Forthcoming and Online First Articles

Afro-Asian Journal of Finance and Accounting

Afro-Asian Journal of Finance and Accounting (AAJFA)

Forthcoming articles have been peer-reviewed and accepted for publication but are pending final changes, are not yet published and may not appear here in their final order of publication until they are assigned to issues. Therefore, the content conforms to our standards but the presentation (e.g. typesetting and proof-reading) is not necessarily up to the Inderscience standard. Additionally, titles, authors, abstracts and keywords may change before publication. Articles will not be published until the final proofs are validated by their authors.

Forthcoming articles must be purchased for the purposes of research, teaching and private study only. These articles can be cited using the expression "in press". For example: Smith, J. (in press). Article Title. Journal Title.

Articles marked with this shopping trolley icon are available for purchase - click on the icon to send an email request to purchase.

Online First articles are published online here, before they appear in a journal issue. Online First articles are fully citeable, complete with a DOI. They can be cited, read, and downloaded. Online First articles are published as Open Access (OA) articles to make the latest research available as early as possible.

Open AccessArticles marked with this Open Access icon are Online First articles. They are freely available and openly accessible to all without any restriction except the ones stated in their respective CC licenses.

Register for our alerting service, which notifies you by email when new issues are published online.

We also offer which provide timely updates of tables of contents, newly published articles and calls for papers.

Afro-Asian J. of Finance and Accounting (72 papers in press)

Regular Issues

  • Ownership concentration and firm valuation in a typical frontier market   Order a copy of this article
    by Nam Tran, Chi Le 
    Abstract: This study investigates the valuation effect of concentrated ownership in a typical frontier market. Using an extensive sample of Vietnamese publicly listed firms, we find that the valuation effect is inconclusive before combined equity holdings reach a certain threshold, beyond which market valuation increases exponentially with ownership. The latter log-linear effect can be interpreted as a more profound dominance of the monitoring incentives of large shareholders over the potential expropriation of minority shareholders at higher levels of concentration. Our finding reconciles the seemingly conflicting results of previous studies and contributes to understanding corporate governance practices in frontier markets.
    Keywords: ownership concentration; market valuation; piecewise linear regression; frontier markets; Vietnam.

  • Investigation of stock return volatility using Shannon entropy: evidence from ASEAN stock markets   Order a copy of this article
    by Xuan Vinh Vo, Thi Tuan Anh Tran 
    Abstract: This study assesses stock market volatility in ASEAN countries. We use Shannon entropy as an alternative measure to traditional measure of stock return volatility. We use daily stock price data of national stock market indices of ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) for the period from August 2001 to December 2016. The results show that the returns series of Vietnam VNINDEX is the most volatile stock index, followed by Indonesia, Singapore, Malaysia, Thailand and the Philippines. The study also suggests that entropy is an important alternative to the traditional measure of stock return volatility. The study offers important implications for risk management and portfolio theory.
    Keywords: volatility of stock returns; standard deviation; entropy; Shannon entropy; probability density function.

  • Stock market efficiency: the Pakistan Stock Exchange merger   Order a copy of this article
    by Asad Ali, Saqib Sharif 
    Abstract: This study examines the valuation, liquidity, volatility, and efficiency before and after the integration of Islamabad Stock Exchange (ISE) and Lahore Stock Exchange (LSE) with Karachi Stock Exchange (KSE) to form the Pakistan Stock Exchange (PSX). The firm-level daily data is analysed to determine the effects of regulatory change. Based on regression analyses, results indicate mixed evidence for different market measures following the integration of domestic bourses. However, the post-integration period in Pakistan is fraught with political turmoil and weak economic indicators. Thus any improvement that is hypothesised following the merger is offset by poor economic and political factors.
    Keywords: stock exchange merger; valuation; liquidity; volatility; market efficiency; financial regulation; Pakistan Stock Exchange; demutualisation.

  • Bank growth, competition and small business financing in Nigeria   Order a copy of this article
    by Cosmas Asogwa 
    Abstract: The level of bank growth, asset concentration, and competition in Nigerias banking sector have significantly increased following a series of banking reforms, thus raising concern about these reforms effects on the efficiency of banks credit distribution. In this study, we use ex post-facto and difference-in-difference designs to examine how competition among high-growth banks has affected the banks provision of assets to small business borrowers in Nigeria. The study used a bi-sample structure through a judgmental technique that examined 126 and 96 firm-years. Thus, we focused on the period between 2001 and 2017, which enabled us to test both pre- and post-bank growth-competition Boone model effects. When we controlled for firm, market, and macroeconomic influences, we found evidence that in both the pre- and post-bank-growth eras, competition significantly increased small business loans. This finding is consistent with the competition-stability hypothesis, which considers competition as a non-credit constraining factor. A unit increase in the Boone competition indicator resulted in over a 3% credit supply to micro-credit users. However, when we used concentration ratio (CR6) as a structural measure, we found that pre-mega structure competition yields negative effects but that the post-growth effect on credit supply remains positive. Macroeconomic factors such as gross domestic product, money supply, inflation, and capital market indices yield a very significant effect on credit supply as huge banks compete with each other. Thus, policymakers should not ignore the variables in competition-monetary transmission policies in Nigeria.
    Keywords: bank competition; small business; competition: lending: growth: MegaBank: Boone competition indicator.

  • The equity market returns and volatility spillover from the US and Japanese markets to Asian frontier markets   Order a copy of this article
    by T.H.I. Ngan Nguyen, T.H.I. Kieu H.O.A. Phan, Nirav Parikh 
    Abstract: This paper examines the magnitude of return and volatility spillovers from the US and Japan to Asian frontier equity markets (Sri Lanka and Vietnam). The US and Japan shocks are exogenous variables in the ARMA-GARCH-M model. The study indicates that the day effect occurs in Sri Lankan at pre- and post-crisis (2008). Secondly, the return contagion from Japan impacts Vietnam before, during and after the 2008 crisis. This contagion from the US influences Vietnam during and after the crisis with higher magnitudes than Japan. Thirdly, the return spillover from the US impacts Sri Lanka before and during the crisis, while this spillover from Japan to Sri Lanka occurs after the crisis. Finally, the volatility spillover from the US and Japan does not impact the Vietnamese market during the three periods. The volatility contagion from Japan influences Sri Lanka in the crisis, with no volatility spillover from the US to Sri Lanka through three periods.
    Keywords: return spillover; volatility spillovers; frontier markets; contagion effects; ARMA-GARCH-M.

  • Does accounting quality predict corporate cash holdings?   Order a copy of this article
    by Rajesh Pathak, Ranajee Ranajee, Ranjan Das Gupta 
    Abstract: This study empirically examines the role of better accounting quality as a substitute for corporate cash holdings. The paper builds on the premise that if information asymmetry and agency concerns are the justifications for increased corporate cash holdings, better accounting quality, by alleviating these concerns, can enable companies to accumulate less cash, circumventing liquidity concerns. The study uses data for Indian firms during the years 200616 and employs a host of panel models to test the relationship amid the set of idiosyncratic controls and robustness tests. It reports that firms with high discretionary accruals hold high levels of cash, implying poor earnings quality leading to cash accumulation by average Indian firms. Results are highly consistent for alternate measures of accounting quality and cash holdings and are robust to controls of the antecedents of cash holdings and endogeneity issues. Furthermore, analysis of group-affiliated firms compared with their counterparts, for accounting quality and cash holding connect, reveals that while group affiliates suffer from poor earnings quality compared to non-affiliates, it does not have bearings on their cash holdings, a fact that can be attributed to the easy access of group affiliates to internal capital markets. The results imply that managers of Indian firms, on average, should focus on maintaining better accounting quality to alleviate the need to accumulate cash as a means of avoiding fundraising constraints when needed.
    Keywords: accounting quality; cash holdings; accruals; business groups.

  • Directors' interests, family control and firm performance: evidence from Hong Kong listed firms   Order a copy of this article
    by Ben K.F. Wong, Raymond Wong, Annie H.C. Ko, Raymond Kwong 
    Abstract: Whether adoption of revised CG (corporate governance) rules and best practices in 2005 has had significant impact on firm performance in Hong Kong is examined through multiple regression models. A conceptual framework is developed and performance is measured on the basis of a comprehensive CGI (corporate governance index) in the post-2005 period. The main findings suggest that CGI has a significantly positive relationship with firm performance and family factors have a relationship with firm performance in some situations. Moreover, there is a changing point at which family ownership (<=23%) or directors interests (<=18.4%) have a significantly positive relationship with firm performance. This study also examines the effect of three family control measures on firm value under five different corporate governance conditions. When the percentage of the number of outside directors on the board is comparatively high, the family control and the family ownership are significantly related to firm value. For board size, the family control and family head are significantly related to firm value when the board has 11 members or less. For firm age, the family control is significantly related to firm value for younger firms. For top five salaries, all family control measures are significantly related to firm value when the five highest salaries are comparatively low. Companies need to increase spending to enhance governance performance (i.e. CGI). It is necessary to boost confidence of the public in information disclosed by companies. Besides, international investors and regulators can refer to results of sample firms which have ADRs listed in the United States. Most Hong Kong listed companies are family controlled but their willingness to reform corporate governance is expected to increase when they see the benefits discussed in this study.
    Keywords: corporate governance; corporate governance index; family control; directors’ interests; firm performance.

