such.Design/methodology/approachTo test the study’s hypotheses, linear regressions were applied using the Thomson Reuters database to analyze 20,463 firm-year observations between 2010 and 2017. The treatment group comprised companies that adopted IR; using propensity score matching, the authors defined the control group. The authors adopted a research design based on difference-in-differences to compare the cost of the capital of treatment with the control group for the periods before and after the IR adoption.FindingsThe results indicate that IR disclosure is negatively related to the cost of equity, and this negative effect is more prevalent for companies operating in high-enforcement environments.Research limitations/implicationsCost of equity is not a directly observable variable, implying that the results are sensitive to changes in the parameters that are used to compute this term. The results can help companies looking for evidence of potential effective gains of adopting IR. They also help understand that discussions related to environment, social, and governance information are somehow incorporated by analysts and investors, and reflected in the cost of raising funds.Originality/valueThis study demonstrates how IR relates to the cost of equity considering a global sample of voluntary adopters. It also analyzes the impact of institutional factors on this relationship by using a robust method of analysis. The results support the argument that companies in a strong legal system are more likely to behave sustainably and to disclose this attitude. Additionally, they are pressured to implement proposals rather than just adopting an initiative as a label.

Аналіз чистого прибутку та сукупного доходу: емпіричне дослідження компаній, які котируються на Бухарестській фондовій біржі

Stakeholders usually use net profit as an important indicator in assessing the performance of companies. In times of economic instability, there is a need for additional financial information, so the company's net profit and comprehensive income can be important in stakeholder decision-making. The article is devoted to analysing the relationship between earnings per share, comprehensive income per share and equity per share. The object of the study is companies whose shares were listed on the Bucharest Stock Exchange in 2019-2021. For this study, companies were selected that prepared financial statements per International Financial Reporting Standards (IFRS) and disclosed information about their comprehensive income. Financial entities were excluded from the analysis. Data were collected by querying the Thomson Reuters (Refinitiv) database, and comprehensive income data were collected manually from financial statements published by the companies on the Bucharest Stock Exchange website. The purpose of the study is to determine whether there is a significant effect of the share price on earnings per share, comprehensive earnings per share, and equity per share. The authors used the linear regression to identify the relationship between dependent and independent variables. The study results show that all variables significantly affect the share price. In particular, earnings per share have a more significant impact on the share price than comprehensive earnings per share, although this difference is insignificant.

ESG as a Measure of Credit Ratings

The aim of this study was to examine the impact of environmental, social, and governance (ESG) measures on credit ratings given to non-financial institutions by the largest credit rating agencies according to economic sector divisions. The hypotheses were as follows: a strong negative impact on non-financial institutions’ credit rating changes will result from ESG risk changes, and the reaction of credit rating changes will vary in different sectors. Panel event models were used to verify these hypotheses. The study used data from the Thomson Reuters Database for the period 2010–2020. The analysis was based on the literature on credit rating determinants and on papers and reports on COVID-19, ESG factors, and their impact on credit rating changes. Linear decomposition was used for the analysis. To verify these hypotheses, long-term issuer credit ratings presented by Moody’s and Fitch for European companies listed on these stock exchanges have been used. In the analyses, financial and non-financial factors were also considered. The results suggested that, within the last year, the methodology presented by credit rating agencies has changed, and ESG factors are one of the basic measures that are used to verify credit rating changes, especially those related to the pandemic.

Changes in the Stock Market of Food Industry Companies during the COVID-19 Pandemic—A Comparative Analysis of Poland and Germany

The COVID-19 pandemic had a dramatic effect on the world economy, leading to disturbances in the global agri-food system. Disrupted supply chains caused instability in the market resulting in mixed reactions among market participants. The balance in the access and availability of food was disturbed at various levels starting from local up to international. Partial lockdowns of economies affected the equilibrium on the labor market in the food sector, the level of income and food security. The aim of this study was to determine the effect of shock caused by the COVID-19 pandemic on rates of return from shares of companies in the agri-food sector listed in Poland and Germany, as well as indicate dependencies between restrictions imposed by the investigated countries and changes in the rates of return from shares as a result of the pandemic. The source of data for the analyses of the capital markets in Poland and Germany was the Thomson Reuters database. In order to determine the effect of shock caused by the coronavirus pandemic and restrictions imposed by the states on the capital market the abnormal rates of return were calculated for shares of 24 Polish and 23 German companies from the food sector. The investigated Polish companies were listed on the Warsaw Stock Exchange, while the German companies were listed on the Frankfurt Stock Exchange and other stock exchanges in Germany. Calculations were based on stock market indexes: for the Polish stock exchange it was WIG and WIG-food, while for the German capital market it was DAX and DAX Food & Beverages. In this study the Stringency Index was also used as a tool to follow the response of the governments to the coronavirus pandemic. The results indicate that following the pandemic outbreak large reductions were observed for cumulative rates of return from shares as a consequence of the pandemic both in Poland and Germany. Abnormal cumulative rates of return for the investigated companies were comparable. Markedly greater increases in abnormal rates of return were recorded for the Polish companies of the food sector listed at the Warsaw Stock Exchange. The Stringency Index indicates that restrictions imposed by the German authorities in response to the coronavirus pandemic were slightly more radical than those introduced by the Polish government.

