Determinants of Corporate Leverage in Publicly Listed GCC Companies – Conventional versus Sukuk

I study the determinants of conventional leverage in a sample of publicly listed corporations based in Saudi Arabia, United Arab Emirates, and Qatar, for a period spanning from 2005 up to end of 2014, and investigate whether those determinants can also explain the utilization of Sukuk by the same corporations in their capital structures. Evidence related to the determinants of conventional leverage is consistent with results from prior studies conducted on corporations based in developed and developing countries. Firm\u27s size, profitability, tangibility, age, and tendency to pay dividends are significant determinants of conventional leverage. However, not all those factors significantly explain the utilization of Sukuk as a financing vehicle. The size of the firm remains to be the most significant factor, in addition to the conformance of those corporations with respect to Shari\u27a principles measured by their utilization of other Islamic investments and financing instruments. Overall, I conclude that models used to predict conventional leverage are not capable of fully explaining the determinants of Sukuk issuances

Impact of COVID-19 on Emerging Markets

The COVID-19 pandemic is impacting global markets through unprecedented circumstances. Fears surrounding such novel virus has led to dramatic market turbulence and massive tumbles in stock prices. In this paper, we explore the impact of COVID-19 on a comprehensive sample of 45 emerging countries. We track the performance of each of the markets during the outbreak using its major stock index and we compute the volatilities using a GARCH (1,1) model. Moreover, we report conventional and Islamic bond issuances and assess investors\u27 perceptions towards credit risk by examining the premiums on sovereign credit default swaps. We then compare the results to the global financial crisis period. We find that indeed COVID-19 has harshly struck the emerging countries driving sharp declines in stock market indices, causing an escalation in volatility levels, and widening the premiums on sovereign credit default swaps. However, such upheavals did not yet reach the global financial crisis levels. We finally examine the reactions of the IMF and local governments and central banks in response to such crisis

Do Women Directors Improve Firm Performance and Risk in India?

© 2020 World Scientific Publishing Company. Midwest Finance Association. We examine board diversity in India following a 2013 law requiring all public companies to have at least one female board member. Our results indicate that having women on the board of directors improves firm performance and reduces firm bankruptcy risk. Using data on directors\u27 backgrounds and social connections, we find that important factors include female directors\u27 independence, social network size, committee memberships, and graduate education. Our results hold after addressing endogeneity using instrumental variable (IV) and difference-in-differences (DID) approaches

The Covid-19 Impact On Emerging Markets

The COVID-19 pandemic is affecting global markets through unprecedented circumstances. Fears surrounding such a novel virus have led to dramatic market turbulence and massive tumbles in stock prices. In this article, the authors explore the impact of COVID-19 on a comprehensive sample of 46 emerging countries and assess investors\u27 perceptions toward credit risk. The authors also record the volume of new bond issues in conventional and Islamic bond markets and find that indeed COVID-19 has harshly struck the emerging countries, driving sharp declines in stock market indexes, causing an escalation in volatility levels, and widening the premiums on sovereign credit default swaps. Such upheavals, however, did not yet reach global financial crisis levels. The authors finally examine the reactions of the International Monetary Fund (IMF) local governments, and central banks in response to such a crisis

Essays on Mergers and Acquisitions and Governance

There is a recent strand of corporate finance literature that explores the impact of executives and directors\u27 Social connections on firm value, performance, and governance. Those studies document that such Social connections could be beneficial when they enhance the sharing of information and knowledge, but could also be detrimental when associated with CEOs, as they could provide the CEO with a source of influence that makes her more entrenched and powerful. In the first essay, I use four common measures of network centrality to compute the position of the CEO within the Social network of all executives and directors of US public companies. This differentiates this study from previous research as it focuses on the overall connectedness of CEOs rather than studying the effect of bilateral Social connections across executives, directors, or firms. Furthermore, I investigate the determinants of such CEO network centrality. I find that graduating from an elite university, having a prior career path in a publicly listed firm, serving on the board of directors of other S&P firms, and being successful in the past career path positively increases a CEO\u27s position in the Social network. However, spending a longer period of time in the career prior to holding the CEO position, and being more optimistic decreases the CEO\u27s position in the Social network. Finally, I investigate the impact of such CEO network centrality on the firm\u27s overall valuation, performance, and CEO compensation. I find that increases in CEO network centrality after holding the CEO position increases the firm\u27s value when measured by market to book ratio, doesn\u27t significantly increase the firm\u27s accounting performance when measured by ROA, and significantly increases the CEO\u27s compensation. In the second essay, I examine the impact of CEO network centrality on M&As which are considered to be one of the most important events that adversely impact the value of firms, and in which the CEO plays a crucial role in exploiting any power that she could have as a result of her influential central position in the Social network. I find that in the specific context of M&A\u27s, higher CEO network centrality increases the frequency of mergers, and not only creates losses to the acquirer shareholders but also decreases total expected synergies. This evidence is consistent with the managerial entrenchment hypothesis; more centrally positioned bidder CEOs are insulated from both the disciplinary market for corporate control and the executive managerial labor market. Finally, in the third essay, I study the M&A\u27s from a different angle, to examine how external governance acts when the internal governance fails to act. Shareholder activism is an excellent area to do such investigation, as numerous studies document evidence regarding the relevance of shareholder activism to internal governance, but only a few studies explore the impact of shareholder activism on external governance. I find that shareholder activism, measured by the presence of shareholder proposals, shareholder votes in favor of a proposal, and the participation of shareholders in voting on the proposal, significantly increases the probability of a firm becoming a target of a subsequent completed acquisition. At the same time, target companies with previous shareholder proposals earn significantly less cumulative abnormal returns around the merger announcement compared to targets with no proposals. One potential channel that facilitates such functioning of the market for corporate control when internal governance fails to act is the common share ownership. I find the highest effect of takeover probability when the proposal sponsors in the target firm are also owners in the bidder firm

