CERES :: Browsing by Author "Belghitar, Yacine"

Browsing by Author "Belghitar, Yacine"

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Open Access
CEO chairman controversy: evidence from the post financial crisis period
(Springer, 2020-07-13) Gontarek, Walter; Belghitar, Yacine
Regulators generally discourage bank CEOs also holding the role of board Chairman, as this governance structure can hinder independent decision-making and effective risk oversight. This study examines the issue of CEO Duality, identifying a positive relation to greater risk-taking across a battery of sensitivity tests. In further analysis, the study controls for differences in supervisory monitoring levels to examine its impact. Banks led by CEO Chairmen which are subject to lower levels of supervision continue to report a robust association to risk-taking, as before. However, this association dissipates for banks which are subject to heightened supervisory monitoring. These findings indicate that agency costs related to Duality may be moderated by greater regulation. This paper weighs-in on the controversy relating to a single contentious governance structure (i.e., CEO Duality), thus informing boards, regulators and researchers of the need to consider the overall interplay of monitoring mechanisms.
Open Access
Convexity, magnification, and translation: The effect of managerial option-based compensation on corporate cash holdings
(Blackwell Publishing Ltd, 2014-06-11T00:00:00Z) Belghitar, Yacine; Clark, Ephraim
Using the distinctions among the convexity, magnification, and translation effects, we identify the pertinent parameters and examine empirically the relation between cash holdings and option-based managerial compensation. We show that changes in delta reduce the effects of magnification and convexity on managerial risk aversion. We also provide evidence that there is a negative relation between the option-based incentives delta and vega and cash holdings. These results are robust when incentives are extended to include all executive board members and when the sample is broken down according to different risk characteristics.
Open Access
Does it pay to be ethical? Evidence from the FTSE4Good
(Elsevier, 2014-07-08) Belghitar, Yacine; Clark, Ephraim; Deshmukh, Nitin
The empirical mean–variance evidence comparing the performance of Socially Responsible Investments (SRI) and conventional investments suggests that there is no significant difference between the two. This paper re-examines the problem in the context of Marginal Conditional Stochastic Dominance (MCSD), which can accommodate any return distribution or concave utility function. Our results provide strong evidence that there is a financial price to be paid for socially responsible investing. Indices composed of socially responsible firms are MCSD dominated by trademarked indices composed of conventional firms as well as by indices carefully matched by size and industry with the firms in the SRI indices. Zero cost portfolios created by shorting the SRI index and using the proceeds to invest in the conventional index generate higher average returns, lower variance and higher skewness than either of the two indices standing alone. They also MCSD dominate the SRI and conventional indices standing alone.
Open Access
Does religiosity affect financing activity? Evidence from Indonesia
(Wiley, 2022-11-27) Fatwa Wijaya, Ibrahim; Moro, Andrea; Belghitar, Yacine
We examine the role of religiosity on the financing activities in both Islamic and conventional banks in Indonesian provinces by using five different measures of religiosity: number of Islamic schools, hajj application, number of Islamic seminary schools, number of Mosques, and number of certified halal products. Based on regression analysis, the results show that both Islamic and conventional banks provide more financing in religious provinces. Religiosity also helps in reducing the volume of non-performing financing. Our the results are still qualitatively valid after taking into account endogeneity issue that emanates from omitted variables (i.e., unobservable beliefs, ideas, and attitudes), and possible reverse causality between religiosity and the total amount of financing at the province level.
Open Access
Does religiosity and trust affect financing activities? Evidence from Indonesia.
(Cranfield University, 2020-12) Wijaya, Ibrahim Fatwa; Moro, Andrea; Belghitar, Yacine
Islam religiosity and trust are inextricable linked since Islamic teachings promote trustworthy behaviour. Existing literature has shown that perceived trustworthiness of a party has positive impacts on the business-to-business relationship, especially in financing relationships. So far, however, there has been limited discussion on the role of religiosity and trust to support financing activities in the Islamic context. Empirical paper number 1 examines the impact of Islam religiosity on financing availability and non- performing financing in both Islamic and conventional banks. I contribute to the literature by using more suitable Islam religiosity proxies at province level, namely Islamic school, Islamic seminary school, mosque, Hajj application, and halal certificate and by finding that Islamic and conventional banks in stronger Islam religiosity areas provide more financing and have less non-performing financing. Empirical paper number 2 explores the magnitude of values-based trust vis-à-vis competence-based trust on financing availability in the context of Islamic culture, an issue that has limited discussion in current literature. I find that values-based trust plays stronger role than competence-based trust in Islamic culture. Finally, existing literature on trust and bank lending has not taken into account the characteristics of financing products in their studies. The third empirical paper discusses the role of trust on financing availability in three different Islamic financing products, i.e., Murabaha, Ijara, and Profit-loss sharing. I find that values-based trust is more important than competence-based trust in Ijara, but competence-based trust plays stronger role than values-based trust in both Murabaha and Profit-loss sharing.
