WIG20 Index Research Articles

The external assurance of ESG reports in Poland on the example of companies from the WIG20 index

Purpose: The article identifies the basic practices that audit companies use when auditing ESG reports in Poland after 2017. Methodology/approach: The study covered 120 ESG reports published by companies included in the WIG20 index between 2017 and 2022. The first stage of the research involved selecting companies from the research sample whose reports were externally audited. The second stage involved analyzing the contents of the assurance reports. The article also used bibliometric analysis, a critical literature review, comparative analysis, and induction and synthesis methods. Findings: The empirical research shows that out of 120 sustainability reports, only 36 were externally audited. A detailed analysis allowed the identification of audit firms’ basic practices: (1) the most common reference is to a report from an independent assurance service with limited certainty, (2) half of the reports were prepared by the “Big Four”, (3) all reports followed the International Standard for Assurance Services 3000, (4) the most common subject of the audits was GRI indicators, which were listed exhaustively in the report.Research limitations/implications: The research was conducted on a relatively small sample – only companies from the WIG20 index; additionally, the time scope of the research only covered reports from 2017–2022.Originality/value: The article contributes to the Polish literature on the subject but also has practical significance. The results of the empirical study indicate that audit reports are created with a large degree of freedom, which may negatively affect their cognitive value and comparability.

Variation in the values of the beta coefficient for systematic risk depending on the approach applied on the example of companies from the WIG20 index

Purpose of the study: The beta coefficient for systematic risk can be obtained with various methods. Each of these methods may be methodologically correct and justified in the scientific literature, but the results obtained may differ. The aim of the article is to indicate differences in the estimated values of the beta coefficient for systematic risk caused by different methods of their calculation or different sources of data acquisition. Methodology: The article presents methods of calculating the beta coefficient for systematic risk and the most popular sources of obtaining this coefficient. Then, the beta ratio was calculated using the historical method for the period of 1, 2, 5 and 10 years for companies from the WIG20 index and beta indicators were obtained from the publications by A. Damodaran. On the basis of the obtained data, maximum divergences in beta coefficient values were determined and their mean value was calculated. Main findings: The results of the work indicate the average difference in beta values for companies from the WIG 20 index at the level of 0.51 and the maximum value of 1.12. Moreover, it was determined that statistically the lowest beta values as of December 31, 2023 for companies from the WIG20 index were provided by the historical method for a period of 2 years, and the highest values were provided by A. Damodaran. Application of the study: The conducted research indicates the range in which stock market analysts and valuation specialists can model the valuation value from the level of the beta coefficient. Market practitioners can choose both the highest and the lowest value and thus influence the value of the discount rate and the value of the company's valuation in the discounted cash flow method. Originality/Novelty of the study: The article presents original results of empirical research on the beta coefficient. This paper presents volatility in the values of the beta coefficient for systematic risk resulting from different methods of estimating it on the example of companies from the WIG20 index.

Assessment of the cybersecurity of Ukrainian public companies listed on the Warsaw Stock Exchange S.A.

Nowadays, the number of sophisticated cyberattacks targeting critical infrastructure or banking systems is increas- ing. Cases of successful attacks are not uncommon, as statistics in Ukraine demonstrate, and they are becoming more frequent and advanced. This results in an increased risk for companies listed on the stock exchange. The article provides examples of cyberattacks in Ukraine, including those using ransomware, attempts to infiltrate energy systems, and attacks on government institutions. It is noted that the presence of cyber threats is strongly linked to the politi- cal and international situation of the country. Analyses conducted focus on the examination of cyber threat events in Ukraine and their impact on the WIG_UKRAIN stock index from 2015 to 2023. The evalu- ation includes the index’s return rates on the day of the cyber threat occurrence, the following day, and the average return rate within five sessions after the threat. An analogous study for the WIG index is adopted as a benchmark. Based on the obtained results, it can be said that before the year 2022, cyberattacks on Ukraine did not have a significant impact on the value of the Ukrainian company stock index. The situation changed after 2022, where each potentially economi- cally harmful cyberattack contributed to the decrease in the value of Ukrainian-listed companies. Generally, the start of hostilities in 2022 significantly increased the volatility of the WIG_UKRAIN index quota- tions. This is to be expected, as markets react badly to uncertainty.

Impact of tax changes on the risk premium of the WIG index

The presented article provides an empirical analysis of changes in the risk premium of stocks on the Warsaw Stock Exchange in response to changes in tax rates. The analysis uses a structural VAR model, identified with sign restrictions. This method turns out simple to use and proves to be effective in overcoming the problem of predictability of fiscal policy, which is especially important in studies using variables from financial markets. The results show an increase in the risk premium following a sudden tax hike, accompanied only by a temporary reduction in GDP growth. Meanwhile, an anticipated tax hike seems to lower risk premia while being more harmful to GDP dynamics.

