Pricing cloud stocks: Evidence from China

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Abstract

Using factor models, we examine two pricing issues of cloud stocks in China's stock market. In particular, we test whether the Fama and French factor models are useful to explain the stock prices of cloud stocks and whether there are abnormal returns unexplained by these models. Using the daily stock prices of 1670 cloud stocks from 2012 to 2022, we find that the factor models explain up to nearly 97% of the stock return variations of the cloud stocks, and mispricing. The results are robust to alternative measure of factors, outliers, sampling period and different approaches of factor modelling.

The new normal? Cluster farming and smallholder commercialization in Ethiopia

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Abstract

Cluster farming is increasingly recognized as a viable means of improving smallholder economic integration and commercialization in many developing countries. However, little is known about its impact on smallholder welfare and livelihoods. We examine the relationship between cluster farming and smallholder commercialization using a large-scale survey of 3969 farm households in Ethiopia cultivating high-acreage crops such as teff, wheat, maize, barley, and sesame. Using switching regressions and instrumental variable estimators, we show that cluster farming is associated with commercialization measured as commercialization index, market surplus value, and market price. To further deal with endogeneity concerns, we also employ some pseudo-panel models where we observe similar insights. Beyond this, we account for heterogeneities by disaggregating households based on farm scales and crops cultivated. Our findings show that cluster farming is positively associated with commercialization for all farms and crop types despite this disaggregation. However, the related gains are higher among medium and large farms and vary per crop type. These findings imply that cluster farming is crucial in improving smallholder commercialization and may be a critical entry and leveraging point for policy. We thus lend support to initiatives and plans that seek to upscale cluster farming as they can potentially improve smallholder commercialization with ensuing impacts on rural livelihoods and welfare.

Family ownership and speed of adjustment towards targeted capital structures: A study of ASEAN firms

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Abstract

Utilising a sample of ASEAN firms, we examine the effects of family ownership on firms' speed of adjustment to targeted capital structure. We find that family firms adjust their capital structure more slowly than non-family firms. This is due to the higher costs of adjustment associated with high information asymmetry and agency conflicts between family owners and external investors. The effect of family ownership on capital structure adjustment speed is more pronounced when family firms have a higher level of family board involvement and higher ownership concentration. There is also an asymmetric effect of family ownership on capital structure adjustment speed at different levels of debt, by the distance from the targeted capital structure, and between overleveraged and underleveraged firms. Overall, evidence in our study suggests that family ownership is a key determinant on how quickly ASEAN firms may adjust their capital structure towards targeted levels.

The impact of board ethnic diversity and Chief Executive Officer role on corporate social responsibility

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Abstract

We examine the influence of board ethnic diversity on firms' corporate social responsibility (CSR) activities within modern day corporations. Using firm-year observations in Australia from the period 2004–2017, we document that board ethnic diversity leads to better CSR performance and CSR disclosure. Our results suggest that for every additional ethnic cluster represented on the board, on average, a firm's CSR performance rating from ASSET4 is higher by 2.6% and the odds ratio of producing a CSR report increases by 38.8%. The results are robust to controlling for endogeneity (using both instrumental variable approach and difference-in-differences analysis) and alternate proxies to measure CSR performance and ethnic diversity. We also document the moderating impact of Chief Executive Officer (CEO) power on the relationship between board ethnic diversity and firms' CSR activities. Specifically, a less powerful CEO and a CEO of ethnic minority (i.e., non-Anglo) are more likely to facilitate this relationship. This study adds to our understanding of how board ethnic diversity, an often-overlooked factor in prior research, can have significant impacts on firm outcomes.

Vintage capital and trade credit

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Abstract

This paper examines whether and how capital age influences trade credit extended by suppliers. We find that firms with older capital are associated with a reduction in trade credit offered by suppliers, which is consistent with the view that vintage capital, with outdated technology, is detrimental to firms. Employee outside opportunity, labour mobility and organisational capital are important factors that moderate the association between capital age on trade credit. Our findings are not driven by specific industry sectors or periods and remain robust to alternative measures of trade credit and to endogeneity concerns. In addition, we show evidence that shareholders view vintage capital as value-destructive. In sum, this study reveals that risk exposure associated with capital age matters for corporate trade credit decisions.

