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Investment cash flow sensitivity under managerial optimism: New evidence from NYSE panel data firms
Get PDFInvestment cash flow sensitivity constitutes one important block of the corporate financial literature. While it is well documented in standard corporate finance, it is still young under behavioral corporate finance. In this paper, we test the investment cash flow sensitivity among panel data of American industrial firms during 1999-2010. Using Q-model of investment (Tobin, 1969), we construct and introduce a proxy of managerial optimism following Malmendier and Tate (2005a) to show the impact of CEOs’ optimism in the relationship between investment and internal cash flow. Our results report a positive and significant coefficient of investment to cash flow for the full sample. While, on estimations of our model using sub-sample of more and less constrained firms, we find that the sensitivity exists stronger only for totally constrained group. We find also that board characteristics can reduce investment policy’s distortions.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.04.00
Aid allocation, selectivity, and the quality of governance
Get PDFThe introduction of good governance in the economic growth and development agenda in the last two decades, along with the failure of aid conditionality to produce positive growth results, motivated expost selectivity instead of the ex-ante conditionality as a new approach to aid allocation. This paper aims to explore whether aid selectivity on the basis of the quality of governance is employed as a criterion in foreign aid allocation. The paper uses different instrumental variables as estimators to analyze the determinants of aid allocation over the period 2001–2010. The results produced strong evidence that countries with good governance are given preferential treatment by donors. Among the six governance indicators, it seems that voice and accountability and control of corruption are critical in the aid allocation decision.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.03.00
Dynamic estimation of an interest rate structure in Colombia. Empirical analysis using the Kalman filter
Get PDFThe official estimation for the term structure model in Colombia is based on the Nelson and Siegel (1987) development which is widely accepted and used. This estimation is based on the curve fitting with available data, only for one day ahead, making difficult to estimate the future zero-coupon yield curve. Taking into account the importance of having an estimation of the term structure for the valuation of financial assets in the Colombian market, this research proposes a methodology to estimate in a dynamic form the parameters of interest rates in the Nelson and Siegel Model. This required the use of the reparameterization proposed by Diebold and Li (2006), which determines the shape of the term structure through latent factors such as level, slope and curvature. This paper aims to show the dynamic estimation of the term structure of interest rate using the Kalman filter methodology framed in State - space. Results show that predictions are successful for more than one period in the future.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.07.00
External audit quality and ownership structure: interaction and impact on earnings management of industrial and commercial Tunisian sectors
Get PDFThis article emphasizes the significance of researching the cross effect of using jointly external audit quality and ownership structure over managerial discretion in a largely unexplored, non-Western and emerging context. The analysis is based on a sample of 61 Tunisian firms listed and unlisted on the Tunis Stock Exchange and operating in the industrial and commercial sectors during the period 2007-2011. To provide evidence on this topic, we conduct an empirical examination. First, we examine the effect of external audit quality and ownership structure on the discretionary accruals for the whole sample. We find that only auditor reputation has a negative and significant effect on earnings management. Second, this article provides empirical evidence on the cross effect of external audit quality variables and capital concentration on earnings management. This test suggests that this combination has a negative and significant effect on earnings management in industrial firms but it has a positive and non significant effect in commercial firms. Finally, the third empirical test concerns the combined effect of external audit quality and institutional property on earnings management.We find thatthe cross effect ofthis combined relation is negatively and significantly associated with earnings management of industrial firms but it has no significant effect on the earnings management of commercial firms. As for the cross effect of the auditor seniority and the institutional property, it has a positive and a significant effect in the commercial sectors, while, it is positively and non-significantly associated with earnings management of industrial firms.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.10.00
CEO's personal characteristics, ownership and investment cash flow sensitivity: Evidence from NYSE panel data firms
Get PDFThis study tries to extend previous works on behavioral corporate finance by examining the interaction between investment cash flow sensitivity and various CEO characteristics in either the existence or inexistence of managerial optimism. Using a Q-investment model and departing from a sample of 475 annual observations, our results highlight that CEO’s financial education, CEO’s ownership and their optimism bias can explain distortions in corporate investment policy since they affect investment cash flow’s relationship.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.10.00
In this issue
Get PDFWe are pleased to introduce the 36th issue of the Journal of Economics, Finance and Administrative Science. The journal promotes research in the field of economics, finance, operations, management and supply chain management. The latter fields are typical for the business school. Our purpose is to show the state of the art in research for different business fields. Also, our journal is international oriented with worldwide research.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.04.00
Modelo binomial para la valoración de empresas y los efectos de la deuda: escudo fiscal y liquidación de la firma
Get PDFThis paper proposes a binomial model for company valuation, projecting scenarios of continuity or insolvency of the company, and comparing it with the discounted cash flow model. The Real Option Theory is used for estimating the value of the company, which results in an explicit trade-off between the advantages and the risk of taking on debts. The work is organized as follows: the model is introduced and developed, and then it is illustrated with the application of a case, comparing the results obtained with the discounted cash flow model. Variables like: leverage, tax rate and volatility are sensitive when analyzing the impact on the value of the company. Finally, the document describes the advantages of the proposed model.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.03.00
Características estadísticas del índice general de la Bolsa de Valores de Colombia (IGBC) en sus primeros 10 años
Get PDFThere are many studies published in the literature on stylized facts in financial time series. However, for the Colombian case there is only one work that documents the stylized facts of the returns. Alonso and Arcos (2006) documented the presence of four stylized facts in the exchange rate series and the principal Colombian Stock Exchange Index (IGBC), using a daily sample for the period from January 21, 1999 to April 31, 2005. The aim of this document is to present five stylized facts on the behavior of the IGBC returns in its first 10 years. Furthermore, a wider range of statistical test is used to support the existence of those stylized facts. Evidence is provided for the following stylized facts: I) no efficiency of the market; II) heavy tails of the distribution; III) aggregational Gaussianity; IV) volatility clustering and V) Taylor effect. In our case, the sample of the daily IGBC will be used for the period between July 3, 2001 and July 5, 2011.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.03.00
Fusiones y adquisiciones en Latinoamérica, gobierno corporativo y modelo gravitacional
Get PDFIn this study, and by making use of a gravity model, an analysis is made on whether transnational mergers and acquisitions (M&A) are influenced by the corporate governance standards of a country. The study only focuses on the M&A flows from the OECD countries towards Latinamerican economies, as well as using the Kaufmann indicators for measuring, among others, the corporate governance of a country. Evidence is found that the gravity model is explicative of the M&A flows, and that the better the level of corporate governance at both origin and destination countries, the greater is the M&As activity.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.10.00
El fenómeno de la informalidad y su contribución al crecimiento económico: el caso de la ciudad de Guayaquil
Get PDFEl subempleo o informalidad se muestra como una verdad acuciante en las naciones en desarrollo, y el Ecuador no es una excepción, menos aún la ciudad de Guayaquil. Este estudio descriptivo pretende indagar sobre la informalidad, su realidad y sus características, y especialmente su aporte al crecimiento económico y su potencialidad en el desarrollo futuro de la urbe, al verificar las variables que influyen en la no formalización de sus actividades. Los resultados sustentan que la informalidad puede verse como un mecanismo de emprendimiento o un fenómeno relacionado. Las actividades que los individuos llevan a cabo de manera informal repercuten, no en la medida esperada, en la producción y crecimiento de una ciudad o región.
DOI: http://dx.doi.org/10.1016/j.jefas.2014.09.00