Menachem Abudy and Simon Benninga
This paper aims to derive firm value implications for various kinds of employee stock options (ESOs) in a framework that considers uncertainty, non‐diversification and the US…
Abstract
Purpose
This paper aims to derive firm value implications for various kinds of employee stock options (ESOs) in a framework that considers uncertainty, non‐diversification and the US statutory tax treatment.
Design/methodology/approach
The authors extend the analysis of ESOs from the case of perfect capital markets to two cases of imperfect capital markets using the Benninga‐Helmantel‐Sarig framework.
Findings
It is found that ESOs are inferior to cash compensation and that the degree of option inferiority depends on employee diversification. In addition, incentive stock options (ISOs) are generally inferior to non‐qualified stock options (NSOs). This relative profitability of the NSO versus ISO increases as market imperfections are added. The authors also find that in general firm hedging of ESOs is suboptimal.
Originality/value
The paper highlights the firm value of employee stock options.
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Abstract
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This paper aims to explore the effects of illiquidity on portfolio weight and return dynamics.
Abstract
Purpose
This paper aims to explore the effects of illiquidity on portfolio weight and return dynamics.
Design/methodology/approach
Using a novel continuous-time framework, the paper makes two key contributions to the literature on asset pricing and illiquidity. The first is to study the effects of illiquidity on portfolio weight dynamics. The second contribution is to analyze how illiquidity affects the risk/return dynamics of a portfolio.
Findings
The numerical results highlight that investors should be prepared for potentially large and skewed variations in portfolio weights and can be away from optimal diversification for a long time when adding illiquid assets to a portfolio. Additionally, the paper shows that illiquidity increases portfolio risk. Interestingly, this effect gets more pronounced when the return correlation between the illiquid and liquid asset is low. Thus, there is a correlation effect in the sense that illiquidity costs, as measured by the increase in overall portfolio risk, are inversely related to the return correlation of the assets.
Originality/value
This is the first paper that highlights that the increase in portfolio risk caused by illiquidity is inversely related to the return correlation between the liquid and illiquid assets. This important economic result contrasts with the widely used argument that the benefit of adding illiquid (alternative) assets to a portfolio is their low correlation with (traditional) traded assets. The results imply that the benefits of adding illiquid assets to a portfolio can be much lower than typically perceived.
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Scott J. Niblock and Elisabeth Sinnewe
The purpose of this paper is to examine whether superior risk-adjusted returns can be generated using monthly covered call option strategies in large capitalized Australian equity…
Abstract
Purpose
The purpose of this paper is to examine whether superior risk-adjusted returns can be generated using monthly covered call option strategies in large capitalized Australian equity portfolios and across varying market volatility conditions.
Design/methodology/approach
The authors construct monthly in-the-money (ITM) and out-of-the-money (OTM) S&P/ASX 20 covered call portfolios from 2010 to 2015 and use standard and alternative performance measures. An assessment of variable levels of market volatility on risk-adjusted return performance is also carried out using the spread between implied and realized volatility indexes.
Findings
The results of this paper show that covered call writing produces similar nominal returns at lower risk when compared against the standalone buy-and-hold portfolio. Both standard and alternative performance measures (with the exception of the upside potential ratio) demonstrate that covered call portfolios produce superior risk-adjusted returns, particularly when written deeper OTM. The 36-month rolling regressions also reveal that deeper OTM portfolios deliver greater risk-adjusted returns in the majority of the sub-periods investigated. This paper also establishes that volatility spread variation may be a driver of performance for covered call writing in Australia.
Originality/value
The authors suggest that deeper OTM covered call strategies based on large capitalized portfolios create value for investors/fund managers in the Australian stock market and can be executed in volatile market conditions. Such strategies are particularly useful for those seeking market neutral asset allocation and less risk exposure in volatile market environments.
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Huan Huu Nguyen and Hung Tien Nguyen
This research aims to investigate the relationship between environmental, social and governance (ESG) factors and the performance of real estate companies before and after the…
Abstract
Purpose
This research aims to investigate the relationship between environmental, social and governance (ESG) factors and the performance of real estate companies before and after the COVID-19 pandemic. By conducting a comprehensive case study analysis, we will explore how real estate companies' adoption of ESG practices has influenced their financial performance, market value and resilience during these uncertain times. The findings of this study will contribute to the existing body of knowledge on the relationship between ESG factors and company performance, specifically within the real estate sector. Moreover, the research outcomes will offer practical implications for real estate companies, investors, policymakers and other stakeholders, aiding them in making informed decisions regarding ESG integration and its potential benefits in uncertain times. Overall, this research aims to shed light on whether ESG factors truly enhance the performance of real estate companies, considering the unique challenges posed by the COVID-19 pandemic and sanctions. By examining the case study before and during uncertain times including COVID-19 pandemic and sanctions, we provide valuable insights into the role of ESG practices in shaping the future of the real estate industry.
