Investment Management and Financial Innovations

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ISSN / EISSN : 1810-4967 / 1812-9358
Published by: LLC CPC Business Perspectives (10.21511)
Total articles ≅ 737
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Mustapha Ziky, Mohamed Tajeddine Elghabri
Investment Management and Financial Innovations, Volume 19, pp 1-13;

The health sector in Morocco is marked by many achievements, but also by large deficits, especially in terms of healthcare expenditures borne by individuals. With the introduction of Islamic banks (called participative banks) in Morocco, the study aims to determine the extent to which Ijara Forward, as an Islamic financial contract, is adapted to the expectations of Moroccans to finance their health expenditures.The study sample consisted of 200 individuals. The univariate and bivariate analyses are used to identify possible relationships between the study variables. In addition, this paper proposes a model that will predict the demand for Ijara Forward based on the logistic regression method. The results reveal that the financial characteristics of the Ijara Forward contract are in line with the financial expectations of Moroccan individuals. Furthermore, the cost of health services is the main factor that makes healthcare inaccessible. This factor influences the demand of Ijara Forward. In addition, this paper reveals that religious beliefs stimulate Ijara Forward’s demand and encourages people to pay a higher price for Ijara Forward.
Mike Aguilar, Anessa Custovic, Ruyang Chengan, Ziming Huang
Investment Management and Financial Innovations, Volume 19, pp 14-31;

Tracking error is a ubiquitous tool among active and passive portfolio managers, widely used for fund selection, risk management, and manager compensation. This paper shows that traditional measures of the tracking error are incapable of detecting variations in skewness and kurtosis. As a solution, this paper introduces a new class of Quantile Tracking Errors (QuTE), which measures differences in the quantiles of return distributions between a tracking portfolio and its benchmark. Through an extensive simulation study, this paper shows that QuTE is six times more sensitive than traditional tracking measures to skewness and three times more sensitive to kurtosis. The QuTE statistic is robust to various calibrations and can easily be customized. By using the QuTE tracking measure during the Dot Com bubble and the Great Recession, this paper finds differences between the DIA and its benchmark, the DJIA, that otherwise would have gone undetected. Quantile based tracking provides a robust method for relative performance measurement and index portfolio construction.
Xu Jiahui, Babak Naysary
Investment Management and Financial Innovations, Volume 18, pp 380-392;

Despite a large number of government subsidies, Chinese listed companies still face numerous challenges. This requires research into the effects of government subsidies on corporate investment efficiency. The paper provides empirical evidence to investigate investment efficiency and enriches the study on the interactions between government intervention, rent-seeking, and ownership structure. Generalized least square (GLS) models with fixed effects were constructed using 2012–2020 data from 869 Chinese listed A-share non-financial firms. Results show that government subsidies received by listed companies significantly damage investment efficiency (β = .138, p < .01). This can be attributed to their rent-seeking behaviors to obtain subsidies, which also significantly harms investment efficiency (β = .915, p < .05). Government subsidies are also found to significantly mediate the impact of rent-seeking on investment efficiency. In three-step regression for testing mediating effect, coefficients are 0.475, 0.915, and 0.131 at the level of 1%, 5%, and 5%, respectively. Furthermore, ownership structure shows a moderating effect in the relationship between subsidies and investment efficiency. The management shareholding ratio significantly reinforces the negative impact (β = 1.369, p < .01), while the institutional shareholding ratio shows no significant moderating effect (β = 0.0571, p = n.s). Non-state-owned enterprises show a more significant negative impact (β = 0.17, p < .05) than state-owned enterprises (β = 0.148, p < .1). Finally, the study tests the above relationships for companies in the manufacturing industry that receive the most percentage of government subsidies in China, and the results are robust.
Artem Bielykh, , Dong Meng Ren,
Investment Management and Financial Innovations, Volume 18, pp 366-379;

