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This paper aims to document the impact of Ramadan on the optimism of analysts’ recommendations taking as a sample the countries of the MENA region during the period between 2004 and 2015. The choice of these countries can be explained by the fact that their population is predominantly of a Muslim faith (The Future of World Religions: Population Growth Projections, 2010-2050, 2015).

The authors used univariate and multivariate regression models to highlight the existence of the Ramadan effect on the optimism of analysts. They have found that pre-holiday optimism is significantly lower than post-holiday optimism.

This paper also documented the effect of analysts’ experience and information uncertainty on the analysts’ optimism level that allowed us to infer that low experience enhances optimism, while environment with low information uncertainty tends to decrease the level of optimism.

Previous research on this topic has investigated the effect of months of the year, turns of the month and days-of-the-week on the behavior of stock exchanges. Another strand of the literature also analyzed the effect of holidays on the latter. However, this is the first attempt to investigate this effect on analysts’ recommendations optimism when the holiday period is related to Islam.

This paper explores the impact of tone complexity on the cost of debt in the USA.

A sampling from 692 publicly nonfinancial-traded companies in the USA is employed over the period between 2010 and 2018. Generalized methods of moments (GMM) model is implemented to examine the impact of tone complexity on the cost of debt and its implications upon creditors and users.

The findings show that high-tone complexity is associated with a greater cost of debt. The use of a more complex tone in a company's annual reports has been shown to influence creditors' perceptions of risk.

This research pursues innovation by examining how creditors can use the tone complexity of annual report to assess the level of information asymmetry and estimate the required rate of return accordingly.

This paper aims to document the relationship between advertising expenditures and analyst coverage in a sample of Indian firms during the period between 2000 and 2019.

In order to test the effect of advertising expenditures on the extent of analyst coverage, the authors estimate various versions of pooled ordinary least squares (OLS) regression. The dependent variable (ANALYST) measures the total number of analysts covering a firm in a given year. The main independent variable of interest in this paper represents the advertising activity. The authors define the extent of advertising activity (ADVERT) as the ratio of total advertising expenditures and total assets.

The study’s results show that advertising expenditures have a significantly positive impact on the extent of analyst coverage and are robust across various proxies of the key variables and various estimation procedures.

There are a number of key takeaways from our study. First, firms that expend more resources on advertising are more likely to be followed by analysts which is associated with better performance, lower information asymmetries associated and high advertising expenditures. Second, stock prices with more information embedded in them may signify that these firms receive more attention from investors and have lower information asymmetries. And finally the impact of advertising on the decision of an analyst to cover a firm becomes more pronounced for firms with high stock price synchronicity. All these three main conclusions are giving investors a clear insight on analyst coverage, advertising expenditure and the link between the two.

The results are consistent with the argument that advertising expenditures induces analysts to cover firms because firms with high advertising activities are more likely to have better performance, lower information asymmetries and increased attention from investors. All of these factors are supposed to facilitate the analyst coverage.

This paper documents the impact of political uncertainty on the decision of private firms to use external auditors to verify their financial statements.

The authors use the data from 141 countries and the pooled logistic regression to test our arguments. The data is provided by the World Bank's Enterprise Surveys and is collected during the period between 2006 and 2019.

The results show that firms with high exposure to political uncertainty are more likely to use external auditors to verify their financial statements. The results are robust across various sub-samples and hold when we use alternate proxy for political uncertainty. The results are also robust after controlling for potential endogeneity concerns. The authors also find that the effect of political uncertainty on the choice of external audit is more pronounced for firms that are headquartered in countries with weak institutional environment. The authors document significant role of democracy, rule of law and accountability in determining the relationship between political uncertainty and the choice of external audit.

The authors believe that theirs is one of the initial attempts (if not the first) to investigate the effect of political uncertainty on the choice of external audit among the private firms in developing countries.

The aim of this paper is to document the impact of dividend policies on the downside risk in stock prices.

The authors use the data for non-financial firms from the MENA region to test our arguments by estimating the pooled OLS regressions. The data cover the period between 2010 and 2018.

This paper shows that firms with higher dividend payouts have significantly lower downside risk in their stock prices than the other firms. The findings of this paper are robust across various proxies of dividend policy and across various sub-samples. This paper contends that lower downside risk associated with the stock prices of firms paying high dividends is due to the fact that these firms have lower agency problems. Lower agency problems reduce the downside risk in stock prices.

To the best of the authors’ knowledge, most of the prior research (covering the MENA region) overlooks the impact of dividend policy on the downside risk in stock prices. This paper fills this gap by documenting the relationship between the two by using the data for firms from the MENA region.

The purpose of this paper is to document how male and female managers respond to competition posed by informal firms.

