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We reveal the reporting quality channel by investigating the mediating role of financial reporting quality (FRQ) in the relationship between product market competition (PMC) and analysts’ forecast quality (AFQ). We analyze a sample of 1,179 unique nonfinancial Chinese listed firms, resulting in 6,074 firm-year observations, over the period 2007-2016. We employ the Herfindahl-Hirschman Index (HHI) to measure PMC, the modified Jones model to measure FRQ, and analysts’ forecast dispersion and accuracy as measures of AFQ. We then apply a three-step mediation model following the Baron and Kenny approach to test our proposed hypotheses. The results of the mediation model support our hypotheses by revealing the mediating role of FRQ in the PMC-AFQ relationship. The results suggest that intense PMC enhances the FRQ of Chinese-listed firms, in turn enhancing AFQ. Our findings present important implications for both current and potential investors, financial analysts, and relevant government regulatory bodies.

While prior studies have mostly highlighted that firms engage in corporate social responsibility (CSR) because of social norms, we introduce a new perspective by proposing that firms’ motive towards CSR is defined largely by the expected utility perspective. Consistent with our proposition, we show that greater social trust in a region has a positive effect on CSR and that this effect is due to the expected utility mechanism rather than the social normative mechanism. We also show that the association between social trust and CSR is stronger when the focal firm’s peers carry out high-level CSR and when a firm is strongly influenced by Confucianism. Our findings extend the theoretical research on CSR by showing that a firm’s motive towards CSR is based mainly on the expected utility mechanism.

PurposeThe purpose of this paper is to explore how multiple facets of board diversity influence technical efficiency (TE) and total factor productivity (TFP).Design/methodology/approachThe authors measure board diversity in two dimensions: relation-related dimension (age and gender) and task-related dimension (tenure, education and expertise). The authors use a balanced panel data of 806 nonfinancial Chinese firms over the period 2009–2017. The authors use a two-stage approach for analysis. In the first stage, the authors use a non-parametric frontier approach to calculate the TE and factor productivity scores. In the second stage, the authors regressed these scores on board diversity attributes (relation-related diversity and task-related diversity).FindingsBy using tobit regression and two-step system GMM, the authors find that board diversity improves TE and TFP. The authors’ analyses illustrate that a higher diversity on corporate board (in terms of age, gender, tenure, education and expertise) positively influence firm efficiency.Practical implicationsThe findings have important implications for policymakers. The findings suggest that regulators should devise policies to encourage board diversity. Because a diverse board can bring knowledge, skills, abilities, expertise and experience of diverse group members, which will ultimately enhance a firm’s efficiency. Especially, in the emerging markets (such as China), there is still a need for standard governance mechanisms; therefore, the authors suggest that policymakers should develop regulations and promote diversity of directors as one of the factors for improving the governance mechanisms, which will ultimately improve firms productivity.Originality/valuePrior studies mostly considered only one dimension (such as gender) of diversity and, therefore, have overlooked how other dimensions influence firms. The authors consider several dimensions of diversity and quantify them into relation-related (age and gender) and task-related (tenure, education and expertise) attributes and show how they influence firms’ efficiency. To the best of the authors’ knowledge, this is the first study to comprehensively investigate how several facets of diversity influence a firm’s TE and TFP.

Purpose The purpose of this study is to explore whether different board diversity attributes (corporate governance aspect) can be used to predict financial distress. This study also aims to identify what type of prediction models are more applicable to capture board diversity along with conventional predictors. Design/methodology/approach This study used Chinese A-listed companies during 2007–2016. Board diversity dimensions of gender, age, education, expertise and independence are categorized into three broad categories; relation-oriented diversity (age and gender), task-oriented diversity (expertise and education) and structural diversity (independence). The data is divided into test and validation sets. Six statistical and machine learning models that included logistic regression, dynamic hazard, K-nearest neighbor, random forest (RF), bagging and boosting were compared on Type I errors, Type II errors, accuracy and area under the curve. Findings The results indicate that board diversity attributes can significantly predict the financial distress of firms. Overall, the machine learning models perform better and the best model in terms of Type I error and accuracy is RF. Practical implications This study not only highlights symptoms but also causes of financial distress, which are deeply rooted in weak corporate governance. The result of the study can be used in future credit risk assessment by incorporating board diversity attributes. The study has implications for academicians, practitioners and nomination committees. Originality/value To the best of the authors’ knowledge, this study is the first to comprehensively investigate how different attributes of diversity can predict financial distress in Chinese firms. Further, this study also explores, which financial distress prediction models can show better predictive power.

