Investment Management and Financial Innovations
ISSN / EISSN : 1810-4967 / 1812-9358
Published by: LLC CPC Business Perspectives (10.21511)
Total articles ≅ 831
Latest articles in this journal
Published: 20 October 2022
Investment Management and Financial Innovations, Volume 19, pp 65-82; https://doi.org/10.21511/imfi.19(4).2022.06
The interrelationship between equity, bond, commodity and forex movements can provide investors with abundant trading opportunities regardless of whether one market is trending upward or downward. Hence, to understand the interlinkage between markets, this study examines the long-run and causal linkage between forex, G-sec bonds, oil prices, gold rates, foreign institutional investment (FII) flows, and equity market and sectoral index returns. Daily time-series data from August 2012 to August 2021 were considered for empirical analysis. Johansen’s cointegration test revealed that foreign exchanges like USD, Euro, GBP and Yen, oil and gold rates, G-bond returns and FII flows were significantly cointegrated with the stock market and sectoral indices in the long run. Further, Granger causality found a uni-directional relationship between forex rates (i.e., USD, Euro, Yen) and the market, as well as sectoral indices, except Nifty 50 and Nifty IT indices. Oil price movements were found to effectively predict future price changes of Nifty consumer durables, auto, IT indices. Gold prices are useful to predict Nifty-Auto, Bank, Financial Services, Oil & Gas and PSU. The study also found a bi-directional relationship from FII inflows to the stock market and sectoral indices. The findings suggest that forex rates, oil prices and FII flows significantly affect India’s stock market and sectoral performance. The study contributes to the existing literature by comprehensively examining the interlinkage between commodities such as oil and gold, foreign exchanges like USD, Euro, GBP and Yen, G-bond, FII flows and the stock market, and fourteen sectoral indices in the Indian context.
Published: 18 October 2022
Investment Management and Financial Innovations, Volume 19, pp 51-64; https://doi.org/10.21511/imfi.19(4).2022.05
Most studies concentrate on the impact of only one constituent of the foreign capital influx on the stock market and economic performance, but only few studies simultaneously considered the unique impact of the duo of foreign portfolio investment (FPI) and foreign direct investment (FDI), and many of these studies were not undertaken in Nigeria.This study, therefore, assesses how foreign capital inflows (FPI and FDI) affect the stock market development in Nigeria. The foundations for the empirical study were built upon the dividend discount model, which formed the basis for the analytical framework. Going forward, the ARDL co-integration procedure was adopted to examine the long-run relationship between foreign capital and stock market performance. The results from the ARDL Bounds test suggest no evidence of a long-run equilibrium relationship between foreign capital inflows (FDI & FPI) and the stock market performance. Also, the short-run analysis indicates an insignificant relationship between FDI and stock market performance, whereas, a reversed relationship was obtained for FPI, as it exerts a positive and significant impact on stock market performance. The study recommends strengthening the institutional framework for the enlistment of multinational companies in the Nigerian stock market.
Published: 17 October 2022
Investment Management and Financial Innovations, Volume 19, pp 40-50; https://doi.org/10.21511/imfi.19(4).2022.04
In recent years, investors have perceived that Environmental, Social, and Governance (ESG) practices significantly increase the value of companies’ stocks. This study investigates the impact of ESG inclusion on the price, liquidity and financial performance of stocks listed in the Indian ESG indices. Two major Indian benchmark ESG Indices, the BSE100 ESG and Nifty 100 ESG, were considered for the study. A total sample of 64 firms from the BSE100 ESG index and 86 firms from the Nifty100 ESG index were selected. The market model of the event study methodology was employed to measure AAR and CAAR and to demonstrate the effect before and after the inclusion of the stocks in the ESG indices. The empirical results show a highly significant negative AAR on the announcement day, i.e., on (day = 0) for BSE100 ESG index stocks and an insignificant positive AAR for Nifty100 ESG index stocks. In addition, the results also document a significant negative CAAR for BSE 100 ESG stocks and a positive insignificant CAAR for Nifty100 ESG stocks. Moreover, the liquidity test results revealed a considerable liquidity enhancement in the stocks posts their inclusion in the BSE100 ESG. At the same time, there were no significant changes in the liquidity ratio of stocks after being included in the Nifty100 ESG index. This study concludes that there will be a substantial improvement in the companies’ financial performance as indicated by EPS and market capitalization after their inclusion in the ESG indices.