  • The effect of financial repression policy on bank liquidity risk: evidence from the Central Bank of Iran   Order a copy of this article
    by Seyed Ehsan Hosseinidoust, Armin Saatian 
    Abstract: This study investigates the long-run effect of financial repression policy on the liquidity risk in the Iranian banking sector during 2006 and 2018. In this research, financial repression, in the other words, the central bank's interventionist monetary policies, have been assessed based on the endogenous money view using four indicators: the real interest rate, the legal reserve ratio, the unofficial exchange rate, as well as the bank credit to GDP ratio, which can show the financial depth of an economy. The results show that imposing more restrictions on the legal reserve ratio has reduced the liquidity risk. Also, the Iranian banking system has reduced the liquidity risk through two mechanisms. Firstly, through the allocation of financial resources and bank credits to profit-making companies which are conducted under the banks' control, which these investments generally include non-productive sectors of the economy, and secondly, through inflationary taxes that appear as an increase in the exchange rate and devaluing the domestic currency. Also, the findings for the interest rate ceiling policy show that the more the real interest rate increases, the more the liquidity risk decreases. Although the financial repression policies in the Iranian banking system have generally reduced the liquidity risk, the bank losses have been passed on through hidden taxes to depositors and domestic money holders, which illustrates the need for structural reforms in the Iranian banking system.
    Keywords: financial repression; liquidity risk; endogenous money; real interest rate; credit to GDP ratio; exchange rate; legal reserve ratio.

  • Earnings deviation of interim and annual accounts: pre- and post-MASB 26   Order a copy of this article
    by Saidatunur Fauzi Saidin, Mazrah Malek, Phua Liang Kee 
    Abstract: This study is to examine whether the use of the discrete method may enhance the quality of interim financial accounts. It examines whether the magnitude and occurrence of earnings deviation post-MASB 26 is significantly lower than pre-MASB 26. Data is based on listed companies on Bursa Malaysia for two years before and after the introduction of MASB 26 in 2002. The t-test shows that the magnitude of earnings deviation pre-MASB 26 is significantly higher as compared with post-MASB 26. Sub-sample analyses also showed that the magnitude of both overstated and understated companies is significantly higher pre-MASB 26. However, Pearson chi-square shows that the occurrence of earnings deviation has increased post-MASB 26, which was contributed by the increase in occurrence of understated quarterly earnings. This study provides evidence that the use of the discrete method might enhance the quality of interim reporting. Although alternative methods of accounting provide different benefits and drawbacks, this study highlights the need for regulators to consider the objective of financial reporting in formulating the accounting standards.
    Keywords: discrete method; earnings quality; integral method; interim reporting; quarterly accounts.

  • Asset pricing models: evidence from the Indian equity market   Order a copy of this article
    by Kapil Choudhary, Parveen Kumar, Sakshi Mehta 
    Abstract: The asset pricing model has been a core area of research in finance owing to its applicability in corporate finance and security analysis. The present study attempted to evaluate the three popular asset pricing models, viz. the capital asset pricing model (CAPM), the Fama-French three-factor model, and the Fama-French five-factor model, in the Indian equity market for the period from January 2009 to November 2018. The study also examined the role of the size, profitability, value, investment, and market factors in explaining the average equity returns in the Indian equity market. The empirical results reveal the inferior performance of a single market factor in describing the variations in average stock returns in comparison with the Fama-French three-factor model and the Fama-French five-factor model. Further, the size and value factors added to CAPM yield a vital melioration in explaining the variation in average returns of sample stocks.
    Keywords: capital asset pricing model; Fama-French three-factor model; Fama-French five-factor model; size effect; value effect.
    DOI: 10.1504/AAJFA.2022.10046380
  • Audit review and audit outcome of tax auditors in Thailand: moderating effects of professional skepticism and audit experience   Order a copy of this article
    by Kornchai Phornlaphatrachakorn 
    Abstract: This study aims at examining the relationships between audit review and audit outcome of tax auditors in Thailand through moderating effects of professional skepticism and audit experience. In this study, 195 tax auditors in Thailand are the samples of the study. Both structural equation model and multiple regression analysis are applied to test the research relationships. The results indicate that audit review positively affects audit efficiency and audit effectiveness, but it has no effect on audit quality and audit outcome. Both audit efficiency and audit effectiveness have a positive influence on audit quality and audit outcome, but audit quality does not relate to audit outcome. Also, professional skepticism is a moderator of the relationship between audit review and audit efficiency, and audit experience has a moderating effect on the relationships between audit efficiency and audit outcome and between audit effectiveness and audit outcome. Thus, audit review plays an important role in directly determining both audit efficiency and audit effectiveness and indirectly explaining audit outcome. Accordingly, auditors should pay attention to studying, understanding and learning characteristics, qualifications and applications of audit review and use them as an excellent audit practice to increase audit efficiency, audit effectiveness, and audit outcome.
    Keywords: audit review; audit efficiency; audit effectiveness; audit quality; audit outcome; professional skepticism; audit experience; tax auditor.

  • Impact of cross-border mergers and acquisitions on short-term gain to shareholders of target firms in India-effect of the mode of payment and industry relatedness.   Order a copy of this article
    by Manoj Panda, Mayank Joshipura 
    Abstract: We examine the effect of announcements of cross-border mergers and acquisitions on short-term gain to shareholders of target firms in India. Using event study, we analyse 137 listed target firms taken from Bloomberg in post-financial crisis era from 2009 to 2019. Our analysis does shows short-term gains on acquisition of Indian firms, with the gains being high in and around the event day. Moreover, the return is positive both for pre- and post-event day windows, though the pre-event day window return is higher compared with post-event day window. Notably, the return for the shareholders on an acquisition announcement is higher for cash payment, compared with other payment modes. Further, the wealth effect for acquisitions in the related industry is higher compared with the acquisitions in unrelated industries. We have done multivariate analysis with the cumulative average abnormal return as the dependent variable, and mode of payment and industry relatedness as independent variables. The analysis shows a higher return for acquisitions in the related industry with cash payment. The findings of this research by and large concur with earlier studies, and are useful for foreign investors to appreciate the market behavior in acquisitions of Indian firms post 2009.
    Keywords: cross-border; mergers and acquisitions; event study; market efficiency.

  • The role of assets components in firm valuation   Order a copy of this article
    by Gee Jung Kwon 
    Abstract: This study investigates the impact of the asset components on firm value in listed Korean stock markets during the period of 2000-2015. This paper extends conventional studies on firm valuation by including asset components such as current assets, non-current assets, quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other non-current assets in Ohlson's (1995) model. Analytical results show that all these asset components have a significantly positive impact on firm value. However, performance variables such as net income, operating income, and operating cash flows are negatively associated with business value at the 1% significance level. The results of this study show that the asset component on the balance sheet has a more positive effect on the increase in corporate value than the profitability and performance variables on the income statement and the cash flow statement. The empirical evidence of this study suggests that asset components should be regarded as major corporate value related variables in the Korean stock market. This study also suggests that intangible assets are the most important factors among accounting information that should be considered in evaluating firm value. The findings of this study suggest the possibility of a new discussion about the value relevant factors in the asset components of Korean stock markets.
    Keywords: firm valuation; assets components; current assets; noncurrent assets; quick current assets; inventory assets; tangible assets; intangible assets; investment assets; other noncurrent assets.

  • Social performance reporting in the Indian banking sector: exploring linkage with financial performance   Order a copy of this article
    by Parul Munjal, P. Malarvizhi, Deergha Sharma 
    Abstract: The research aims to analyse the social performance of the Indian banking sector and examine its relationship with the financial performance. Secondary data has been collected for a five year period (2013-14 to 2017-18) on a sample of 54 banks operating in India. Content analysis was applied to extract information about social performance disclosed by sample banks to help to construct disclosure score index. Hierarchical multiple regression was applied to analyse the relationship between social and financial performance while controlling for the effects of size, financial leverage, and capital intensity. Our results indicate that there exists a significant positive relationship between social and financial performance of banks operating in India. These results lend support to the stakeholder theory, the good management theory, and the motivational theory. Our findings provide insights into the role of bank managers, policy makers and regulators to integrate social performance into core banking operations, and to frame more concrete social policies leading to enhanced financial performance.
    Keywords: social performance; financial performance; banking; content analysis; hierarchical multiple regression.

  • The effect of corporate governance, dividend policy and informativeness of risk disclosure on the firm value: Egyptian evidence   Order a copy of this article
    by Tariq Ismail, Mohamed El-Deeb 
    Abstract: The purpose of this paper is to investigate the effect of corporate governance, dividend policy and the risk disclosure level on firm value and in turn, explore the main drivers of implementing corporate governance mechanisms, declaring dividend and risk disclosure within the annual reports of the Egyptian listed companies. A risk disclosure index was constructed to measure the level of the risk disclosure. Structure equation modelling has been employed to test the hypotheses using a sample of the most active 30 companies that are listed on the Egyptian Stock Exchange Market (EGX30). The findings suggest that (i) the board independence and board size have insignificant effect on the firm value, while CEO duality shows a significant positive impact on the firm value, and (ii) risk disclosure level allows investors to better predict future earnings growth. Furthermore, dividend policy and risk disclosure informativeness affect significantly the firms ability to raise money and its value in a positive direction. Hence, this contributes to the literature of emerging markets by providing evidence in Egypt that may highlight the magnitude of corporate governance mechanisms, risk disclosure informativeness and dividend policy and their impact on the firm value.
    Keywords: corporate governance; dividend policy; risk disclosure level; firm value; EGX30; Egypt.
    DOI: 10.1504/AAJFA.2021.10039250
  • The effect of audit committee on audit opinion through earnings management as mediation variable   Order a copy of this article
    by Fany Lim, Devie Devie, Juniarti Yunie 
    Abstract: This study aims to examine the mediating effect of earnings management in the influence of the audit committee on audit opinion. The research samples are listed companies in the IDX in the sectors of infrastructure, utilities, and transportation for the period 2011-2017. These industrial sectors were selected because they obtained many qualified audit opinions in the study period compared with other sectors. This study adds control variables, namely firm size and leverage. We measure audit committee using two approaches, the first is the total score of each component of audit committees including size, independence, expertise, and meeting, and the second is the partial score of each attribute of the audit committee. The results show that the audit committee influences the audit opinion and there is a negative significant influence of earnings management and audit opinion. However, this study fails to prove the mediating effect of earnings management in the relationship of the audit committee and audit opinion.
    Keywords: audit committee; earnings management; audit opinion.

