July 2015 (Journal of Business and Policy Research)

July 2015 (Journal of Business and Policy Research)

Total Articles - 11

Pages 1 – 26

Author: Chih-Hsien Liao and Tawei Wang

This study examines whether product market competition constrains managers’ real earnings management behavior. Using four different competition measures based on industry concentration and market size, we find that firms facing higher product market competition conduct lower levels of real earnings management. We also find that this negative effect is more pronounced in industries with higher litigation risk. The findings support the argument that product market competition serves as an efficient disciplinary corporate governance mechanism.

Pages 27 – 46

Author: Iris W.H. Yip, Andy W.W. Cheng and Raymond W. So

The purpose of this paper is to investigate the dynamic relationships among the US, China and Hong Kong stock markets.  Information transmission on return and volatility spillovers among these three markets are examined by using daily stock market data for the January 1992 to June 2014 period and by analysing these data through a dynamic conditional correlation multivariate generalised autoregressive conditional heteroskedasticity model.  The empirical results show that transmission and spillover effects exist among the three markets.  Over the whole sample period, the US market is found to have dominant volatility effects on the other two markets.  Further detection of time variation and structural breaks in volatility spillovers suggests that the volatility of the China market has had a greater effect on the Hong Kong market since the financial crisis in 2007.  The volatility interactions between the China and Hong Kong markets have been more prominent than those between the US and China or between the US and Hong Kong.  These findings suggest that asset allocation and hedging strategies in the greater China market, especially in Hong Kong, require sensitivity to information on volatility behaviour in China and close attention to the US market.  The results of this research provide important implications for international portfolio diversification.

Pages 47 – 68

Author: Mohamed Abdelaziz Eissa and Mohammed M Elgammal

In this paper, we employ a Multivariate GARCH model to study volatility spillovers among two developed markets (US and UK) and six emerging markets, namely, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. We find strong evidence of local shocks and persistent volatility in all markets under estimation. Interestingly, we did not find evidence of shocks or volatility spillovers from the US and the UK to all GCC stock markets, but there is evidence of shocks and volatility spillover among the GCC stock markets. These results may be due to the restrictions that eliminate the ability of foreign investors to trade in GCC stock markets.

Pages 69 – 95

Author: Erekle Pirveli and Jochen Zimmermann

The Georgian Stock Exchange (GeSE) is one of the smallest and most illiquid capital markets worldwide. Inefficient regulation and high transaction costs feature high in describing the embryonic stage of Georgia's stock market. This paper, by supplying first-hand empirical evidence on time-series properties of the GeSE firms’ earnings, attempts to consider and explain the limited stock market properties from earnings quality perspective. Statistical tests predicate on the primarily collected financial information of 83 Joint Stock Companies registered at the GeSE. The work covers the years of from 2005 to 2013, constituting around 500 firm-year observations. The major finding suggests that reported earnings at the GeSE are poorly persistent and predictable, making it difficult for investors to assess firm value. This is a pervasive phenomenon: Investors are practically unable to estimate firm finances up to a three year horizon. It is further revealed that from the earnings components such as cash-flows from operations and total accruals, the former operates with higher persistence and predictability. Financially pernicious years (2008-2009)’ negative effect on the properties of earnings’ components, as opposed to earnings themselves, is also detected. The findings are robust to time and industry fixed effects.

Pages 96 – 114

Author: Maher Asal, Abolhassan Jalilvand and Lars Rolseth

This paper investigates whether value and size premia exist in the Euro area’s industry returns and, if so, what factors are driving them. We use a Garch-M (1,1) model on daily return data from the STOXX market indices for five major industries in the euro area. Our findings show that an industry-specific three-factor Fama and French type model does provide a robust explanation of returns over the period, 2001-2012. While, our results further emphasize the widespread influence of the value and size effects in the Euro market, the pattern, sign, size, and significance of these factors vary widely across different industries and market conditions.

Pages 115 – 136

Author: Yuxing Yan

This paper shows the impact of politics on a firm’s profitability. The Republican Party has a color of red, while the Democratic Party is coded blue. In this paper, we show that the equity market’s performance is statistically the same whoever occupies the White House. However, at the firm level we see a quite different picture. Over the years, 4.35 percent of firms could be labeled as blue meaning their stocks perform better when the sitting president comes from the Democratic Party. The red firms count for 5.11 percent. The rest, 90.54 percent of all US firms, are colorless. In an election year, the excess volatility of colored stocks increases dramatically, 48 percent more volatile than colorless ones. In addition, a zero-investment portfolio formed by longing and shorting opposite colored stocks at the beginning of a new administration generates an abnormal return of 9.3 percent per year.

