Russ Kashian, Rashiqa Kamal and Yuhan Xue
Specific types of Hispanic-owned banks (HOBs), including those related to Brazilian, Cuban, Mexican or Puerto Rican heritage, have not be analyzed to date. There are important…
Abstract
Purpose
Specific types of Hispanic-owned banks (HOBs), including those related to Brazilian, Cuban, Mexican or Puerto Rican heritage, have not be analyzed to date. There are important differences between the relevant communities, including geographic location, language barriers, population size and the importance of remittances to foreign nations. The analysis here sheds light on these differences.
Design/methodology/approach
HOBs with the Federal Deposit Insurance Corporation (FDIC)-designated minority-owned depository institution (MDI) designation are identified, along with bank ownership heritage. Financial data, a measure of market competition, and demographics of depositors from 2003 to 2017 are utilized in an exploratory analysis comparing banks by HOB type, with random effects regressions for the pre-collapse (2003–2006) and post-collapse (2009–2017) periods.
Findings
Although each of the four types of HOBs serve Hispanic and poor communities, there are substantial differences. For example, Brazilian and Puerto Rican banks on the island held high levels of nonperforming loans (NPLs) post-collapse, with the Brazilian and Mexican banks expanding levels of risky commercial real estate (CRE) lending post-collapse, while the Cuban banks contracted CRE lending. Differences in terms of return on assets (ROAs), the cost of borrowed funds and the tier-1 risk-based capital ratio are also identified.
Social implications
HOBs, like Latinos in the USA, are culturally heterogeneous and likely operate in different ways depending upon the culture and economic circumstances of the communities where they operate.
Originality/value
Although there is substantial research on MDIs, this is the first analysis which treats HOBs as culturally heterogeneous. Further research of this type is warranted.
Details
Keywords
Management theorists suggest that entrepreneurially oriented firms manifest higher risk levels than more conservative companies, but executives of such firms and their consultants…
Abstract
Purpose
Management theorists suggest that entrepreneurially oriented firms manifest higher risk levels than more conservative companies, but executives of such firms and their consultants argue that the opposite is true. The purpose of this paper is to explore this issue and examine the relationship between entrepreneurial orientation and idiosyncratic risk of firms.
Design/methodology/approach
Content analysis is applied to the 2018 third-quarter earnings call transcripts for 992 companies to measure five factors attributed to entrepreneurially oriented firms: autonomy, competitive aggressiveness, innovation, proactiveness and risk-taking, and their relationship to firm-level idiosyncratic risk. Multivariate regression analysis is used to examine the effect of these factors on measures of idiosyncratic risk obtained from the Wharton Research database Service's Beta Suite.
Findings
Results show that firms whose executives frequently use terms related to risk-taking tend to manifest higher levels of idiosyncratic risk, but those firms whose executives stress innovation-related terms tend to have lower levels of idiosyncratic risk. The degree to which executives use words related to the three other entrepreneurial orientation factors show no associations with idiosyncratic risk.
Practical implications
The results might suggest to managers which of the individual components of entrepreneurial orientation, if adopted, are likely to affect firm-specific risk and in what way.
Originality/value
This paper is the first to attempt to bridge the gap between the management concept of entrepreneurial orientation and the financial concept of idiosyncratic risk by studying the possible relationship between the two. The research also uses the novel methodology of applying content analysis to earnings call transcripts, which is uncommon in finance research.
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Rashiqa Kamal, Edward R. Lawrence, George McCabe and Arun J. Prakash
There is empirical evidence that a firm's addition to S&P 500 results in significant abnormal returns and an increase in a stock's liquidity. The purpose of this paper is to argue…
Abstract
Purpose
There is empirical evidence that a firm's addition to S&P 500 results in significant abnormal returns and an increase in a stock's liquidity. The purpose of this paper is to argue that changes in the information environment after the year 2000 due to the implementation of Regulation Fair Disclosure (FD), decimalization and Sarbanes Oxley Act, should result in reduced abnormal returns in the post‐2000 period.
Design/methodology/approach
The authors compare the abnormal returns and liquidity changes around the announcement day of firm's addition to S&P 500 in the pre‐ and post‐2000 periods. Univariate and multivariate tests are used to control for factors that research shows affect the abnormal returns around additions to S&P 500.
Findings
It is found that the reduction in informational asymmetry in the post‐2000 period has resulted in a significant decrease in the abnormal return on the announcement day of additions to S&P 500 index and changes in the stock's liquidity in the post announcement period are now marginal.
Originality/value
Existing literature related to changes in the abnormal returns around additions to S&P 500 does not account for changes in the information environment in the two sub periods, pre‐ and post‐2000. The results may have implications for studies related to additions to S&P 500 where the sample period spans over the two sub periods.