International Journal of Banking, Accounting and Finance (7 papers in press)

Regular Issues

• DIVIDENDS, INVESTMENT AND PENSION CONTRIBUTIONS  
  by Jon Tucker, Ismail Ufuk Misirlioglu 
  Abstract: We study the determinants of pension contributions for UK listed companies to better understand how the contributions decision is placed within the wider operational and strategic framework of the company. We model the potential displacement effect of discretionary pension deficit contributions in relation to corporate investment and dividends and find a significant displacement effect in relation to both which is further strengthened for dividends during periods of poor firm performance and financial constraints. Our results imply that the firms dividend payout and investment policies significantly influence its propensity to make extra pension contributions.
  Keywords: Pension contributions; investment; dividends.
  
  
• Booking positions in small offshore financial centers: focus on US global banks  
  by Carmela D'Avino, Mimoza Shabani 
  Abstract: Small offshore centres are home to the leading booking centres of global banks and facilitate their transactions across offices worldwide. This paper investigates the factors driving booking positions in offices located in small offshore centres, with a focus on US global banks. We find that global banks tend to increase their booking positions when liquidity conditions at the global and parent levels deteriorate and when banks’ risk-taking increases through leverage. Our results suggest that lower tax levels and higher secrecy explain booking centres’ localisation in small offshore countries.
  Keywords: small offshore centres; prudential regulation; global banks; booking positions.
  DOI: 10.1504/IJBAAF.2023.10057910
   
  
• What do credit rating agencies tell us about earnings momentum?  
  by Sarayut Rueangsuwan, Somchai Supattarakul 
  Abstract: This study extends the literature on the effects of earnings momentum on credit ratings in debt markets by investigating the wider dimensions of their economic implications. Consistent with prior research, our research provides empirical evidence of an association between earnings momentum and credit ratings and further explores whether business fundamentals determine earnings momentum. We find that credit rating agencies assign higher (lower) credit ratings for firms with increasing (decreasing) earnings momentum and that the credit rating implications of decreasing earnings momentum are more pronounced. We further find that increasing (decreasing) earnings momentum with high (but not low) accounting quality can predict better (worse) future firm performance. Our findings suggest that traditional measures of low reporting quality indicate information with respect to future prospects. Our empirical evidence seems to support the view that earnings momentum is a manifestation of a firm's true performance as perceived by credit rating agencies.
  Keywords: credit rating; earnings momentum; reporting quality; earnings predictability.
  DOI: 10.1504/IJBAAF.2023.10058195
   
  
• Going global: evidence from India  
  by Roberta Adami, Sudha Mathew, Prem Puwanenthiren, Sheeja Sivaprasad 
  Abstract: American depository receipts (ADRs) and global depository receipts (GDRs) remain one of the predominant routes used by firms in emerging economies to list overseas. However, the aftermarket performance of ADR/ GDR issuances is not widely researched amongst emerging economies. Using an Indian sample of ADR and GDR issues, we analyse the short- and long-term performance of these firms. We adopt an event study methodology to assess the short-term performance and Lyon et al.'s (1999) approach to examine the long-term performance. We also examine the changes in firms' operating performance following ADR/GDR issuances. The results show that the short-term buy and hold abnormal returns for ADRs are relatively better than GDRs and in the long run yield positive abnormal returns. These firms also have better operating performance post their overseas issuance in the American stock markets and finally the results also show that ADR issues is a key driver in firm performance.
  Keywords: American depositary receipts; global depositary receipts; GDRs; firm performance; operational characteristics; India.
  DOI: 10.1504/IJBAAF.2023.10055872
   
  
• Do foreign investors affect stock price crash risk in the Korean stock market?  
  by Sang Koo Kang, Haksoon Kim, Hyunil Lim 
  Abstract: We examine the relationship between short-selling activity and stock price crash risk in the Korean stock market. We find a positive relationship between short-selling and stock price crash risk. This result is consistent with prior literature on short-selling activity and stock price crash risk. Furthermore, the positive relationship is more pronounced when a firm is more likely to attract bad news or when more informed traders, specifically foreign investors, are present in the market. The contribution of this paper's results is that the role of foreign investors as informed traders and their effect on stock price crash risk is deemed significant in the Korean stock market.
  Keywords: short sales; crash risk; negative skewness; foreign investor; institutional investors.
  DOI: 10.1504/IJBAAF.2023.10055667
   
  
• Director reputation and earnings management: evidence from the British Honours System  
  by Tolulola Lawal 
  Abstract: This study introduces a novel and methodological enhancement to the literature on the measurement of director reputation and examines the link between director reputation and earnings management. Using hand-collected British Honours System data for 2005-2014, we test two competing hypotheses about the relationship between director reputation and earnings management: the opportunistic hypothesis and the efficient contracting hypothesis. The results support the hypothesis of a positive association between director reputation and abnormal accruals consistent with the opportunistic hypothesis. However, this study also reports evidence suggesting that boards with reputed directors are more likely to report a loss and, thus, less likely to engage in loss avoidance practices, supporting the prediction of the efficient contracting hypothesis. The results are also robust to the inclusion of additional control variables, self-selection bias, and reverse causality that may result from the potential endogeneity of director reputation. The results of this study suggest that director reputation has different implications for different dimensions of earnings management and contributes to the debate on the double-edged implication of director capital alluded to in the literature.
  Keywords: earnings management; earnings quality; British Honours System; director reputation; corporate governance; abnormal accruals; loss avoidance; efficient contracting hypothesis; opportunistic hypothesis.
  DOI: 10.1504/IJBAAF.2023.10056181
   
  
• The dark side of inside debt: evidence from innovation  
  by KwangJoo Koo 
  Abstract: This study examines whether executive pensions and deferred compensation plans, collectively known as 'inside debt', influence innovation outputs that are considered critical drivers of firm growth. We find evidence that the association between inside debt and future growth outputs is negative by providing a decline in innovation performance. This result means that chief executive officers (CEOs) with larger inside debt would care more about the risk aspects of their firms. Thus, the firm may have to divert resources to pay off its debt obligations to its executives rather than invest in the innovative initiative. In particular, the negative relationship observed between inside debt and innovation is reduced or reversed in firms with CEOs with higher general management skills and longer decision horizons. Our finding is also robust to controlling for endogeneity concerns through a coarsened exact matching approach and a two-stage least squares (2SLS). In sum, the outcomes of this study contribute to the literature on CEO compensation schemes and corporate management and offer a more nuanced understanding of the role played by debt-like compensation in reducing risk-taking behaviours and decreasing future growth for firms, investors and regulators.
  Keywords: inside debt; deferred compensation; pension; innovation.
  DOI: 10.1504/IJBAAF.2023.10056955