Pages 137 – 152

Author: Yuan-Cheng Tsai, Yu-Ting Ou and Yi-Lun Chi

In order to enhance consumer shopping rates and consumer satisfaction, network operators should maximize the evaluation of online shoppers by products and overall performance. Previous studies have shown that both perceived quality and product involvement are likely to have an influence on consumer loyalty. This study further explores what relationship will be established among network perceived quality, product involvement and customer loyalty of online shoppers and clarifies how product involvement interferes with the relationship between perceived quality and consumer loyalty. The theoretical model is tested with the linear structured equation which is consistent with AMOS path modeling assumptions. Data were collected from 158 effective questionnaires. The research findings contribute to marketing theory by providing empirical evidence to support assumption that: (1) perceived quality has a significant positive influence on the loyalty of online shoppers, (2) product involvement has a positive moderating effect on the relationship between perceived quality and consumer loyalty. Finally, this study puts forward implications for management and future studies.

Pages 153 – 163

Author: Peter Yannopoulos

We study how people perceive the importance of defensive marketing strategies before and after competitive entry into the market. In particular, we examine how business students of different nationalities would react, before and after competitor entry, using several defensive marketing strategies. A number of students enrolled in the business program of a major Canadian University participated in this simulation. Participants were asked to indicate the importance of various defensive marketing strategies for responding to before and after competitor entry. Participants were of different nationalities – Canadian, Chinese, and Indian. MANOVA and ANOVA analyses were used to analyze differences in responses among the different groups. The results show that there are significant differences between Indian, Chinese and Canadian respondents.

Pages 164 – 177

Author: Richard E. Hicks and Eva-Maria Knies

Psychological capital (PsyCap: involving self-efficacy, optimism, hope and resilience) clearly contributes to organisational success, as indicated in western-based studies. But does psychological capital operate in a stable way across cultures? Few or no studies had addressed this issue. We were able to examine, in a multicultural industrial organisation (centred in Europe but with Asian and US regional centres), how psychological capital was related to workplace engagement and self-perceived quality of workplace performance across the organisation.  A sample of 183 employees from the multinational organisation completed the Psychological Capital Questionnaire (PCQ), the Utrecht Work Engagement Scale (UWES), a one-item self-perceived performance scale (on contribution made to the organisation) and a demographics questionnaire identifying position level held (manager, other) and other data. There were 55 employees from America, 69 from Europe and 59 from Asia. Strong similarities across the cultural groups were found when regression equations, controlling for position held, examined how well PsyCap predicted first, work engagement of individuals, and second, the employees’ perceived performance in contributing to the organisation. The results largely confirmed the stability of psychological capital and its effects, across regions, with HR implications for organisations with multinational operations. Limitations and future research directions are indicated.

Pages 178 – 190

Author: Mihir Kumar Roy and Sazzad Hossain Khan

This research plans to investigate the effect of banks’ overall service quality, product quality, and corporate social performance on bank reputation within the context of private commercial banks of Bangladesh.  Here, banks’ overall service quality, product quality and corporate social performance are considered as the independent variables and bank reputation is considered as dependent variable. The survey administered 80 questionnaires given to clients and employees of ten private commercial banks of Bangladesh. The SPSS version 11 software was employed in this study for data analysis. Correlation analysis and stepwise regression were performed to assess the hypothesis. The correlation analysis produced precise support to prove almost all the hypotheses but the stepwise regression provided partial support to the hypothesis. After successfully analyzing the gathered information, it was found that all the measured independent variables (i.e., overall service quality, overall product quality, and corporate social performance) were statistically and significantly correlated with bank reputation.

Pages 191 – 210

Author: Priya Bhalla

Mergers & Acquisitions are becoming increasingly popular among all entities, particularly financial entities. The theory suggests that such attempts could result in a number of benefits including higher efficiency. But a review of the empirical literature is mostly ambiguous. Furthermore, there are few such studies in the context of Indian financial entities. Accordingly, the present study attempts to examine the technical efficiency of Indian financial sector entities using stochastic distance function (SDF) approach. This is one of the first attempts to analyze the technical efficiency of Indian financial entities that are engaged in mergers and acquisitions (M&A) transactions during the period 19952011. The study finds no significant technical efficiency differences among acquirers and targets in the pre M&A period.  However, in the post M&A period, acquirers have significantly higher efficiency compared to targets suggesting that M&A could have positively affected these entities.  An increase in efficiency and size of financial entities has important implications. These financial entities can rapidly gain size, efficiency as well as market power through M&A. While there are several benefits attached to larger size, at the same time, a big entity could also pose a threat to financial stability of an economy, calling for effective regulation of these entities.

Total Articles- 11

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