  • Rational speculative bubbles in the stock market: the case of Amman Stock Exchange   Order a copy of this article
    by Usama Fendi, Bassam Mohammad Maali, Muhannad Ahmad Atmeh 
    Abstract: This paper aims at inspecting the existence of a rational speculative bubble in Amman Stock Exchange Market (ASE) along two sample periods. The first period was from 2004 to 2009, and the second one was from 2010 to 2018. The paper compares the two periods using different statistical tools in order to diagnose any probable bubbles based on the historical performance of the ASE index. The paper uses three different quantitative approaches to analyse the returns for ASE index over the selected sample periods. The first approach is descriptive statistics, the second one is the explosiveness test approach, and the third one is the duration dependence test approach. The paper found evidence for the existence of a rational speculative bubble in ASE returns for the first sample period inspected and based on the three different approaches. This paper represents a contribution toward establishing an effective early warning system for predicting and mitigating financial crises started from stock markets. This paper is the first paper, up to the authors' knowledge, that implements such advanced statistical and econometrical approaches to examine the existence of a speculative bubble in ASE. It represents a good extension to the existing contribution for monitoring the investment environment in Jordan, and it enhances the healthy business environment in general.
    Keywords: rational speculative bubble; explosiveness test; duration dependence test; Amman Stock Exchange.
    DOI: 10.1504/AAJFA.2021.10035096
  • Default prediction for audited and unaudited private firms under economic and financial stress: evidence from Zimbabwe   Order a copy of this article
    by Frank Ranganai Matenda, Mabutho Sibanda, Eriyoti Chikodza, Victor Gumbo 
    Abstract: This study seeks to separately predict default probability for audited and unaudited Zimbabwean privately-owned firms under distressed economic and financial conditions using stepwise logit models based on different amalgamations of firm and loan characteristics, financial ratios and macroeconomic variables. The research paper's main intention is to identify and interpret the predictors of default probability for audited and unaudited Zimbabwean private firms. For pertinence and effectiveness reasons, the study applies two unique real-world data sets of defaulted and non-defaulted loan accounts for audited and unaudited private firms gathered from a major anonymous Zimbabwean commercial bank over the observation period from 2010 to 2018. The findings of this study indicate that under economic and financial stress, accounting information is imperative in differentiating defaulted and non-defaulted Zimbabwean private firms, and the predictive capacity of the private firm default models is augmented by including macroeconomic factors. Moreover, the study reveals that the drivers of default risk for audited and unaudited Zimbabwean private firms are dissimilar. As a recommendation, accounting information and macroeconomic variables must be incorporated when predicting default probability for private firms under downturn conditions. Furthermore, from a risk management perspective, it is crucial to separately design models for and examine drivers of default probability for audited and unaudited private firms.
    Keywords: default probability; audited and unaudited private firms; economic and financial stress; developing economy; predictor variables; stepwise logit models.

  • Extreme value volatility estimators and realised volatility of stock prices in Amman Stock Exchange   Order a copy of this article
    by Dima Alrabadi 
    Abstract: The aim of this study is to compare between extreme value volatility estimators and other realised volatility estimators in the Amman Stock exchange (ASE) over the period from 2012 to 2016. The dataset consists of daily opening, highest, lowest and closing stock prices for a sample of 100 companies listed in ASE, including 1236 trading days. The methodology of the study is based on relative efficiency proxies between extreme value volatility estimators. The results of the study show that extreme value volatility estimators are more efficient than other realised volatility estimators. In addition, the Garman-Klass estimator is a more efficient volatility estimator than the Parkinson and Rogers-Satchell volatility estimators.
    Keywords: extreme value volatility estimators; realised volatility; high-frequency data; Parkinson volatility estimator; Garman-Klass volatility estimator; Rogers-Satchell volatility estimator; Amman Stock Exchange.

  • A longitudinal investigation of IFRS-8 implementation: evidence from Qatar   Order a copy of this article
    by Ghassan H. Mardini, Amneh Alkurdi, Ahmed Hassan Ahmed 
    Abstract: The main objective of the current study is to investigate the Segmental Information Reporting (SIR) of Qatari listed firms covering the period from 2009 to 2018. The sample comprises all companies listed on the Qatar Stock Exchange (QSE) at the end of 2009. A disclosure index was developed to determine the extent of SIR amongst the sample companies. The study used a longitudinal empirical analysis approach; a year-by-year analysis. The findings revealed a gradual upsurge and awareness of the requirements of IFRS-8 from year to year. Moreover, the reported results suggest that the post-implementation review of IFRS-8 has had a large and positive impact on SIR disclosures since 2014. This research should provide substantive insights for regulators and standard-setters in identifying best practices and spreading awareness of SIR, which in turn should allow SIR practices to become more standardised, making them easier to monitor and govern. Our study provides a longitudinal examination of segmental reporting practices in a developing country, such as Qatar, which permits direct examination of the progress made regarding the implementation and extent of SIR.
    Keywords: IFRS-8; segmental reporting; post-implementation review; IASB; emerging markets.
    DOI: 10.1504/AAJFA.2022.10045453
  • The mediating effect of financial reporting quality on corporate governance effectiveness and cost of debt   Order a copy of this article
    by Muneer Amrah, HafizaAishah Hashim, Lutfi Hassen Ali Al-Ttaffi 
    Abstract: The purpose of this study is to examine the mediating effect of financial reporting quality on corporate governance effectiveness and cost of debt by considering the business environment in the Sultanate of Oman. This study uses a panel dataset that consists of multiple observations of the same economic units. Each element has two subscripts: the group identifier, i (68 companies listed on the Muscat Securities Market), and the within-group index, t, which denotes the time (years 2012 to 2018). The regression is based on the random effects model, which, according to the Hausman and the Breusch-Pagan LM tests, is an appropriate model for this study. The empirical results that were obtained by applying a four-step approach show that companies with more effective corporate governance and higher quality of financial reporting obtain the optimum cost of debt. The study also reveals that financial reporting quality partially mediates the relationship between corporate governance effectiveness and cost of debt. This study provides a comprehensive analysis of the association between corporate governance effectiveness, financial reporting quality and cost of debt in the setting of Oman. It is among a limited number of studies that provide evidence for the mediating effect of financial reporting quality on the role of corporate governance effectiveness and cost of debt. The study findings have potential implications for all users of financial reports because they indicate that financial reporting quality has a central role in evaluating firm performance and in eliminating information asymmetry, and therefore can reduce the cost of financing.
    Keywords: cost of debt; corporate governance; financial reporting quality; mediation effect; Oman.
    DOI: 10.1504/AAJFA.2021.10040612
  • Market reaction to the annual cash dividend changes in Pakistan   Order a copy of this article
    by Sana Tauseef 
    Abstract: This study examines the investors response to the announcement of cash dividend changes made by firms listed on Pakistan Stock Exchange. It also investigates the factors contributing to the investors behaviour surrounding the annual dividend announcements over the years 2011 to 2017. Results of event study analysis show that investors respond negatively to the announcement of dividend decrease; however, there is no evidence of positive investor response following dividend increase. The regression results show that the stocks abnormal returns earned on and after the announcement of dividends are positively impacted by dividend change and dividend yield. Our findings contribute to the literature on market inefficiency through providing a partial support for the signalling hypothesis and have significant implications for investors and firm managers.
    Keywords: dividend change; abnormal return; panel data; event study; Pakistan.

  • Influencing factors for internal audit effectiveness in the Indian context   Order a copy of this article
    by Prem Lal Joshi, Govindan Marthandan 
    Abstract: In this study, an attempt is made to document and provide empirical evidence on the critical determinants of internal audit (IA) effectiveness in Indian Nifty500 companies. IA effectiveness is arguably a result of the interplay among different factors that may have an immense effect but have not been thoroughly investigated in the Indian context. As a part of the research methodology, a proportionate stratified sampling technique based on Security Board of Indias (SEBI) criteria is used to select companies for data collection. The survey was conducted between January and April, 2020 and a total of 71 responses were received out of which 64 questionnaires were complete and used for the final analysis. The response rate was 28.2%. Non-response bias and common method bias (CMB) were non-existent in the survey responses. Factor analysis and multiple regression are used. The results of the model show that (a) the interaction between internal auditor and audit committee, (b) risk-based planning and guidelines and (c) the moderating role of management support with big data analytics are the critical determinants for IA effectiveness in the Indian context. The implications are that sound awareness in the listed companies on how IA effectiveness may be measured and what are the critical determinants that may potentially influence this effectiveness in the changing business and technological environment, are important for policy decision purposes.
    Keywords: internal audit effectiveness; audit committee; risk-based planning; big data and analytics; management support; critical determinants; moderating role.

  • The effect of credit rating announcements on stock returns of banks in India   Order a copy of this article
    by Silky Kushwah, C.A. Manav Vigg 
    Abstract: This study investigates the impact of credit rating changes (downgrade) by CRISIL on the stock returns of the commercial banks of India. The event study methodology is used to examine this effect (Choy et al. 2006). The study investigates the effect of downgrading announcements on bank stock prices using various windows surrounding the downgrade announcement date for a period from 2015 to 2020. It applies both average abnormal returns (AAR) and cumulative abnormal returns (CAR) for the analysis. The study reports that the bank returns are significantly negative during the pre-downgrade announcement period. Interestingly, the returns are negative again on the downgrade announcement day. Conversely, the bank returns turn insignificantly positive during the post-downgrade announcement period. The study concludes that downgrades do not have negative wealth impact on the stock returns of banks after the announcement by credit rating agencies. It may be because the regulators tightly supervise the banking sector in India. Eventually, it results in early awareness of investors regarding the financial position of the banks and it doesn't come as a shock to them. The study has a direct implication for short term investors who rely highly on the announcements by rating agencies to make buy/sell decision. These investors may use the current findings to make investment decisions by understanding the nature of volatility during such downgrade events. Moreover, the study will also help the regulators and banks to better understand the impact of such rating changes on stock returns.
    Keywords: event study; market efficiency; average abnormal return; cumulative abnormal return; banks; credit rating.

