Scielo RSS <![CDATA[Journal of Economics, Finance and Administrative Science]]> vol. 26 num. 51 lang. es <![CDATA[SciELO Logo]]> <![CDATA[IFRS adoption and firms’ opacity around the world: what factors affect this relationship?]]> Abstract Purpose. This paper aims to identify what are the moderating factors affecting the relationship between firms’ adoption of international financial and reporting standards (IFRS) and the firm’s opacity. Design/methodology/approach. This study uses the meta-analysis methodology from Hunter et al. (1982) to find if the mere IFRS adoption reduces firm’s opacity and a meta-regression from Stanley and Jarrell (1989) to identify the moderating factors that may influence this relationship. Findings. Contrary to previous studies, this study finds a low, negative and nonsignificant correlation between IFRS adoption and firms’ opacity, but this relationship depends on the geographical region. Using 34 results from 28 studies from different continents published between 2005 and 2018 this study finds that IFRS adoption reduces opacity in countries with common law (COML) and with more authorities’ oversight and power to enforce the rules. Originality/value. This study finds two institutional commonalities between different previous studies that intend to assess the impact of the IFRS adoption upon firms’ opacity: the legal system and the authorities’ oversight power. <![CDATA[Institutional quality and risk in the banking system]]> Abstract Purpose. This paper aims to offer an empirical study of the impact of institutional quality on the banking system risk and credit risk. Design/methodology/approach. Applying cross-sectional dependent tests and stationary tests to check the property of our sample, the panel corrected standard errors model is recruited as the main estimator, while feasible generalized least squares, pool ordinary least squares (OLS), robust pool OLS and other estimators are used as a robustness check for an unbalanced panel data for 56 economies divided into three subsamples between 2002 and 2015. Findings. The empirical results show several significant contributions. First, an improvement in institutional quality is an important factor to reduce the banking system risk. This effect of the institutions is less important in well-capitalized, highly profitable and in high-economic growth countries. This effect is also stronger in highly liquid banking systems. Notably, a better institutional quality helps to reduce the banking system risk in the highly concentrated banking system. Second, institutional quality has a significant negative relationship with the banking credit risk, especially in highly concentrated banking systems and in high-growth countries. This influence is weaker in highly liquid and well-capitalized banking systems. Finally, better institutions reduce the positive effect of trade openness, but it induces a higher credit risk for the banking system from the trade openness. Notably, a better institutional quality enhances the negative effect of foreign direct investment (FDI) inflow on both banking system risk and credit risk. These findings are documented for a global sample and three subsamples: low and lower-middle-income economies, upper-middle-income economies and high-income economies. Originality/value. This study provides some recommendations, for policymakers, on the roles of institutions in the banking system and financial stability. <![CDATA[Financial system specialization and private research and development expenditure: research for OECD countries]]> Abstract Purpose. The purpose of this paper is to analyse the role that different financial sources and financial specialization have on private research and development (R&amp;D) activity in OECD countries. Design/methodology/approach. The authors developed several panel regressions choosing as a final model a two-way random effects regression to understand which funding sources are related to the R&amp;D expenditure, and how financial specialization has links to the private portion of R&amp;D aggregated expenditure. The authors include data from the years 2000 to 2016 for OECD countries. Findings. The results reinforce the critical role that stock markets have in enhancing private R&amp;D and that bond markets have an inverse relationship with private R&amp;D national expenditures. The authors do not find evidence of a link between bank sources and private R&amp;D. Specialized financial systems (banking or market) support innovation in a better way than a mixed arrangement of those two systems. Practical implications. The findings of this study have considerable policy implications. Policymakers need to be aware of these results, given that some variables related to financial markets, seems to boost the inputs for R&amp;D. In the long term, this could be a signal that national and regional systems of innovation need a broad view of the factors hampering scientific activity, and also a signal that there are other ways to impact the results of the complex innovation activity through the development of stronger financial systems backing up national systems of innovation. Originality/value. The authors found that the long discussion about the financial system that a country has to choose to enhance growth with R&amp;D&amp;I may have been misleading the public policy. The findings show that rather than a bank or a stock market financial system, economies looking to boost R&amp;D&amp;I, must specialize in one of the two systems, deepen these and generate the appropriate policies to promote