Osama M. Al Hares

During the COVID-19 pandemic, technology stocks, such as FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google), attracted the attention of global investors due to the vast use of technology in daily business. However, technology stocks are generally considered risky stocks; hence, efficient risk management is required to construct an optimal portfolio. In this study, we investigate the volatility spillovers and dynamic conditional correlations among the daily returns of FAANG company stocks, gold, and sharia-compliant equity to construct the optimal portfolio weights and hedge ratios during the COVID-19 pandemic period by utilizing a multivariate GARCH framework. The dynamic conditional correlations reveal that both gold and sharia-compliant equities exhibit lower correlations with FAANG stocks during the COVID-19 pandemic, implying opportunities for portfolio diversification. The findings indicate that gold and shariah-compliant equity are good candidates to hedge FAANG stocks. These findings are highly relevant for international investors, asset managers, hedgers, and portfolio managers.

The current study evaluated the influence of corporate governance mechanisms (CGM) from 130 banks from 13 Middle East and North Africa (MENA) countries. The goal was to analyze their risk disclosure practices from 2012-2019 and understand the impact of corporate governance (CG) on the level of bank risk disclosure. The current findings reveal a positive association between the level of bank-risk disclosure and 1) the presence of Sharia supervisory board; 2) the ownership of structure at the bank level; and 3) control of corruption at the country-level. The study has implications for developing, implementing, and enforcing governance standards at the corporate and national levels that are relevant to corporate boards, investors, governments, and regulatory authorities.

The purpose of this paper is to investigate the effect of corporate governance quality and ownership structure on the relationship between the agency cost and firm performance. Both the fixed-effects model and a more robust dynamic panel generalized method of moment estimation are applied to Chinese A-listed firms for the years 2008 to 2016. The results show that the agency–performance relationship is positively moderated by (1) corporate governance quality, (2) ownership concentration, and (3) non-state ownership. State ownership has a negative effect on the agency–performance relationship. Various robust tests of an alternative measure of agency cost confirm our main conclusions. The analysis adds to the empirical literature on agency theory by providing useful insights into how corporate governance and ownership concentration can help mitigate agency–performance relationship. It also highlights the impact of ownership type on the relationship between agency cost and firm performance. Our study supports the literature that agency cost and firm performance are negatively related to the Chinese listed firms. The investors should keep in mind the proxies of agency cost while choosing a specific stock. Secondly; the abuse of managerial appropriation is higher in state-held firms as compared to non-state firms. Policymakers can use these results to devise the investor protection rules so that managerial appropriation can be minimized.

This work is licensed under a Creative Commons Attribution 4.0 International License. Abstract The results of empirical work on the relation

We examine the effects of the North Korea-U.S. summit and related events on the South Korean stock market over the period March 2018 to June 2018. Employing the event study methodology, we estimate sectoral abnormal returns following the events surrounding the summit and conduct several robustness tests to control for market integration and firm-specific information. Furthermore, we assess how sectoral systematic risk changes following these events by using various ARCH-type models such as GARCH, TARCH, EGARCH and PARCH. The results show that the South Korean stock market was highly sensitive to these events. In particular, we find that the market was negatively affected by the news that could reduce the probability of holding the summit and vice versa. We also find that market scepticism about the summit leads to the rise of a diamond risk structure.

Using a sample of 528 firm-year observations, drawn from the top 500 U.K. listed firms, this study examines the effect of audit quality and audit committee (hereafter: AC) characteristics on goodwill impairment losses recorded following the mandatory adoption of IFRS 3 “Business Combinations”. The hypothesis investigated is that managers disciplined by effective ACs and auditors are less likely to act opportunistically but instead use their accounting discretion to convey their private information resulting in the recognition of higher amounts of existing goodwill impairments that better reflect the underlying performance of the firm. Shareholders will not expect ACs and auditors to constrain accounting choices (e.g., goodwill impairments) used credibly by managers. After controlling for economic factors and financial reporting incentives, empirical results reveal that auditor and AC characteristics do not seem to have a significant effect on the recognition of goodwill impairments. Although ACs are expected to act as a monitoring device, the monitoring incentives of AC directors may be hampered by the joint board responsibility for the quality of financial reporting. The results also suggest that the formation of ACs does not always necessarily imply effective monitoring as ACs may fall short of doing what are generally perceived as their duties (Sommer, 1991). These results may be of interest to standard setters, regulators and policy makers.

