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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.

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 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.