Causal Relation Between Stock Market Performance and Firm Investment in China: Mediating Role of Information Asymmetry

Zaigham, Ghulam Hussain Khan; Xiangning, Wang; Ali, Haji Suleman

doi:10.1177/2158244019885146

Cited by 10 publications

(6 citation statements)

References 59 publications

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“…Some prior studies (e.g., Chandrakumaramangalam and Govindasamy, 2010;Xin and Xu, 2012;Grazzi et al, 2016;Taipi and Ballkoci, 2017;Lian et al, 2017;Korent and Orsag, 2018;Singh and Bagga, 2019) found a positive association between investments and profitability. In contrast, other prior studies (e.g., Shima, 2010;Alipour et al, 2015;Zaigham et al, 2019;Bialowolski and Wezia, 2014;Reschiwat et al, 2020) found a negative association among different types of investments and profitability. These contrasting findings motivated us to study the relationship between a firm's investment intensity and EBITDA with special reference to companies in GCC countries.…”

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confidence: 66%

The relationship between investment intensity and profitability measures from the perspective of foreign investors

Ani

Chavali

2023

Humanit Soc Sci Commun

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Investment intensity is the level of investment in fixed assets that affects a company’s long-term growth prospects. In order to make good investment decisions, investors pay more attention to achieving a high level of investment intensity. This study examines the impact of two non-GAAP measures of profitability—earnings before interest, tax, depreciation, and amortization and earnings before interest and tax—on investment intensity in Gulf Cooperation Council (GCC) member countries. The study also examines the preference for two non-GAAP measures of profitability from the perspective of foreign investors. The study conducts panel data regressions using 205 firm observations covering the period 2010–2019 to examine the relationship between earnings before interest, tax, depreciation and amortization, earnings before interest and tax, and investment intensity. The study used various statistical estimators to overcome the heterogeneity and endogeneity problems of panel data and employed many diagnostic tests to increase robustness. The study finds that earnings before interest, tax, depreciation and amortization are positively and significantly associated with investment intensity in all GCC countries, but earnings before interest and tax are negatively associated with investment intensity in these countries. The results indicate that foreign investors prefer to use earnings before interest, tax, depreciation, and amortization to make decisions about investment intensity. The main implication of the study is that capital market regulators and foreign investors should use earnings before interest, tax, depreciation, and amortization information as a guideline to improve investment intensity decisions and achieve a better allocation of resources in capital markets.

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confidence: 66%

The relationship between investment intensity and profitability measures from the perspective of foreign investors

Ani

Chavali

2023

Humanit Soc Sci Commun

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“…Using returns data of US-listed security, from July 1963 to December 2001, Hou and Moskowitz (2005) found that high information asymmetry corresponds to increased price delay. Recently, in China Zaigham et al (2019) show that information asymmetry, measured using the interaction terms of stock prices and asymmetric information (measured by firm age and size) and stock prices are negatively and significantly related. It is expected that stock price is positively related to the proxies of information asymmetry.…”

Section: Context Methodology and Methodsmentioning

confidence: 99%

“…Empirical research provides mixed results regarding the relationship between information asymmetry and stock price. Some prove that stock price is positively associated with the bid-ask spread (Yoon et al, 2011;Kuo and Lin, 2014;Hou and Moskowitz, 2005), while others prove the opposite (Heflin et al, 2005;Gajwiski and Li, 2015;Zaigham, et al, 2019). Using returns data of US-listed security, from July 1963 to December 2001, Hou and Moskowitz (2005) found that high information asymmetry corresponds to increased (2019) show that information asymmetry, measured using the interaction terms of stock prices and asymmetric information (measured by firm age and size) and stock prices are negatively and significantly related.…”

Section: Stock Price (Lnprice)mentioning

confidence: 99%

Web-based financial reporting, social media and information asymmetry: the case of Saudi Arabia