Open Access
The effect of a curruption scandal, recession and legislation on voluntary disclosure, reporting quality, and governance, compliance and control: the case of Brazil.
(Cranfield University, 2019-08) Whitehead, Martin; Belghitar, Yacine
This thesis sets out the results of a mixed methods research project comprising three separate studies that look to address the overarching research question: how do trigger events in the form of crises and legislation affect (i) corporate reporting, i.e. through voluntary disclosure and earnings management, and (ii) governance, compliance and internal controls? This important topic, which sits at the intersection of three research domains - crisis management; corporate control and governance; and financial reporting quality - has not been targeted in a holistic way in prior studies. This thesis aims to shed new light on the topic by addressing this gap. Paper 1 comprises a systematic literature review (SLR) which is motivated by the research question: - how do crisis trigger events (corruption scandal, transparency legislation, and recession) impact corporate responses in the form of management actions, and their reporting choices around voluntary disclosure and earnings management? Adopting established SLR methodology, the review identifies 91 articles from research domains across management, accounting and finance. The study synthesizes key findings from the sample, identifies emergent themes, and constructs a conceptual crisis response framework centred on dynamic stakeholder management for determining action and reporting choices, which must be navigated within a control and regulatory environment that chiefly influences reporting response options. The paper also sets out implications for practitioners and policy makers, makes the case for Brazil as a fruitful location for relevant and interesting studies, and presents a tangible research agenda which is used to inform Papers 2 and 3. Paper 2 is a case study which examines how Petrobras responded to a major corruption scandal in the period 2010-2017 through (i) disclosures in its annual report (AR), sustainability report (SR), and press releases; and (ii) organizational restructuring changes made to strengthen governance and controls in response to the crisis. We find evidence in support a legitimacy theory explanation of a strategy to repair trust with key stakeholders through (i) enhanced disclosure and (ii) an evolving sequence of actions to regain control and restructure the organization, pursuant to trust repair models. In addition, we obtained new insights into how a company uses the AR and SR to target different stakeholder groups and communicate differently with them to manage their respective legitimacy concerns, findings which support stakeholder theory and organizational façade theory explanations. Finally, our review of actions taken by management shows that these align well with models of trust repair and legitimacy management, and appear to have resulted in Petrobras successfully regaining legitimacy by 2017. Paper 3 is a quantitative study which assesses how three major external events influenced earnings management in Brazil during the period 2000 – 2017. We consider the effect of the Petrobras corruption crisis, recession, and the introduction of a new transparency law (the Brazil Clean Company Act (BCCA)). We find that the corruption crisis affecting Petrobras in 2014 and 2015 (and the resulting external scrutiny from regulators, media and the public associated with it), was of such an intensity that it had an impact similar to that of legislation elsewhere, such as Sarbanes-Oxley: - i.e. in Brazil during the corruption crisis the level of accruals-based earnings management (AEM) decreased and real earnings management (REM) increased as the two were used as substitutes. During recession, firms reduced the level of REM they use, which is consistent with an interpretation that this costly form of manipulation is not required when all firms are facing unfavourable reporting. BCCA, which was introduced in 2014 to improve transparency and reduce corruption, has had the effect of reducing real earnings management, which we interpret as being due to an increased focus on compliance and governance with improved tone at the top. This study is the first to consider the impact of both a corruption crisis and transparency legislation on earnings management behaviour, and adds to extant knowledge on what influences REM usage, the results of which widen our understanding of how management weighs the costs and benefits of its manipulation options, dependent on external scrutiny and the quality of internal governance mechanisms Overall, the results from the three papers enable us to contribute to the research literature in a number of ways in respect of the influence specific crisis and exogenous shock events have on management decision making related to (i) its responsive actions to ensure the adequacy of its governance and controls environment, and (ii) in the reporting and communication choices it makes around earnings management and voluntary disclosure; findings which have relevance beyond the Brazilian environment.
