The Moderating Role of Policy Intervention on the Relationship of Environment, Social, and Governance (ESG) and Cost of Equity Capital: A Study in Basic Materials Companies in Asia

Environment, Social, and Governance (ESG) disclosure is a non-financial disclosure that is expected to enhance firms’ transparency, ease estimation of risk, hence lower cost of equity (CoE). However prior studies show mixed results. Using Institutional theory, this paper argues that sustainability policy intervention could have a different effect. However, this framework expects that the more ESG disclosure, the higher firms’ cost of equity (CoE) due to shareholders’ perception of mindless ESG plan. The policy intervention examined is government regulation of mandatory sustainability practices. This study uses a sample of 98 basic materials sector companies in eleven Asia countries with 5 years study period from 2017-2021 as a research sample. Using panel-data regression analysis, this study finds that there is a positive relationship between ESG scores and CoE. Moreover, the government policy strengthens such a relationship. Therefore, consistent with coercive mechanism in institutional theory, we conclude that mandatory sustainability disclosure in the Asian Basic material sector companies in-creases firms’ CoE and the existence of mandatory regulation strengthens such a relationship

The Link Between ESG Performance and Earnings Quality

The field of study pertaining to environmental, social, and governance (ESG) concerns has gained significant interest in recent years, primarily driven by increasing worldwide concern about climate change and environmental challenges. Prior research has examined corporate social responsibility (CSR) and environmental, social, and governance (ESG) initiatives as actions that may be susceptible to opportunistic conduct by managers, which may be observed via earnings management. This research aims to investigate different perspectives of earnings quality (EQ) by examining the determinants of EQ described as inherent operating environment and risk of the industry business process (innate factors of EQ) and management reporting decision (manager’s discretion of EQ). Separating the components of EQ determinants individually is considered an advantage by the previous researcher. Using fixed effect panel data, this study demonstrates that ESG performance is positively associated with discretionary accruals and negatively related to innate earnings quality. This phenomenon might perhaps be attributed to the challenges posed by the sector, characterized by rapid digital transformation and unexpected digital development in the markets. This observation suggests that over time, the utilization of symbolic ESG business practices, which are susceptible to greenwashing, would have a detrimental effect on the fundamental earnings quality influenced by the operational context and the risk of uncertainty associated with the organization

Long-Term Effect of IPO Underpricing on Aftermarket Liquidity

This research examines the long-term effect of IPO underpricing on the aftermarket liquidity for firms that decided to go public on the IDX between the period of 2016 to 2019. Additionally, this research also employs firm size, ownership structure, firm performance, and underwriter reputation as control variables. The sampling method used is a purposive sampling method and a total of 122 companies listed on the IDX’s main and development boards are used as the research samples. The method of analysis used is the multiple regression analysis. The result suggests that IPO underpricing does have a positive effect on aftermarket liquidity when a simple regression is conducted. However, its significance on liquidity is taken over by firm size when multiple regression is performed. The result might suggest that IPO underpricing is no longer relevant in the aftermarket liquidity since there is more information revealed within 12 months after the IPO. Nevertheless, result should be interpreted cautiously due to relatively small sample size, which may warrant further studies

Determinants of Bank Competitiveness in Digital Era A Case Study of South Korea

Technical innovations in Digital Era provide the incentives for banks to redesign their business operations to enhance their competitiveness. Prior studies use financial indicator as factors that affect bank competitiveness, however, with the technology advancement, Information Communication Technology (ICT) become major factors in assessing banks’ competitiveness. The aim of this study is to analyze specific ICT factors, as well as financial factors, affecting bank competitiveness. This study examines all 17 commercial banks in South Korea. The ICT factors are measured by IT center operation and IT scandal released in news or mass media while the bank competitiveness is proxied by market share of each bank both in the borrowing and lending market. In addition, the study tests to retrospect financial indicators in comparison with ICT factors. Using OLS regression models, this study finds that, in the case of Korean commercial banks, ICT factors plays an importance role in bank competitiveness, however, the financial factors still have greater influences on market share than ICT factors. The implication is that banks should leverage the ICT innovation since there is a surge of ICT based non-bank financial service providers that have started to assume roles that have been traditionally played by banks. Furthermore, this study raises implications for policy makers to consider ICT security regulations in the banking market. This study contributes to the literatures by supporting the fact that the positive relationship between IT scandals and market share suggests implications to concentrated banking sectors and provides alarming with authority’s monitoring system

Long-Term Effect of IPO Underpricing on Aftermarket Liquidity

This research examines the long-term effect of IPO underpricing on the aftermarket liquidity for firms that decided to go public on the IDX between the period of 2016 to 2019. Additionally, this research also employs firm size, ownership structure, firm performance, and underwriter reputation as control variables. The sampling method used is a purposive sampling method and a total of 122 companies listed on the IDX’s main and development boards are used as the research samples. The method of analysis used is the multiple regression analysis. The result suggests that IPO underpricing does have a positive effect on aftermarket liquidity when a simple regression is conducted. However, its significance on liquidity is taken over by firm size when multiple regression is performed. The result might suggest that IPO underpricing is no longer relevant in the aftermarket liquidity since there is more information revealed within 12 months after the IPO. Nevertheless, result should be interpreted cautiously due to relatively small sample size, which may warrant further studies