  • Impact of institutional quality on firms debt maturity in developing nations   Order a copy of this article
    by Bolaji Tunde Matemilola, A.N. Bany-Ariffin, Gbemisola Adeoye 
    Abstract: This article investigates the impacts of institutional quality on debt maturity using 3885 listed firms from 22 developing nations. This study specifies the dynamic panel models and applies the two-step system generalised method of moments estimation that reduces the reverse-causality problem. The findings reveal that the average institutional quality index has positive impacts on debt maturity in developing nations. Furthermore, regulatory quality, rule of law, and control of corruption have positive impacts on debt maturity, separately. Moreover, institutional quality has positive impacts on debt maturity of listed firms in developing nations where legal enforcement quality is high, but it has negative impacts on the debt maturity of firms in developing nations where legal enforcement quality is low. The overall findings suggest that strong institutional quality and legal enforcement reduce bankruptcy costs; these encourage lenders to provide firms debt capital with long-term maturity.
    Keywords: debt maturity; institutional quality; legal enforcement; system-GMM; developing nations.

  • How COVID-19 pandemic and oil prices drive the Saudi sectors over investment horizons: a wavelet sector-based view   Order a copy of this article
    by Chaker Aloui, Sharif Arshian, Noshaba Aziz 
    Abstract: The Saudi economy has been severely shackled by the combined shocks inherent to the sharp fall of prices of oil as well as the tremendous propagation of the newly infectious disease (COVID-19). In this study, the focus is given to the assessment of COVID-19 impact on the leading Saudi industrial sectors over the investors investment horizons. We are resorted to three variants of the wavelet methods to achieve the study objective. The main advantage of the wavelet is to isolate the effect of oil price shocks and to account for the Saudi investors perceptions of the uncertainty inherent in response to the COVID-19 propagation in Saudi Arabia. Moreover, we check the robustness of our results using the non-linear ARDL (NARDL) model, which is restricted to timescales. Our findings reveal a varying pattern of oil and COVID-19 over timescales and frequency bands across sectors. When isolating the oil impact, the COVID-19 effect is relatively low as compared to oil. These results are also supported by the NARDL outcomes. The results of our study propose operational implications for portfolio managers and policy makers and also pave the way for new research avenues.
    Keywords: Saudi market; industrial sectors; COVID-19; wavelets; NARDL model.

  • Adherence level to materiality in stand-alone GRI sustainability reporting in Arab nations: does listing status matter?   Order a copy of this article
    by Krayyem Al-Hajaya 
    Abstract: The purpose of this study is twofold: firstly, to show the status quo of stand-alone sustainability reporting and the level of adherence to materiality according to the Global Reporting Initiative (GRI) classification in Arab nations between 2014 and 2018; and secondly, to identify the impact of firms listing status on the level of adherence to materiality in stand-alone GRI sustainability reporting. Based on data derived from the GRI Sustainability Disclosure Database, corporate websites and other commercial websites, binary and multinomial logistic regressions are performed to ascertain whether firms listing status might affect their level of adherence to materiality in GRI sustainability reporting, controlling for size, sector and organisation type. The findings of the study support its initial proposition that listed firms in the Arab region have greater motives to perform better than unlisted companies in adhering to advanced levels of materiality in GRI sustainability reporting, and thereby enhance their international comparability, accountability and transparency on sustainability issues. As Arab nations, generally, are facing severe economic, environmental and social challenges, this study may shed light on sustainable development issues in this region and motivate policy-makers to encourage companies to voluntarily disclose their material contributions toward green economy and sustainable development activities. There is currently no investigation into the impact of firms listing status, as a proxy for the corporate burden of agency and political costs, on the level of compliance with materiality in GRI stand-alone sustainability reporting. Thus, the current study is an attempt to fill this gap in the literature.
    Keywords: CSR; GRI; Arab nations; stand-alone sustainability reporting; GRI adherence level.

  • Drivers of shareholder value: evidence from an emerging market   Order a copy of this article
    by Samuel Buertey 
    Abstract: In the ever-competitive capital market, value creation is vital to a firms ability to attract and maintain investment funds. To this end, it is important that the factors that drive shareholder value are identified and consistently emphasised. Drawing from the shareholder theory, this paper attempts to identify factors that strongly drive shareholder value of non-financial firms listed on the Ghana Stock Exchange during the period 2007 to 2017. A fixed-effect regression model is used in the study to estimate the relationship between various drivers identified in the extant literature and shareholder returns. The empirical result shows fixed capital investment, earnings per share, and return on equity are the main drivers of shareholder value among the sampled firms. They have a statistically significant and positive effect on shareholder value. Sales growth, operating margin, and free cash flow are not significantly associated with shareholder value. The study control for interest expenses, firm size, and age. This study is the first to examine the main drivers of shareholder returns on the GSE. In relevance, the study provides both managers and investors with useful signals about the factors that matter most in shareholder value creation, especially from the perspective of an emerging market.
    Keywords: shareholder value; value drivers; Ghana Stock Exchange; shareholder theory; market value added.

  • Determinants of gold futures trading volume: a study of Thailand Futures Exchange   Order a copy of this article
    by Woradee Jongadsayakul 
    Abstract: This research shows a positive impact of one-day-lagged volume of 50 Baht Gold Futures on current volumes of gold futures. There is evidence of a bidirectional causality between 50 Baht and 10 Baht Gold Futures trading volumes. The 50 Baht and 10 Baht Gold Futures trading volumes are useful in forecasting Gold Online Futures trading volume. The response of gold futures trading volume to its own shock and 50 Baht Gold Futures trading volume shock vanishes within 5 days. The variability of gold futures volume is caused not only by its own innovations but also by 50 Baht Gold Futures trading volume shock. Therefore, it is significant to promote trading activity in 50 Baht Gold Futures market. Moreover, special care should be taken when there is a negative exogeneous shock to 50 Baht Gold Futures trading volume due to its contribution to the variability in trading volume of each gold derivatives contract.
    Keywords: derivatives market; gold; risk management; Thailand Futures Exchange; trading volume.
    DOI: 10.1504/AAJFA.2022.10048043
  • Impact of cash conversion cycle on financial performance: an empirical study of listed companies in Botswana   Order a copy of this article
    by C.R. Sathyamoorthi, Christian Mbekomize, Lame Bakwenabatsile 
    Abstract: The study examines the impact of cash conversion cycle on the financial performance of selected listed companies in Botswana Stock Exchange for the period 2012-2018. Financial statements of the listed companies are used as the main source of data. Return on assets and return on equity are used as the dependent variable to measure financial performance. The data is analysed using descriptive statistics, correlation analysis, and a multiple regression analysis to measure the impact of cash conversion cycle on profitability. Correlation analysis reveals a non-significant negative relationship between cash conversion cycle and profitability, whereas the control variables of size and debt exhibit a significant negative relationship with firm profitability. The regression results show that cash conversion cycle has an insignificant positive effect on return on assets, but has a significant impact on return on equity. Both size and debt have a significant impact on return on assets and return on equity. The findings highlight the need for the firms to focus on policies and strategies that will reduce the length of cash conversion cycle by minimizing the inventory turnover period and accounts receivable collection days, while negotiating for extension of accounts payable payment days. This will enhance profitability and firm value.
    Keywords: cash conversion cycle; return on assets; return on equity; profitability; Botswana.

  • The relationship between tax revenue and economic growth: an empirical study in Vietnam   Order a copy of this article
    by My-Linh Thi Nguyen, Nga Phan Thi Hang, Toan Ngoc Bui, Hoai Thu Ho, Tung Duy Thai 
    Abstract: This paper focuses on examining the impact of tax revenue on economic growth in Vietnam. In particular, tax revenue is measured through tax revenue ratio or the Governments total tax revenue to GDP. The research data were collected on a yearly basis in the period 1990-2019. Through the Vector Autoregressive (VAR) model, the paper has achieved great success when finding the positive impact of tax revenue (TAX) on economic growth in Vietnam; however, this impact is negative in the long term. Conversely, economic growth has a positive impact on tax revenue with one lag and three lags. In addition, economic growth in Vietnam is affected by domestic savings (SAV), trade openness (OP), Government spending (GOV), and domestic investment (CAP); meanwhile, tax revenue is affected by domestic savings (SAV), trade openness (OP), and Government spending (GOV). The paper is the first empirical evidence in Vietnam for the relationship between tax revenue and economic growth. Therefore, the research results have important implications for the Government of Vietnam to have a basis to administer tax policies in order to stimulate economic growth in a sustainable way.
    Keywords: economic growth; tax policy; tax revenue; Vietnam.

  • Do earnings quality models affect different excess cash holdings models?   Order a copy of this article
    by Mohammed Yassin, Saja Al-Kasasbeh 
    Abstract: With the increased levels of cost of external financing in Jordan, excess cash holdings are the dominant feature for industrial companies listed on Amman Stock Exchange (ASE). This study provides empirical evidence on the information asymmetry problem by examining the impact of earnings quality on the excess cash holdings. The results should help investors and creditors in evaluating the transparency and confidence of financial reporting to enhance decision-making and minimise default risk. The study employed three different models for earnings quality and two different models for excess cash holdings. By using panel data, the study found that firms with poor earnings quality tend to accumulate excess cash holdings to be isolated from information asymmetry problem.
    Keywords: earnings quality; excess cash holdings; information asymmetry; Amman Stock Exchange; Jordan.

  • Seasonality in Gulf Cooperation Council stock markets   Order a copy of this article
    by Turki Alshammari 
    Abstract: This study strives to model the seasonality and the cyclicality of the Gulf Cooperation Council (GCC) stock markets returns. The study documents that the stock markets of Kuwait, Bahrain, the Emirates, and Oman all show weekday seasonality, but the effect of that seasonality on stock returns is trifling, especially after considering the transaction cost. Besides, all GCC stock markets, except the Saudi market, show monthly seasonality. Furthermore, all GCC stock markets returns exhibit cyclicality. The results are robust to the employed econometric method. These results could be ascribed to country-specific investors attitudes that might be employed to frame distinct investment strategies
    Keywords: GCC; seasonality; cyclicality; Box-Jenkins; stock returns; market efficiency.