Open Access
The effect of exchange rate fluctuations on the performance of small and medium sized enterprises: Implications for Brexit
(Elsevier, 2021-03-17) Belghitar, Yacine; Clark, Ephraim; Dropsy, Vincent; Mefteh-Wali, Salma
This paper develops an innovative technique that takes into account the time varying nature of exchange rate (XR) exposures and separates these exposures into those that increase stock market returns and those that reduce them to study the effect of XR fluctuations on the performance of UK small and medium sized enterprises (SMEs). It provides evidence that XR fluctuations have a strong negative effect on SME performance at the industry and individual firm level for both depreciations and appreciations of the GBP against the USD and a residual index of all other currencies except the euro. For the euro, the exposures are much smaller at the industry level and generally not statistically significant. At the firm level they are also more evenly divided between performance enhancing and performance decreasing. Differences of exposures to currency variations between export-oriented firms and domestically-focused firms are also analyzed. Our results have policy implications for Brexit.
Open Access
Empirical analysis of debt maturity, cash holdings and firm investment in developing economies
(Wiley, 2021-01-05) Nnadi, Matthias; Surichamorn, Vachiraporn; Jayasekera, Ranadeva; Belghitar, Yacine
This study investigates the potential simultaneous relationships among leverage, debt maturity and cash holdings and how these jointly affect financial policy and firms' investment activities in developing countries of Thailand, Indonesia and Singapore during the period 2006–2015. Using the two‐step system GMM estimator, our results show that high‐growth firms not only shorten debt maturity to reduce the underinvestment incentive, but also decrease leverage to reduce liquidity risk. We find evidence that the level of cash holdings is a key determinant of leverage in all countries and that debt policy and growth opportunities affect the investment decision of firms in Thailand and Singapore whereas cash policy is more important in Indonesia. These findings have significant implications for investment decisions in these economies.
Open Access
Essays on contemporary issues in the South Korean economy
(Cranfield University, 2023-02) Saade, Ahmed J.; Alexiou, Constantinos; Belghitar, Yacine
This doctoral thesis sheds light on some issues that are characteristic of the South Korean socioeconomic landscape today. In a series of three papers, I empirically address important questions faced by policy makers of this country, whilst also contributing to major debates currently taking place within the Economics discipline. In the first chapter, I investigate the effects of robotization on Korean workers’ labor supply from the lens of dynamic monopsony. I show that an increase in the density of industrial robots is associated with manufacturing workers becoming more responsive to a change in wages in their decision to quit to non-employment, and that the opposite is true for non-manufacturing workers. The second chapter contributes to the discussion on youth unemployment in South Korea, in tandem with the question of the high turnover rate within the nation’s Nursing profession. I find that the unemployment rate at time of graduation has scarring effects on Nurses’ wages, workhours, and subjective wellbeing. The final chapter of this dissertation tackles the problem of social isolation among Korean elders and contributes to the very small literature on the economic determinants of this phenomenon. I offer the first set of causal evidence linking the social isolation of elders with their adult children’s inheritance expectations.
Open Access
Foreign currency derivative use and shareholder value
(Elsevier Science B.V., Amsterdam., 2013-09-30T00:00:00Z) Belghitar, Yacine; Clark, Ephraim; Mefteh, Salma
This paper investigates the effect of foreign currency (FC) derivative use on shareholder value. Exposures are broken down by currency, by whether the currency is appreciating or depreciating and by whether exposures are symmetric or asymmetric. We find that derivatives are effective in reducing overall FC exposure but there is no evidence of value creation through the application of a program that identifies and targets only loss causing exposures. We also find that FC derivative use has no significant effect on firm value in the overall sample and when the sample is broken down by eThis paper investigates the effect of foreign currency (FC) derivative use on shareholder value. Exposures are broken down by currency, by whether the currency is appreciating or depreciating and by whether exposures are symmetric or asymmetric. We find that derivatives are effective in reducing overall FC exposure but there is no evidence of value creation through the application of a program that identifies and targets only loss causing exposures. We also find that FC derivative use has no significant effect on firm value in the overall sample and when the sample is broken down by exposure type and derivative product.
Open Access
Governance mechanisms, investment opportunity set and SMEs cash holdings
(Springer Science Business Media, 2013-01-01T00:00:00Z) Belghitar, Yacine; Khan, James
This study analyses the effect of firm characteristics and governance mechanisms on cash holdings for a sample of UK SMEs. The results show that UK SMEs with greater cash flow volatility and institutional investors hold more cash; whereas levered and dividend paying SMEs with non-executive ownership hold less cash. We also find that ownership structure is significant only in explaining the cash holdings for firms with high growth investment opportunities, and leverage is only significant in explaining the cash held by firms with low growth investment opportunities. Our findings suggest that internal governance mechanisms are more effective for SMEs with high growth investment opportunities, while external governance mechanisms, such as capital market monitoring, are more effective for firms with low growth investment opportunities.
