DO DIFFERENT SECTORS AFFECT EQUITY RISK PREMIUMS IN EMERGING MARKETS? EVIDENCE FROM ASIA

This paper explores intricacies of the higher equity risk premia of emerging Asian economies within the context of industrial composition. The conventional ex-post empirical analysis is executed to scrutinize the impact of industries on the country's stock performance, diverging from the contemporary literature on finance, which was restricted to "total market indexes." By utilizing the DataStream’s Total Return Indices (TRIs) data of emerging market industries, this study highlights the contribution of various industries towards higher equity risk premiums across prominent Asian emerging countries. The study unearths several salient empirical findings. Primarily, the study confirms the "high-volatile highperformance nature" in conjunction with the time-varying dynamics of excess returns for emerging markets at the industry level. Secondly, the study's findings identify the industries accountable for the most significant contribution to higher stock premia of emerging markets at both the country and dynamic context levels. Thirdly, we observe that certain industries demonstrate greater exposure to global factors than others. It is, therefore, argued that these observations provide a crucial indication for international portfolio diversification. The investigation of diversification opportunities due to the impact of global factors on country indexes, and the existence of some industries that offer little but advantageous insurance components provide valuable insights for the higher equity premia of emerging markets. The overall study findings suggest that foreign portfolio investors must not only diversify across countries but also across industries to generate augmented returns in emerging stock markets

Corporate governance, financial constraints, and dividend policy: Evidence from Pakistan

AbstractInformation asymmetry between insiders and outsiders creates various issues for a firm, such as the agency problem where managers pursue their own interests even at the cost of the well-being of the firm’s shareholders, and probable external financial constraints where external investors discount risk by causing a surge in the cost of financing. Normally, a firm manages the issues of the agency problem and external financing constraints by omitting or initiating dividend payments. Therefore, this study investigated the impact of corporate governance on dividend policies in the presence of financial constraints using a sample of 139 non-financial firms listed on PSE, where a weak regulatory framework generates agency problems and the underdevelopment of the financial sector causes financing constraints for businesses. The results reveal that, in Pakistan, dividends are an Outcome of governance practices. As the quality of firm-level governance improves, shareholders are provided with the legal strength to ultimately force firm managers to pay dividends. Along with the agency problem, the availability of external financing is an important factor related to dividend payment decisions in Pakistan. When a company is confronted with agency problems and financial constraints simultaneously, managers try to avoid costly external financing rather than reducing the agency’s problem. The results of the study can be further refined by enhancing the study period and sample size. Furthermore, the work can be extended by classifying sample subjects to the nature of industry and group ownership