• The Journal of Asian Finance, Economics and Business
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• v.9 no.6
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• pp.231-243
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• 2022

The objective of this study is to analyze the impact of conservative financial reporting on investment during uncertainty. It was assumed that during uncertainty conservative financial reporting can play an important role to improve investment decision-making. For our analysis, data sets from 2005-2020 of nonfinancial companies are used. To measure the impact of conservative financial reporting in the non-financial sector of Pakistan, Khan and Watts' (2009) model is applied. "Prospector" and "Defender" Business strategy is applied for measuring firm-level uncertainty. Investment is measured by adding the change in fixed assets (property, plant, and equipment). To check the robustness of conservative financial reporting, Givoly and Hayn's (2000) Negative Accruals measure is applied. To measure the robustness of uncertainty, environmental scanning and alertness technique is applied. According to environmental scanning and alertness technique, companies are divided into two groups named 'inert' and 'alert'. 'Inert' are those firms that are not scanning their environment, and 'alert' are those firms who continuously analyze their environment. The empirical estimations support our hypothesis. The empirical findings provide the proof that in the wake of uncertainty conservative financial reporting may facilitate to take optimal investment decisions in the developing economy of Pakistan. Our results provide critical and practical implications for investors, researchers, and standard setters.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.3
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• pp.31-38
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• 2021

The study investigates the diversification behavior of Islamic stocks against US financial uncertainty. Considering limitations found in the literature, a comprehensive index of financial uncertainty (FU) is used, developed by Jurado, Ludvigson, and Ng (2015). The empirical analysis uses monthly data from four Islamic markets - Saudi Arabia, Malaysia, Indonesia, and Turkey - for the period from January 2010 to September 2019. Results of the bivariate EGARCH models show that Islamic stocks can be used for diversification purpose against the financial uncertainty of the US because the volatility of US uncertainty does not propagate in the Islamic stock markets. Moreover, findings show that the spillover effect of financial uncertainty varies with the FU forecast horizon. The spillover effect of FU increases with an increase in the FU forecast horizon and becomes significant over 3-month and 12-month periods in the case of Saudi Arabia. The current volatility of Islamic stock returns is independent of the size of shocks in past volatility. The leverage effect and asymmetry have been found in Saudi Arabia and Malaysia. The findings validate the arguments of the literature that Islamic markets are resilient facing uncertainties and perform well during crisis periods. The findings are important for investors in making better portfolio decisions.

• Economic Analysis
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• v.25 no.3
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• pp.70-99
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• 2019

Using a stochastic volatility-in-mean VAR model consisting of the KOSPI index, the foreign exchange rate, the government bond rate, and the credit spread, this study investigates the effects of financial market uncertainty on financial markets. We find that higher uncertainty has recessionary effects on financial markets. The effects are especially stronger in equity markets and in won-dollar exchange markets. We also find that the effects of uncertainty become stronger during times of financial market stress compared to normal times. Finally, the results imply that financial market uncertainty may potentially affect the real sector, too.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.12
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• pp.233-243
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• 2020

This study aims to assess the impacts of COVID-19 on International Financial Reporting Standards (IFRS), because of the problems associated with changing and amending the financial reports according to the policies established based on the circumstances of the epidemic. The study sample targeted several international financial reports that were amended based on epidemic conditions. The revised financial reporting period provides standardized reporting procedures for financial transactions worldwide despite the pandemic. Therefore, IFRS has been used to reduce challenges in financial reporting by monitoring the duration of social distancing while reporting matters to eliminate confirmed uncertainty and judgment. After analyzing the data obtained through global search engines, the results conducted provided evidence that COVID-19 affects financial reporting in companies around the world. Therefore, companies face difficulty reporting finances based on the challenging environment that the pandemic represents. Besides, IFRS fair value measurements consider the prices that were predicted according to current market values. The contexts of the changing the standards by IFRS to curb the effects of the COVID19 financial reporting was attained through evaluation of the online files that were randomly selected and filtered to obtain valid data.

• The Journal of Asian Finance, Economics and Business
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• v.9 no.4
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• pp.39-52
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• 2022

This study examines whether accounting conservatism can support real earnings management by reducing accrual earnings management techniques. The net impact of conservative reporting on earnings management is also analyzed. It is assumed that moderating the role of conservative financial reporting during uncertainty can mitigate earnings management practices. For our analysis, 5354 firm-year observations for the period 2007-2020 of nonfinancial companies listed on the Pakistan Stock Exchange are applied. To measure conservatism in the non-financial sector of Pakistan, Khan and Watts' (2009) model is used to provide evidence that conservatism is a way to restrict earnings management during uncertainty. "Prospector" and "Defender" Business strategy is applied for measuring firm-level uncertainty. To measure accrual earnings management Modified Jones (1995) model and Dechow and Dichev (2002) approach and Kasznik (1999) model are applied, and for real earnings management Roychowdhury model is applied which follows three approaches to measure real earnings management i.e. cash flow manipulation, Overproduction, and discretionary expenses. The estimations support our hypothesis by providing statistically significant proof that conservative financial reporting in a developing economy like Pakistan may be used to overcome the net impact of earnings management during uncertainty. Our results provide critical and practical implications for investors, researchers, and standard setters.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.2
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• pp.747-757
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• 2021

