This study seeks evidence on whether the return series on Bangladesh's Dhaka Stock Exchange (DSE) is independent and followsthe random walk model. The study focuses on assessing if the DSE deviates from idealised efficiency. The sample primarily includes all the listed companies on the DSE daily price index over the period 1988 to 2000. The results of both non-parametric (Kolmogrov-Smirnov: normality test and run test) and parametric test (Auto-correlation test, Autoregressive model, ARIMA model) provide evidence that the security returns do not follow the random walk model and the significant auto-correlation coefficient at different lags reject the null hypothesis of weak-form efficiency. The results are consistent with observations in different sub-samples without outlier and for individual securities. This anomaly with the efficient market hypothesis supports the thought that the market does not respond to new information instantaneously. This may be due to a delay in dissemination to new price sensitive information or biases (under or over reaction) in the response of market participants to such information. It may also be for the momentum effect related to herding in particular 'positive feed back trading' or 'trend following' the trading strategy by the average investors. JEL Classification: G12, G14, G34
PurposeWe investigate the relationship between chief executive officer (CEO) compensation and a firm's financial performance in the insurance industry to determine CEO pay policies that are more effective in promoting specific financial corporate goals.Design/methodology/approachConsidering different components of executive pay, we investigate the latter’s relationship with the corporate performance of the insurance industry using the generalized method of moments (GMM) model developed for dynamic panel estimation. Our data encompasses the periods before and after the 2008 financial crisis.FindingsWe observe that after the crisis the insurance industry experienced a major change in executives’ compensation packages. While CEOs’ compensation was primarily based on bonuses pre-crisis, the average size of the bonus was reduced to one-third of the level, stock awards and nonequity incentives were doubled and option awards increased almost 70 percent in the post-crisis period. It is also evident that the work experience of CEOs and the firm's financial performance play a significant role in determining CEO compensation. As the CEO becomes more experienced, stock awards and option awards replace cash bonus.Originality/valueThe paper finds supporting evidence for the agency-related problem in the insurance industry and the convergence of interest hypothesis, suggesting that a firm's market valuation rises as its managers own an increasingly large portion of the firm. To align the interest of owners with that of management, managers should be converted into owners via stock ownership. The paper addresses a topical issue regarding pay and performance and the effect of the financial crisis in the insurance industry.
Using cross-sectional panel data over eleven years (2009–2019), or 1001 firm-year observations, this study examines the relationship between capital structure and firm performance of service sector firms from Australian stock market. Unlike other studies, in this study directional causalities of all performance measures were used to identify the cause of firm performance. The study finds that long-term debt dominates debt choices of Australian service sector companies. Although the finding is to some extent similar to trends in debt financed operations observed in companies in developed and developing countries, the finding is unexpected because the sectoral and institutional borrowing rules and regulations in Australia are different from those in other parts of the world.
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