V. Veeravel, Pradiptarathi Panda and A. Balakrishnan
The present study aims to verify whether there is a positive (negative) role being played by the institutional investors on the loss-making companies' performance.
Abstract
Purpose
The present study aims to verify whether there is a positive (negative) role being played by the institutional investors on the loss-making companies' performance.
Design/methodology/approach
The authors employ panel data regression and two-step system generalised method of moments (SYS-GMM) to test the above objective.
Findings
The empirical results clearly show that no positive relation is found between institutional investors and loss-making companies' performance.
Research limitations/implications
The findings of the study might have significant implications for firms to improve the firms' operational performance [return on assets (ROA)]. Also, the firm's financial performance [return on equity (ROE)] could be improved by increasing profitability which will reflect in the share prices of the firms whereby the performance can build the investors' confidence over the firm. Market performance (Tobin's Q) could be increased by providing more attractive offers and discounts to customers to capture the business opportunities available in the market.
Practical implications
The overall findings might have for reaching implications in the manufacturing sector with regard to allowing (disallowing) institutional investors.
Social implications
The results of the study may help both companies and institutional investors.
Originality/value
This is the maiden attempt to study whether loss-making companies could be positively (negatively) impacted by the arrival of sophisticated institutional investors [foreign institutional investors (FIIs) and domestic institutional investors (DIIs)]. Further, this study is largely different from previous studies in terms of using new variables which are related to firm characteristics and valuation multiples. Further, seeing if the institutional investors tend to enhance the firm performance is curious.
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Amina Buallay, Jasim Yusuf AlAjmi, Sayed Fadhul and Aikaterini Papoutsi
This study investigates the association between corporate sustainability disclosures and firm performance and value.
Abstract
Purpose
This study investigates the association between corporate sustainability disclosures and firm performance and value.
Design/methodology/approach
This study collected data from 694 manufacturing companies operating in 34 countries between 2007 and 2019, yielding 6,181 firm-year observations. This study employs a dual-model framework to analyze the influence of environmental, social, and governance (ESG) performance on return on assets (ROA), return on equity (ROE), and Tobin's Q ratio. Two sets of control variables, firm- and country-specific, were incorporated to account for potential confounding factors. To validate the robustness of the findings, we utilized a battery of econometric techniques, including traditional ordinary least squares (OLS), firm-fixed effects, quantile regression, and instrumental variables-generalized method of moments (IV-GMM), applied to both the pooled and firm-fixed effects models.
Findings
The findings are contradictory: there is a negative relationship between sustainability disclosure and operating performance and return on equity, but a positive relationship between sustainability disclosure and firm value. The negative correlation is consistent with agency theory and the positive correlation is consistent with the legitimacy and shareholder theories. These results are robust to performance measures and estimation methods.
Research limitations/implications
Short-term profit shouldn't deter sustainability. It boosts legitimacy, reputation, efficiency, and long-term market value. Investors must look beyond profitability ratios, embracing ESG metrics. Firms should see sustainability as strategic investment, not cost. Patience pays off: long-term gains await. Regulation can guide balanced growth, prioritizing both shareholders and societal well-being.
Originality/value
This study is the first to adopt a firm’s fixed-effect quantile regression, which provides deep insights into the role of sustainability disclosure in meeting stakeholders’ expectations.
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Paolo Agnese, Rosella Carè, Massimiliano Cerciello and Simone Taddeo
This paper investigates the relationship between commitment to ESG practices and firm performance using a synthetic index based on ESG disclosure and ESG performance scores.
Abstract
Purpose
This paper investigates the relationship between commitment to ESG practices and firm performance using a synthetic index based on ESG disclosure and ESG performance scores.
Design/methodology/approach
Using the Mazziotta-Pareto aggregation method, we develop a novel synthetic index of ESG engagement based on ESG rating and disclosure. This index is employed in a dynamic panel regression, implemented using the Arellano-Bond estimator, to explain profitability in a sample of 146 listed Canadian firms over the period spanning from 2014 to 2021.