This study investigates how uncertainty (economic policy uncertainty, market-based uncertainty, firm-specific uncertainty, and CAPM-based uncertainty) impacts the Chinese listed firms’ capital structure for the period 1999–2016, and further tests whether this relationship varies for state-owned enterprises (SOEs) and non-SOEs. In addition, we examine the moderating effect of a non-formal financing channel (trade credit) on the relationship between leverage and uncertainty. The findings show that firms decrease the level of leverage with an increase in uncertainty, and this impact is less prominent for firms owned by the state. Furthermore, the results reveal that trade credit decreases the negative association between uncertainty and leverage, suggesting that firms (especially non-SOEs) adjust their financing demands by using trade credit under high uncertainty. The findings provide implications for corporations and policymakers about how capital structure decisions are influenced by different types of uncertainties in a firm’s environment.

PurposeThis study examines how Confucianism, as an informal system, alleviates manager–shareholder conflicts and thus decreases managerial behavior of keeping higher levels of cash reserves. This study also investigates whether formal governance mechanisms (state ownership and institutional investors) moderate the relationship between Confucianism and cash holdings.Design/methodology/approachThis study opts a sample of Chinese listed firms over the period of 2004–2015. The geographical-proximity-based method was followed to measure Confucianism, which is the distance between a firm's registered address and the national Confucianism centers.FindingsThe results indicate that Confucianism adversely influences cash holdings. The authors’ findings illustrate that Confucian culture promotes ethical behavior, and therefore, firms in a strong Confucianism environment keep a lower level of cash reserves. The authors further document that the effect of Confucianism on cash holding is weaker for state-owned firms but stronger for firms with low institutional ownership.Practical implicationsThe findings provide implications for policymakers, academicians, and corporations. The results suggest that culture can reduce cash holdings. Especially, in emerging markets, such as China, where formal mechanisms are relatively less effective, informal institutions can serve an alternative system for alleviating adverse effects of agency conflicts.Originality/valueThis study contributes to the literature in two ways. First, this study contributes to cash holdings literature by showing that culture (Confucianism) is negatively associated with cash holdings. Second, this study extends the incumbent literature that seeks to explore how Confucian culture influences corporate behavior. To the best of the authors knowledge, this is the first study that identifies that Confucianism is associated with cash holdings.

This study investigates the effects of firm-specific, market-based, CAPM-based, and economic policy uncertainty on the relationship between leverage and investment for firms of different nature, i.e., state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs). The study uses a panel of Chinese listed firms covering the period 1999–2016 and applies a robust two-step system Generalized Method of Moments technique to cope with the endogeneity problem. The findings show that leverage has a significant and adverse impact on non-SOEs investment behavior. The results further show that firm-specific and market uncertainties exacerbate the negative effect of leverage on investment for non-SOEs. However, economic policy uncertainty and CAPM-based uncertainty attenuate the association between leverage and investment for SOEs and non-SOEs, respectively. Overall the results suggest that the impact of leverage on investment can be mitigating or exacerbating depending on the underlying uncertainty and the nature of the enterprise.

We investigate whether social trust environment influences earnings management. Using a sample of Chinese firms during 2001–2016, we find strong evidence that social trust reduces earnings manageme...

This study attempts to assess the influence of investor-advisor personality congruence on the trading behavior of futures investor. This research tested the hypotheses based on the unique d...

The study investigates the effect of principal-principal (PP) conflicts on corporate cash holdings. By examining a sample of Chinese listed firms over the period 2003–2016, we observe that PP conflicts are positively associated with cash holdings. Furthermore, we observe that institutional ownership attenuates the positive association between PP conflicts and cash holdings. Additional analysis reveals that the positive effect of PP conflicts on cash holdings is more pronounced for firms with high cash holdings than for those with low cash holdings. Overall, the results support the argument that controlling shareholders expropriate minority shareholders by holding larger cash reserves.