science, technology and innovation using those financial markets. <![CDATA[Pensionable age vs cross-country diversity of economic activity of the near-elderly]]> Abstract Purpose. The purpose of this paper is to examine whether cross-country differences in pensionable age explain such differences in economic activity of people at near-retirement age. Design/methodology/approach. The empirical study uses regression models for macro-panel encompassing 21 European countries in the period 2008-2014. Findings. Empirical results indicate that pensionable age is a determinant of cross-country differences in employment rate in the near-retirement age group, and less a factor differentiating average effective retirement age. It turns out that other factors matter, including salaries and wages as percentage of GDP (treated as a proxy for the occupational composition of populations across the countries studied), self-employment, participation in education and training, or self-perceived health. Social implications. The problem of economic activity at the near-retirement age is complex and cannot be limited to legal regulations concerning pensionable age. The policy aiming at stimulating the economic activity of the near-elderly should include actions on many sides including labour market, pension system, education, training, or health care. Originality/value. The results complement studies based on the single-country approach and demonstrate that pensionable age does not account for cross-country differences in terms of average effective age of retirement when controlling for other factors. Moreover, factors differentiating effective retirement age and employments rates across countries studied are not similar. <![CDATA[Relationship between cash holdings and expected equity returns: evidence from Pacific alliance countries]]> Abstract Purpose - This paper aims to examine the relationship between cash holdings (CH) and expected equity return in a sample of firms of Pacific alliance countries. Design/methodology/approach - This paper constructed a panel of Pacific alliance firms for the period ranging from 2010 to 2016. This paper estimated different specification models using multivariate regression, and the statistical technique used to validate the hypothesis was panel data. Findings - Results showed that there is a positive relationship between CH and expected equity return (r). The relationship between CH and systematic risk (ß) was estimated and this paper found a positive and statistically significant association. Findings suggest that corporate liquidity contains underlying information that contributes to explain the expected equity return, which, if ignored, can produce quite misleading results. Originality/value - The results of this study have both academic and practical implications. First, the findings of the research contribute to a better understanding of the asset pricing models in emerging countries. On the other hand, the results obtained in this study can serve shareholders to make better estimations of the expected equity return, so investors can improve the risk-return trade-off due to the model allow a better estimation of the risk-return relation. <![CDATA[Portfolio performance under tracking error and benchmark volatility constraints]]> Abstract Purpose. Using a portfolio comprising liquid global stocks and bonds, this study aims to limit absolute risk to that of a standardised benchmark and determine whether this has a significant impact on expected return in both high volatility period (HV) and low volatility period (LV). Design/methodology/approach . Using a traditional benchmark comprising 40% equity and 60% bonds, a constant tracking error (TE) frontier was constructed and implemented. Portfolio performance for different TE constraints and different economic periods (expansion and contraction) was explored. Findings. Results indicate that during HV, replicating benchmark portfolio risk produces portfolios that outperform both the maximum return (MR) portfolio and the benchmark. MR portfolios outperform those with the same risk as that of the benchmark in LV. The MR portfolio weights assets to obtain the highest return on the TE frontier. During HV, the benchmark replicated risk portfolio obtained a higher absolute risk value than that of the MR portfolio because of an inefficient benchmark. In HV, the benchmark replicated risk portfolio favoured intermediate maturity treasury bills. Originality/value. There is a dearth of literature exploring the performance of active portfolios subject to TE constraints. This work addresses this gap and demonstrates, for the first time, the relative portfolio performance of several standard portfolio choices on the frontier. <![CDATA[The impact of rating classifications on stock prices of Brazilian companies]]> Abstract Purpose . This paper aims to identify if there is an impact of the rating announcements issued by the agencies on the returns of the stocks of Brazilian companies listed on Brasil Bolsa Balcão, from August 2002 to August 2018, identifying which types of announcement (upgrade, downgrade or the same initial classification) cause variations in prices around the date of disclosure of the rating. Design/methodology/approach. The event study methodology was applied to verify the market reaction around the announcement dates in a 21-day event window (−10, +10). The market model was used to calculate the abnormal returns (ARs), and subsequently, the accumulated ARs. Findings . The hypotheses tests allowed to verify that the accumulated