The Impact of Foreign Stock Market Indices on Predictions Volatility of the WIG20 Index Rates of Return Using Neural Networks

AbstractThe paper investigates the issue of volatility of stock index returns on the Warsaw Stock Exchange (WIG20 index returns volatility). The purpose of this review is to compare how other stock market indexes as HANG SENG, NIKKEI 225, FTSE 250, DAX, S&P 500 and NASDAQ 100 influance the volatility of WIG20 index returns. The innovation of this work is the usage of a new neural network with three different activation functions to predict future volatility of WIG20 index returns. The input for this network is the last 3 values of WIG20 index returns volatility and the last 3 values of one of the considered foreign index returns volatility. As measurements for the best forecasting performance of neural networks are taken common used forecast errors: ME (mean error), MPE (mean percentage error), MAE (mean absolute error), MAPE (mean absolute percentage error), RMSE (root mean square error). The study shows that the Polish stock market is mainly influenced by the European and US markets.

The relationship between the inflation rate and the unemployment rate in Poland and their long-term associations with selected macroeconomic variables

The purpose of this paper is to examine the relationship between the inflation and unemployment rates in Poland and to analyze their long-term relationships with selected macroeconomic variables: the WIG20 index, consisting of the 20 largest Polish companies noted on Warsaw Stock Exchange, the USD/PLN exchange rate, the Brent crude oil index, and the interest rate on 10-year government bond yields. The main objective of the study is to determine the relationship between inflation and unemployment. In this study, a vector error correction model (VECM) was used to study long-run dependence. The impulse response function and forecast error variance decomposition were also used to examine the interactions between variables. There is one long-run relationship between the factors studied. Both the values of the VECM model parameters and the results of the impulse response function indicate that there is a negative relationship between inflation and unemployment in the short term. In the long term, there is a positive relationship, resulting in the stagflation phenomenon.

ESG risk rating and company valuation: The case of the Warsaw Stock Exchange

This research investigates whether investors on the Warsaw Stock Exchange are willing to pay a premium to invest in large companies with a relatively more favourable environmental, social and governance (ESG) risk profile. The theory is that lower exposure to ESG risks and better ESG risk management practices are perceived by investors as a signal of potentially lower financial uncertainty and improved ability of companies to grow future earnings. The analysis was conducted for companies included in the mWIG40 and WIG20 indices. The relationship between market ratios reflecting company valuation, such as price to net book value and enterprise value to EBITDA, and their ESG risk ratings was modelled using regression models. Those were estimated using ordinary and generally least squares techniques. Although ESG management practices are still at a relatively early stage of implementation in Central Europe (including Poland), the results of the analysis confirm a strong negative relationship between the severity of ESG risks and the relative valuation of the company, accompanied by the existence of significant valuation differences across industries. Of particular note is the impact of a favourable ESG risk rating on a higher Enterprise Value to EBITDA ratio. This ratio is important because it is very often used as a valuation basis in corporate buy-sell transactions. The research confirms that investors are willing to pay more for companies that have built business models that are less vulnerable to future ESG risks and have a quality management culture. As a result, the research provides evidence that consciously investing in climate risk mitigation and improving corporate governance practices in large companies pays off for shareholders.

Verification of neural network models for forecasting the volatility of the WIG20 index rates of return during COVID-19 pandemic

Verification of neural network models for forecasting the volatility of the WIG20 index rates of return during COVID-19 pandemic

Verification of neural network models for forecasting the volatility of the WIG20 index rates of return during the COVID-19 pandemic

Verification of neural network models for forecasting the volatility of the WIG20 index rates of return during the COVID-19 pandemic

Verification of the impact of selected macroeconomic issues on the formation of the WIG20 index

Verification of the impact of selected macroeconomic issues on the formation of the WIG20 index

How cultural factors influence sustainable development reporting in Poland

Purpose: The purpose of this article is to demonstrate the connection between cultural factors and sustainable development reporting in Poland. Methodology/approach: We use a case study to explore in depth the object of our study – the reporting of non-financial information. The analysis was conducted from multiple perspectives based on Hofstede’s cultural dimensions. Findings: The research suggests that the attitudes of stakeholders and companies towards the development of SDG reporting and the use of Global Reporting Initiative (GRI) are neutral. Poland’s performance on Hofstede’s dimensions is consistent with the frequency and type of GRI indicators companies use in their reports. Research limitations: A limitation of our research is that we only examine one area of non-financial reporting, and we only refer to companies in the WIG20. Additionally, we only study one year. Practical implications: This paper will be useful to academics and practitioners to enable an understanding of cultural dimensions in the context of sustainable development reporting. Originality/value: Our research explains the reluctance to report social areas. Our research analyzes the sustainable development reports of companies from the Warsaw Stock Exchange WIG Index. We determine which social indicators are reported by companies and which are not, and using Hofstede’s theory, we explain the reasons for the lack of disclosures.