PurposeThis paper aims to examine whether and how gender diversity and CEO gender can influence firm value in the emerging market of Pakistan. The study further tests whether these relations vary across state-owned enterprises (SOE) and non-state-owned enterprises (NSOE).Design/methodology/approachThis study considers Pakistani listed firms over the period 2010-2017. The firms have been divided into SOE and NSOE for additional analysis. Tobin’s Q is used to measure firm’s value.FindingsThe authors document that female directors (FDirectors) on corporate boards is positively associated with firm value. The findings also illustrate that female CEOs (FCEOs) enhances a firm value. Additional analyses show that the influence of FDirectors and FCEOs on firm value is stronger in NSOE than in SOE.Practical implicationsThe results suggest that gender diversity and CEO gender play a significant role in corporate decisions. The findings imply that FDirectors discipline the management, reduce agency conflicts and thereby improve corporate governance, resulting in higher firm value.Originality/valueThis study has two important contributions. First, while prior studies mostly based their arguments on using gender diversity of corporate boards, this study shows that a firm performance can be significantly improved if a female serves as a CEO. Second, this study also tests the stated relations for SOE and NSOE and show that gender diversity plays a significant role in NSOE than in SOE.

This study investigates the effect of terms of trade (TOT) on the economic growth of China over the period 1980–2013. Autoregressive distributed lag (ARDL) model proposed by Pesaran, Shin, and Smith (2001, Journal of Applied Econometrics, 16(3), pp. 289–326) is applied for examining the short-run and long-run associations. The causality analysis between variables is analyzed by using Granger causality test and variance decomposition test. The ARDL model reveals that TOT significantly and adversely affect economic growth in the short run as well as in the long run. The results also imply positive short-run and long-run effect of labor and capital on the economic growth of China. The Granger causality results reveal significant bidirectional causal relationship between economic growth and capital, and between capital and labor force. The results show unidirectional causality from TOT to labor force. The variance decomposition results show that most of the innovation in economic growth is explained by its own innovation, while other variables have very small contributions to its innovations. The notable findings of the study suggest that TOT deterioration is relatively important for enhancing the economic growth of China.

PurposeThe purpose of this paper is to examine how corporate governance instruments impact firm value in the context of Pakistan. This paper considers state- and non-state-owned enterprises and examines whether the influence of corporate governance on firm value varies across firms having different nature of ownership.Design/methodology/approachThis study opts for an unbalanced sample of state- and non-state-owned enterprises for the period 2010-2014. Panel data regression is adopted for estimation of main results. The suitable model, i.e. fixed and random effect model, is selected using Hausman specification test.FindingsThe notable findings show that board independence has a significant and positive relationship with firm value only for state-owned companies. Furthermore, the results show that market capitalization and return on assets have a significant and positive association with firm value for both state- and non-state-owned enterprises. All other variables are found insignificant for both state- and non-state-owned companies, but the results are consistent with those reported in previous studies.Practical implicationThe findings of the study suggest that fair induction of independent directors, appropriate board size and cost-benefit analysis to conduct frequent meetings can help corporations to improve their performance.Originality/valueThis study is adding to the current literature by providing new insights and shows that the impact of corporate governance on firm value varies across firms of different types of ownership, i.e. state- and non-state-owned enterprises.

Purpose The purpose of this paper is to investigate the role of financial advice on investor trading behavior by analyzing the influence of advisor personality. Design/methodology/approach The study utilized the Big Five personality framework from Costa and McCrae (1992) to measure personality traits of advisors and examined the data collected from 314 stock investor–advisor dyads. Personality traits of advisors were measured by the NEO-Five Factor Inventory (Costa and McCrae, 1989). Confirmatory factor analysis was conducted to assess the fitness of the Big Five model. We followed two-stage least square method for estimating endogenous covariate by employing instrumental variable analysis. Probit model was used to evaluate the moderating influence of advisor personality traits on the association between the usage of financial advice and trading behavior. Findings The authors found that financial advice positively impacts investors’ stock trading frequency. The authors also provide empirical evidence that financial advice is more likely to increase trading frequency when advisor personality tends to be openness, conscientiousness and agreeableness. On the other hand, information acquired from financial advisors causes fewer adjustments in investors’ portfolios when the personality of advisors is likely to be extraverted and neurotic. Research limitations/implications The theoretical model in our study seeks to explain that a psychological factor, namely, advisor personality, influences the way an investor interprets information signals from financial advice, which, in turn, influences the investor’s decision to trade in securities. Practical implications This research suggests that characteristics of advisors other than those of investors can be of relevance for policy makers in their attempts to improve their business in the financial services industry. Originality/value Survey-based studies in finance are lacking. This study adds to the existing literature of behavioral finance that accounts for the observed variations in investors’ financial decision making explained by psychological factors. No previous study has been conducted so far exploring variations in the impact of financial advice on investors’ stock trading behavior by the Big Five advisor personality, and this paper strives to fill this research gap in Chinese stock market.