  • Mean reversals and stock market overreactions: further evidence from India   Order a copy of this article
    by T.G. Saji 
    Abstract: This research investigates the price reversals and stock market overreactions in the Indian stock market over the period 2008-2016. Our test procedures follow the US evidence offered by De Bondt and Thaler (1985, 1987) and Zarowin (1990). Fama's decomposition and Jensen's alpha measures that compute excess returns from the monthly price data on Nifty-included stocks of the National Stock Exchange (NSE) provide the primary inputs for our search process. Consistent with the US evidence, the study finds that the prior losers outperform prior winners in the subsequent one to two years of portfolio formation. The research finds convergences in investor overreactions to price trends prevailing in upside and downside market conditions in India.
    Keywords: overreactions; winner-loser effects; CAPM Beta; excess returns.

  • Evaluating the sources of productivity of insurance firms in Arab Gulf Countries and Jordan: Malmquist Productivity Index   Order a copy of this article
    by Abderrazak Bakhouche, Eman Zabalawi, Mohamed Lotfi Boulkeroua 
    Abstract: In recent years, the adoption of technological advances in finance may have impacted the efficiency and productivity of financial institutions, through lower transaction costs and reduced information asymmetries. This paper employs the Malmquist productivity index to measure productivity and identify its main drivers for 98 conventional and Sharia-compliant insurance firms operating in the GCC and Jordan over the period from 2009 to 2017. The results show that insurance firms in the countries under study experienced productivity progress, primarily brought about by technological change. The study reveals the existence of a scope to enhance productivity by exploring both pure and scale efficiencies, with the continuous integration of advanced technology
    Keywords: insurance; productivity; Malmquist productivity index; efficiency change; technological change; takaful; GCC; Jordan;.

  • Sentiment and stock returns: aggregate and cross-sectional analysis from Pakistan   Order a copy of this article
    by Sana Tauseef, Hira Suman 
    Abstract: This study examines the impact of investor sentiment on aggregate stock market returns and on a cross-section of stock returns for the emerging market of Pakistan. We constructed an investor sentiment index using principal component analysis based on seven proxies: advances-to-decline ratio, share turnover rate, money flow index, relative strength index, price-to-earnings ratio, dividend premium and interest rate. Results of vector auto-regression suggest that one-month lagged sentiment index is a strong predictor of itself and aggregate stock market return with a positive sign, showing persistence and providing evidence of herd behaviour. Our two-dimensional sorts of stock returns indicate disproportionate effect of sentiment on the stock returns as suggested in literature on developed markets; however, the time series regressions of arbitrage portfolios fail to confirm the significance of these cross-sectional patterns.
    Keywords: investor sentiment; stock returns; arbitrage portfolios; emerging market; Pakistan.

  • Earnings management and ownership type in microfinance institutions: international evidence   Order a copy of this article
    by Naima Lassoued 
    Abstract: The purpose of this paper is to examine whether earnings management in MFIs is motivated by opportunistic behaviour and whether ownership structure could explain this practice. This study is conducted on a sample of 581 MFIs observed over the 2007 to 2015 period. It tests the effect of discretionary provision for loan impairment on future profitability by distinguishing different types of MFIs ownership. The results show that earnings management in MFIs tends to be opportunistic rather than efficient. The type of earnings management differs depending on ownership structure. Indeed, while cooperatives tend more to choose opportunistic earnings management, privately-owned MFIs manage their earnings efficiently. Furthermore, we found inconsistent evidence about earnings management in NGOs.
    Keywords: microfinance institutions; provision for loan impairment; emerging economies; earnings managment; ownership type.

  • Financial reporting quality of private and public banks in India   Order a copy of this article
    by Vijyapu Prasanna Kumar, Sujata Kar 
    Abstract: The present study compares the earnings management practices amongst the Indian private and public sector banks using the second digit test, one of the primary Benford law tests. The sample consists of data on five variables: interest income, other income, interest expenses, deposits, and loans and advances from 14 private and 17 public sector banks from Q1 2005 to Q4 2018. Deposit turns out to be the most misreported financial figure for the private banks whereas public sector banks misrepresented loans and advances the most. Overall, the public sector banks seem to be more into rounding up behaviour compared with the private banks. We also explored possible linkages between financial manipulations and a CEOs tenure approaching its completion, and observed evidence in support of this argument.
    Keywords: rounding up behaviour; Benford’s law; earnings management; second digit test; mean absolute deviation.
    DOI: 10.1504/AAJFA.2021.10039619
  • Banking sector intermediation and economic growth: new evidence from CEMAC countries   Order a copy of this article
    by Pierre Axel Louembe, Man Wang, Dilesha Nawadali Rathnayake 
    Abstract: An abundant body of literature explores the impact of finance on economic growth. However, only a few studies examine this link for developing economies. This paper investigates the banking intermediation-growth nexus with respect to the Central African Economic and Monetary Community (CEMAC). Making use of two panel estimation techniques, we examine the positive influence of banking sector intermediation on long-run growth over the studied period (1990-2016). Despite finding a negative association between financial development proxies and growth, our results suggest that the banking system in CEMAC still performs its main function of pooling and allocating financial resources. The latter is evidenced by the positive association between credit proxies (domestic credit to the private sector and bank credit to bank deposits) and growth/fixed capital formation.
    Keywords: financial intermediation; financial development; banking sector; CEMAC; economic growth; panel estimation.

  • Trade credit forecasting: empirical analysis using a ratio targeting approach   Order a copy of this article
    by Shame Mugova, Nicola Cucari 
    Abstract: This study employs a panel data model that uses trade credit's own recent history to predict trade credit levels. Companies set a predetermined target for trade payables and re-balance trade credit towards the desired level. A predictive model of trade credit is developed to predict the levels of trade payables and receivables. Previous forecasting techniques do not incorporate the targeting aspect and long period historical data. A target ratio should be set for trade payables and trade receivables to total assets. For instance, total assets in year two contain an amount which was part of total assets in year one. Trade credit is debt finance which is maintained at a certain ratio to total assets. In this paper, we make use of panel data from 230 non-financial South African listed firms from 2001 to 2013. Firms use trade credit targeting to pursue growth opportunities and their size affects their access to capital. Trade credits recent history can be used to predict target trade credit levels. The paper makes an original contribution by developing a model to predict the level of trade credit.
    Keywords: trade credit; forecasting; historical data; South Africa.
    DOI: 10.1504/AAJFA.2021.10043355
  • Branch banking variability and rural banks' performance: a GMM approach   Order a copy of this article
    by Haruna Maama, Emmanuel Okofo-Dartey 
    Abstract: The study employed the resource-based view theory to investigate the impact of the number of branches and city branches on the financial performance of rural banks in Ghana. The study used 492 annual reports of 76 rural banks in Ghana for the analysis. Both return on capital employed (ROCE) and loan recovery rate (LRR) were used as proxies for financial performance. A dynamic model based on Generalised Methods of Moment (GMM) was developed for the regression analysis. The evidence showed that the number of branches of rural banks has a positive impact on their ROCE but negatively impacts their LRR. Consistent with the resource-based view theory, the study further found that the establishment of rural banks in cities has a positive impact on their ROCE. It is concluded that the number and location of branches of rural banks have an impact on their financial performance. The results imply that the rural banks are better off establishing most of their branches in the cities. Nonetheless, it is recommended that rural banks should not concentrate more on the cities but also in the rural areas since evidence also showed that the number of branches positively impacts on their profitability. The study contributes to the body of knowledge by advancing the current sphere of descriptive studies on this subject matter. This study will perhaps help firms to empirically test the relationship between branch variability and the performance of banks.
    Keywords: branch banking; rural banks; resource-based view theory; profitability; Ghana.

  • Modelling the real exchange rate misalignment in the presence of outliers for developing countries   Order a copy of this article
    by Ridha Ettbib, Mansour Eddaly 
    Abstract: Persistent real exchange rate misalignment is sometimes explained by the presence of a nonlinear adjustment process towards the long-run equilibrium. However, although the nonlinearity may be a feature for some real exchange rates, outliers and nonlinearity may be easily confused. The main purpose of this paper is to make the distinction between nonlinearity and outliers using robust estimation methods of maximum likelihood. Also, the nature of the real exchange rate misalignment is specified, based on the value of fundamentals, for a sample of African countries during the period from 1960 to 2015. According to the robust estimation procedures, the results of linearity tests are particularly interesting. Indeed, the apparent nonlinearity is significantly reduced when considering outliers, especially for South Africa, Ghana, Madagascar and Morocco. We can conclude that the source of the nonlinearity of the real exchange misalignment rate for the countries already mentioned is the existence of outliers in the considered series.
    Keywords: real exchange rate; outliers; smooth transition autoregressive; robust estimation.

  • Volatility dynamics of Tunisian stock market before and during COVID-19 outbreak: Evidence from the GARCH family model   Order a copy of this article
    by Mohamed Fakhfekh, Ahmed Jeribi, Marwa Ben Salem 
    Abstract: The aim of this paper is to choose the appropriate GARCH model to analyse the volatility dynamics of Tunisian sectorial stock market indices during the COVID-19 outbreak period. We explore the optimal conditional heteroskedasticity model with regards to goodness-of-fit to these sectorial indices. In particular, we propose four models (EGARCH, FIGARCH, FIEGARCH, and TGARCH) to measure asymmetric and persistence volatility. Our findings point to three interesting results. First, following the COVID-19 outbreak, volatility is more persistent in all series. Second, the results show that building construction materials, construction and food and beverage sector returns volatilities have insignificant asymmetric effect, while consumer service, financials and distribution, industrials, basic materials and banks sector return volatilities have relatively high positive and significant asymmetric effect compared with those during the pre-COVID period. Finally, the findings show that financial services, automobiles and parts, insurance and TUNINDEX 20 sectors have insignificant leverage effect. Our results can thus be useful to investors when accounting for future volatility and implementing hedging strategies under COVID-19 crisis.
    Keywords: Tunisian sectorial stock market indices; GARCH models; COVID-19 outbreak.