Published: 13 October 2022
Investment Management and Financial Innovations, Volume 19, pp 23-39; https://doi.org/10.21511/imfi.19(4).2022.03
Despite the rapid growth of developing markets, aided by globalization, comparative studies of cryptocurrency and stock market volatility have focused on the developed markets and neglected developing ones. In this regard, this study compares cryptocurrency volatility with that of the Johannesburg Stock Exchange (JSE), a developing market. GARCH-type models are applied to daily log returns of Bitcoin, Ethereum, and the FTSE/JSE 4O in two ways. Firstly, the models are applied directly; secondly, structural breaks are tested and accounted for in the models. The sample period was from September 18, 2017, to May 27, 2021. The results show higher volatility and higher volatility persistence in cryptocurrency than in the JSE market. They also show that persistence is overestimated for cryptocurrencies when structural breaks are not accounted for. The opposite was true for the JSE.Moreover, the two cryptocurrencies were found to have close to identical volatility plots that differ from that of the JSE. High volatility periods of cryptocurrency also did not coincide with that of JSE and those of JSE did not coincide with the cryptocurrency ones. There is also evidence of an inverse leverage effect in cryptocurrency, which opposes the normal leverage effect of the JSE market.
Published: 6 October 2022
Investment Management and Financial Innovations, Volume 19, pp 14-22; https://doi.org/10.21511/imfi.19(4).2022.02
Cost and capital structure are needed to evaluate the feasibility of the investments made by a company. This study aims to estimate and analyze the effect of the component of cost of capital (COC) and capital structure (CS) on firm value. Pulp & Paper companies listed on the Indonesia Stock Exchange (IDX) became the research sample for the 2013–2020 period. The research method applied is a moderation regression analysis approach. The empirical findings of the study prove that firm value is not influenced by the cost of debt (COD), while the cost of equity (COE) has a negative effect, and COC is positive. COC is a combination of the use of debt and equity, modeling by adding a CS variable as a moderating variable; this leads to the conclusion that COD and COE have a negative effect on firm value, whereas COC and CS have a positive effect. The finding of the role of CS as a moderating variable reveals that CS is a quasi-moderator variable and plays a role in increasing.
Published: 4 October 2022
Investment Management and Financial Innovations, Volume 19, pp 1-13; https://doi.org/10.21511/imfi.19(4).2022.01
The efficient market hypothesis assumes that the stock prices fully reflect all relevant information. Under the weak form, the future prices are independent of current prices or in the other words, they follow the random walk hypothesis. Global issues tend to have an impact on capital markets around the world. Therefore, the objective of this study is to assess the effect of global issues on the movements of expected returns in the Indonesian capital market from January 1, 2022, to June 30, 2022. The sample of 755 listed firms is used to test whether the expected returns have a random pattern during the observation period. The results of runs tests and variance ratio test show that the expected return movements are not random. On those results, the weak form of the efficient market hypothesis is rejected, and it can be concluded that the capital market in Indonesia for this period is inefficient. The findings of this study imply that the information about global issues does not affect the market. The success of the Indonesian government’s strategy in dealing with global issues (including the Covid-19 pandemic) in the form of a vaccination program and also followed by excellent fiscal and monetary policies has led to more predictable returns in the capital market. Moreover, investors can set their portfolios to get extraordinary returns as the market is more predictable.
Published: 30 September 2022
Investment Management and Financial Innovations, Volume 19, pp 360-372; https://doi.org/10.21511/imfi.19(3).2022.30
Nigeria has a serious food crisis, which can be attributed to poor management of tangible non-current assets by food manufacturing companies, which leads to low productivity, product wastages, and ineffective processing and distribution of products culminating in low return on assets. Therefore, this study examined the effects of changes in tangible non-current assets on return on assets of food manufacturing firms in Nigeria. The study employed an ex-post facto research approach with data obtained from top food manufacturing companies quoted on the Nigerian Stock Exchange from 2008 to 2020. The finding revealed that tangible non-current assets play a very important role in the return on assets of food manufacturing companies in Nigeria. Specifically, the study revealed that changes in investment in land and buildings, plants and machineries and motor vehicles have a statistically significant influence on return on assets (ROA) of quoted food manufacturing companies (FMCs). It was concluded that an increase in tangible non-current assets enhances the return of assets of food manufacturing companies. In line with the findings of this study, it was recommended that considerable attention should be paid by the management of FMCs to efficient utilization of tangible non-current assets because it is only when non-current assets are efficiently utilized that they would have significant contributions to or implications for the return on assets of the business.
