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Abstract We conjecture that marketplace lending provokes an increase in the quantity of entrepreneurship, particularly in more regionally disadvantaged areas, albeit at lower average quality. Using a fuzzy regression discontinuity...
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Abstract We conjecture that marketplace lending provokes an increase in the quantity of entrepreneurship, particularly in more regionally disadvantaged areas, albeit at lower average quality. Using a fuzzy regression discontinuity design that exploits exogenous variation in borrowers’ access to marketplace loans along U.S. state borders, we estimate a 10% increase in marketplace lending causes a 0.44% increase in business establishments per capita. The effects are more pronounced for less experienced entrepreneurs, for small and less profitable firms, firms more dependent upon external finance, in industries with lower sunk costs of entry, and for low-income regions with inferior access to financial institutions.
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The main objective of this article is to examine the long-term overreaction for all listed shares in the Egyptian Stock Exchange. I find evidence of long-term overreaction which is not due to size effect. Therefore, a contrarian s...
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The main objective of this article is to examine the long-term overreaction for all listed shares in the Egyptian Stock Exchange. I find evidence of long-term overreaction which is not due to size effect. Therefore, a contrarian strategy by buying losers and selling winners is likely to be profitable. The findings also suggest that the overreaction phenomenon in the Egyptian stock market is not sensitive to the length of the formation period. Interestingly, I find a link between the regulatory policies and long-term overreaction as I find no evidence of investor overreaction within the strict price limit regime. On the other hand, the over-reaction phenomenon is clear during the circuit-breaker regime. The findings also show that the overreaction phenomenon in the Egyptian Stock Exchange cannot be attributed to the seasonality effect.
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A large literature has adumbrated the value-added role of private equity (PE) firms in backing buyouts. The present paper examines a different and hitherto unexplored issue: the role of financial restructuring in PE buyouts in the...
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A large literature has adumbrated the value-added role of private equity (PE) firms in backing buyouts. The present paper examines a different and hitherto unexplored issue: the role of financial restructuring in PE buyouts in the UK both before and after the financial crash of 2007. The UK evidence indicates that while PE buyouts had greater financial risk than comparable public limited companies (PLCs), they (1) already contained provisions to optimize recovery rates under insolvency, raising their recovery rates significantly relative to controls; and (2) rapidly adjusted the capital structures of new deals in response to the changes in financial and economic climate from 2007 onward resulting in failure rates somewhat lower than PLCs and non-PE buyouts. Non-PE management buyins (MBIs) by contrast have much higher failure rates than any other category throughout the 12-year period. Our analysis offers important implications for policymakers. First, it shows that there has been greater adjustment over time in the leverage and cash position of buyouts than for other private companies and matched PLCs. Second, policymakers need to recognize that while PE buyouts are highly leveraged, non-PE-backed buyouts are more or less well managed. Third, ceteris paribus, PE-backed deals are not riskier than the population of non-buyouts; active involvement by PE firms in helping portfolio companies deal with trading difficulties plays an important role. Fourth, the governance mechanisms in PE buyouts result in greater preservation of value when a portfolio firm enters formal bankruptcy than is the case for PLCs.
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The paper uses a new, hand-collected data set of 93 private equity (PE)-backed buyouts and 96 PLCs that became financially distressed over the period 1995-2008 to investigate empirically whether PE-owned companies (buyouts) in fin...
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The paper uses a new, hand-collected data set of 93 private equity (PE)-backed buyouts and 96 PLCs that became financially distressed over the period 1995-2008 to investigate empirically whether PE-owned companies (buyouts) in financial distress (Receivership/Administration) have better recovery rates (RRs) for secured debt (SD) than their publicly-owned (PLC) counterparts and, if so, why. We find that the RRs of buyouts (amount recovered in proportion to SD outstanding) are in fact about twice thai of PLCs during this period. Administration, surprisingly, has no effect on debt-RRs but seems significantly to reduce the time to recovery. A larger number of creditors which in theory should reduce RRs, again has no impact, nor does company size. Intriguingly, however, higher leverage consistently reduces the RR as (we hypothesise) more leveraged buyouts need to have recourse to lower quality assets for security. Finally, the time in recovery is negatively related to the date of distress onset (later years have shorter durations) and to the size of the firm (a concave relationship).
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This paper examines the relationship between corporate social responsibility (CSR) and financial performance in Islamic banks. Using a comprehensive CSR index covering ten dimensions, we analyse the CSR disclosures in a sample of ...
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This paper examines the relationship between corporate social responsibility (CSR) and financial performance in Islamic banks. Using a comprehensive CSR index covering ten dimensions, we analyse the CSR disclosures in a sample of 90 Islamic banks across 13 countries. The CSR disclosure index shows that Islamic banks engage across the range of social activities, both as individual banks and as countries. However Islamic banks seem to show more commitment to the vision and mission, the board and top management, and the financial product/services dimensions, whilst least attention is paid to the environment dimension. Islamic banks also show a considerable awareness of the mandatory disclosure recommendations of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) however, they pay less attention to the voluntary CSR disclosure. Moreover, we find a pronounced emphasis in Islamic banks strategy towards more universal disclosures, suggesting the legitimacy of these banks is reinforced through disclosure to the wider stakeholder community. The empirical analysis highlights a positive association between CSR disclosure and financial performance. We also find a positive and highly significant association between the Shari'ah supervisory board (SSB) size and CSR disclosure index. Finally, the results of the three-stage least squares estimation show that the causality between the two endogenous variables runs from financial performance to CSR disclosure. Thus CSR disclosure is determined by financial performance.
