We investigate the relation between earnings predictability, information asymmetry and the behavior of the adverse selection cost component of the bid‐ask spread around quarterly earnings announcements for NASDAQ firms. While we find an increase in the adverse selection component of the bid‐ask spread on the day of and the day prior to quarterly earnings announcements for firms with less predictable earnings, we find no evidence of such changes for firms with more predictable earnings. During a non‐announcement period, we find that firms with relatively less predictable earnings have consistently higher total bid‐ask spreads than firms with more predictable earnings. This finding suggests that firms with relatively less predictable earnings have a higher cost of equity capital than comparable firms with more predictable earning streams, ceteris paribus. Hence, earnings predictability may be a legitimate concern of managers who wish to minimize their cost of equity capital at least as it pertains to bid‐ask spreads.

This paper estimates Indian capital flight at US $88 billion (in 1997 dollars) over the 1971-97 period, a sum that is roughly 20% of the US $448 billion real external debt disbursed to the country over the same time period. There is also evidence of a strong year-to-year correlation between debt inflows and flight-capital outflows. The paper explores the nature of this association between capital flight and external debt in the Indian economy. An analysis by Boyce (1992, World Development, 20, pp. 335-349) for the Philippines revealed the presence of contemporaneous bi-directional causality, in other words, a financial revolving door relationship between external debt and capital flight in that economy. The research question addressed by this paper is whether such a financial revolving door relationship exists in India, given its higher level of external indebtedness and lower debt-to-GNP ratio as compared with the Philippines. Utilizing a simultaneous equation model to examine the association between capital flight and external debt in the Indian economy, the paper confirms the existence of a financial revolving door relationship between the two endogenous variables.

This paper focuses on flows to emerging capital markets (ECMs) and examines the importance of corporate transparency and public governance in attracting portfolio flows to ECMs. This paper's empirical investigation centers on the hypothesis that ceteris paribus , ECMs with better quality accounting standards and good governance attract higher levels of portfolio equity and bond flows. To assess the incremental impact of each of these factors, a pooled time series, cross-sectional model was econometrically tested for 17 ECMS over the 1998-2002 time period. Our empirical analysis demonstrates a positive association between public governance, corporate transparency, and portfolio flows after controlling for other macroeconomic factors. The results suggest that good public governance and high accounting quality are important determinants of portfolio flows to ECMs. Finally, the paper establishes that while portfolio equity flows are significantly attracted to ECMs with strong democratic institutions, there is no significant association between portfolio bond flows and the presence of democratic institutions.

Sustainable investing allocates investments based on environmental, social and governance factors (ESG). The societal value of sustainable investment is becoming progressively relevant as investors are increasingly recognizing the importance of investing in companies that seek to combat climate change, environmental destruction, while promoting corporate responsibility. Environmental policy and sustainable growth initiatives at a country-level are also being influenced by the UN’s Sustainable Development Goals (SDGs). Situated within the current trend of declining foreign direct investment flows (FDI), our study examines the role of ESG factors in attracting FDI and enabling progress toward SDGs. We econometrically examine the linkages between ESG and FDI inflows for a sample of 161 counties. We also focus on low- and middle-income emerging economies and low- and middle-income commodity exporters as these countries face unique challenges of mobilizing financing to achieve SDGs and generating sustainable economic growth. Results suggest that FDI inflows to the full sample of countries are positively attracted by good governance in a destination country. We observe that good scores on HDI deters FDI, that higher FDI flows are associated with higher levels of carbon emissions in the case of emerging markets. Sustainability reporting attracts FDI to commodity exporting countries. The study provides possibilities for future research in a post-pandemic future.

Did banking sector reforms in India and the adoption of capital adequacy norms based on the Basel Capital Accord prompt Indian banks to understate their bad loans? This paper addresses this question by investigating whether Indian banks under provide for loan loss provisions and understate their gross non performing assets in order to boost earnings and capital adequacy ratios. The paper examines the behavior of Indian banks in the context of tighter regulatory standards that became effective after 1999. The results show that "weak" Indian banks – defined by low profitability and low capital ratios camouflaged the magnitude of their gross non performing assets in the post-1999 period. Based on this the paper concludes that the true nature of India's bad loan problem may be more serious than alluded to in recent studies.