ARs are different, before and after the three types of rating announcements (upgrades, downgrades and the same classification); in upgrades, the mean of accumulated ARs increases in the days before the event, while in downgrades, this increase occurs after the event. This paper concluded that the rating announcements have an impact on the return of stock of the Brazilian market and that the market reaction occurs most of the time before the event happens, which indicates that the market can anticipate the information contained in the changes in credit ratings. Practical implications. The results have considerable implications for portfolio managers, institutional investors and traders. It facilitates investment decision-making in the face of rating classification announcements. Market participants can pay more attention to their investment strategies and asset allocation during periods of risk rating announcements. Additionally, traders can understand the form of investment strategy for superior earnings. Originality/value. The importance of the study is related to the fact that the results may explain the causes of specific movements in the Brazilian financial market related to a source of information that may or may not be able to influence the decisions of the financial agents that operate in this market. The justification is centred on the idea that, for investors who somehow react to the announcements, it is relevant to understand the impact of rating classifications on companies, as access to such information allows for more conscious decision-making. <![CDATA[The impacts of intellectual capital on financial performance and value-added of the production evidence from Chile]]> Abstract Purpose. The purpose of this paper is to analyse the direct impacts on financial performance and the added value of production in family businesses, considering the efficiency of intellectual capital as determining variables. Design/methodology/approach. A comparative analysis between family businesses (FB) and non-family businesses (NFB) is proposed to explore significant differences in the impacts on financial performance and added value of companies, through multivariate techniques. It contributes to the literature on the family business, and its performance from an analytical framework that incorporates the theory of intellectual capital and the measurement of its impact. Findings. The findings show that the value-added coefficient of intellectual capital (VAICTM) is a determining factor in the financial performance of companies and, to a greater extent, in the FB than in their NFB counterparts. It is also verified that the efficiency of intellectual capital in the FB has a direct and greater relationship with the value added of production (VAEmp), with respect to non-family businesses, being an important factor in predicting the performance of companies. Practical implications. The findings allow us to conclude the importance of efficient management of intangible factors in companies, such as intellectual capital, becoming a competitive advantage factor. Originality/value. The document explores the relationship and impact of VAICTM in family businesses that belong to an emerging economy and demonstrates the existence of differences between FB and NFB, at the level of intangible factors under a comparative analysis. <![CDATA[Innovation and patents as a business success factor]]> Abstract Purpose . The purpose of this paper is to expose the impact of innovation and patent registration, as a strategy that contributes to business success in the current competitive and globalized market conditions. Design/methodology/approach . This paper presents a study on the innovation and contribution of the patent registry in the growth of economic sales of 1,746 companies in the Colombian manufacturing sector, whose applied methodology was a statistical correlation analysis and a binary logistic regression. Findings. The results reveal a positive relationship among incremental product innovations with the achievement of sales success, although it is evident that patent registration negatively influences business success as a factor in innovation. Originality/value . This study allows organizations to understand the importance of developing innovation processes and patent registration as a competitive factor that drives sales growth and success. <![CDATA[Ethnic diverse and financing choices affecting of business survival: a case study of New Zealand small- and medium-sized enterprises]]> Abstract Purpose. This paper aims to investigate how ethnic diversity and finance options impact the survival of small- and medium-sized enterprises (SMEs) in New Zealand. Design/methodology/approach. This study incorporates survey data and secondary data from the public domain. The surveys were conducted across six sectors of the economy categorised into four main ethnic groups involving six nationalities. This study adopts regression analysis using Probit, Logit and linear probability. Findings. The financing choices of the entrepreneurs were consistent with pecking-order theory. The evidence suggests that information asymmetries are prevalent in New Zealand, as SMEs’ owners perceive significant risk from expanding businesses internationally. There is no relationship between ethnicity bias and the survival of firms. Originality/value . This study provides a contribution to the literature on factors relating to business survival and guides the policymakers to use the benefits of potential factors to increase the survival rate of SMEs.