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Stock market efficiency is associated with news being spread immediately in the market. The literature, however, offers two competing theories to explain this phenomenon. One theory, the mixture of distributions hypothesis (MDH) c...
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Stock market efficiency is associated with news being spread immediately in the market. The literature, however, offers two competing theories to explain this phenomenon. One theory, the mixture of distributions hypothesis (MDH) claims immediate dissemination, while the other, the sequential information arrival hypothesis (SIAH) argues for sequential dissemination, or effectively market inefficiency. The present paper provides a critical test of the two theories using emerging market data, specifically from Hgypt, and finds evidence to validate both hypotheses, conditional on the regulatory regime (price limit versus circuit breaker). Using generalized method of moments estimation on 10 years of daily data on the HXG 30 market index, our results show that within the price limit window, news proxied by trading volume, spreads instantaneously to all market participants, consistently with the MDH. Within subsequent circuit breaker window, however, new information leaks out to all market participants only over a period of several days, consistently with the SIAH. We find this switch is moreover associated with an increase in price volatility. Thus, not only is the market less-efficient after the switch, it is also more volatile.
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Manuscript Type: Empirical Research Question/Issue: The study investigates the impact of venture capital (VC) ownership on corporate governance characteristics in entrepreneurial companies listed on the UK's Alternative Investment...
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Manuscript Type: Empirical Research Question/Issue: The study investigates the impact of venture capital (VC) ownership on corporate governance characteristics in entrepreneurial companies listed on the UK's Alternative Investment Market (AIM). In particular, the paper examines the impact of venture capital funds on the firm's governance structure post-IPO and the dynamic interrelationship between corporate governance (CG), venture capital ownership and financial performance. Research Findings/Insights: Using hand collected data from a sample of 271 entrepreneurial companies admitted to AIM during the period 2000-2007, we measure and track the corporate governance characteristics by constructing a CGAIM50 index. Our findings suggest a high level of VC ownership and its reputation leads to better corporate governance in our sample of entrepreneurial Initial Public Offering (IPO) companies. We also find a positive and significant relationship between corporate governance characteristics and financial performance, which suggests that outside shareholders such as VCs bring managerial know-how and hence help improve IPO companies' performance. Theoretical/Academic Implications: The study is the first to examine the CG characteristics of entrepreneurial (fast growth) companies on the AIM using a unique index. The inter-relationship between venture capital ownership structure, corporate governance, and financial performance is modeled using the system GMM estimator of dynamic panel model in addition to the 3SLS methodology. Practitioner/Policy Implications: The study offers practical implications for regulatory authorities and investors, as it highlights that venture capital funds investing in entrepreneurial companies on the AIM have a positive impact on both corporate governance and company performance, which improves after IPO admission, and also on subsequent performance.
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This paper investigates the short-term overreaction to specific events and whether stock prices are predictable in the Egyptian stock exchange (EGX). We find evidence of the short-term over-reaction in the EGX. Losers ("bad news" ...
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This paper investigates the short-term overreaction to specific events and whether stock prices are predictable in the Egyptian stock exchange (EGX). We find evidence of the short-term over-reaction in the EGX. Losers ("bad news" portfolios) significantly outperform winners ("good news" portfolios) and investors can earn abnormal return by selling the winners and buying losers. Terrorist attacks have negative and significant abnormal returns for three days post event followed by price reversals on day four post event. Whereas, the tensions in the Middle East region have a negative and significant abnormal returns on event day followed by price reversals on day one post event. Moreover, the formation of a new government has no effect on the average abnormal returns post event in the EGX. The results also show that small firms tend to have greater price reversals compared to large firms. Overall, our results provide evidence of the leakage of information in the EGX.
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I investigate the effects of imposing different bands of price limits on stock returns and volatility in the Egyptian (EGX), Thai (SET) and Korean (KRX) stock exchanges. In addition, the paper examines whether the switch from narr...
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I investigate the effects of imposing different bands of price limits on stock returns and volatility in the Egyptian (EGX), Thai (SET) and Korean (KRX) stock exchanges. In addition, the paper examines whether the switch from narrow price limits (NPL) to wider price limits (WPL) structurally alters volatility and the day of the week anomaly. Using the extended EGARCH and PARCH asymmetric volatility models, I found that the switch from NPL to WPL structurally altered both asymmetric volatility and the day of the week anomaly in the EGX, SET and KRX. I argue that the price discovery mechanism is disrupted due to the switch as closing prices do not fully reflect all information arrived in the market when prices hit the limits and that is reflected on volatility and market efficiency.
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I investigate the effectiveness of two competing regulatory regimes and the effect of switching from strict price limits to circuit breakers on volatility spillover, and also on trading interference hypotheses. I find that switchi...
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I investigate the effectiveness of two competing regulatory regimes and the effect of switching from strict price limits to circuit breakers on volatility spillover, and also on trading interference hypotheses. I find that switching to the circuit breakers' regime increases volatility and disrupts the price discovery mechanism. Stock prices are prevented from reaching their equilibrium levels and traders are unable to obtain their desired positions on limits hit day. Moreover, I find that volatility is spread out over the following 2 days post-limit hits within the strict price limits regime. Finally, the results show that price limits interfere with trading activity and affect investors' beliefs and liquidity positions.
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