Purpose This paper aims to examine the volatility spillover dynamics between stock and foreign exchange market of China considering subprime 2007 financial crisis period. Design/methodology/approach This study considered daily data from January 2, 2002, to December 31, 2013. The sample period has been further divided into three periods; full sample period (January 2002-December 2013), pre-crisis period (January 2002-October 2007) and post-crisis period (October 2007-December 2013). This study opted Exponential Generalized Autoregressive Heteroskedasticity (EGARCH) model for the purpose of investigating asymmetric volatility spillover. Findings The results obtained using the EGARCH model imply that volatility spillover dynamics varies from period to period. In full sample period, the results show evidence of significant unidirectional volatility spillover from foreign exchange market to stock market. In pre-crisis period, the results indicate unidirectional volatility spillover from stock market to foreign exchange market. However, in post-crisis period, the results reveal significant bidirectional volatility spillover between stock and foreign exchange market. Practical implications The results of the study are important for policy makers because understanding the behavior of the financial markets, i.e. stock and foreign exchange market, would increase the success of policies implemented in a crisis situation. The results would help investors to formulate efficient portfolios. Originality/value This study is an important contribution to the existing literature in terms of analyzing volatility spillover between stock and foreign exchange market in an emerging economy, China. Furthermore, this study explored the volatility spillover dynamics between the two markets by considering the pre and post subprime Asian crisis period.

Mergers and Acquisitions are considered as one of the useful strategies for growth and expansion of businesses. These strategies have widely been adopted in developed economies while are quite often practiced in developing countries like Pakistan. This study aims to explore the effect of Mergers and Acquisitions on stock price behavior of banking sector in Pakistan by using event study analysis for the period of 2002–2012. Market Study Method was used to compute the abnormal and cumulative abnormal returns for analyzing pre and post events effect of the phenomenon on share prices. The results reveal mixed observations of the activity of mergers and acquisitions on stock price performance. Our findings indicate that most of the firms experienced negative while some firms have shown positive abnormal and cumulative abnormal returns following the activity. Overall, the results indicate that the market responded negatively towards the phenomenon of mergers and acquisition in Banking sector of Pakistan. The results would be useful in providing new insights to the investors and management in making their investment related decisions.

This study investigates the Islamic and conventional Index integration over the period 3rd September, 2008 to 30th September, 2015. This study uses Johansen and Juselius cointegration method for exploring the long run association. The short run association is explored using VECM model. The volatility spillover dynamics is examined using the GARCH and EGARCH models. The robustness of the results is analyzed by using Granger causality method, Variance Decomposition method, and Impulse Response Function. The estimation results show significant long run and short run association between Islamic and Conventional index. Furthermore, this study finds asymmetric bidirectional volatility spillovers between Islamic and conventional index. The findings suggest that domestic investors have low diversification opportunities by adding both Islamic and conventional index in their portfolios. However, international investors can add one of the indices in their portfolios, in order to benefit from portfolio diversification. Keywords: Islamic index, Conventional index, EGARCH, GARCH, Pakistan

Purpose The purpose of this paper is to investigate the impact of the frequency of information acquisition on the frequency of stock trading. The authors also examined if the Big Five personality traits of investor influence the association between information acquisition and stock trading behavior. Design/methodology/approach The authors adopted NEO Five-Factor Inventory (Costa and McCrae, 1989) inventory to measure the Big Five personality traits of investors and examined the data collected from 541 individual investors of the Chinese stock market. To overcome the potential endogeneity bias, the authors followed two-stage least square method for estimating endogenous covariate by employing instrumental variable analysis. The authors performed probit regression to evaluate the moderating influence of investor personality traits on the association between information acquisition and stock trading behavior. The authors also performed several other tests to check the robustness of the key findings. Findings This research confirmed the previous findings that the more frequently investors acquire information, the more often they trade in stocks. Moreover, the authors added to the existing literature by providing empirical evidence that the Big Five personality traits moderate the relationship of information acquisition with stock trading behavior. Information acquisition tends to increase stock trading frequency in investors with conscientiousness, extraversion and agreeableness traits. On the other hand, it also has the tendency to decrease the intensity of stock trading in investors with openness and neuroticism traits. Research limitations/implications The theoretical model in this study seeks to explain that the psychological factor, namely, investor personality, influences the way an investor interprets signals from information which in turn influences the investor decision to trade in securities. This research suggests that psychological characteristics of investors can be of relevance for policy makers in their attempts to improve their business in the financial services industry. Originality/value This study combines both information search literature and behavioral finance literature to investigate whether or not the information acquisition that relates to investors’ asset allocation decisions is influenced by investor personality. The study offers new theoretical insights into investors’ behavior due to the characteristics of the Chinese stock market which are uniquely different from other stock markets in the world. No previous study has been conducted so far in the Chinese stock market to explore variations in the impact of investors’ information acquisition on their stock trading by the Big Five personality and this paper strives to fill this research gap.