The Business Model in Energy Sector Reporting—A Case Study from Poland: A Pilot Study

The business model is understood as a way of generating revenue and creating value. This article aimed to define the framework and detailed characteristics of the business model in corporate reporting in the energy sector. The study also addressed the issue of value creation and examined the correlation between reporting information about the business model and the value of the enterprise, calculated using selected accounting measures. The research was conducted in 2021 on all listed companies in the energy sector included in the WIG20 index in 2019–2020. The research methodologies included critical analysis of the literature, analysis of the content of corporate publications, comparative analysis, analysis of phenomena and synthesis of results, Spearman’s rank correlations, and graphical data presentation. The originality of our research concerns directing attention to the disclosure and reporting of information about the business model in corporate reports in the energy sector in Poland. This is the first such study in Poland conducted on companies in the energy sector; therefore, it is treated by the authors as a pilot study. The results show that companies in the energy sector included in the WIG20 index do not disclose information about their business models in reports and the structure of published reports is very diverse, which makes it even more difficult to compare financial and non-financial data. Enterprises in the energy sector disclose financial and non-financial information in financial statements and the reports of the management board on the activities of the company and the capital group. The financial information disclosed by the companies most often included financial and productive capital. Energy companies are reluctant to disclose information about by-products and waste.

Evaluation of the Level of Innovativeness of Listed Companies Managed by Female Managers in Poland

The article aims to evaluate the level of innovation among listed companies managed by women in Poland using the ROA and ROE profitability ratios. The authors analyzed the financial statements of 31 listed companies in the WIG20 index from 2012-2020. The study included statistical and Spearman correlation analyses to determine if more women on the board of directors leads to improved profitability for Polish-listed companies. The hypothesis that there is no significant increase in profitability for listed companies managed by women in Poland was confirmed by the authors.

Employee-related disclosures in non-financial reports. Evidence from Poland

Purpose: The article assesses the scope of employee-related disclosures in sustainability reports in Poland between 2017 and 2020. Methodology/approach: The research study covered 80 non-financial reports of the companies included in the WIG20 index. The employee-related disclosures were divided into four categories, and 24 non-financial metrics were analysed. The first stage of the research involved a quantitative analysis of selected non-financial metrics. The second analysed the rate of changes in disclosing employee-related information. Findings: From 2017 to 2020, the scope of employee-related disclosures in non-financial reports in Poland increased. Therefore, the transposition of Directive 2014/95/EU to the Polish legal system has had a positive effect on employee-related disclosures in non-financial reports, even though the observed change is evolutionary rather than revolutionary. Research limitations/implications: The sample comprised only 20 companies and selected non-financial metrics; therefore, the results cannot be generalised. Originality/value: The study fits into the current trend of research conducted in the area of sustainability reporting. Using statistical indexes, the development of employee-related disclosures in non-financial reports in Poland after 2017 is assessed.

Covid-19 cases influencing the Stock Exchange indices on the example of BIST100 in Turkey, NASDAQ in the USA and WIG in Poland

The purpose of the article/hypothesis: The goal of this paper is to show differences between markets’ reactions to a number of Covid-19 new cases. Stock exchanges and their indices from Turkey, the USA and Poland are analyzed during the first year of the global pandemic. The hypothesis that there are significant differences between markets regarding the reaction to new Covid-19 cases is tested in this research paper.
 Methodology: BIST100 Index representing the Istanbul Stock Exchange in Turkey, NASDAQ Composite representing NASDAQ Exchange in the USA and WIG Index representing the Warsaw Stock Exchange in Poland are analyzed in relation to Covid-19 new cases. The correlation analysis with delays of markets’ reactions and panel data OLS regression models are tested with rates of return as dependent variables.
 Results of the research: The findings show the immediate negative influence of new cases rates of change on the stock indices rates of return, although there are some differences and similarities between correlation coefficients, especially when the delays in reactions are taken into consideration. The Turkish exchange was reacting immediately to the rates of change of new Covid-19 cases, the US exchange needed more time to adjust, while in Poland the correction was detected after investors’ over-reaction in the first two weeks. The significant difference between the Polish and US markets regarding the correlation is confirmed indicating that the reactions on the global market were not identical. What the findings add to the literature is the evidence of differences and similarities between markets representing different religions, continents, and cultures.