  • Women participation in corporate boards: quantile regression approach   Order a copy of this article
    by Akshita Arora, Tarun Kumar Soni 
    Abstract: Our study unfolds the stylised facts on women directorship in corporate boards for Indian listed companies. We analyse women directorships across different sectors, firm age groups, different categories of board sizes and year-wise, and then investigate the impact of women directors on firm performance using panel fixed effects and pooled quantile regression approach. The panel data framework has been structured for a dataset of 442 companies for the time period 2013-2019. The women engagement in boardroom has advanced from a meagre 5% in 2013 to 14% in 2019 after the introduction of gender-based quotas in India. The empirical results substantiate that the impact of women directors on firm performance is weak. From the policy perspective, it is evident that amendments in the regulatory framework in board composition have led to more participation of women in leadership positions. However, it is suggested that further reforms are needed for encouraging women directors to act independently and foster more diversity in Indian boardrooms.
    Keywords: women directors; firm performance; independent directors; corporate boards; ordinary least squares; quantile regression.
    DOI: 10.1504/AAJFA.2021.10042446
  • Loan loss provision practices during economic crises: evidence from banks listed on the Damascus Securities Exchange   Order a copy of this article
    by Layla Ashoor, Linda Ismaiel, Zeina Al-ahmad 
    Abstract: This study aims to examine loan loss provision (LLP) practices exercised by banks listed on the Damascus Securities Exchange during the Syrian crisis, the incentives behind such practices, and whether those practices differ between Islamic and conventional banks. A sample of 11 conventional and three Islamic banks was used during the period 2011-2018. Applying a random effect panel data model revealed that banks engaged in income smoothing activities to decrease their income when their earnings were high but not to increase their income when their earnings were low. In addition, banks that reported losses in the previous year engaged in fewer income-decreasing activities than banks that reported a profit; however, no evidence was detected of their engagement in income-increasing activities. As per the use of LLP to manage regulatory capital or to signal future value, the findings did not support such practices. Moreover, Islamic banks do not appear to exercise different LLP practices or to have different incentives to manipulate LLP compared with conventional banks.
    Keywords: discretionary loan loss provision; income smoothing; capital management; signalling; Islamic banks; conventional banks; economic crisis.

  • Factors affecting CEO compensation: an empirical investigation from emerging markets   Order a copy of this article
    by Gehan Mousa 
    Abstract: This study examines determinants of the CEO compensation using a sample of 1044 firm-year observations from six emerging markets covering the period from 2015-2018. The study has employed a backward regression analysis to examine the effect of some governance structure variables and firm attributes on the total cash of CEO compensation. The findings of the study show that governance structure variables such as, blockholder ownership and CEO duality have a significant effect on total cash of CEO compensation while, board size and board independence are insignificant factors. Companies with blockholder ownership pay more CEO compensation, suggesting that blockholder ownership is not a good governance mechanism to monitor corporate boards decisions. Furthermore, companies with CEO duality tend to pay more compensation. This result suggests that the presence of the CEO in corporate boards reduces the efficiency of the board in monitoring managerial decisions, such as CEO compensation, which agrees with the agency view. Finally, firm performance and firm size are influential factors in determining the CEO compensation. The results report that board independence and board size variables as governance mechanisms are not effective in monitoring CEO compensation. Shareholders should avoid CEO duality in their business to pay less CEO compensation. The study contributes to the limited studies on determinants of the CEO compensation in emerging markets.
    Keywords: CEO compensation; board features; financial performance; governance structure.

  • Internecine interrelations among liquidity risk, market risk and credit risk in the Indian banking system   Order a copy of this article
    by Satya Krishna Sharma, Girish Jain, Pratap Biswal 
    Abstract: Events such as the 2008 financial crisis have highlighted the need to consider the complicated interrelations between liquidity risk, credit risk, and market risk for better and integrated financial risk management of banks, This work uses autoregression with distributed lag, considering demonetisation as a dummy variable, to study these interrelationships in the context of the Indian banking system. It is found that liquidity deficit and credit risk have a tendency to exacerbate each other irrespective of demonetisation. The work finds that funding the liquidity deficit faced by the banks increases interest rate volatility. Indications of debt rollover to alleviate proxies and indicators credit risk are there too. All in all, the work shows that demonetisation had reduced liquidity problems but increased credit risk issues.
    Keywords: liquidity risk; credit risk; market risk; interest rate risk; demonetisation; systemic risk.
    DOI: 10.1504/AAJFA.2022.10044067
  • Predictive ability of operating cash flow and earnings on future cash flow of NSE-listed firms   Order a copy of this article
    by Mwila Mulenga, Meena Bhatia 
    Abstract: The study examines the predictive ability of current operating cash flow and earnings on the future operating cash flow of the National Stock Exchange -100 listed firms in India. It is a 15 years (2001 to 2015) study and has 1120 firm-year observations. The Ordinary Least Square method is used to improve the accuracy fixed-effect model and a Random effect model are used. Evidence suggests that the current operating cash flows explain future cash flow better than current earnings, which contrasts with the Financial Accounting Standards Board assertion (FASB, Statement of Financial Accounting Concepts No.1 1978) and International Accounting Standards Board (IASB,1989). Current operating cash flow's predictive ability on future cash flow is more powerful in profit-making firms than the loss-making firms and for all industries. Further, the disaggregated earnings model significantly enhances predictive ability. These findings will enable the users of financial statements to understand the role of current operating cash flow and earnings in predicting future operating cash flows.
    Keywords: operating cash flow; earnings; predictive ability; accruals; loss-making firms; profit-making firms; disaggregated earnings.

  • Cross-border merger impact on wealth of acquirers: evidence from an emerging nation   Order a copy of this article
    by Sweta Agarwal, Anubhav Jain 
    Abstract: The paper tries to assess the impact of cross-border mergers and acquisitions announcements on the Indian acquiring firm's shareholder wealth. A total of 110 CBMA deals announced by Indian acquirers between 2013-2018 comprise the data set. Value effects were determined using event study methodology. The study reveals positive abnormal returns on the announcement day consistent with other similar Indian studies. It also reports higher positive wealth effects in post-announcement windows compared with pre-announcement windows. The results highlight increasing informational efficiency in Indian stock markets and shrinkage of wealth-creating windows in CBMA deals for an acquiring firm's shareholders.
    Keywords: cross-border mergers and acquisitions; abnormal returns; event study methodology; emerging economy.
    DOI: 10.1504/AAJFA.2022.10045990
  • Use of information sources, annual reports and other corporate announcements: the case of large and small investors of India   Order a copy of this article
    by Meena Bhatia 
    Abstract: This study investigates the perceptions towards corporate annual reports, its sections, information sources, and other announcements used for equity investing by large and small individual investors, and studies the differences in perceptions between the two groups. The data gathered from 276 completed surveys is analysed using descriptive statistics and Mann-Whitney tests. The findings show that, in comparison with developed markets and other developing markets, Indian investors (both large and small) rely more on personal knowledge of the firm and analysis of the company in relation to annual reports. Investors find annual reports too long, and large investors reported that there is a delay in publishing them. The financial statements are the most important and understandable section. Announcements on stock exchanges are deemed the most crucial because they are related to their choices. There is no prior research on this feature of Indian investors in the literature.
    Keywords: corporate reports; emerging markets; investment decisions; Ind AS; investors; financial statements; India; announcements.
    DOI: 10.1504/AAJFA.2022.10045585
  • Did the public company oversight board's restrictions on auditor-provided tax services reduce companies' tax avoidance?   Order a copy of this article
    by Mahmoud Ahmed 
    Abstract: In 2005, the Public Company Accounting Oversight Board (PCAOB) implemented restrictions on auditor-provided tax services (APTS), which resulted in a major decrease in the provision of these services in 2005 and 2006. The central research question in this study is whether these restrictions have affected tax avoidance after firms reduced their APTS. Using a difference-in-difference design, this paper investigates and finds that reducing APTS leads to a significant decrease in tax avoidance. These results are consistent with the notion that the PCAOBs restrictions, intended chiefly to enhance auditor independence, also led to this significant decrease in tax avoidance.
    Keywords: auditor-provided tax services; tax avoidance; PCAOB.

  • Extending the theory of planned behaviour for predicting investment intention of millennials by including risk-taking propensity   Order a copy of this article
    by Shikha Bhatia, Nidhi Singh 
    Abstract: The study aims to review the theory of planned behaviour (TPB) and extend it with a risk-taking propensity to examine the influence on investor's behavioural intention to invest in the stock market in the context of a developing nation. The study uses a cross-sectional sampling process and a quantitative approach. PLS-SEM approach was applied to determine the suggested relationship between the constructs. The study's findings suggest that TPB variables are highly significant to measure the behavioural intention of an individual. The study helps to identify the factors which predict the intention to invest. The findings point towards the need for improving financial attitude, financial self-efficacy, subjective norms, and the risk-taking propensity of millennials to increase their investment intention in the long run. The financial institutions, policymakers, and other related agencies must take concrete steps to enhance individuals' awareness and risk ability towards financial products and investment options
    Keywords: theory of planned behaviour; risk-taking propensity; investment intention; millennials.

  • Forecasting the volatility of the Saudi stock market and sectoral indices   Order a copy of this article
    by Sunitha Kumaran 
    Abstract: Volatility can be regarded as a coercing factor through its effect on consumer expenditure. It is a key input in investment decisions and portfolio creation. As volatility is not directly observable, a good forecast of the volatility of asset prices over the investment holding period is a good starting point for assessing an investment risk. Several models have been developed, of which the most well-known are the conditional heteroscedastic models. In the present study, the volatility clustering behaviour, volatility persistence and leverage effect of the daily returns in the Saudi Stock Market Composite Index (TASI) and the 16 sectoral indices of Saudi Stock Market were analysed using the asymmetry GARCH models for a period of 3 years. The long-term volatility forecast was done for an out-of-sample period of one year. The results provide strong evidence of the existence of conditional heteroscedasticity in the stock market returns. They further suggest that past news about volatility and lagged conditional variance has a significant impact on the daily volatility. The high degree of persistence in the conditional volatility of the stock indicates explosive volatility. The leverage effect coefficient signals that bad news impacts heavily on the current period of volatility rather than the goods news of the same magnitude in the Saudi stock market. The forecast long-term daily volatility is expected to be high for Media & Entertainment and Capital Goods sectors and low long-term daily volatility is observed in Material, Transportation and Real Estate sectors.
    Keywords: volatility clustering; persistence; leverage effect; GARCH; Saudi Stock Market Composite Index (TASI).