Open Access
Importance of the fund management company in the performance of socially responsible mutual funds
(Wiley, 2017-09-01) Belghitar, Yacine; Clark, Ephraim; Deshmukh, Nitin
We compare the performance of a sample of U.K.-based socially responsible investment (SRI) funds with similar conventional funds using a matched-pair analysis based on size, age, investment universe, and fund management company (FMC). We find that both the SRI and conventional funds outperform the market index about 50% of the time, even after fees. Subsample tests show that the SRI funds in our sample perform better in the pre- and postfinancial crisis periods but underperform during the financial crisis period. Importantly, we find that the FMC plays a major role in the outperformance of both SRI and conventional funds.
Open Access
Inheritance expectations and social isolation: evidence from South Korea
(2024-11-30) Saade, Ahmed J.; Alexiou, Constantinos; Belghitar, Yacine
Little is known about the economic causes of social isolation among elders in spite of the phenomenon becoming a growing policy concern in many developed countries with ageing populations. This paper fills this gap by assessing the role of inheritance as a novel determinant of social isolation among elders. Drawing on bequest motive theory as well as aspirations theory, we utilize a granular dataset from South Korea spanning the period 2008 – 2020. The nascent evidence suggests that adult children having high inheritance expectations is beneficial to parents. In particular, having higher inheritance expectations is found to increase the frequency of parent-child meetings, thus lowering the risk of parents’ isolation. Additionally, mothers who report a higher likelihood of leaving an inheritance to their children are less isolated and disclose better well-being. Lastly, we find that the split of inheritance following a father’s death has consequences on the subsequent isolation of mothers. To the best of our knowledge this is the first study that investigates the direct role of inheritance in the creation of elderly social isolation, hence providing useful insights to policymakers of countries facing this problem.
Open Access
A measure of total firm performance: new insights for the corporate objective
(Springer, 2018-07-31) Belghitar, Yacine; Clark, Ephraim; Kassimatis, Konstantino
Because heterogenous and unknown shareholder utility functions make it difficult to define a corporate objective common to all shareholders based on utility, the traditional theory of the firm concentrates on wealth maximization as the main measure of performance. Using the concept of ranked marginal utility, we develop a multi-dimensional measure of firm performance (TPM) that reflects the preferences of all risk averse shareholders towards all aspects of risk. We verify empirically that this is, in fact, the case for the first four moments of a large sample of US stocks over the period 2002–2010. Then, using the manager/shareholder agency conflict as the analytical framework, we show that TPM is a reliable, multi-dimensional performance measure and that one dimensional performance measures, such as mean returns, volatility or Tobin’s Q can lead to erroneous inference. By including shareholder preferences towards risk in the measure of firm performance as the corporate objective, we bring together the corporate finance literature and the literature on portfolio investment theory and practice.
Open Access
Narrative Finance - The use of narrative to inform investment judgement. How stories move markets - the system behind the Boeing 737 MAX shock news.
(Cranfield University, 2023-07) Harris, Richard; Moro, Andrea; Belghitar, Yacine
NARRATIVE FINANCE: The use of narrative to inform investment judgement Narrative Finance is the term coined for research into this new sub-discipline of financial economics - for it is the “voice of the market.” The information embedded within text and speech is pervasive in determining asset prices. This contribution to financial research highlights ways to use financial narratives to inform investment judgement. Financial narrative is modelled as a disruptive force by uniquely applying General System Theory to illustrate the complex architecture of the financial system. The energy budget of a material narrative is seen to be expended in the work carried out to adjust asset prices. Investors can use the departure and recovery of prices from the dynamic equilibrium upon the receipt of news as an investment indicator; described herein as Decoupling Theory. The signal of a narrative is mapped as it travels through the non- linear financial system (and back as feedback). Narrative nomenclature is devised to describe dominant, dormant, and legacy narratives, the Narrative Cycle, Narrative Signal, Narrative Phases, and the Narrative Tree. This theory was tested against the shock news of the two Boeing 737 MAX 8 accidents, which provided two proxy narrative signals and investment outcomes from a single event cause. The empirical output includes the proof of theory for the narrative morphology and phases, the extraction of fast and frugal investment narrative indicators, the importance of feedback, and the matching of narrative frequency to market movements. These metrics can help investors make better judgements and decisions by narrowing the probabilities in nowcasting and forecasting models. Narrative Finance is an intellectual descendant of classical finance and behavioural economics and contributes an alternative method of valuing investments to the toolbox of investors, academics, and securities regulators.