Managerial inclusiveness and corporate innovation in China

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Abstract

This study explores how managerial inclusiveness affects corporate innovation. Using an annual dataset of A-share Chinese listed companies from 2008 to 2021, we find that managerial inclusiveness is positively related to corporate innovation. Market competition and team heterogeneity positively moderate the relationship between managerial inclusiveness and innovation. In addition, managerial inclusiveness in state-owned enterprises plays a more significant role in promoting corporate innovation than it does in non-state-owned enterprises. By investigating the mechanism of influence, we found that inclusive managers can promote corporate innovation by relaxing internal controls and increasing corporate risk-taking.

What promotes production contract in Indian agriculture? Managing market risk versus profit orientation

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Abstract

We identify factors influencing farmers’ decision-making on various production contracts and are explicitly concerned with whether managing market risk or profit orientation promotes contract farming (CF). After controlling for potential endogeneity, the IV-Tobit regression results indicate that farmers’ risk behavior and profit orientation are vital factors driving CF participation decisions. However, we observed that the impact of profit orientation is relatively more substantial than the risk management motive, suggesting that earning a higher profit, rather than managing market risks, is the primary objective of CF adoption. In addition, other factors such as farm size, mean contract price, education, age, and extension services play a significant role in CF participation. The major policy implications, based on results, call for enhancing the CF network and encouraging farmers to commercialize agriculture as it facilitates access to the market and higher profits. Further, agribusiness firms should share more market risks with farmers to invite risk-averse smallholders into the fold of commercial farming.

Transitory and permanent shock transmissions between real estate investment trusts and other assets: Evidence from time‐frequency decomposition and machine learning

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Abstract

We evaluate asset returns and volatility connectedness using the time-frequency connectedness model and machine learning approaches. Using 48 years of monthly indices of equity real estate investment trusts (EREITs), mortgage real estate investment trusts (MREITs), stocks, commodities, and bonds, we find that shocks to EREIT, and MREIT returns have a transitory impact on other assets. However, asset volatility connectedness among assets occurs at lower frequencies as markets slowly process pricing information. Therefore, shocks to EREIT and MREIT decay gradually and spill over to the other three assets for long periods. We also find that the intensity of the time-frequency connectedness of returns and volatility varies with business cycles and significant domestic and global non-recession events. We attribute the dominance of real estate investment trusts (REITs) in destabilising the financial system through long-term volatility transmission to the heavy linkage of REITs to highly illiquid underlying direct real estate markets and high REITs leverage, making them more sensitive to real estate fundamentals, monetary shocks and macroeconomic risks than stocks and bonds. The result of the algorithm-based GA2M machine learning model broadly supports the dominance of EREITs in the transmission of returns and volatility and shows that commodities have more explanatory power in the transmission of volatility than in returns. The empirical findings have implications for strategic and tactical asset allocation and policy design for market stability.

The effect of auditor experience on stock price crash risk

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Abstract

In this study, we explore whether auditor experience has an effect on stock price crash risk. Using a sample of Chinese firms, we find a negative association between auditor experience and stock price crash risk, especially in firms with high client importance. The path analysis shows that accounting information transparency plays a mediating role in the relationship between auditor experience and stock price crash risk. And the effect of auditor experience on clients' stock price crash risk is dominant when auditor tenure is short and when the firm is audited by non-Big Four audit firms.

New bottle or new label? Distinguishing impact investing from responsible and ethical investing

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Abstract

A common topic of debate in academic scholarship on impact, ethical, and responsible investing is definitional clarity around the motivations and applications of each form of investment strategy. We ask, how does the subfield of impact investing differentiate itself from more established ethical and responsible investing – and do these differences necessitate yet another field of study? Adopting a combination of bibliometric and content analyses, we identify four distinct features of impact investing – positive impact targeting, novelty of governance structures, long time horizons, and the importance of philanthropy.