The moderating effects of corporate social responsibility assurance in the relationship between corporate social responsibility disclosure and corporate performance

AbstractThe aim of this research is to analyse the impact of corporate social responsibility (CSR) disclosure on corporate performance. It also analyses the moderating effect of CSR assurance on the association between CSR disclosure and corporate performance, contributing to knowledge in this area. The theoretical framework of the study is based on stakeholder theory and legitimacy theory. The sample used consists of 9861 international firm‐year observations collected from the Thomson Reuters database between 2009 and 2018. Our model has been estimated using the generalised method of moments (GMM) estimator. The findings show that CSR disclosure is positively associated with corporate performance, as proposed in our hypothesis. Additionally, our evidence shows that CSR assurance plays a positive moderating role between CSR disclosure and corporate performance.

Direct and Indirect Effects of Cash Dividend Policies on Firms’ Capital Accumulation in Selected Developed Markets

The effects of cash dividend policies on the capital accumulation of non-bank firms operating in The United States (S&P 500), The United Kingdom (FTSE 100), Japan (Nikkei 225), and France (CAC 40) have been investigated in this study. The dataset used in the study consists of annual observations between 2010 and 2015. Also, the data were retrieved from the Thomson Reuters database. The system in GMM is employed in the econometric estimations in this paper. “Total effect” of cash dividend policies on capital accumulation has been bisected as “direct” and “indirect” effects. In this study, we call the effect of the cash dividend policies on investments via financial and liquidity constraints as “direct effect” and the effect of the policies on the accumulation via market value and business reputation as “indirect effect”. Obtained results show that the indirect effect is positive, whereas the direct effect is negative. However , the magnitude of the direct effect is larger than that of the indirect. Therefore , the total effect of cash dividend policies on the accumulation of capital and investments is negative. The fact that movements in stock prices of firms have an effect on the capital accumulation has shown that the financial markets could affect real economic variables. Also, the results that the cash dividend policies positively affect the market value of firms are mounting evidence to the validity of Signalling and Information Content Approach and Bird in Hand Theory. 

Governance failure and its impact on financial distress

Purpose The purpose of this paper is to examine the effects of corporate governance failure, excess remuneration and entrenchment of managers, company variables and corporate governance variables on the company’s financial distress risk (DETR) in the French context. Design/methodology/approach Using the regression analysis, this paper is based on 201 observations about 67 companies of SBF 120 from 2015 to 2017. Data are collected on the Thomson Reuters database and in the referenced documents, which are published on the internet. Findings The research findings reveal that firm’s DETR is influenced negatively by excess remuneration and entrenchment of managers. In addition, there is a positive and significant relationship between DETR and company variables (performance and ownership structure) and corporate governance variables (power structure). However, a company’s size and board of directors’ independence do not affect firms’ DETR. Practical implications The impact highlighted between remuneration and entrenchment of managers and the financial distress of the company is explained by the intention of managers to work for announcing good short-term performance indicators that are most favorable to them. Originality/value The shareholder/manager agency problem can be changed when business performance tends to decline. Certainly, the managerial latitude adopted by the managers is used as an external careerism strategy. Its positive impact on the reduction of the firm’s financial distress can benefit shareholders who aim to sell their securities in the short term.

The impact of CEO overconfidence on real earnings management: Evidence from M&A transactions

Research Question: Does CEO overconfidence have an effect on the level of real earnings management (REM) in the mergers and acquisitions (M&A) context? Motivation: the relationship between the overconfident manager’s behavior and REM in the context of M&A has gained momentum in the accounting and financial studies. In this context, the present work will enrich the literature on behavioral finance and REM in the M&A context. Idea: This study was to investigate the effect of overconfidence as part of the manager’s cognitive characteristics on the level of REM in M&A context. Data: The data were collected from the annual reports of the companies to build an M&A database and the Thomson Reuters database for the other variables. This study used panel data analysis on a sample of 280 M&A deals of American listed firms indexed in the S&P500 between 2012 and 2018. The total sample was divided into two subgroups according to whether the companies are involved in M&A transactions (test sample) or not (control sample). Tools: To test study’s hypotheses, we applied multiple regression analysis based on panel data using the annual reports and Thomson Reuters database. Findings: The main finding of this study is related to the positive effect of overconfident manager’s behavior on REM in the M&A context. The results show that overconfident managers of acquiring and target companies manage their results upwards using REM. Contribution: The present study provides a new addition to the prior literature by exploring the contributions of behavioral finance in studying the reality and perspectives of the real earnings management in the presence of an overconfident manager’s behavior in the M&A market.