This paper investigates the effect of the Brexit vote on the connection between UK stock market expectations and US stock market returns. To gauge UK stock market expectations, the option-implied volatilities of the FTSE 100 index are calculated in the period starting five months before and ending four months after the Brexit referendum. To keep the analysis “clean”, it stops right before the 2016 US presidential elections. It uses an OLS regression to estimate the change in the relationship between US and UK stock market expectations.The main findings show that the US and UK stock markets became somewhat less integrated four months after the Brexit referendum compared to the five months before it. The S&P 500 Index returns have a statistically significant impact on implied volatilities of the FTSE 100 only before the Brexit referendum. However, the British risk-free rate (LIBOR) became a statistically significant factor affecting FTSE 100 implied volatilities only after Brexit. This analysis may be used by decision-makers in the money management industry to act appropriately during Black Swan events. When UK citizens unexpectedly voted in favor of Brexit, the risk-free rate dropped, making it cheaper to invest, increasing the Sharpe ratios of equity portfolios. Coupled with increased uncertainty, this caused portfolio reallocations. In turn, expected volatility measured by options-implied volatility increased. AcknowledgmentThe authors would like to thank Olesia Verchenko for critique, a KSE M.A., external defense reviewer for helpful comments.
Investment Management and Financial Innovations, Volume 18, pp 340-354;

In 2020, due to the COVID-19 pandemic, university funding in Ukraine suffered significant losses due to unprecedented quarantine measures. The challenge for universities is to diversify funding sources, develop effective approaches to minimize existing and prevent future threats to ensure their financial stabilization (sustainability) in the post-pandemic period. The paper aims to consider financial sustainability of a university (the case of Taras Shevchenko National University of Kyiv) due to COVID-19 using the objective calculative approach on the statistical sample of data for 2011–2020. The tasks for achieving the aim are seen in determining, using regression methods, the number of lost receipts from general and special funds in the short and medium term, which will maintain a constant value of receipts at constant assets. The main idea of the paper is that financial sustainability is considered as a condition, and stabilization is considered as a process towards stability/sustainability. The modeling approach reveals a fragile list of factors for the future preventing measures of the University to sustain. It is estimated that the University’s top management should consider financial strategy in dollar terms only. The challenge is that funding in hryvnia seems to be quite increasing and linear, but indeed, funding of the University is non-linear and has a quite intensive downward trend. Thus, for the financial sustainability strategy, this fact should be crucial.The results indicate the need for a significant increase in university funding to mitigate the impact of macroeconomic instability due to various crises, including the COVID-19 pandemic. AcknowledgmentThe study is carried out under the grant funded from the National Research Fund of Ukraine within the competition Science for Human Security and Society, topic 2020.01/0265.
, Li Zhang, Kostiantyn Bezverkhyi, Dmytro Nikytenko, Lyudmyla Khromushyna
Investment Management and Financial Innovations, Volume 18, pp 309-325;

This paper examines the difference that the assurance brings to the quality of CSR reports in the Chinese institutional setting, in particular, the difference in quality (proxy – RKS ranking) of assured and unassured CSR reports, as well as whether the high ownership concentration and corresponding to it “entrenchment effect” obstruct the positive impact the assurance exerts on the quality of CSR reports. The paper examines CSR reports on 2,292 firm-year observations of large Chinese companies over three years (2015–2018). The hypothesis development process predicates on the signaling and stakeholder theories, whilst this study applies regression analysis to test the hypotheses. Consistent with the predictions of signaling and stakeholder theories, the paper finds that assurance contributes to the higher quality of CSR reports. Moreover, the study finds that assured CSR reports have higher sub-scores in all four aspects of RKS ranking. However, as ownership concentration exceeds 50 per cent and reaches the majority, it thwarts the advancement in the quality of CSR reports through its assurance. The paper provides an initial empirical account of the role of assurance in the emerging CSR reporting practice in China. The paper contributes to the modest body of empirical research on the function of external assurance in the CSR area by explicating the role played both by the accounting (external assurance) and corporate governance (ownership concentration) infrastructure to ensure high quality of CSR reporting. The paper briefs local, international regulatory authorities and the business community about the importance of external assurance for the CSR reporting quality.
Lai Cao Mai Phuong, Vu Cam Nhung
Investment Management and Financial Innovations, Volume 18, pp 297-308;

