Panagiotis Andrikopoulos

An Investigation of the Economic Performance of Sustainability Reporting Companies Versus Non-reporting Companies: A South African Perspective

Abstract This study explores the potential differences in the economic performances of companies that report on their sustainability information and those companies that do not report thereon. Even though there have been similar studies conducted in 1st world countries, this is the first study of its kind in a developing economy, and considers the economic performances of South African publicly listed companies. Annual performance data, from 2002 to 2009, for the two groups of companies was taken from the McGregor BFA database. The significance of the average differences between key financial indicators of the test-group and the control-group was determined by the t-test, while the difference of positive or negative Economic Value Added and Market Value Added values between these two groups was also evaluated. Even though some evidence indicates that companies that disclose sustainability reports may experience better economical performance, the statistical analysis could not confirm a definite positive relationship between sustainability reporting and economic performance.

Impact of Board Independence on the Quality of Community Disclosures in Annual Reports

Abstract This study investigates the link between board independence and the quality of community disclosures in annual reports. Using content analysis and a panel dataset from UK FTSE 350 companies the results indicate a statistically significant relationship between board independence, as measured by the proportion of nonexecutive directors, and the quality of community disclosures, while holding constant other corporate governance and firm specific variables. The study indicates that companies with more non-executive directors are likely to disclose higher quality information on their community activities than others. This finding offers important insights to policy makers who are interested in achieving optimal board composition and furthers our understanding of the firms interaction with its corporate and extended environment through high-quality disclosures. The originality of this paper lies in the fact that it is the first to specifically examine the relationship between outside directors and community disclosures in annual reports. The paper contributes both to the corporate governance and community disclosure literature.

On the impact of market mergers over herding: evidence from EURONEXT

Purpose - – The purpose of this paper is to present and empirically test for the first time the hypothesis that herding in a market increases following the markets merger in an exchange group. Design/methodology/approach - – The hypothesis is tested empirically in EURONEXTs four European equity markets (Belgium, France, the Netherlands and Portugal) on the premise of the Hwang and Salmon (2004) measure which allows us insight into the significance, structure and evolution of market herding. Tests are conducted for each market for the period prior to and after its merger into EURONEXT, controlling for a series of variables (market conditions, common risk factors, size) to gauge the robustness of the findings. Findings - – Results indicate that, with the exception of Portugal, herding grows in significance, yet declines in momentum post-merger. The authors ascribe the findings to EURONEXTs enhanced transparency (which makes it easier for investors to observe their peers’ trades, thus allowing them to infer and free-ride on their information) and its fast-moving informational dynamics that render herding movements shorter-lived. These results are robust when controlling for various market states and common risk factors, with deviations being observed when controlling for size and market volatility. Originality/value - – The study presents results for the first time on the impact of exchange mergers on herd behavior. The authors believe these to constitute useful stimulus for further research on the issue and bear important implications for regulators/policymakers in view of the ongoing proliferation of exchange mergers that has been underway since the 1990s.

Short-selling constraints and ‘quantitative’ investment strategies

This study uses stock lending data from Data Explorers to assess the impact of short-selling constraints on the profitability of eight investment strategies. Returns from unconstrained long–short portfolios are compared with those from ‘feasible’ portfolios, constrained to short-selling only those shares that can be borrowed. We find that only a small percentage of the firms identified by Datastream for short-selling are available for lending, but our results suggest that differences in profitability between unconstrained and feasible strategies are statistically insignificant. We also find that the stock borrowing fee for the majority of the strategies is normally less than 1% per annum, showing that prior UK studies, which assumed that the short-selling fee is flat at 1.50% per annum, have overestimated such cost. Overall, these results indicate that stock loan unavailability and stock borrowing fees do not explain the persistence of returns from anomaly-exploiting quantitative investment strategies in the UK stock market.