Design/methodology/approach
The study focuses on the selection process and main model used to investigate the relationship between ESG factors and firm performance. The data is divided into four groups based on ESG quartiles to analyze differences between firms with high and low ESG scores. The Difference-in-Differences (DID) model is employed to assess anomalous returns and stock volatility across different ESG quartiles before and after the COVID-19 pandemic. Panel data models are utilized to study the association between ESG and firm performance, with random effects and fixed effects estimators considered. The study builds a model to analyze the impact of ESG on financial performance indicators, incorporating various factors and control variables. Additionally, the Average Treatment Effect on the Treated (ATET) analysis and DID model are explored to evaluate the causal impact of ESG on firm performance. The study emphasizes the importance of testing for parallel trends to ensure the validity of the ATET analysis and it presents a generalized DID model to examine the relationship between ESG scores and company performance outcomes.
Findings
Our study's main conclusions show that, in a world with some degree of stability, ESG not only does not improve but, in some situations, also hurts firms' success. On the other hand, at times of notable worldwide unrest, like the COVID-19 pandemic, firms with better ESG ratings demonstrate exceptional stock market success and a noteworthy ability to rebound from a crisis. Moreover, we note that investors truly prioritize sustainable investments as a risk mitigation strategy in addition to their environmental and social duties only when companies face sufficiently significant risks. The results will highlight the significance of sustainable and responsible investment for investors and provide management with more knowledge to create effective ESG strategies for their companies.
Practical implications
By incorporating sustainability and responsibility into their operations, businesses may reduce risk, perform better over the long run and benefit society and the environment. As investors come to understand the importance of ESG issues in their decision-making, the global landscape is experiencing a transformation. Therefore, in the era when stakeholders, such as consumers, workers and shareholders, want more responsibility and transparency when it comes to ESG practises, it is crucial that companies should devote their priority to their ESG performance in order to reduce the danger of slipping behind, especially in light of the increasing importance of sustainability issues and changing laws. However, in the case of small-sized firms, investment policies to improve companies’ governance need to be controlled in moderation during the period of stability because it will create financial pressure and leave them without enough resources to cope with negative impacts during uncertain period. In sum, sustainable and ethical investment is not only a fad; rather, it is a vital and unavoidable route for companies looking to prosper in an unpredictable and complicated global environment.
Originality/value
This research study significantly enhances the existing academic discourse surrounding the relationship between ESG factors and firm performance, particularly, in periods of uncertainty. The findings underscore the critical importance for real estate companies to place a greater emphasis on ESG practices in order to not only benefit themselves but also to improve their overall performance and sustainability in the long term. By shedding light on the positive outcomes associated with prioritizing ESG considerations, this study offers valuable insights for real estate firms seeking to enhance their competitive advantage and stakeholder value in today's dynamic business landscape.
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Zeynep Caferoglu Akin, Gizem Aytekin-Sahin, Busra Aslan Gonul, Didem Gunes Kaya and Yavuz Tokgoz
This study aims to examine the dietary compliance of children and adolescents with celiac disease (CD) and their diet quality (DQ) and dietary acid load (DAL) and to determine the…
Abstract
Purpose
This study aims to examine the dietary compliance of children and adolescents with celiac disease (CD) and their diet quality (DQ) and dietary acid load (DAL) and to determine the relationship of these dietary parameters with health-related quality of life (HRQoL).
Design/methodology/approach
Ninety-one children and adolescents with CD and 144 healthy peers were included in this cross-sectional study. Anthropometric measurements were conducted by researchers. DQ and DAL were calculated from participants’ 24-h dietary recall records. HRQoL was assessed using the Pediatric Quality of Life Inventory, and compliance with a gluten-free diet (GFD) was obtained using the GFD score. Data was collected through a face-to-face questionnaire.
Findings
Of celiac patients, 53.1% were strictly compatible with the GFD, and 35.8% were non-compliant with the diet. The DQ scores of participants with CD were higher than their healthy peers, and the DAL scores were lower (p < 0.01). Finally, no relationship was found between the DQ and DAL with HRQoL scores in celiac patients (p > 0.05). However, better dietary compliance with the GFD was associated with improved HRQoL (p < 0.05).
Practical implications
While DQ and DAL had no association with HRQoL, better dietary compliance improved the HRQoL of celiac patients. This may help develop solutions to the problems experienced by celiac patients, thereby improving the management of CD.
Originality/value
To the best of the authors’ knowledge, this study is the first to investigate the association of DQ and DAL with HRQoL in children with CD.