The purpose of this study is to examine whether investor sentiment as measured by technical analysis indicators has an impact on stock returns. The research period is from 2015 to mid-2020. 1-year government bond yields, financial data, transaction data of 57 companies in the VN100 basket, and VNIndex are analyzed. The investor sentiment variable is measured by each technical analysis indicator (Relative Strength Index – RSI, Psychological Line Index – PLI), and the general sentiment variable is established based on extracting the principal component from individual indicators. The paper uses two regression methods – Fama-MacBeth and Generalized Least Square (GLS) – for five different research models. The results show that sentiment plays an important role in stock returns in the Vietnamese stock market. Even controlling the factors such as cash flow per share, firm size, market risk premium, and stock price volatility in the studied models, the impact of sentiment is significant in both the model using individual technical indicators and the model using the general sentiment variable. Furthermore, investor sentiment has a stronger power to explain excess stock returns than their trading behavior. The implication from the results shows that the Vietnamese stock market is inefficient, in which psychology is a very important issue and participants need to pay due attention to this factor. AcknowledgmentThis study was funded by the Industrial University of Ho Chi Minh City (IUH), Vietnam (grant number: 21/1TCNH03).
Lukas Setia-Atmaja, Yane Chandera
Investment Management and Financial Innovations, Volume 18, pp 266-279;

This paper examines the impact of family ownership, management, and generations on IPO underpricing and the long-run performance of publicly listed firms in Indonesia from 2004 to 2015. This study is based on agency theory, which discusses the relationship between shareholders and management, as well as controlling and non-controlling shareholders. Study results show that IPO underpricing was 28% higher for family firms than non-family firms. Among family firms, a family member’s presence as a Chief Executive Officer (CEO) significantly reduced the level of IPO underpricing. A negative relationship between family CEO and IPO underpricing was only observed if a CEO at the time of IPO was the founder instead of family descendants. A long-run return of family-firm IPOs was more likely to underperform their non-family-firm counterparts. The findings in the primary market suggest that investors predict bigger issues of agency conflicts between controlling and non-controlling shareholders in family firms than the issues of agency conflicts between shareholders and management in non-family firms. Since investors consider family-firm IPOs to be riskier than non-family firms, they demand a higher level of IPO underpricing to compensate for such risks. The results in the secondary market confirm the findings in the primary market.
Abdel Razzaq Al Rababa’A, , Raed Hendawi
Investment Management and Financial Innovations, Volume 18, pp 280-296;

Different models have been used in the finance literature to predict the stock market returns. However, it remains an open question whether non-linear models can outperform linear models while providing accurate predictions for future returns. This study examines the prediction of the non-linear artificial neural network (ANN) models against the baseline linear regression models. This study aims specifically to compare the prediction performance of regression models with different specifications and static and dynamic ANN models. Thus, the analysis was conducted on a growing market, namely the Amman Stock Exchange. The results show that the trading volume and interest rates on loans tend to explain the monthly returns the most, compared to other predictors in the regressions. Moreover, incorporating more variables is not found to help in explaining the fluctuations in the stock market returns. More importantly, using the root mean square error (RMSE), as well as the mean absolute error statistical measures, the static ANN becomes the most preferred model for forecasting. The associated forecasting errors from these metrics become equal to 0.0021 and 0.0005, respectively. Lastly, the analysis conducted with the dynamic ANN model produced the highest RMSE value of 0.0067 since November 2018 following the amendment to the Jordanian income tax law. The same observation is also seen since the emerging of the COVID-19 outbreak (RMSE = 0.0042).
Viktoriia Apalkova, Sergiy Tsyganov, Tetiana Chernytska, Nataliia Meshko, Nadiia Tsyganova
Investment Management and Financial Innovations, Volume 18, pp 252-265;

Despite market volatility in 2020 due to the COVID-19 pandemic and a decline in global investment flows to 2005 levels, sustainable development funds continued to grow. These data indicate a change in development vectors: now leading investors are guided by technologies for sustainable growth. The purpose of this paper is to determine the optimal model for evaluating investment projects in terms of their economic and environmental effects on the development of the region. The proposed technique is being tested for an investment project aimed at developing the production of mobile phones in Europe. As shown, the analysis of the location of the production of smartphones in Europe for subsequent implementation in the European market has a number of advantages and is more beneficial in terms of environmental and economic effects for the region. First, from an economic point of view, this leads to an increase in the volume of attracted investments, a decrease in operating costs for international logistics, the creation of new jobs and qualifications for the population. In addition, it is important to be able to actively implement circular business models that will reuse lithium-ion phone batteries, which will lead to a decrease in the need for cobalt as a raw material, as well as lead to an increase in the level of recycling of e-waste and the circularity of the European economy. Also, such investment projects open up great opportunities for manufacturers from a marketing point of view, creating bonuses for a positive image and preferences for a “local green producer”.
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