Search

The factors affecting environmental quality are examined in this chapter. Along with the support of relevant literature, Environmental Kuznets Curve (EKC) hypothesis is explained in detail to examine the impact of economic growth. In order to understand the linkage between foreign direct investments (FDI) and environmental degradation, pollution haven hypothesis (PHH) and pollution halo hypothesis (P-HH) are scrutinized. Using data of Sweden for the period 1971-2015, impacts of economic growth, FDI inflows, and energy consumption on the ecological footprint are measured. Results show that there exists a U-shaped relationship between gross domestic product per capita and ecological footprint. In the long run, the EKC hypothesis is contradicted. Additionally, FDI inflows are found to affect ecological footprint negatively, meaning that it decreases the environmental deterioration, in the long run, affirming P-HH. This study could be extended by using different econometric models, countries, and larger datasets.

Purpose The purpose of this paper is to empirically investigate the effect of real credit ratings change on capital structure decisions. Design/methodology/approach The study uses three models to examine the impact of credit rating on capital structure decisions within the framework of credit rating-capital structure hypotheses (broad rating, notch rating and investment or speculative grade). These hypotheses are tested by multiple linear regression models. Findings The results demonstrate that firms issue less net debt relative to equity post a change in the broad credit ratings level (e.g. a change from A- to BBB+). The findings also show that firms are less concerned by notch ratings change as long the firms remain the same broad credit rating level. Moreover, the paper indicates that firms issue less net debt relative to equity after an upgrade to investment grade. Research limitations/implications The study covers the periods of 2009 to 2016; therefore, the research result may be affected by the period specific events such as the European debt crisis. Moreover, studying listed non-financial firms only in the Tadawul Stock Exchange has resulted in small sample which may not be adequate enough to reach concrete generalization. Despite the close proximity between the GCC countries, there could be jurisdictional difference due to country specific regulations, policies or financial development. Therefore, it will be interesting to conduct a cross country study on the GCC to see if the conclusions can be generalized to the region. Originality/value The paper contributes to the literature by testing previous researches on new context (Kingdom of Saudi Arabia, KSA) which lack sophisticated comparable studies to the one conducted on other regions of the world. The results highlight the importance of credit ratings for the decision makers who are required to make essential decisions in areas such as financing, structuring or operating firms and regulating markets. To the best of the authors’ knowledge, this is the first study of its kind that has been applied on the GCC region.

The main aim of the present study is to examine the possible nonlinear relations between foreign direct investments and environmental deterioration for subpanels separated according to the income levels of countries by using the classification made by the World Bank. Total energy consumption, economic growth, and renewable energy share are also considered as determinants of environmental deterioration in the model. Cross-sectional dependence is observed; hence, appropriate panel data unit root and cointegration tests are utilized for which results pointed out mixed integration order. Pooled mean group (PMG) estimator panel auto-regressive distributed lag (ARDL, hereafter) approach is adapted to observe short- and long-run relationships between the variables. Long-run results supported the pollution haven hypothesis as foreign direct investments caused an increase in ecological footprint. Findings are sensitive to different income levels of the subpanels of countries. This empirical study suggests tailored policymaking for every income level subpanel to ensure sustainable development.

The devastating Japan earthquake (magnitude 9.0) and tsunami (39-metre high) of 2011, also called the Great Tohoku or Sendai earthquake, was a record-breaker natural disaster causing enormous damage and a nuclear meltdown at Fukushima nuclear power plant. This paper attempts to analyse the long and short run effects of this record-breaking natural disaster on the Japanese equity, debt and FX markets as well as Gold as one of the most popular metals and investment options, using daily data. A variance bound test proposed by Fakhry & Richter (2018) underpinned by the C-GARCH-t model of volatility is adopted. The results seem to indicate that the natural disaster influenced the efficiency of the market in the immediate terms more than the long term. In a global financial market where the key is competitiveness, it is essential to analyse the efficiency and therefore stability of the Japanese financial market. Therefore, analysing the impact of the natural disaster on the competitiveness of the Japanese financial market.

Previous studies on company scores conducted at firm-level, generally concluded that there exists a positive relation between company scores and stock returns. Motivated by these studies, this study examines the relationship between company scores (Corporate Governance Score, Economic Score, Environmental Score, and Social Score) and stock returns, both at portfolio-level analysis and firm-level cross-sectional regressions. In portfolio-level analysis, stocks are sorted based on each company scores and quintile portfolio are formed with different levels of company scores. Then, existence and significance of raw returns and risk-adjusted returns difference between portfolios with the extreme company scores (portfolio 10 and portfolio 1) is tested. In addition, firm-level cross-sectional regression is performed to examine the significance of company scores effects with control variables. While portfolio-level analysis results indicate that there is no significant relation between company scores and stock returns; firm-level analysis indicates that economic, environmental, and social scores have effect on stock returns, however, significance and direction of these effects change, depending on the included control variables in the cross-sectional regression.