The primary purpose of the study is to investigate the volatility spillover from financial uncertainty (FU) of the United States (US) to the stock markets of SAARC member countries including India, Sri-Lanka, Pakistan, and Bangladesh. The empirical literature overlooked SAARC countries and the FU index. Based on the estimation method, the data of FU is available for three different forecast horizons including 1-month, 3-months, and 12-months. For empirical analysis, monthly data is used from February 2013 to September 2019. EGARCH model is employed to investigate the volatility spillover effects. The findings of the study show that the spillover effect of FU varies with the forecast horizon. The FU with a higher forecast horizon has a significant spillover effect on more countries. The spillover effect of US financial uncertainty is negative in most of the SAARC countries. Bangladesh stock market is influenced by FU with all three forecast horizons whereas the volatility of the Pakistan stock market is not influenced by FU with any forecast horizon. The findings are consistent with the concept of "limited trade openness" in the financial markets of emerging economies. The emerging economies avoid financial market openness to minimize the risk of spillover of other countries.

• Asia-Pacific Journal of Business
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• v.12 no.1
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• pp.183-193
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• 2021

Purpose - The purpose of this study is to examine the impacts of global uncertainty on gross and net capital flows in Korea. Design/methodology/approach - We conduct an empirical analysis of the impact of global uncertainty on the net and gross capital flows in korea. To investigate the impacts, we incorporate linear and nonlinear ARDL models. Findings - We find global uncertainty has negative impacts on the gross and net capital flows. But this impact is nonlinear. The negative global uncertainty shocks are bigger than the positive global uncertainty shocks on capital flows in Korea. And we find this relationship is noticeable in gross capital inflows. We also find interest rate difference between the US and Korea is the main driving source in capital flow after the Global financial crisis. Research implications or Originality - The results of this study suggest that the negative impacts of global uncertainty are noticeable. This means that economic players in financial markets should be more concerned about the bad news.

• KDI Journal of Economic Policy
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• v.27 no.2
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• pp.89-121
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• 2005

This paper investigates the empirical relationship between investment and uncertainty using the firm level data of Korean manufacturing sector. Empirical results show that uncertainty is negatively correlated with investment only for the post-crisis sample period. In particular, the negative effect of uncertainty on investment is more significant for low interest coverage ratio firms, high debt-asset ratio firms and small firms. The results are consistent with the claim that firms act in a more risk-averse manner after the financial crisis. This paper also finds a significant sensitivity of investment to cash flows only for the pre-crisis sample period, suggesting that financial constraint is not relatively important in explaining low investment after the financial crisis.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.43 no.4
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• pp.178-189
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• 2020

The purpose of this study was to analyze structural relationships with regard to the effect of customer integration, which is a type of integration in the supply chain, and market orientation of supply chain on the resulting change in the supply chain and management performance. The results of analysis in this study are as follows: First, customer integration and market orientation had a positive effect on reducing the flexibility and uncertainty of SCM. The decreased flexibility and uncertainty of SCM had a positive effect on non-financial performance, which also had a positive effect on financial performance. Second, customer integration and market orientation had a positive effect on financial and non-financial performance indirectly by decreasing the flexibility and uncertainty of SCM. Third, the effect of customer integration and uncertainty of SCM on the flexibility of SCM changed depending on the position in the supply chain; the effect was larger in the distribution group. The implications based on the analysis results are as follows: It is expected that the ability to deal with market changes in the overall supply chain is improved by laying the foundation for cooperation through establishing information infrastructure, including sharing information with trade partners and integrating systems, and implementing customer integration based on these achievements. It is also necessary to consider the business types and characteristics of individual companies in establishing information infrastructure.

• Journal of the Korea Society of Computer and Information
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• v.20 no.12
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• pp.107-113
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• 2015

This study analyzed the effect of the factors of introducing information technology(organizational and environmental characteristics) on non-financial performance. As detailed variables of each characteristic, the technical support/task force, users' IT capability, and education/training were used for the organizational characteristics while the degree of competition, external pressure, and uncertainty of environment were used for the environmental characteristics. In the results of the analysis, such factors like technical support/task force, users' IT capability, and education/training of the organizational characteristics had significant influence on non-financial performance. Also, factors such as degree of competition, external pressure, and uncertainty of environment of the environmental characteristics had significant influence on non-financial performance.