Khlifi¹

2021

JFRA

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Purpose This paper aims to examine the effect of Web-based financial reporting and social media platforms on the proxies of information asymmetry in the Saudi Stock Exchange. Design/methodology/approach The sample of this paper consists of 133 Saudi listed non-financial companies for the year 2019. Web-based disclosure level was measured using 25 items, and the social media platforms examined in this study are Facebook, Twitter and LinkedIn. The information asymmetry proxies are measured using the relative spread and the time-weighted average bid-ask spread. Findings The empirical results have shown that there is a negative and significant relation between Web-based financial reporting and the adoption of social media platforms and the proxies of information asymmetry. Indeed, the relative spread and the time-weighted average bid-ask spread decreased with increased Web-based reporting levels. Among three platforms (Facebook, Twitter and LinkedIn), the results show that only the use of Twitter as a channel for information disclosure has a negative and significant effect on information asymmetry proxies. Consequently, in the Saudi context, the authors demonstrate that the assumptions of the agency, stewardship and signaling theories are supported. Also, results reveal that the effect of information disclosure through websites and social media on reducing information asymmetry is stronger for large companies than small companies. Practical implications The paper provides new insights into the role played by websites and social media platforms in the reduction of the information asymmetry in the stock market. Consequently, investors and regulatory authorities in the Saudi financial market must give great importance to online information disclosure and its implications for lowering information asymmetry. This empirical study informs regulators in Saudi Arabia to conduct the better practice of Web-based and social media financial reporting and to regulate the current practice of information disclosure. Besides, the obtained results have the potential to convince firms’ managers to improve online information disclosure to benefit from the reduction in information asymmetry. Originality/value Unlike previous studies, this study investigates, simultaneously, the effect of Web-based and social media information disclosure on the proxies of information asymmetry in a developing economy. In addition, the hypotheses of this study are developed based on a set of theories (the agency, signaling and stewardship theories), to verify the applicability of these three theories in the Saudi context.

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“…In addition, large firms have the economies of scale to attract more investment and by extension increase the firm's market share price. Firm size has been measured in different ways to include volume of traded shares (Zaigham,Wang & Ali, 2019), value of total assets, number of employees, and market capitalization (Leledakis, Davidson & Smith, 2004).The study of Llorente, Michaely, Saar and Wang (2002) posited that average daily number of shares traded increase with firm size.…”

Section: Figure 1 Source: Field Work (2020)mentioning

confidence: 99%

Market Risk and Stock Return of Listed Financial Service Firms in Nigeria

2021

EJBM

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The trading financial instruments in the capital market by Financial Service Firms (FSF) have generated return arising from changes in the prices of stock which exposed the firms to market risk. An effective market risk decision remains significant to determining stock return level realized from the volume and value of stock traded. This study examines the effect of market risk on stock return of listed FSF in Nigeria. The population of this study consists of fifty-six (56) financial service firms listed in the Nigerian Stock Exchange Market. In arriving at the sample size of twenty-nine ( 29) firms the purposive sampling technique and filtering criteria were employed. Data were sourced secondarily from the audited annual report of financial service firms, Nigeria Stock Exchange fact book, and other relevant financial service firms' websites for period of twelve ( 12) years (2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015)(2016)(2017)(2018). Panel multiple regression technique of data analysis was applied using the ordinary least square estimator. The findings of the study revealed that book to market ratio as a proxy of market risk was insignificantly negative on stock return during the period under review. Net interest margin as a proxy of market risk revealed a significant positive effect on stock return during the period of review. Also, the study revealed that control variables of firm size, leverage had significant positive effects on stock return, though; the effect of monetary policy rate was positive but insignificant on stock return. The study concluded that a higher book to market ratio would reduce stock return and to a larger extent the reduction in stock return may not be affected significantly. It also concluded that a higher net interest margin would result to a higher stock return and vice versa. The study recommended that decisionmakers and portfolio managers of financial service firms should employ appropriate risk strategies through derivatives, forwards, futures, swaps, options that can mitigate market risk in order to optimize return.

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Causal Relation Between Stock Market Performance and Firm Investment in China: Mediating Role of Information Asymmetry

Cited by 10 publications

References 59 publications

The relationship between investment intensity and profitability measures from the perspective of foreign investors

The relationship between investment intensity and profitability measures from the perspective of foreign investors

Web-based financial reporting, social media and information asymmetry: the case of Saudi Arabia

Market Risk and Stock Return of Listed Financial Service Firms in Nigeria

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