Open Access
Narratives in corporate annual reports: the drivers and impacts of narrative's readability and tone.
(Cranfield University, 2019-09) Alrefaei, Hessa; Belghitar, Yacine; Nnadi, Matthias
Corporate annual reports have increased in size over time, not only to contain financial data but a plethora of narrative explanations concerning the firm’s current performance and their prospects. This thesis attempts to fill the gaps presented in the field of research of narrative disclosure in corporate reports by conducting three interconnected studies presented in a journal article manuscript form. The first paper provides an understanding of the drivers and consequences of narrative disclosure in corporate reports by conducting a systematic literature review of existing studies. The aim is to get a full understanding behind the intentions and consequences of narrative disclosures, to identify the gaps in research, and to provide recommendations for future research. The second paper focuses on the consequences of the readability of narratives, as an impression management technique in corporate annual reports. This study expands existing literature by not only analysing the reading difficulty of narratives but also touching on the use of ambiguous. It is found that readability (using both readability and ambiguity measures) are negatively associated with firm performance, indicating management’s use of impression management to obfuscate adverse performance, resulting in the reduction of performance persistence and firm value. The third paper focuses on earnings management as the driver of the tone of narratives. The study aims to find that relationship between earnings management (using accruals-based and real activities-based earnings management) and the tone of narratives, during two different strategic incentives that drive managers to manipulate earnings (meeting or beating prior year’s earnings and leverage increase). It is found that when managers practice income-increasing (decreasing) earnings management the tone is positive (negative). The findings signify that whether the intention is beneficial or harmful to investors, the tone of narratives is biased towards management’s intentions of earnings management practices.
Open Access
National culture and small firms' use of trade credit: evidence from Europe
(Elsevier, 2021-07-16) Moro, Andrea; Belghitar, Yacine; Mateus, Cesario
We examine the use of trade credit in Western Europe by relying on a sample of 182,296 small firms for the period 2003–2013. Building on information asymmetry theory, we explore how a country's culture can impact SMEs use of trade credit. We discover that countries' cultural norms play a key role in explaining trade credit differences in Europe. We find that in countries with high power distance, high individualism, high masculinity, and high uncertainty avoidance rely more on trade credit.
Open Access
Political connections and corporate financial decision making
(Springer, 2018-11-16) Belghitar, Yacine; Clark, Ephraim; Saeed, Abubakr
This paper investigates whether and how political connections influence managerial financial decisions. Our study reveals that those firms that have a politician on its board of directors are highly leveraged, use more long-term debt, hold large excess cash and are associated with low quality financial reporting compared to their non-connected counterparts. These effects escalate with the strength of the connected politician and whether he or his party is in power. The winning party effect is observed to be stronger than victory by the politician himself. Overall, our paper provides strong evidence that political connection is a two-edged sword. It is indeed a valuable resource for connected firms, but it comes at a cost of higher agency problems.
Open Access
Political connections and corporate performance: evidence from Pakistan
(Wiley, 2019-03-24) Saeed, Abubakr; Belghitar, Yacine; Clark, Ephraim
This study seeks to understand how political connections affect firm performance. Using a hand‐collected dataset of Pakistani firms from 2008–2014, our firm fixed effects and Heckman two‐stage regression results show that connected firms outperform those without political ties. Moreover, we show channels through which political benefits are realized in terms of greater access to debt, lower financing costs and lower tax rates. These benefits are found to be particularly large when firms are connected to politicians who held political positions most recently and firms connected through their owners. Finally, we do not find evidence for differences in political favours across regulated and unregulated industries
Open Access
Read between the lines: board gender diversity, family ownership, and risk‐taking in Indian high‐tech firms
(Wiley, 2019-11-08) Saeed, Abubakr; Mukarram, Syed Shafqat; Belghitar, Yacine
This article examines the effect of board gender diversity on firm risk‐taking level. Drawing on the contingency framework, we contend that the influence of women executives on firm risk‐taking depends largely on the organizational context of the firm such as the industry in which it operates. To investigate this proposition, we compare the influence of board gender diversity on firm risk‐taking level in Indian high‐tech and in non‐high‐tech sectors. Our findings indicate that female executives operating in high‐tech sectors take more risk than their counterparts female executives who operate in non‐high sector. Interestingly, our analysis also reveals that family ownership negatively moderates the impact of female executives on risk‐taking in high‐tech firms. In additional analysis, we find that female executives exert a positive impact on firm performance only in high‐tech sector. This suggests that the influence of female executives on firm outcomes is not always straightforward.