The effect of ex ante and ex post conservatism on the cost of equity capital: A quantile regression approach for MENA countries

Khalifa, Maha; Othman, Hakim Ben; Hussainey, Khaled

doi:10.1016/j.ribaf.2017.07.093

Cited by 16 publications

(13 citation statements)

References 59 publications

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“…Thus, hypothesis which states that accounting conservatism lowers the cost of equity capital is proven and confirmed by empirical data. Li (2015), and Khalifa et al (2018) reporting that accounting conservatism lowers the cost of equity capital. The above results also reinforce the findings of Goh et al (2017) which prove that there is a decrease in equity capital costs when conservatism levels increase, Razzaq & Rui (2018) find that conditional conservatism lowers the cost of equity capital in Chinese companies, and Razzaq (2019) reports that conditional conservatism lowers the cost of equity capital in companies in Pakistan.…”

Section: ü Analysis and Discussionmentioning

confidence: 99%

“…The main problem in agency relations is the emergence of information asymmetry, both in the context of adverse selection and moral hazard (Scott, 2015). The application of the conservatism principle is expected to lower the cost of the company's capital by reducing the number of dividends paid so that in turn lowers the agency conflict (Razzaq & Rui, 2018 Khalifa et al (2018). They proved that low quality of return has an impact on the high cost of equity capital.…”

Section: ü Literature Review and Hypothesis Formulationmentioning

confidence: 99%

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Accounting Conservatism and Cost of Equity Capital – Evidence from Indonesia

Krismiaji

2021

CBR

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This paper describes the results of the research that investigates the association between ex-post conservatism or conditional conservatism and cost of equity capital in Indonesian manufacturing companies using data from 2015 to 2019. Conservatism is measured using accrual methods while equity capital costs are measured using a price/earnings growth (PEG) model. Using data from 142 companies or 710 observations, selected using purposive sampling methods, the study concludes that ex-post accounting conservatism lowered the company's cost of equity capital. These results not only confirm previous research conducted in other countries, but also the agency theory which predicts that accounting conservatism lowers the asymmetry of information between the company's management and shareholders, thereby affecting the decrease in equity capital costs.

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Section: ü Analysis and Discussionmentioning

confidence: 99%

Section: ü Literature Review and Hypothesis Formulationmentioning

confidence: 99%

Accounting Conservatism and Cost of Equity Capital – Evidence from Indonesia

Krismiaji

2021

CBR

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“…The QR approach has been widely employed in different research fields like economic, finance, accounting and corporate governance and other fields outside management sciences. For example, in education economics, we find Arias et al (2001), Buchinsky (1994, 2001), Eide and Mark (1998), Chernozhukov and Umantsev (2001) and Bassett and Chen (2001) in mutual fund investment styles, Engel and Manganelli (2004) in value at risk, Meligkotsidou et al (2009) in hedge fund strategies, Li and Miu (2010) in bankruptcy prediction, Barreto and Hughes (2004) in economic growth studies, Li and Hwang (2011) and Khalifa et al (2018) in accounting, Ramdani and Witteloostuijn (2010) in corporate governance, Buchinsky (1994), Garcia et al (2001), Machado and Mata (2001) and Nielsen and Rosholm (2001) in wage analysis.…”

Section: Quantile Regressionmentioning

confidence: 92%

Bank capital and liquidity creation: new evidence from a quantile regression approach

Chaabouni

Zouaoui

Ellouz

2018

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Purpose The purpose of this paper is to examine the effect of bank capital on liquidity creation. Especially, the authors test two competing hypotheses: the “risk absorption” hypothesis and the “financial fragility-crowding out” hypothesis that describe such association in the context of UK and French banking industry. Design/methodology/approach The authors use data collected from Bankscope for commercial banks pertaining to the aforementioned countries. The sample period ranges from 2000 to 2014. Liquidity creation was measured using a novel approach proposed by Berger and Bouwman (2007). This study uses the quantile regression (QR) and the instrumental variables QR, along with classical ordinary least squares (OLS) and panel regression, to deal with the mixed results reported by previous papers. Findings Using OLS and panel regression, the authors first find that bank capital negatively affects liquidity creation which supports risk absorption hypothesis. Second, the result from QR confirms the negative association between the aforementioned variables and shows that the effect is homogenous across quantiles of liquidity creation distribution. The result remains unchanged when using the QR with instrumental variables to address the potential problem of endogeneity. Originality/value This paper sheds more lights on the relationship between bank capital and liquidity creation by using a novel estimation approach based on the QR methodology.

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“…In order to estimate equations ( 1) and ( 2), the literature showed that the standard OLS method provides a partial view of the relationship between variables by focusing on the conditional mean of the dependent variable (Koenker and Hallock, 2001). Furthermore, this technique may suffer from the presence of outliers or extreme values that may cause the non-normality of the dependent variables, and therefore violate the normality assumption of residuals in the OLS regression (Khalifa et al, 2017). Following the study by Koenker and Bassett (1978), the quantile regression approach is considered to deal with the technical issues related to the OLS regression method.…”

Section: Econometric Analysismentioning

confidence: 99%

Effects of the political risk on Bitcoin return and volatility: evidence from the 2016 US presidential election

Ajmi

Arfaoui

2020

JFEP

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Purpose This paper aims to investigate the effect of the political risk on Bitcoin return and volatility during the 2016 US pre-election and post-election periods. Design/methodology/approach A daily composite political risk index is calculated by using the principal component analysis and Google Trends. A quantile regression approach is adopted to assess the effect of the political risk index on Bitcoin return and volatility for both periods subject to market conditions. Findings Findings reveal that the political risk index tends to increase when moving from the pre-election period to the post-election one. This is mostly attributed to the new challenges faced by the new elected government. During the pre-election period, the quantiles regression shows that the political risk index negatively affects Bitcoin return when the market is bearish, whereas a positive impact on volatility is found in bearish and bullish markets. When the political situation becomes severer during the post-election period, the quantiles plots show that the increase of the political risk index leads to a significant increase of Bitcoin return, whereas Bitcoin volatility remains relatively stable. This means that Bitcoin can be adopted as a hedging tool when the political situation becomes severer. Originality/value Comparing to the existed studies in the field, this paper considers Google trends as a main source to assess the daily composite political risk index during the 2016 US presidential election.

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The effect of ex ante and ex post conservatism on the cost of equity capital: A quantile regression approach for MENA countries

Cited by 16 publications

References 59 publications

Accounting Conservatism and Cost of Equity Capital – Evidence from Indonesia

Accounting Conservatism and Cost of Equity Capital – Evidence from Indonesia

Bank capital and liquidity creation: new evidence from a quantile regression approach

Effects of the political risk on Bitcoin return and volatility: evidence from the 2016 US presidential election

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