Sentiments–risk relationship across the corporate life cycle: Evidence from an emerging market

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F62690094%3A18450%2F21%3A50018311" target="_blank" >RIV/62690094:18450/21:50018311 - isvavai.cz</a>

Výsledek na webu

<a href="https://www.mdpi.com/2227-7099/9/3/111" target="_blank" >https://www.mdpi.com/2227-7099/9/3/111</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.3390/economies9030111" target="_blank" >10.3390/economies9030111</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Sentiments–risk relationship across the corporate life cycle: Evidence from an emerging market

Popis výsledku v původním jazyce

The influence of market sentiments on the bankruptcy risk propensity of firms has been extensively explored in the literature. However, less attention has been paid to whether the corporate life cycle plays any role in this nexus. The purpose of this research is to unveil how the corporate bankruptcy risk propensity responds to market sentiments, and whether this sentiments–risk relationship varies over different stages of the corporate life cycle. Using a sample of 301 Pakistani non-financial listed firms for 2005–2014, we employ two-step generalized method of moments (GMM) regression estimation to address the issue of endogeneity. Empirical evidence reveals that managers tend to escalate a firm’s bankruptcy risk during high market sentiments. Further analysis indicates that during the period of positive market sentiments, introduction stage firms prefer to assume the highest bankruptcy risk followed by decline and growth firms, while mature firms continue to be risk-averse. This research contributes to the corporate finance literature by suggesting that managerial risk-taking is influenced by market sentiments and corporate managers show a different attitude towards risk at different stages of the corporate life cycle. Therefore, to ensure enterprise sustainability, capital market regulators should have a robust risk management framework in place to discipline the excessive risk-taking by firm managers over different stages of the corporate life cycle. Moreover, investors and creditors shall take into consideration the respective life cycle stage of the firm to minimize the risk exposure of their investment portfolios. Our results are robust to alternate econometric specifications and alternate variable specifications. © 2021 by the authors. Licensee MDPI, Basel, Switzerland.

Název v anglickém jazyce

Sentiments–risk relationship across the corporate life cycle: Evidence from an emerging market

Popis výsledku anglicky

The influence of market sentiments on the bankruptcy risk propensity of firms has been extensively explored in the literature. However, less attention has been paid to whether the corporate life cycle plays any role in this nexus. The purpose of this research is to unveil how the corporate bankruptcy risk propensity responds to market sentiments, and whether this sentiments–risk relationship varies over different stages of the corporate life cycle. Using a sample of 301 Pakistani non-financial listed firms for 2005–2014, we employ two-step generalized method of moments (GMM) regression estimation to address the issue of endogeneity. Empirical evidence reveals that managers tend to escalate a firm’s bankruptcy risk during high market sentiments. Further analysis indicates that during the period of positive market sentiments, introduction stage firms prefer to assume the highest bankruptcy risk followed by decline and growth firms, while mature firms continue to be risk-averse. This research contributes to the corporate finance literature by suggesting that managerial risk-taking is influenced by market sentiments and corporate managers show a different attitude towards risk at different stages of the corporate life cycle. Therefore, to ensure enterprise sustainability, capital market regulators should have a robust risk management framework in place to discipline the excessive risk-taking by firm managers over different stages of the corporate life cycle. Moreover, investors and creditors shall take into consideration the respective life cycle stage of the firm to minimize the risk exposure of their investment portfolios. Our results are robust to alternate econometric specifications and alternate variable specifications. © 2021 by the authors. Licensee MDPI, Basel, Switzerland.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50204 - Business and management

Projekt

—

Návaznosti

S - Specificky vyzkum na vysokych skolach

Rok uplatnění

2021

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Economies

ISSN

2227-7099

e-ISSN

—

Svazek periodika

9

Číslo periodika v rámci svazku

3

Stát vydavatele periodika

CH - Švýcarská konfederace

Počet stran výsledku

17

Strana od-do

"Article Number: 111"

Kód UT WoS článku

000699053500001

EID výsledku v databázi Scopus

2-s2.0-85112764712