  • Auditors choice, audit partner busyness, and sustainability reporting quality   Order a copy of this article
    by Elaigwu Moses, Ayoib Che-Ahmad, Salau Abdulmalik 
    Abstract: While past investigations have examined the role of the corporate board as a determinant of the quality of sustainability disclosures, there is a dearth of empirical evidence as regards the influence of auditors choice and auditor busyness. This paper, therefore, investigates the effect of auditors choice and audit partner busyness on Sustainability Reporting Quality (SRQ). This study uses a longitudinal sample of 594 firm-year observations of non-financial companies listed on the main board of Bursa Malaysia for the periods 2015 to 2017. The results of the panel regression reveal that the choice of big 4 as an external auditor positively and significantly influences the quality of sustainability disclosures. Likewise, audit partner busyness has a positive and significant relationship with the sustainability reporting quality explained by the knowledge spillover effect. Though, the positive relationships indicate a slight improvement in the SRQ of listed firms but, do not amount to a high SRQ as the disclosure is more qualitative and general than quantitative. The improvement might be as a result of some regulatory changes e.g. the revised MCCG within this period. Meanwhile, this has policy implications for regulators in terms of strengthening the compliance with the sustainability reporting guide; the companies regarding the role of the boards in ensuring credible disclosure; and the government, and other stakeholders as it has to do with maintaining or increasing the pressure to improve SRQ. The study bridged literature gaps by offering new insights and empirical evidence on the role of external board governance mechanisms in SRQ that have received no empirical attention in the Malaysian context.
    Keywords: sustainability reporting quality; auditor’s choice; big 4; audit partner busyness; Legitimacy theory; Stakeholder theory.

  • Explanatory power of realised moments   Order a copy of this article
    by Seema Rehman, Saqib Sharif, Wali Ullah 
    Abstract: This study decomposes realised moments into high and low components and examines if the high minus low realised moment factors are helpful in explaining future stock returns. Tick-by-tick data is used to generate five-minute returns for computing daily estimates of realised moments. Daily measures of realised moments are averaged for each firm to obtain weekly values, resulting in 157,000 firm-week observations. Realised moments factors are incorporated as extensions to basic asset pricing models. Evidence of this paper suggests the role of realised moments in enhancing the stepwise model development. To the best of authors knowledge, this is the first study to analyse the role of realised moments using high frequency data in the emerging stock market of Pakistan. This study may help investors and fund managers to employ best strategies to gain maximum return on their investment.
    Keywords: equity returns; emerging market; intraday data; realised volatility; skewness; kurtosis.

  • Financial frictions and stabilisation policies   Order a copy of this article
    by Saira Tufail, Ather Maqsood Ahmed 
    Abstract: This research examines the implications of price and quantity based financial frictions for the macroeconomic dynamics and effectiveness of stabilisation policies in Pakistan. Price and quantity based financial frictions are captured through external finance premium and collateral constraint, respectively. Results from calibrating a New Keynesian Dynamic Stochastic General Equilibrium Model showed that quantity based frictions generate a strong financial accelerator mechanism and impede the stabilisation through monetary, fiscal and macroprudential policies. On the basis of findings of this research, we conjecture that, along with switching to rule based policy and effective management of nominal rigidities, quantitative controls in credit markets should be monitored very vigilantly for the effective working of stabilisation policies.
    Keywords: external finance premium; collateral constraint; financial accelerator mechanism; fiscal policy; macroprudential policy; monetary policy.

  • Investment approach, predictability and mediating effect of the market profitability index on investor sentiment on the West African regional stock exchange.   Order a copy of this article
    by Pourakin Djarius Dieudonné Bama 
    Abstract: Emerging markets have diversification potential for international investors, provided they know the characteristics of these markets in order to make good allocation decisions. In this perspective, this paper studies the predictability of the West African regional stock exchanges indicators with investors investment approach and the mediating effects of the profitability index between their sentiment and market liquidity. The results indicate that the market profitability index plays a moderating role rather than mediating role between investor sentiment and market liquidity. In the context of predictability, the results are contradictory. Apparently in a perceptible illusion and logic of savings on the market, investors are unable to correctly anticipate the development of the market, which is relatively stable.
    Keywords: investor sentiment; liquidity; mediation effects; predictability.

  • Cointegration of MIBOR with rupee-dollar and rupee-yen exchange rates: estimating volatility spillovers and asymmetry   Order a copy of this article
    by Upendra Nath Shukla, Neelam Tandon, Deepak Tandon, Hemendra Gupta 
    Abstract: Mumbai interbank offer rate (MIBOR) plays a significant role in Indian interbank market. and its role would be more imperative in India as LIBOR is expected to cease by 2021. This paper has a purpose to understand the movement and volatility of MIBOR by exploring any cointegration of MIBOR with exchange rates of major currencies, such as US dollar, Japanese yen, Euro and UK pound sterling, to derive a model gauging volatility spillovers and asymmetry of MIBOR. Based on the daily data from 01.01.19 to 21.01.21, VECM and E-Garch model are applied. MIBOR is found to be cointegrated with exchange rates of US dollar and yen with error correction being done by the Rupee- Yen exchange rates. Volatility spillovers were significant with previous error lag with no asymmetry due to any negative news. Findings have great implications to manage interest rates and liquidity in the Indian interbank and money markets.
    Keywords: MIBOR; cointegration; exchange rates; interest rates; volatility; symmetry; money market; capital market; India.
    DOI: 10.1504/AAJFA.2022.10045006
  • The relationship between implied volatility and equity returns in South Africa.   Order a copy of this article
    by Faeezah Peerbhai, Damien Kunjal, Delane Naidu, Camiel Singh, Fabian Moodley 
    Abstract: This study investigates the relationship between implied volatility and stock market returns. Although previous studies on this topic only exist from an international context, this paper presents evidence from South Africa by examining the effect of the South African Volatility Index (SAVI) on different Johannesburg Stock Exchange (JSE) listed stock indices. The objectives of this study are to determine which GARCH model is most appropriate for modelling volatility in South Africa and whether the SAVI displays any relationship with the returns on equity indices. The study finds that the TGARCH model is the most suitable model for modelling volatility on the JSE. Thereafter, using an TGARCH model, it is observed that the SAVI is significantly positively related to the returns of all the chosen indices and that a leverage effect exists between them. The results provide important insight for investors, risk managers and policy makers.
    Keywords: GARCH; implied volatility; returns; South African Volatility Index; volatility modelling.
    DOI: 10.1504/AAJFA.2022.10047523
    by Hanna'a Shehada, Mohammed Alashi, Hisham Madi, Maher Durgham 
    Abstract: This study aims at investigating the effect of corporate social responsibility (CSR) disclosure on the financial performance of Palestinian financial listed firms. Content analysis of 13 financial firms annual reports from the period 2010 to 2016 is assessed based on the existence and comprehension of CSR disclosure. Findings of Pooled OLS regression reveal that the mean value of CSR disclosure is low. The results reveal that CSR disclosure is insignificantly affected by financial performance measured by ROA and Tobins Q. This study contributes to the existing CSR disclosure literature by extending the prior research to provide additional empirical results from emerging economies, including Palestine, which rarely has been studied through investigating the effect of CSR disclosure on financial performance.
    Keywords: CSR disclosure; financial performance; Palestine Exchange; stakeholder theory.

  • Developing of an asset/liability allocation model for banks   Order a copy of this article
    by Mohsen Mohammadloo, Nasser Motahari Farimani, Mehdi Feizi, Mohammadali Pirayesh 
    Abstract: Asset/liability management is one of the ways that leading banks use in the implementation of banking policies. In this research, we tried to present a model that introduces new constraints and objectives as a mathematical model of asset/liability management in accordance with Iranian banking rules. The final programming model was obtained as a linear multi-objective, which was solved by lexicography. Before solving the model, the goal ranks were determined by the Cook and Seiford techniques, which are based on the views of 20 bank experts obtained by the Delphi method. In the end, by solving the model, the values of balance sheet variables were calculated for an Iranian bank.
    Keywords: bank; asset/liability management; multi-objective linear model; lexicography method; Cook and Seiford ranking.

  • The long-run performance of initial public offerings: evidence from a transition economy   Order a copy of this article
    by Tan Nguyen, Trang Ninh 
    Abstract: This study provides empirical evidence on the long-run performance of initial public offerings (IPOs), along with identifying factors affecting the long-run performance of IPOs in Vietnam. By selecting 183 IPOs in Vietnam from 2005 to 2019, the authors conclude that the long-run performance measures of IPOs (ARt and CAR1,t) change over time after listing. In particular, these IPOs tend to underperform from the fourteenth month considering ARt. IPO underperformance occurs when there are negative cumulative abnormal returns in the long run. This study adopts the Bayesian model averaging method, and the results show that factors affecting the long-run performance of the IPOs include initial returns and offer size.
    Keywords: equitisation; initial public offerings; Bayesian model averaging method; long-run performance; state-owned enterprises.