Published: 23 September 2022
Investment Management and Financial Innovations, Volume 19, pp 322-334; https://doi.org/10.21511/imfi.19(3).2022.27
The study examines the dynamics and determinants of target capital structures among manufacturing firms listed on the Nigeria Stock Exchange during the period from 2012 to 2021. The study is motivated by the disparity in the Speed of Adjustment (SOA) to target leverage, which is influenced by firm-specific attributes largely dependent on macroeconomic indices. Therefore, understanding the determinants of SOA to target leverage is germane because no two macro-economic environments are the same. A longitudinal research design is used with a population of 75 manufacturing firms. The sample consists of 42 firms, drawn using a simple random technique. Secondary data is sourced from the annual report. Generalized Method of Moments is the estimation technique. The result shows that manufacturing firms adjust to a target capital structure with a high speed of 72%. This confirms the application of dynamic trade-off theory among listed manufacturing firms in Nigeria. Profitability, firm size, and asset tangibility are significant determinants of SOA to a target capital structure, confirming pecking order, agency, and static trade-off theories, respectively. Tax shelter and growth were not significant determinants. The study concludes that there is evidence of dynamic adjustment to the optimal capital structure of listed manufacturing firms in Nigeria. Governments and policymakers in firms should make effective policies that aid speedy access to long-term funds by these firms to increase their SOA to target capital structure.
Published: 20 September 2022
Investment Management and Financial Innovations, Volume 19, pp 312-321; https://doi.org/10.21511/imfi.19(3).2022.26
The cryptocurrency market is not regulated, people and companies wishing to invest in cryptocurrency do not have the same protection as when investing in other assets. In the absence of information and regulatory laws, investors should decide if cryptocurrencies make sense for their financial goals and what kind of investment strategy to choose not to go bankrupt. The aim of the study is to determine the probability of “tail events” and to assess in this way the probability of bankruptcy when investing in cryptocurrency using the Monte Carlo method. The analysis is carried out on the period from September 1, 2014 up to July 1, 2022. Despite the fact that today there are more than 10,000 types of cryptocurrencies, Bitcoin was chosen to assess the probability of bankruptcy. The reason is that Bitcoin is the world’s first decentralized cryptocurrency and its data is stored in a long-term history, which allows testing a long-term investment strategy. Besides, Bitcoin has not gone through a period of persistent inflation that makes the result of testing a short-term investment strategy more reliable. To date, there are around 25 million Bitcoin holders, representing 42.2% of the crypto market. Almost all cryptocurrencies have been proven to follow Bitcoin. The probability of bankruptcy for a short-term cryptocurrency investment strategy is about 17%-23%. For a long-term cryptocurrency investment strategy, the probability of bankruptcy fluctuates from 13% to 16%. Contrary to popular belief, investors looking to avoid bankruptcy should prefer a long-term strategy. The best way for cryptocurrency investors to protect themselves from bankruptcy is to alternate long and short investment periods.
Published: 16 September 2022
Investment Management and Financial Innovations, Volume 19, pp 291-301; https://doi.org/10.21511/imfi.19(3).2022.24
This study empirically examines the factors that influence the level of disclosure of local government financial statements, with audit opinion as a moderating variable. The ratio of financial independence, capital expenditure, intergovernmental revenue, and legislative size are independent variables in this study. The dependent variable is the degree of disclosure of local government financial statements (LKPD). The population used in this study is the financial statements of local governments in Indonesia that have been audited by BPK RI. The sample on this study consisted of 338 district/city governments on Java Island in 2018–2020 with purposive sampling. The test carried out is Multiple Linear Regression analysis using STATA version 16. Based on the results that have been analyzed, it can be concluded that the ratio of financial independence and intergovernmental revenue has a significant effect on the level of LKPD disclosure. Meanwhile, capital expenditure and legislative size have no significant effect on the level of LKPD disclosure. Audit opinion moderated the ratio of financial independence and legislative size on the level of disclosure of LKPD. Meanwhile, audit opinion does not moderate capital expenditure and intergovernmental revenue on the level of LKPD disclosure. This study provides information on the factors that influence the level of disclosure of LKPD in local governments, both districts/cities. A high level of LKPD disclosure indicates an accountability and transparency carried out by local governments.