This study estimates the implied cost of equity capital of the Jordanian companies listed at the Amman Stock Exchange using the residual income valuation model suggested by Gebhardt, Lee, and Swaminathan (GLS) (2001). The results show that the implied cost of equity capital computed from the GLS approach produces a mean of ex-ante cost of equity capital of 9.6% for the Jordanian companies listed at the ASE. We also examine whether the Jordanian firms' cost of equity capital, based on the residual income model, is a more reliable measure of cost of equity than the realised stock returns, by investigating the association between the cost of equity capital (or realised returns) and firm-specific risk proxies. We find that the implied cost of equity capital is associated significantly with all risk proxies in the predicted directions, while the realised stock returns show a significant association only with the size of the firms and market beta. We also find that the adjusted R² of the regression of the implied cost of equity capital on the risk proxies is higher than that of the realised stock returns. We conclude that the implied cost of equity capital derived from the residual income valuation model is a more reliable measure for the ex-ante cost of equity capital than that of the realised stock returns in terms of the association with firm-specific risk proxies.

This study is a commentary on the financialperformance and quality capital of Islamic versus conventional banks currentlyoperating in the Gulf Cooperation Council (GCC) region. In addition toassessing the financial performance of the full set of banks across various GCCcountries, the study is the first toconsider the extent to which Islamic vs.conventional GCC banks comply with the new Basel III requirements of raising betterquality capital. The study uses bank-level data for 75 (55 conventionaland 20 Islamic) banks in Kuwait, United Arab Emirates, Kingdom of Saudi Arabia,Oman, Qatar, and Bahrain. Financial ratios are used tomeasure and compare Islamic vs. conventional banks performances, and weemploy a comprehensive and the most recent sample of data available in the region, consisting of cross-sections from 2003 to 2011.The results reveal that Islamic banks are, onaverage, less efficient but more profitable, more liquid, more solvent (lessrisky), and enjoyed higher internal growth rates than conventional banks during2003-2011. The results indicate that there are statistically significant differencesbetween the two types of banks, as far as profitability, solvency, and internalgrowth rate ratios are concerned; however, there are no statisticallysignificant differences in liquidity and efficiency. The results also indicatethat banks, as a whole, appear to be largely sufficiently capitalized for BaselIII. Gulf Cooperation Council banks are well positioned to absorb higherprovisions and impairment charges given the higher capital adequacy ratiosreported by most. The Common Equity Ratio, Tier 1 Capital Ratio, and Capital AdequacyRatios (CARs), for the majority of banks in 2011, comfortably satisfy theenhanced capital requirements of Basel III. The results show that Islamic bankshave, on average, noticeably higher (and significantly different) capitalratios compared to conventional institutions. With regard to theimpact of the global financial crisis on both types of the banks, the resultsindicate that Islamic banks performed better thanconventional banks during the period 2006-2009, as the former enjoys highercapitalization, higher liquidity reserves, and also maintained stronger growthcompared to conventional banks in almost countries.Findings of this study may be useful for capital-market participants, as the full set of banks across various Gulf Cooperation Councilcountries needs to be examined before any substantive conclusions can bereached about the relative performance of Islamic versus conventional banks.Further, as the full implementation of Basel III requirements will not takeplace until 2019, the results of this study will convey information that shouldencourage banks to consider the earlier implementation of Basel III capitalrequirements in order to provide themselves with a reputational boost, as wellas a competitive advantage.

Using a sample of 528 firm-year observations, drawn from the top 500 UK listed firms for 2005 and 2006, this study employs a multivariate ordinary least squares regression to assess the value relevance of goodwill impairment losses following the adoption of IFRS No. 3 “ Business Combinations ”. Empirical results reveal a significant negative association between reported goodwill impairment losses and market value, suggesting that these impairments are perceived by investors to reliably measure a decline in the value of goodwill and incorporated in their firm valuation assessments. The study provides evidence consistent with IASB’s objectives in developing the impairment-only standard and reinforces the argument that, through IFRS 3, managers are more likely to use their accounting discretion to convey privately held information about the underlying performance of the firms.