Findings
ESG practices may either foster or hinder firm performance. In particular, a synergy emerges between the social and environmental dimensions of ESG practices, shedding light on the relevance of high standards in terms of environmental and social activities.
Practical implications
The study emphasizes the significance of acknowledging the various facets of ESG engagement and the necessity of transcending the current constraints of accessible ESG data and ratings. Synthetic indices combining different types of ESG information may contribute to mitigating the problems created by strategic disclosure on the part of firms, which typically results in undesirable practices such as greenwashing and social washing.
Originality/value
This is the first study that applies the Mazziotta-Pareto method to develop a synthetic index of ESG engagement, tackling each pillar separately. Moreover, when investigating the effect of ESG engagement on profitability, we allow for cross-pillar synergies and/or trade-offs.
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This paper evaluates the risk-adjusted returns, selectivity, market timing skills and persistence of the performance of Nigerian pension funds.
Abstract
Purpose
This paper evaluates the risk-adjusted returns, selectivity, market timing skills and persistence of the performance of Nigerian pension funds.
Design/methodology/approach
Annual return data of 23 pension funds that operated in Nigeria between 2018 and 2022 were obtained from the National Pension Commission (PenCom). Risk-adjusted return was appraised using the Treynor ratio, Sharpe ratio and Jensen alpha, while the Treynor–Mazuy and Henriksson–Merton multiple regression models were applied to decompose selective and timing skills. Performance persistence was assessed using the contingency table and rank correlation models.
Findings
Evidence shows that pension funds deliver excess risk-adjusted returns and exhibit selective skills. However, the evidence does not support the presence of timing skills, and there is overwhelming evidence that good (bad) performance does not repeat.
Practical implications
An evaluation of the investment performance of pension funds is crucial for ensuring the financial stability of retirees, maintaining economic stability and making informed investment decisions. It serves the interests of pensioners, pension fund managers, regulators and the broader economy. Our evidence that pension funds generate positive excess returns is a departure from most of the literature on managed funds. We recommend that more Nigerians should leverage the pension fund industry to grow their wealth and prepare for retirement.
Originality/value
This study, to our knowledge, is the first to appraise all the key facets of the investment performance of pension funds in the Nigerian context.
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Hasan Mukhibad, Prabowo Yudo Jayanto, Meilani Intan Pertiwi, Ahmad Nurkhin, Bayu Bagas Hapsoro and Christian Wiradendi Wolor
Islamic law, as the fundamental framework for Islamic bank operations, emphasizes the transparency of bank performance information to the ummah (stakeholders). This study aims to…
Abstract
Purpose
Islamic law, as the fundamental framework for Islamic bank operations, emphasizes the transparency of bank performance information to the ummah (stakeholders). This study aims to prove the effect of performance disclosure (shariah compliance, social, environmental and economic performance) on profitability, customer loyalty and cost of debt.
Design/methodology/approach
This study uses 23 Islamic banks in Indonesia and Malaysia observed for 15 years (2009–2023) and analyzed using panel data regression.
Findings
We report that disclosure performance negatively impacts the cost of debt. However, by testing each performance disclosure indicator, we find that disclosure of Shariah and environmental compliance performance positively impacts customer loyalty. In addition, environmental performance disclosure negatively impacts the cost of debt. In the long term, we report that customer loyalty increases in line with the expansion of shariah, social, environmental and economic compliance performance disclosures. In addition, environmental performance disclosure has a positive effect on return on assets (ROE).
Research limitations/implications
This study is limited to Islamic banks in Indonesia and Malaysia, which are predominantly Muslim. Muslims are the primary market for Islamic banks and a major factor in determining Islamic bank legitimacy.
Practical implications
We recommend that regulators encourage banks to expand bank performance disclosure by issuing regulations and laws, such as creating rankings for Islamic banks’ disclosure performance or rewarding banks that provide broader disclosures. Thus, it will help stakeholders to access bank performance information.
Originality/value
The contribution of this study is to develop the concept of business sustainability through comprehensive performance disclosure, including Shariah compliance and social, environmental and economic performance.