This study is an attempt to examine the income and price elasticities of crude oil demand in Pakistan using annual data from 1981 to 2013. The short-and long-run relationship was analysed by autoregressive distributed lag (ARDL) bounds testing approach. The results reveal that income and exchange rate show significant positive relationship with crude oil demand in short run as well as in long run. The analyses also show that crude oil price and domestic production have negative effect in both short and long run on crude oil demand. The income is found to be a strong determinant of crude oil demand in both short and long run. This study suggests that strategies would be formulated and adopted which may control the demand of crude oil without affecting the economic growth of Pakistan.

This paper analyzes the effect of terms of trade on economic growth of Pakistan considering annual time series data from 1980 to 2013. This study opted autoregressive distributed lag model for purpose of analyzing short- and long-run relationship. The results reveal significant negative long-run and short-run effects of terms of trade on economic growth. The analyses also indicate significant positive long-run and short-run effects of labour on economic growth. Further, capital stock is influencing positively the economic growth in long run only. We suggest that economic policies may be implemented to deteriorate terms of trade which will further enhance the economic growth of Pakistan. JEL: F13, F43

The purpose of this study is to investigate the presence of anomalies named; January effect, Islamic calendar effect, Day of the week effect, Time of the month effect, Turn of the month effect and Half of the month effect in an Islamic equity market of Pakistan. This study considered daily data from 30 September 2008 to 30th June 2015. The behavior of the data is tested by using the descriptive statistics method. The Generalized Auto Regressive Conditional Heteroskedasticity Model (GARCH) model is applied to capture the seasonality in returns and volatility in the Islamic equity market. The results of this study highlight certain interesting key findings. The notable findings indicates the absence of prominent January effect and the Ramadan effect. However, this study finds significant Day of the week effect, Turn of the month effect, Time of the month effect and Half of the month effect in the Islamic index. This study suggests that investors would be able to gain abnormal returns, if they would ...

Purpose The purpose of this paper is to examine the role of product market competition in shaping a firm’s reporting quality (RQ). Design/methodology/approach This research uses an aggregate measure of a firm’s RQ, considering both the absolute level of discretionary accruals (DA) and the quality of accruals, using modified Jones model and Francis et al. (2005) accruals quality model, respectively. Whereas, the Herfindahl-Hirschman index and the Lerner index are used to measure product market competition. Further, this study considers the transitional economy of China and employs panel data estimation techniques for testing the hypothesized relationships. Findings This study finds that firms operating in more competitive industries are associated with higher RQ. This association still prevails when analysis is done using the component measures of RQ (i.e. the absolute level of DA and the quality of accruals). Overall, the empirical results provide evidence on the disciplining role of product market competition among Chinese firms. Practical implications Given the complex governance structures and specific kind of agency problems in Chinese corporations, this study suggests that product market competition may play an external disciplining role to improve the corporate information environment. Originality/value This research explores the role of product market competition for a firm’s RQ in Chinese-listed companies, while the prior studies on the same topic are mostly from the developed countries.

The study aims to investigate how relying on short-term debt may help Chinese listed firms to make efficient investment decisions and reduce overinvestment problem for low-growth firms. The study uses a large set of panel data of non-financial Chinese listed firms over the period 2007–2017 and, using the robust two-stage generalized method of moments, which is robust to unobserved heterogeneity of individual firms and addresses endogeneity issues. Findings show a positive relationship between growth and investment; this association is enhanced by leverage, especially for high-growth firms. This supports the view that short-term debt helps Chinese firms to make optimal use of leverage and therefore make better investment decisions. Furthermore, the results reveal that leverage plays a disciplining and monitoring role to reduce overinvestment incentive for low-growth firms. Overall, the study suggests that shareholders should consider short-term debt to mitigate the debt overhang problem and restrict the opportunistic behavior of managers, which can lead to efficient investment decisions. It also provides foreign investors insights about capital structure in China, and how it can help them make better investment decisions.

