77 research outputs found
The impact of stringent insider trading laws and institutional quality on cost of capital
Get PDFThis paper examines the effects of interaction between stringent insider trading laws, institutional quality and equity portfolio allocation on the cost of capital. Using a dataset drawn from 44 countries over the period from 2001 to 2015, we find that stringent insider trading laws interact with institutional quality and foreign equity portfolio allocation to reduce the country-level cost of capital. Further analysis from a quasi-natural experiment based on the 2008–2009 global financial crisis suggests that the findings are robust to endogeneity. Our results imply that the enactment of stringent insider trading laws and their interplay with the quality of institutions are not only important to portfolio investment allocation decisions but reduce the country-level cost of capital
International equity portfolio allocations and stock market development
Get PDFThis paper examines whether the widely reported phenomena of home and foreign biases (i.e. sub-optimal international equity portfolio diversification) hold any ramifications for the development of stock markets. The results, analysed using macro- and micro-level data, support the view that stock markets that are characterised by a higher degree of home bias are associated with lower levels of development. On the other hand, markets where foreign investors show a higher degree of allocation preference, relative to the prescribed benchmark (foreign bias), are found to be more developed. The results, which are robust to the use of shock based identification strategy, indicate that policy measures that promote optimal international equity portfolio diversification could be crucial in developing the depth and breadth of domestic stock markets
CEO hubris and corporate carbon footprint: The role of gender diversity
Get PDFThis paper investigates the effect of an overconfident CEO on firm greenhouse gas emissions. Using panel data of 160,115 firm-year observations from 41 countries for 2000–2021, we find a negative relationship between CEO overconfidence and greenhouse gas emissions. Additionally, drawing on the theories of gender socialisation and diversity, we find that great representation of females on the board further compels overconfident CEOs to reduce firm carbon emissions. Our findings are robust to varying estimation techniques and identification strategies. These findings offer important insights to green investors, corporate boards, managers and policymakers on the role of overconfident CEOs and female leadership in the carbon abatement efforts of public companies
Corporate carbon emissions and market valuation of organic and inorganic investments
Get PDFWe empirically examine the impact of a firm’s carbon emissions level on the market valuation of organic and inorganic investments. We document that the market reacts negatively to corporate investment announcements by companies with high carbon emissions levels. Further analysis indicates that the discount on market valuation is more pronounced for the set of organic investments, within which only asset acquisitions and product launches are negatively affected by the high carbon emissions level at the announcement
Why Do Female Lead Auditors Charge a Fee Premium? Evidence from the UK Audit Market
Get PDFExisting research documents a fee premium for female partner led audits (Ittonen & Peni, 2012; Hardies et al., 2015; Burke et al., 2019; Lee et al., 2019; Hardies et al., 2021). We take this work forward by investigating a possible justification for the observed premium by examining how auditor gender is related to audit report lag and whether the female partner audit fee premium is driven by audit report lag. We find that firms audited by a female lead auditor have a significantly shorter audit report lag but pay a significantly higher audit fee. In further analysis, we find that the fee premium for a female partner led audits is higher for clients receiving a more timely audit opinion. Our findingsare consistent with female lead auditors delivering more timely audits and audit clients being prepared to pay a premium for such timeliness. Our study extends our understanding of the importance of gender in the auditing process and the value clients see in audits led by female auditors. Given the relatively low proportion of female lead auditors, our findings should also encourage audit firms to appreciate the economic value of female lead auditors and to actively facilitate their progression to senior roles
Biases in international portfolio allocation and investor protection standards
Get PDFEconomic reasoning suggests that financial globalization that encourages optimal international portfolio investments should improve investor protection standards (IPS) of a country. In practice, however, investors manifest varying degrees of suboptimal international portfolio allocations. Using a panel dataset covering 44 countries spanning over 15 years we examine whether suboptimal equity portfolio allocation in part is associated with the cross-country variations in IPS. Consistent with economic reasoning we find robust indications that international portfolio allocation may play an important role in the development of IPS. More specifically, the quality of IPS improves with higher degrees of optimal international equity portfolio allocation of domestic and foreign investors
Cross-country analysis of the effects of political uncertainty on stock price informativeness
Get PDFopen access articleWe examine the effects of political uncertainty on the informativeness of stock prices. Using panel data from 49 countries and 441,882 firm-year observations from 2000 to 2020, our results evince several interesting aspects. First, we find that, whereas political uncertainty reduces stock price informativeness in the year prior to elections and during the elections, stock prices tend to be more informative in non-election years. Second, we find that the sensitivity of stock price informativeness to political uncertainty is reduced by the strength of institutional quality. Third, the effects of political uncertainty appear to be heterogeneous across less/unregulated and regulated industries. Lastly, our channel analysis indicates that during the year of elections, firms tend to disclosure less information thereby exerting a negative impact on stock price informativeness. Our results are robust to the system generalized method of moments (SGMM), difference-in-difference, and alternative specifications
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