Size effect, methodological issues and ‘risk-to-default’: evidence from the UK stock market

This paper re-examines the small firm premium in the UK from December 1987 to December 2004 using a new survivorship bias-free and look-ahead bias-free database of the UK market covering stocks officially listed in the UK during this period. Prior research (Dimson, E., and P.R. Marsh. 1987. The Hoare Govett smaller companies index for the UK. Hoare Govett Limited, January; Dimson, E., and P.R. Marsh. 1999. Murphys law and market anomalies. Journal of Portfolio Management 25, no. 2: 53–69) documented an annual small-size premium in the UK market of around 6% during the period 1955–1986 and an annual small-size discount of 6% during the years 1989–1997. Our results show a continuation of the small firm premium in the UK during 1988–2004 in excess of 7% per year. We conclude that the reversal of the small firm premium documented by Dimson and Marsh (1999. Murphys law and market anomalies. Journal of Portfolio Management 25, no. 2: 53–69) is dependent on the data sample and methodology used. The main contribution to the 7%+geometric annual premium reported here comes mainly during the years 1993 and 1999. Furthermore, exploitation of the small firm premium depends on the strategy used and in particular on the length of the holding period before rolling over the strategy. Thus, while it can be argued that an economically significant small firm anomaly continues to exist, it appears to be sample-dependent, time-varying and unreliable, and difficult to exploit in practice.

The time-varying nature of the overreaction effect: evidence from the UK

Previous studies on the overreaction effect in UK show that prior losers consistently outperform prior winners in the period 1975 to 1990. This paper extends current knowledge by assessing the presence of the effect in the UK market for the period of 1987 to 2007. In contrast to earlier research, we produce evidence of a weak presence of the overreaction effect in the UK for the last decade. Further examination reveals that after adjusting for size, the effect almost disappears, while any considerable excess post-formation return to prior-losers is related to alternative market cycles and especially the periods 1987-1990 and the post-2002 era. These studies together imply that the presence of the overreaction effect in the UK stock market is time-varying and difficult to exploit in practice.

Ownership structure and the choice of SEO issue method in the UK

Purpose The purpose of this paper is to analyse the role of ownership characteristics in a firm’s choice of alternative seasoned equity offering (SEO) methods, offer price discounts, and market reactions to such announcements within the UK setting. Design/methodology/approach The study examines 697 SEO events of firms traded in the UK during the period 1998 to 2012 using multivariate and binomial logistic regression models. Ordinary least square models are also used to examine how ownership variables affect offer price discounts and stock market performance during the announcement of such corporate events. Findings The authors show that placings and open offers (OOs) are the preferred methods for issuing equity by firms with higher managerial ownership. Thus, the evidence strongly supports the prediction of the entrenched management hypothesis. Moreover, the probability of choosing a combination of placings and OOs is also found to be significantly related to issue size, offer discount, leverage, and previous stock performance. The results show that pre-issue market conditions have a significant effect on the choice of issue method with rights offers (ROs) and the combination of placings and OOs primarily utilised by firms for issuing equity during hot market periods. Originality/value Unlike prior SEOs’ studies in the UK that predominantly concentrate on the use of ROs and placings, this study examines, for the first time, the link between OOs and the combination of placings and OOs with ownership concentration. The authors also investigate how offer price discounts are related to the firms’ ownership structure, various company micro-characteristics and the wider market conditions.

Structural Breaks, Efficiency, and Volatility: An Empirical Investigation of Southeast Asian Frontier Markets

The purpose of this study is to examine the presence of structural breaks, efficiency, and volatility in the frontier markets of Southeast Asia. Using daily and weekly returns of four composite indices (VN Index, HNX Index, LSX Index, and CSX Index), we measure the presence of price volatility in the markets of Vietnam, Laos, and Cambodia. Our findings from all tests—unit root, autocorrelation, run, and variance ratio—suggest that the Vietnamese stock market is weak-form inefficient, while in the cases of Laos and Cambodia the empirical statistics produce inconclusive results. Furthermore, symmetric volatility models are statistically significant in both daily and weekly series, implying that the impacts of positive and negative news or shocks are the same in magnitude.

Introducing a New Logical Framework for Modelling Reflexivity in Financial Markets

The vicious positive and negative feedback loops (vicious reflexivities) that occur in all areas of the social sciences have the same structure as the logical paradoxes of the Liar and Anti-Liar, and of the corresponding Russell and Anti-Russell paradoxes in set theory. In recent decades the logical and set-theoretic paradoxes have been resolved within the new field of paraconsistent mathematics. The paper argues that the vicious reflexivity apparent in the social sciences can be resolved by a similar move. An outline of the paraconsistent mathematics framework adequate for the modelling of social science reflexivities is presented and discussed.