This study examines the association between various uncertainties and corporate investment and further investigates this association between state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs). Moreover, this study analyzes the indirect effects of uncertainty on corporate investment through cash flow. The current research uses an unbalanced panel data of Chinese nonfinancial listed firms for the period 1999–2016. To control endogeneity issues, this study applies a robust two-step system generalized method of moments (GMM) technique to estimate the model. Empirical findings indicate that market-based and firm-specific uncertainties have positive effects, whereas economic policy and CAPM-based uncertainties have negative effects on corporate investment. Furthermore, results indicate that the effects of market-based, CAPM-based, and firm-specific uncertainties (economic policy uncertainty) were less (more) prominent for SOEs. Additional analyses show that cash flow stimulates the effect of firm-specific uncertainty on SOEs’ investment, whereas it weakens the influence of CAPM-based uncertainty (economic policy uncertainty) on investment of non-SOEs (SOEs). Moreover, cash flow attenuates the market uncertainty effect on investment.

We show how social trust environment influences tunneling. Using social norm theory, we argue that a high social trust environment mitigates unethical behavior from controlling shareholders and reduces tunneling. We further assume that the association between social trust and tunneling is weaker for enterprises controlled by the state and for those located in regions of high legal development. Using a sample of Chinese listed firms from 2003 to 2016, we find supportive evidence for our hypotheses. Similar conclusions were obtained with alternative measures, endogeneity corrections, and additional analyses. Our findings suggest that as a social norm, social trust can serve as an alternative mechanism for reducing agency problems in an emerging economy.

In recent years, the question of how uncertainty influences corporate decisions has received greater interest among academics, researchers, and corporations. This study is an attempt to investigate how uncertainties (firm-specific uncertainty (fsu), market-based uncertainty (mu), and economic policy uncertainty (epu)) influence research and development (R&D) investment and to further examine whether this relation is moderated by product market competition across firms of different sizes. Using a sample of Chinese listed firms covering 2000–2017, this study applies a two-step system GMM model to perform estimations and control for endogeneity issues. The findings show that uncertainties (fsu, mu, and epu) negatively influence R&D investment and that this negative relationship is more prominent for firms operating in competitive industries. In concentrated industries, however, the negative impact of uncertainty is mitigated for large firms, which have more internal resources and better access to external financing. This study contributes to real options theory by illustrating how different forms of uncertainty embedded in a firm’s internal and external environment reduce R&D investment, and by indicating how this relationship is moderated by product market competition.

The prime aim of this study is to investigate the impact of corporate governance practices on earnings management. We employed fixed effect estimators on a sample of 89 non-financial companies listed on KSE (Karachi Stock Exchange), for the period 2003–2012. Corporate governance has been quantified through its four different practices (namely, board size, managerial ownership, CEO–chair duality, and audit committee independence) whereas discretionary accruals have been used as a proxy for measuring earnings management and are calculated through modified Jones model developed by Dechow, Sloan and Sweeney (1995). The empirical findings are quite in line with the philosophy of corporate governance. Audit committee independence and earnings management are negatively correlated. Similarly, CEO–chair duality is positively associated with earnings management. However, two of the corporate governance variables (i.e., board size and managerial ownership) are found insignificantly related to earnings management. The study contributes in general to the existing literature on corporate governance and earnings management by examining their relationship; that corporate governance is negatively associated with earnings management. The study contributes specifically by evidencing that in developing countries like Pakistan, where the interest war is more prominent among the minority shareholder and controlling shareholders than among management and owners, corporate governance is playing an effective role to overcome these problems.