Social issue as an area of non-financial reporting in Poland on the example of selected companies listed on the Warsaw Stock Exchange

Motivation: The dissemination of the concept of sustainable development has resulted in the social issue becoming an important area of non-financial reporting. However, the complexity and multidimensionality of this category mean that the indicators used for this are very diverse. The literature on this subject includes numerous publications, but there is lack of answer to the question: are the social category disclosures presented in non-financial reports comparable?
 Aim: The aim of the paper is an assessment of the comparability of non-financial disclosures in the social area in reports of selected companies listed on the Warsaw Stock Exchange. The ten largest companies listed in the WIG-20 index were selected for the study. The study covered non-financial reports for 2019. The study was divided into five categories: (I) Human Rights, (II) Local Communities and Community Engagement, (III) Supplier Social Assessment, (IV) Customer Privacy, and (V) Other, within each, based on GRI Standards, up to three non-financial indicators have been defined.
 Results: The conducted empirical study confirmed that the analysed non-financial reports were not fully comparable in any of the five categories of disclosures. Moreover, in many reports verbal description dominated, with a relatively small share of information expressed in numbers and/or percentages, which in turn creates a field for narration. Non-financial reporting requires an appropriate balance between descriptive reporting and quantified information. This also applies to the disclosure of information on social issues. In this light, it seems necessary to lobby and then start legislative work aimed at increasing the comparability of non-financial reports.

Wpływ pandemii COVID-19 na płynność akcji notowanych na Giełdzie Papierów Wartościowych w Warszawie

The aim of the article is to verify the impact of the COVID-19 pandemic on stock liquidity on the Warsaw Stock Exchange (WSE). In addition the article tries to assess whether the WIG20 index includes companies with the most liquid quotations. The research was based on an analysis of transaction data of 366 companies listed in the continuous system on the WSE within the January 13–May 15, 2020 period. The analysis was performed using four liquidity measures: average number of transactions per session, average transaction value, average percentage change between transactions, average time distance between transactions in seconds. In order to specify the group of shares with the highest liquidity, a taxonomic analysis was performed using the k-means method. Results indicate that during the stock sell-off related to the COVID-19 pandemic and directly after the period of market declines, the liquidity of shares of companies listed on the WSE increased, and in each of the analyzed periods, the WIG20 consisted of the most liquid companies. Previous studies have not analyzed this phenomenon, and the results allow researchers to better understand the behavior of investors during stock market shocks.

How Google Trends can improve market prediction - the case of the Warsaw Stock Exchange

The aim of this paper is to investigate interdependencies between the WIG20 index and economic policy uncertainty (EPU) related keywords quantified by a Google Trends search index. Tests for two periods from January 2015 till December 2019 and from June 2016 till May 2021 have been performed. This allowed the period of relative stability from the time of economic shock caused by the COVID-19 pandemics followed by various restrictions imposed by the governments to be distinguished. A bivariate VAR model to selected search terms and the value of the WIG20 index was applied. After using AIC to establish the optimal number of lags the Granger causality test was performed. The increased empirical relationship has been confirmed between twelve EPU related terms and changes in the WIG20 index in the second period versus six terms for the pre-COVID period. It was also found that in the post-COVID period the intensity of reverse relations increased

Tax Compliance as an Element of the Corporate Compliance Management System

The aim of the paper was to identify areas of the compliance management system and assess the advisability of including tax compliance within the compliance management system. The methodology involved an analysis of relevant literature, legal acts and compliance standards. The empirical part presents the results obtained, having analysed areas of compliance management systems in a sample of ten entities listed on the WSE and included in the WIG20 index. The studied entities were found to present a variety of information on compliance management systems without taking into account the area of tax compliance. According to the author, the implementation of a coherent overall compliance management system would bring many benefits regarding the fulfillment of tax obligations – e.g. in the field of Mandatory Disclosure Rules (MDR) or transfer pricing – and also facilitate the conclusion of the so-called cooperation agreements in the area of taxes and the Advanced Pricing Agreements (APA).

The Impact of Market Liquidity on the Effectiveness of Option Valuation with the Black-Scholes-Merton Model Using the Example of the WIG20 Index

The Black-Scholes-Merton model is one of the most popular option pricing models used in market practice. This model is based on unrealistic assumptions, including the lack of transaction costs. While it is not possible to satisfy all the conditions of the model, it is logical to assume that perfectly liquid markets will meet them better, which will help to reduce the risk of error. The aim of the article was to measure the impact of liquidity to the divergence of the Black-Scholes-Merton model compared to real market closing prices. The result of the research demonstrates a moderate dependence between the volume of the WIG20 index, the volume of option transactions and a negative correlation with the ILLIQ illiquidity indicator introduced by Amihud (2002). The research led to the conclusion that there is a positive correlation between the liquidity and the divergence between BSM model and the market prices.