Network centrality, connections, and social capital: Evidence from CEO insider trading gains

Chief executive officer\u27s (CEO\u27s) insider trading gains are affected by the position of the CEO within the hierarchy of all executives, as assessed by network centrality. CEOs with high centrality earn superior abnormal returns following their company\u27s stock purchases, consistent with social capital advantage. Social capital and trading gains are positively associated primarily in firms that are riskier, have weak governance, or are managed by CEOs with no background in finance. High‐centrality CEOs also gain by selling their shares prior to a bad news event experienced by their firm. Finally, trading gains are positively affected by CEOs having past connections to the chief financial officers

CEO network centrality and merger performance

© 2015 Elsevier B.V. We study the effects on M&A outcomes of CEO network centrality, which measures the extent and strength of a CEO[U+05F3]s personal connections. High network centrality can allow CEOs to efficiently gather and control private information, facilitating value-creating acquisition decisions. We show, however, that M&A deals initiated by high-centrality CEOs, in addition to being more frequent, carry greater value losses to both the acquirer and the combined entity than deals initiated by low-centrality CEOs. We also document that high-centrality CEOs are capable of avoiding the discipline of the markets for corporate control and the executive labor market, and that the mitigating effect of internal governance on CEO actions is limited. Our evidence suggests that corporate decisions can be influenced by a CEO[U+05F3]s position in the social hierarchy, with high-centrality CEOs using their power and influence to increase entrenchment and reap private benefits

Societal trust and Sukuk activity

Sukuk investments require investors and issuers to adhere to subtle moral and ethical standards beyond following mere profit maximization objectives. Investor trust manifested through the level of societal trust could be vital in the global Sukuk investment surge. This study investigates the relationship between the societal trust level and Sukuk activity. It employs a global sample of Sukuk issuances spanning over 2001–2019 and finds that a country’s societal trust level significantly and positively influences the amount of Sukuk issued. Moreover, this positive effect supersedes the negative effects of higher information asymmetry associated with equity-based Sukuk or Sukuk issued by risky firms. Ultimately, trust is both a deterrent and critical for Islamic finance success

Running the D.C. Circuit Gauntlet on Cost Benefit Analysis after Citizens United: Empirical Evidence from SOX and the JOBS Act

To require disclosure or not to require disclosure; that is the question faced by regulators, including the Securities and Exchange Commission (SEC), in light of the Supreme Court\u27s 2010 Citizens United decision, which allows anew free flow of corporate money into the political system. Pending before the SEC since 2011 is a petition by 10 law professors asking for transparency of corporate political spending. We write this article in anticipation of the SEC\u27s eventual promulgation of rules requiring disclosure of corporate political spending. Many of the core questions about the market\u27s reaction to increased regulation of listed companies that we can study now are likely to be implicated in the debate about regulation within the narrower subset of corporate political spending.Corporations who do not want to disclose their political spending are likely to challenge any rule that the SEC issues on the subject. Such a legal challenge is destined to be heard by the D.C. Circuit Court, which examines federal regulations with an increasingly jaundiced eye. One of the ground on which the D.C. Circuit can dispose of a new regulation is by finding that the SEC did not do a sufficiently rigorous cost-benefit analysis.This article addresses the potential hostility that the D.C. Circuit may harbor against a new SEC rule requiring greater corporate transparency in election activities and provides some data that might assist the SEC in navigating this gauntlet.In summary, our data showed that the market reacted positively to the new regulations in SOX and reacted negatively to the deregulations embodied in the JOBS Act. In short, and as discussed more fully below, the data demonstrate that the market values transparency and distrusts opaqueness. We hope that the D.C. Circuit will find these data useful in illuminating the larger debate over what securities regulations are allowable