Issue #2 (Volume 14 2017)

By combining the market model with the three-factor model, this study investigates firms’ share returns after the announcement of share repurchase. Employing data for China’s A-share market, this study’s sample utilizes 417 share repurchase announcements over the period of 2000 to 2012. Empirical results show that firms with higher sales growth rates are more likely to send a positive signal to the market through their share repurchase efforts. Analysis also shows that the higher a firm’s price-to-earnings ratio (utilized as a measure of overvaluation), the lower the firm’s cumulative abnormal returns. These results imply that Chinese share markets put more emphasis on the firm’s future growth and share overvaluation.

This paper examines how free cash flow and equity concentration are associated with agency costs, and how they influence the profitability of insurance firms listed on the Saudi Stock Market. The results indicate that equity concentration has no significant impact on agency costs, free cash flow has no significant impact on agency costs and agency costs have no significant impact on firm’s profitability. The findings of this study do not show any evidence to support the agency theory among insurance firms listed on the Saudi Stock Market.

This study aims to determine the effect of mediation decisions on investment, and financing decisions influence the company’s risk and dividend policy on firm value. The unit of analysis in this research is company property and real estate sectors listed in Indonesia Stock Exchange continuously for 9 years (2001-2008) that have a complete financial report on the study period. This research study using descriptive analysis and inferentsial to prove examine the relationship between the study variables with the five structural models using WarpPLS. This study is basically to analyze the patterns of relationships between variables in order to determine the effect of directly or indirectly, a set of independent variables (exogenous) to the dependent variable (endogenous). The company’s risk and investment decisions are able to increase the value of the company, while the dividend policy and funding decisions are not able to increase the value of the company, the study was conducted at the companies in the sectors of property and real estate, then this study better developed for other sectors that have different characteristics. Originality from this research is the populations in this study were the companies in the sectors of property and real estate with specific criteria Indonesia and the data used in this study were secondary data obtained from the Indonesia Stock Exchange in the form of financial statements.

In this study, using a widely available market liquidity measure, the “turnover ratio”, the authors test for market liquidity contagion during the four financial crises that occurred between 1997 and 1999: The Thai crisis, the Hong Kong crisis, the Russian crisis, and the Brazilian crisis. It is found that while the liquidity levels decreased in approximately half of the sample markets, in the remaining half, the liquidity levels actually improved. The Granger causality tests show that while there is almost no evidence of causality (in both directions) before each crisis, during each crisis, approximately half of the pairwise tests were significant. The results show that most of these causalities are reverse feedback effects from the non-crisis-origin markets to the crisis-origin market. Therefore, it is concluded that the more crucial phenomenon during these crises is the “reverse feedback effects” rather than the liquidity contagion itself.

After the Asian crisis in 1998, Indonesian banking transformed very quickly into more market-oriented banking. This development increased the competition, on the one hand, and pressure to perform better financially, especially after foreign investor taking over the ownership, on the other hand. Some banks transformed their business strategies into a microfinance bank for profit motives. Such strategy jointly results in significant profitability and efficiency. Using SUR regression, it is found that for the profitability equation, the profitability relates to the size of the bank, the loan loss reserve to gross loan (LLRGL), equity ratio (ETA) and fixed asset ratio (FIXASEQ). For operating efficiency (CIR), the result is similar and only the sign is different. Interestingly that for profitability, the microfinance strategy (MFS) is significant, but not for operating cost efficiency. It implies the need for more cost efficient commercial banks entering microfinance business as it will benefit small borrowers in terms of lower interest margin.

Recent literature on Corporate Annual Reports (CAR) underlines that, in order to meet the changing needs of CAR users, more narrative (forward looking) information should be provided, with a focus on those factors that are liable for longer term value of banks financial performance. This papes investigates the Management Commentary portion (MC) and specifically the effect of Corporate Governance Information (CGI) on banks’ reporting performance mechanisms such as board structure, audit function, bank size and common equity.

Return on Assets (ROA) ratio is used as a proxy to measure financial performance. The data sample comprises of 86 worldwide banks during the period of deep economic crisis (2008-2011). Novelty of the study is the search for the effect of core characteristics of corporate governance on banks’ performance during the financial crisis period. The research uses a Panel Estimated Generalized Least Squares (EGLS) regression model in order to examine the aforementioned effect. The results of this research suggest that boards’ independence strongly supports banks’ efficiency and operations, as well as external audit contributes positively to banks’ efficiency during the crisis period.