This study examines the relation between person-environment (P-E) fit with job satisfaction and job (task) performance. This cross-national study is based on faculty members of universities from Kabul (180) and Islamabad (270). Data is collected through self administered questionnaires and is tested following the Baron and Kenny (1986) moderation and mediation procedures. The studycontend that power distance moderates the relationship between P-E fit and job satisfaction. Contrary to expectation, power distance does not moderate the hypothesized relationship. This study finds that individual's satisfaction from high power distance culture depends on their cultural norms because they give more preference to cultural norms than their own needs and demands. Moreover, results show the direct relationship of P-E fit with job performance in Afghanistan (Kabul) and Pakistan (Islamabad). We compared the results of hypothesized model cross-nationally and find some variation regarding employee's job satisfaction. Job satisfaction partially mediates the relationships between P-E fit and job performance in Kabul, while in Islamabad job satisfaction fully mediate the relationship between P-E fit and job performance. By asserting the role of culture, this study developed practical implications for both theorists and practitioners. Keywords: P-E Fit, Power distance, Job satisfaction, Job performance, Afghanistan, Pakistan

Purpose - This study aims to investigate the market timing strategy in different market conditions (i.e. up, down, normal and in-financial-crisis situation) in the emerging market of Pakistan over the period 1995 to 2015. Furthermore, this study tests the validity of the capital asset pricing model (CAPM) and Fama and French model. Design/methodology/approach - This study considers monthly stock returns of 167 firms and constructs six different portfolios on the basis of different size and book to market ratio. The Treynor and Mazuy model is used to capture the market timing strategy. Findings - The results indicate evidence of the market timing in normal market conditions. However, there is less supportive evidence of market timing in up-market, down-market and in-financial-crisis situations. This study also confirms the validity of the capital asset pricing model and Fama and French three-factor model with strong support of value premium and size premium in the stock market. Practical implications - The findings of this study are helpful to companies in estimating the cost of issuing equity more accurately. The investors can use market timing to make their investment in a more better and profitable manner. Originality/value - Unlike other previous studies, this study considers an extended period to test the validity of the capital asset pricing model and Fama and French model. In addition, this study is novel in testing the marketing timing of the firms in the context of emerging economy of Pakistan. Objetivo - Este estudio tiene como objetivo investigar la estrategia de sincronización del mercado en diferentes condiciones de mercado (es decir, situación al alza, a la baja, normal y en situación de crisis financiera) en el mercado emergente de Pakistán durante el período 1995 a 2015. Además, este estudio prueba la validez de la modelo de valoración de activos de capital (CAPM) y modelo Fama y francés. Diseño / metodología / enfoque - Este estudio considera los rendimientos mensuales de las acciones de 167 empresas y construye seis carteras diferentes sobre la base de diferentes tamaños y relaciones entre libros y mercado. El modelo de Treynor y Mazuy se utiliza para capturar la estrategia de sincronización del mercado. Recomendaciones - Los resultados indican evidencia de la sincronización del mercado en condiciones normales de mercado. Sin embargo, hay menos evidencia de apoyo de la sincronización del mercado en situaciones de mercado al alza, a la baja y en situaciones de crisis financiera. Este estudio también confirma la validez del modelo de fijación de precios de los activos de capital y el modelo de tres factores de Fama y el francés con un fuerte apoyo de la prima de valor y la prima de tamaño en el mercado de valores. Implicaciones prácticas - Los hallazgos de este estudio son útiles para que las empresas estimen con mayor precisión el costo de emisión de acciones. Los inversores pueden utilizar la sincronización del mercado para hacer su inversión de una manera mejor y más rentable. Originalidad / valor - A diferencia de otros estudios anteriores, este estudio considera un período extendido para probar la validez del modelo de valoración de activos de capital y el modelo francés y de Fama. Además, este estudio es novedoso al probar el momento de comercialización de las empresas en el contexto de la economía emergente de Pakistán.

We show how board diversity influences stock price crash risk. By classifying board diversity into relation-oriented diversity (gender and age) and task-oriented diversity (tenure and education), we find that greater diversity on board can lower the risk of future stock crash. Additional analyses show that the effect of board diversity on future crash risk is stronger for firms with high information opacity and low institutional ownership. Overall, our findings provide new insights and suggest for more diverse boards to improve corporate governance practices.

In this study, we conjecture that Confucianism can curb the managerial bad news suppression behavior and consequently stock price crash risk. Using a unique sample of geographical-proximity-based Confucianism variables and Chinese nonfinancial firms over the period 2004–2014, we show that Confucianism is negatively associated with stock price crash risk. Further, we document that analyst coverage and institutional ownership, as formal governance mechanisms, attenuate the effect of Confucianism on stock price crash risk. The results are consistent to a battery of robustness tests and additional analyses. Overall the findings suggest that Confucianism, as an ethical system, mitigates crash risk in Chinese firms.