The methodology uses the ordered logistic regression and the data provided by the World Bank’s Enterprise Survey to test the arguments for firms headquartered in India.

The findings show that firms managed by females are more likely to consider informal competition as a bigger obstacle for their operations than firms managed by males. It also shows that this relationship is more pronounced in provinces with weak institutional infrastructure. Lastly, the paper shows that firms managed by females respond to competition from the informal sector by undertaking more innovations than firms managed by males.

This research extends the literature on gender differences in response to competition by documenting how female managers respond to external competition in emerging markets.

This paper investigates the impact of annual reports complexity (associated with tone complexity) on dividend policy and value of dividend policy.

This paper uses the variable complexity provided by the textual analytics software (Diction 7.0) as the proxy for annual reports' tone complexity. The data covered non-financial American firms from years 2011–2019. The pooled ordinary least squares (OLS) regression and the instrumental variable regression are used to test the study’s arguments.

The findings suggest that the signaling theory of dividends holds in the United States. Firms with more complex annual reports tend to distribute more dividends, mainly in environment of high information. When information asymmetry is high, managers would use dividends as a tool to mitigate information asymmetry. Furthermore, the findings suggest that dividend policy has a stronger impact on firm value, especially when the tones of annual reports are highly complex. These findings support the previous results, namely, that managers would opt for dividend policy as a signaling tool for its positive impact on firm value. The results are robust to potential endogeneity issues and alternative proxies for both dividend policy and information asymmetry.

The results demonstrate that the dividends' signaling theory holds in the United States, where the findings cannot be generalized to all markets; However, the findings of this research can be of use to potential and current investors, users of annual reports and decision makers as well.

The paper highlights the effect of the tone complexity of annual reports (using 10K text analytics) on the value of dividend policy and dividend policy itself in a developed economy. Understanding this relation will enable stakeholders to forecast future dividends, choose more appropriate valuation methods and hence restore investors' faith.

Does Shariah finance have any impact on the cost of debt? The existing literature on Shariah finance revolves around its effect on the macroeconomic level but remains poor when looking at its impact on the corporate level. The purpose of this paper is to strengthen the latter by examining the relationship between the Shariah compliance level and the interest rate.

The authors have used a sample of 600 companies, all Shariah-compliant but with different levels of compliance, from 2002 to 2015. A variable determining the level of Shariah compliance was created in accordance with the methodology by S&P 500 Shariah and its underlying index S&P 500; then, a Probit relapse study was conducted to identify the impact of Shariah level on the cost of debt.

Consistent with the theoretical predictions of the authors, the findings reveal that there is a positive relationship between the level of Shariah compliance and the cost of debt, suggesting that the higher the level of Shariah compliance of a firm, the higher the interest rate.

One important portfolio implication of this study is that the level of Shariah compliance plays a major rule in the cost of debt determination besides the firm-specific factors. The revealed results can be of interest to actors in the fields of corporate finance, corporate governance, decision-makers and investors.

Islamic finance has been one of the most studied and researched topics in the finance world. However, the interest of scholars thoroughly assessed the dynamics of Islamic banking. The effect of Shariah compliance on corporate finance can still be more explored. To the best of the authors’ knowledge, this is a first attempt to capture the effect of Shariah compliance on the cost of debt through the use of a large scope to enrich the literature and at the same time analyzing the effects of Islamic characteristics on firms’ fundamentals.

This paper aims to document the impact of product market competition on the value of analyst coverage.

This paper uses variety of estimation techniques (panel regression as well as the quantile regression approaches) and the data for nonfinancial firms from India to document the impact of product market competition on the value of analyst coverage during the period between 2001 and 2018.

The findings show that the value of analyst coverage is an increasing function of product market competition. The authors argue that better information environment associated with firms operating in industries with high competition improves the quality of research done by analysts, thereby increasing the value of analyst coverage. The study results are consistent across different subsample and remain quantitatively the same when the authors use alternate estimation procedures.

The paper provides evidence regarding the role played by product market competition – a publicly available measure – on the value of research produced by analysts within the context of emerging markets.

This paper explores the factors that shape the complexity of company annual reports in the USA. Using a general-to-specific modeling approach, this study examines the determinants of annual reports' tone complexity.

Negative relationships were found between agency problems and tone; agency costs and readability of annual reports; profitability and tone; and ownership structure and tone complexity.

These relationships helped to confirm several of this study’s hypotheses, whereas positive associations were found between investment growth opportunities and tone complexity, which contradicts one of our initial hypotheses. Findings reveal that the more complex the language in an annual report is, the more difficult it is to strategically make a judgment or decision about the reported financial situation.

Analyzing these variables allows security analysts and investors to obtain important information, not available in the financial statements, which would enhance their understanding of the firm and improve their recommendations and investment decision-making process.