  • Credit risk and bank performance: a sub-Saharan African perspective   Order a copy of this article
    by Adamu Yahaya, Fauziah Mahat, Aliyu Mamman 
    Abstract: Credit risk is one of the dominant risks that pose a great threat to the performance of banks. This study examines the effect of credit risk on the performance of banks in Sub-Saharan Africa (SSA). A total sample of 50 banks was drawn from six SSA countries, including Nigeria, Ghana, South Africa, Zambia, Kenya, and Tanzania, from 2010-2018. A two-step system GMM is applied and the findings reveal a significant negative relationship between credit risk and bank performance in the SSA region. The risk committee has a significant positive impact on the performance of banks in the SSA region. Bank management is encouraged to embrace a modern and efficient credit risk management technique to have better control of the rate of credit risk experienced in banks.
    Keywords: credit risk; return on assets; earnings per share; two-step system GMM; sub-Saharan Africa.

  • Islamic religiosity and corporate capital structure: evidence from Malaysia   Order a copy of this article
    by Yee Peng Chow 
    Abstract: This paper examines the relationship between Islamic religiosity and capital structure and how firm-specific factors, managerial characteristics and corporate governance measures moderate this relationship. This study employs the pooled ordinary least squares estimation procedure, drawing on a panel of non-financial listed firms in Malaysia. The results reveal that Islamic religiosity is positively associated with leverage as proxied by short-term, long-term and total debt ratios. Further investigation confirms that there are certain firm-specific factors (e.g., firm size and age), managerial characteristics (e.g., founder status and excessive shareholdings) and corporate governance measures (e.g., board independence and separation between the CEO and chair) which moderate the positive effects of Islamic religiosity. Several important policy implications can be drawn regarding the selection process of the firms top executives which should consider certain managerial characteristics, the formulation of appropriate financing strategies according to the firms characteristics and the implementation of good corporate governance measures.
    Keywords: Islamic religiosity; capital structure; leverage; religion; Malaysia.

  • Do data mining techniques assist auditors in predicting high-risk accounts in MENA region countries?   Order a copy of this article
    by Wafaa Salah, Lamiaa Fattouh, Moid Uddin Ahmad 
    Abstract: This study aims to construct a model that increases the accuracy of forecasting qualified audit opinions using publicly available measures and artificial intelligence. Additionally, the study probes the financial variables affecting an auditor's propensity to issue a qualified audit report. This study investigated the predictive abilities of three models: Binary Logistic Regression, Random Forest, and Decision Tree. The study examined 564 audit reports (282 qualified reports) from nine MENA region countries from 2012 to 2018. The Random Forest technique produces the most accurate audit prediction. The study found that the significant firm-level variables that affect auditor opinion are book value per share, client size, and leverage ratio. The study's findings will bolster auditors, policymakers, and managers in effective decision-making.
    Keywords: audit reports; decision tree; random forest; logistic regression; qualified audit opinion.
    DOI: 10.1504/AAJFA.2022.10048523
  • Downside deviation quadratic programming for stock portfolio optimisation: an empirical study of Shariah and conventional indices in Indonesia   Order a copy of this article
    by Noor Saif Muhammad Mussafi, Zuhaimy Ismail, Nur Arina Bazilah Aziz 
    Abstract: Quadratic Programming (QP) for portfolio optimisation may yet be improved to generate better results on the risk. This study presents the Downside Deviation Quadratic Programming (DDQP) to optimise the risk of portfolio as a refinement of QP. The data deals with the price of stocks listed in Jakarta Islamic Index and IDX30 Indonesia for a definite interval. The selection of portfolio for all the stocks considered the sectoral approach. Upon selection, the DDQP model was constructed and applied to the selected portfolio before benchmarking to QP. The results showed that the portfolio group 1 had the best risk on the shariah platform, while the portfolio group 7 was superior to conventional. Additionally, the empirical analysis revealed that ten scenarios can be inferred based on the DDQP as it is consistently stable in producing a lower risk portfolio than the QP. Lastly, heuristic pattern search also verified the results of DDQP.
    Keywords: portfolio selection; portfolio optimisation; risk; quadratic programming; downside deviation quadratic programming; pattern search.

  • Deposits and financial sustainability of deposit-taking microfinance institutions: evidence from low income sub-Saharan Africa   Order a copy of this article
    by Moyo Zibusiso, Sophia Mukorera, Phocenah Nyatanga 
    Abstract: This study examined the relationship between deposits and financial sustainability of Deposit-taking Microfinance Institutions (DTMFIs) due to a number of such institutions having collapsed previously in Africa. Panel data spanning 2006 to 2017 from the Microfinance Information Exchange of 64 DTMFIs sampled across 18 Low Income Sub-Saharan Africa (LISSA) countries was utilised. Through probit regression, the study found that the likelihood of attaining financial sustainability by the LISSA DTMFIs is negatively affected by small scale deposits, unfavourable loan loss provisions, deteriorating loan portfolio quality and costly branch coverage. The study recommends low cost, large scale deposit operations, efficiency in managing operating expenses, credit enhancements and restrictive deposit-taking licencing.
    Keywords: scales of deposits; financial sustainability; DTMFIs; deposit-taking microfinance institutions; low income sub-Saharan Africa; LISSA.

  • Systemic risk, contagion and risk factors in the Tunisian banking system context: measures and determinants   Order a copy of this article
    by Mohamed Amin Chakroun, Mohamed Imen Gallali 
    Abstract: This research paper investigated the systemic risk in the Tunisian bank sector. The researchers paid a special attention to the variable accountings and macroeconomics in the explanation of the systemic risk. The results pointed out that the three first banks with an important systemic ranking are public banks (STB, BNA, and BH). The empirical validations revealed the presence of a positive dependence connection between the public and private banks and that the generation probability of a systemic situation is getting more important during the distress periods. The results of the determinants analysis explored that the liquidity risk, the credit risk and the financial institutions inefficient level represent the main trigger factors of a systemic risk, along with an expansionist monetary policy that may lead to an accumulation of a systemic risk.
    Keywords: systemic risk; contagion risk; Copula; marginal expected shortfall; DCC-GARCH.

  • The nexus between free cash flow, audit committee characteristics, and earnings management practices   Order a copy of this article
    by Deaa Al-Sraheen, Nofan Al-Olimat, Mohammad Hamdan 
    Abstract: The purpose of this paper is to analyse the moderating effect of audit committee effectiveness in lessening earnings management practices. Research models are developed to address firstly the relationship between free cash flow, audit committee independence, audit committee meeting, and audit committee expertise and earnings management. The second research model is developed to examine the moderating role of audit committee effectiveness in the relationship between free cash flow and earnings management. Based on a sample of 255 Jordanian listed companies belonging to the Amman Stock Exchange index from 2016 to 2020. The results highlight the opportunistic behaviour of corporate managers in presence of free cash flows. Particularly, corporate managers engage in practicing earnings management that increase reported earnings. The results of this paper also show that the audit committee's independence and expertise are significant in the monitoring role of managers behaviour to reduce earnings management. In addition, the findings of the moderating regression indicate also that the audit committee effectiveness affected positively the relationships between free cash flow and earnings management. This means that the presence of such a committee restricts the space for the corporate managers to practice their opportunistic behaviours in presence of a free cash flow problem.
    Keywords: free cash flow; audit committee meeting; audit committee independence; audit committee expertise; earnings management; and Jordan.

  • Firm attributes and discretionary disclosures of financial institutions in Nigeria   Order a copy of this article
    by Tunji Siyanbola, Appolos Nwaobia, Wasiu Sanyaolu, Festus Adegbie, Lateef Yunusa 
    Abstract: Investors and other stakeholders require corporate reports that are comprehensive and informative in order to make sound economic decisions. However, few entities voluntarily disclose information about their performance and activities beyond mandatory reporting frameworks. This study examined the influence of firm attributes on discretionary disclosure of listed financial services firms in Nigeria. The study adopted an ex-post facto research design. The analysis revealed that the selected firm attributes jointly exerted a positive and significant effect on discretionary disclosure. The isolated effects were mixed. The study concluded that firm attributes affect the extent of discretionary disclosure of information by the financial firms in Nigeria and recommends that the management of firms should be intentional in disclosing non-mandatory information to meet the need of users and possibly enhance the reputation and brand value of their firms.
    Keywords: discretionary disclosure; firm attributes; firm size; leverage; liquidity; ROE.

  • Reported risk categories in the prospectus and IPO valuation in the Indian stock market: an empirical investigation   Order a copy of this article
    by Krishan Lal Grover, Pritpal Singh Bhullar, Seshadev Sahoo 
    Abstract: The current study aims to identify the risk categories that may impact initial public offering (IPO) performance. It also investigates the impact of selected mutually exclusive risk categories on IPO performance. The current analysis examined 131 IPOs from 2011 to 2020 on the main board of the NSE in India. We gathered all the risk statements from the issuers IPO prospectuses and analysed their substance. To standardise and accept these categories across the research fraternity, a five-point Likert scale was established. Using principal component analysis, we find six broad categories of risk factors have been disclosed by the IPO firms, i.e., operational, compliance, management, equity, investment, technology, and innovation risk. The results suggest that corporations prioritised financial soundness (liquidity position) over equity risk when disclosing investment risk. We also find that IPO firms with higher operational risk are more under-priced than firms with lower operational risk.
    Keywords: Indian IPO prospectus; mutually exclusive risk categories; factor analysis; regression; IPO under-pricing.

  • Firm size effect and the price and volume reaction to corporate news: evidence from India   Order a copy of this article
    by Nayanjyoti Bhattacharjee, Anupam De 
    Abstract: We examine the price and volume reaction to corporate news for a sample of firms quoted on the National Stock Exchange of India, an Asian emerging market. We take into account the market capitalization of the firms to examine the firm size effect on market reaction using the standard event study methodology. It is observed that small firms, on average, are associated with 1.12 percent and 0.43% more positive abnormal returns than large and mid-sized firms on the day of the positive news flow. On the other hand, when the news is negative, small firms, on average, are associated with -1.1% and -0.62% more negative abnormal returns than large and mid-sized firms on the day of the news flow. Further, the evidence suggests that the price reaction is consistent while the volume reaction differs according to the type and sentiment of the news in different size groups. The evidence shows the importance of controlling for the firm size in event studies to draw conclusions on the market reaction to corporate news.
    Keywords: corporate news; market capitalisation; firm size; event study; abnormal return; trading volume.