This study investigates the influence of corporate governance and the nature of the ultimate owner on the adjustment behavior of corporate cash holdings. This study uses a sample of Chinese listed firms over the period 2003–2016 and opts difference- and system-GMM (generalized method of moments) models to explore the target cash holdings of Chinese firms. The results demonstrate that Chinese firms have target cash holdings and that the cash holdings adjustment behavior varies across the state-owned enterprises and nonstate-owned enterprises. Finally, the results show that cash holdings adjustment rate varies across normal and crisis period. This study adds to the existing literature by showing how corporate governance attributes and the nature of ownership can impact the cash holdings. Finally, this study provides insights that the cash holdings adjustment varies in normal and a crisis period.

This study investigates the financing behavior of Chinese firms in tranquil and crisis situation over the period 2002–2014. We divide the sample into three sub-periods; pre-crisis, during-crisis, and post-crisis. The results indicate some noteworthy findings as this study incorporates firm and country-level factors. We find that the firms’ financing choice depends on the market conditions. The results show that Chinese firms have significantly decreased their dependence on leverage after the eruption of global financial crisis. Furthermore, we find that financial crisis of 2007–2008 has significantly affected the explanatory power of all factors. Moreover, profitability, size, and liquidity are important factors determining capital structure of the firm in financial crisis period.

Background: The aim of this study is to investigate the effect of the oil price and its volatility on the stock market of Pakistan before and after the 2007 financial crisis period. Methods: The analyses are carried out on daily data for the period from July 31, 2000 to July 31, 2014. This study uses several econometric techniques for the analyses, namely, the Johansen-Juselius cointegration test, generalized autoregressive conditional heteroskedasticity (GARCH) model, exponential generalized autoregressive conditional heteroskedasticity (EGARCH) model, variance decomposition method, and impulse response function. Results: The results of the cointegration method indicate a significant long-run association between stock market and oil prices in the pre-crisis period. The EGARCH model shows that oil price returns have a significant effect on stock market returns in both sub-periods, while the result for the GARCH model is significant only in the post-crisis period. We find a significant effect of oil price volatility on the stock market in both sub-periods from the GARCH model. Furthermore, the EGARCH model shows an asymmetric effect of oil price volatility on the stock market in the pre-crisis period. Variance decomposition shows that stock market variations are mostly explained by self-innovation. Moreover, the impulse response function results show that oil price shocks affected the stock market adversely in the pre-crisis period but positively in the post-crisis period. Conclusions: This study suggests that economic policymakers and investors should consider the oil price as an important factor affecting stock market returns.

Background: This study examined the volatility spillover effects between the stock markets of Asian countries, i.e., Pakistan, India, Sri Lanka, China, Japan, and Hong Kong. Methods: The daily data was considered from the period 4 January 1999 to 1 January 2014, consisting five trading days from Monday to Friday. The volatility spillover between stock markets was captured by using the generalized autoregressive conditional heteroskedasticity (GARCH) model. Results: The empirical analyses show evidence of significant bidirectional spillover of return and volatility between China and Japan. The results also show significant bidirectional volatility transmission between the equity markets of the following countries: Hong Kong and Sri Lanka, China and Sri Lanka. The significant unidirectional transmissions of stock market volatility are found to be flowing from India to China, Sri Lanka to Japan, Pakistan to Sri Lanka, and Hong Kong to India and Japan. Conclusions: These results are important for economic policy makers in order to safeguard the financial sector from international financial shocks. The investors can use this information for making efficient portfolio which will reduce their risk and enhance their returns.

Background The purpose of this study is to examine volatility spillover effects between stock market and foreign exchange market in selected Asian countries; Pakistan, India, Sri Lanka, China, Hong Kong and Japan. This study considered daily data from 4th January, 1999 to 1st January, 2014. Methods This study opted EGARCH (Exponential Generalized Auto Regressive Conditional Heteroskedasticity) model for the purpose of analyzing asymmetric volatility spillover effects between stock and foreign exchange market. Results The EGARCH analyses reveal bidirectional asymmetric volatility spillover between stock market and foreign exchange market of Pakistan, China, Hong Kong and Sri Lanka. The results reveal unidirectional transmission of volatility from stock market to foreign exchange market of India. The analysis reveals no evidence of volatility transmission between the two markets in reference to Japan. Conclusions The result of this study provide valuable insights to economic policy makers for financial stability perspective and to investors regarding decision making in international portfolio and currency risk strategies.