The article deals with a current trend of the global energy market, which is characterized by rising tension in relations between the performers of the energy market regulation mechanisms, and it leads to the emergence of alternative energy sources. The article is called to identify the causes of renewable energy markets nascence, to make comparative description of Ukrainian and European Renewable Energy Markets attractiveness, and to characterize the state policy change in a renewable energy market. Different interpretation of nature and classification of the field of renewable energy in foreign and Ukrainian approaches shows the problem of legal criteria of renewable energy markets regulation. It is proved the existence of double barrier penetration of the European market for renewable energy for Ukrainian companies, which includes compliance with the accepted EU Directives and compliance with the Rules of each member individually. The presence of clearly defined standards and certificates of quality for the European market allows producers to show the competitiveness of Ukrainian products in the international market and stimulate Ukrainian manufacturers. The presence of clearly formulated laws, stable and balanced political and legal environment of the EU allows Ukrainian producers of renewable energy to develop such a strategy that considers the time factor, as the primary parameter of competitiveness in international business. The market of solid biofuels in EU is under formation, its development timeframe and uncertainty of environmental risks becoming is especially important for Ukrainian producers.

With corporate cash holdings on the rise, stakeholders need to know, among other things, what informs the companies’ cash holding policies and whether there are any benefits to be derived from piling up these cash reserves. Studies conducted in developed countries have identified the following as determinants of corporate cash holdings: firm size, growth opportunities, liquid asset substitutes, capital expenditure, leverage, dividend payments, cash flows and cash flow volatility. Few studies have focused on what drives firms’ cash holdings behavior in emerging economies. This study, the first of its kind, investigated the determinants of corporate cash holdings in the South African retail industry. The paper used panel data analysis to test the relationships between cash holdings level and the identified determinant factors. The authors found evidence that liquid asset substitutes, capital expenditure, dividend payments and cash flow volatility significantly influence the cash holdings levels of retail firms listed on the Johannesburg Stock Exchange.

Corporate social responsibility, disclosed in sustainability reporting, influences the financial performance of companies. As a result, traditional stock market indices (TI) are expanded with the social responsible stock market indices (SRI). The aim of this study was to establish whether there are any differences in the behavior of the TI and SRI. To do this, the authors analyzed their efficiency. They used R/S analysis to calculate the Hurst exponent as a measure of persistence (long-term memory property). The presence of persistence was evidence in favor of less efficiency. According to empirical results, SRI has lower efficiency, in particular the Dow Jones Sustainability Index. Lower efficiency was also observed in the emerging markets with a responsible investment segment, compared to the traditional stock market indices. Further standardization and a common methodological approach to corporate sustainability reporting disclosure are proposed.

The aim of this work is to propose a method for creating portfolios with a minimal expected risk. The proposed method consists of two steps. In the first step, the authors use a method for finding a minimum spanning tree. It is a graph theory tool, which is the field of discrete mathematics. Graph is defined as a set of vertices and edges. By this method the authors distribute assets, for example a stock index, into several subgroups. From each group it is then chosen an asset, from which most of the edges come out. These selected assets will be used to create a portfolio. In the second step, the authors will use a method of minimizing the standard deviation of the portfolio to calculate the weight of its assets. By this method, first it is found the weight of each asset so that the resulting portfolio would have the lowest possible expected risk. Then the authors find the portfolio with the lowest possible expected risk at required yield and create investment strategies. These strategies are compared during the time and between each other based on the variation coefficient. The article can be a practical guide for an individual investor during the minimal risk portfolio creation and shows him, which assets (and which asset weights) of the selected index to purchase.

This study explores whether legal liability of audit firms is associated with client’s earnings conservatism. In China, audit firms are allowed to choose between legal forms of general partnership (GP) and limited liability corporation (LLC). Because partner auditor is personally liable for all partners’ service in general partnership form, that will provide an incentive for audit partners to monitor each other’s audit quality. Conversely, personal assets of individual partner, under LLC, are no longer available to pay a partnership’s liability, thus reducing the incentives for intrafirm monitoring by partners within an audit firm. Using several different methods for identifying earnings conservatism, this study finds that LLC audit firms are associated with reduced conservatism.

The pension system existing in Ukraine does not correspond to the modern requirements of society and needs radical reforms in which the main focus should be on the introduction of a mandatory accumulative pension system. It is shown that accumulation of funds in accumulative pension system (APS) requires complex calculations. A model for accumulation of funds in the accumulative pension insurance system used in this paper makes it possible to determine a set of interrelated parameters – insurance premium rates, reasonable insurance periods, the desired rates of profitability, the required amount of savings, investment potential of accumulative pension system, etc. The amount of funds in accumulative pension insurance system depends not only on the basis of insurance (number of payers of insurance premiums), the amount of contributions (rate and object) and (primarily) on the term of beginning of payments of insurance premiums, the coefficient of profitability of invested funds and guarantees of their safety at all stages of functioning of the accumulative system. The analysis has shown that it is necessary: to cover all people employed in the economy with accumulative pension insurance; a rate of contributions should be determined not only by wages, but also by income; prior to the introduction of accumulative pension system – to create the necessary infrastructure, to develop a legal framework, to organize the management of accumulative funds, to solve the issues related to the protection of funds from the risks of losses. The beginning of introduction of the accumulative system should be postponed till 2020.