Scielo RSS <![CDATA[Journal of Economics, Finance and Administrative Science]]> vol. 28 num. 55 lang. en <![CDATA[SciELO Logo]]> <![CDATA[The role of digitalization in the FDI - income inequality relationship in developed and developing countries]]> Abstract Purpose: The study aims to use individuals using the internet and fixed broadband subscriptions as a proxy for digitalization to empirically assess the effects of Foreign Direct Investment (FDI), digitalization, their interaction on income inequality in developed and developing countries from 2002 to 2019. Design/methodology/approach: The paper used the system general method of moments (GMM) estimators for 30 developed and 35 developing countries. Findings: FDI increases income inequality in developed countries but decreases it in developing countries, digitalization reduces income inequality in both groups, interaction term narrows income inequality in developed countries but widens it in developing countries. Originality/value: The paper is the first to introduce digitalization into the FDI - income inequality relationship. Furthermore, it provides empirical evidence to show the difference in the role of digitalization in this relationship between developed and developing countries. <![CDATA[Impact of ICT diffusion and financial development on economic growth in developing countries]]> Abstract Purpose: The present study aimed to examine the relationship between information and communication technologies (ICT) diffusion, financial development and economic growth in the panel of developing countries for 2005-2019. Design/methodology/approach: The study employed the principal component analysis (PCA) to extract the index of ICT diffusion. First-generation panel unit root tests such as Levine Lin Chu (LLC), Im Pesaran Shin (IPS), Augmented Dickey-Fuller (ADF) and Phillips and Perron (PP) were employed to check the stationarity of the variables. Pedroni and Kao co-integration techniques were used to examine the existence of the long-run relationship, and co-integration coefficients were estimated using FMOLS and dynamic ordinary least squares (DOLS). The panel Granger causality approach examined the short-run and long-run causality. Findings: The results confirmed that ICT diffusion, financial development and trade openness accelerate growth, whereas inflation dampens economic growth. Further, the causality test showed bidirectional causality between ICT growth and financial development growth but a unidirectional causality from financial development to ICT diffusion in developing countries. Originality/value: The study recommends synchronizing public and private sector investment for a synergistic effect on ICT infrastructure and adequate investment in the financial sector to increase the growth rate in developing countries. Economic policies should be adopted toward incentives and subsidies to ensure affordable ICT services for disadvantaged communities. Also, training programs focussing on enhancing digital literacy to enable all segments of the population to use digital platforms for financial services are recommended. <![CDATA[Market reaction to firms’ investments in CSR projects]]> Abstract Purpose: The purpose of this paper is to determine the impact of corporate investments in corporate social responsibility (CSR), measured by the environmental, social and government (ESG) rating, on the market valuation of a firm's stocks and to explain the regional differences in the degree of this influence. Design/methodology/approach: The empirical study uses linear and non-linear panel regression models for a panel sample of 951 firms listed in Asia, North America and Europe operating in innovative industries. Findings: The CSR score was found to be significant in terms of stock excess return on the regional level. However, this finding cannot be extrapolated to the global scale. ESG rating is priced by the European and North American markets negatively, while in the Asian market, it is positive. This penalty (negative influence) is greater than the reward for one point increase in ESG rating. Practical implications: The results of this empirical study could be used by firms' managers to adjust strategies aimed at stock value growth and by investors to select an investment strategy to maximize return. Originality/value: The impact of investments in CSR on stock excess return over a defined benchmark is assessed. The study reveals regional differences in the impact of CSR investment using a sample of Asian, European and North American firms. The authors apply a more advanced lagged CSR performance (d.ESG) assessment based on the methodology of Zhang and Rajagopalan (2010). <![CDATA[Consumers’ purchase intention of rapid COVID-19 tests]]> Abstract Purpose: This research aims to analyse the variables related to the purchase intention of COVID-19 rapid tests in Monterrey, Mexico's metropolitan area. Design/methodology/approach: The chosen method was probit regression. The results show that purchase intention depends on the consumer's perceived value and the perception of having a potential contagion and/or presenting symptoms related to the virus. Regarding limitations, the sampling method used in this investigation is a nonprobabilistic convenience approach delivered through a digital platform, which may not be the first option in other contexts. Findings: The findings indicate that the probability of the purchase intention of rapid COVID tests increases when consumers perceive symptoms of the disease and when they have higher education or are female rather than concerning price or income, as suggested by classical demand theory. Research limitations/implications: Probabilistic sampling was impossible due to the difficulty of collecting surveys during the COVID-19 pandemic. Instead, a nonprobabilistic sample of a representative random selection of different zip codes from the responses received was considered. Originality/value: The originality of the paper is its contribution to consumer behaviour during the COVID-19 pandemic in a Latin American context. <![CDATA[Sensitivities-based method and expected shortfall for market risk under FRTB: its impact on options risk capital]]> Abstract Purpose: This paper measures different market risk impacts on options portfolios under the new Fundamental Review of the Trading Book (FRTB) regulation, issued in Basel and coming into effect in 2023. Design/methodology/approach: This paper first suggests an algorithm for implementing the FRTB standardised approach via the sensitivities-based method to estimate a portfolio's risk capital and presents an illustration applied to an option position. Second, it proposes a methodology to estimate the expected shortfall in options portfolios from the FRTB internal models approach. In this regard, an application is developed to measure expected shortfall (ES) and value at risk (VaR) impacts under FRTB versus conventional VaR in a currency option position by considering stress scenarios from the 2007-9 and 2020-1 crises and back-testing procedures. Findings: The suggested algorithm satisfactorily captures impacts via the sensitivities-based method, and higher risk capital demands are expected for emerging economies. Also, the planned FRTB methodology to measure ES and VaR is appropriate; in particular, historical metrics perform well. Astonishingly, their revealed impacts are more significant under the 2020-1 pandemic crisis than the 2007-9 financial crisis. Originality/value: The proposals developed weave a communication bridge between the standardised and internal approaches of FRTB regulation, which can be scaled up technologically and institutionally. <![CDATA[Prospect theory in the financial decision-making process: An empirical study of two Argentine universities]]> Abstract Purpose: This paper aims to provide empirical evidence for using the prospect theory (PT) basic assumptions in the Argentine context. Mainly, this study analysed the financial decision-making process in students of the economic-administrative academic area of two universities, one public and one private, in C√≥rdoba. Design/methodology/approach: The analysis methodology included (1) the descriptive statistical analysis to identify the presence of the certainty, reflection and isolation effects; (2) the construction of a set of indicators on the application of the PT; (3) the chi-squared independence test, to determine if the decisions made are independent of the degree course taken; (4) the non-parametric Kruskal-Wallis test, to determine if the decisions made by individuals vary according to the semesters taken or students' levels of progress; and (5) the non-parametric Mann-Whitney test, to determine if there are differences between the decisions made by men and women. Findings: The empirical results provided evidence on the effects of certainty, reflection and isolation in both universities, concluding that the study participants make financial decisions in situations of uncertainty based more on PT than on expected utility theory. Originality/value: This study contributes to the empirical evidence in a different Latin-American context, confirming that individuals make financial decisions based on the PT independently of their degree course, semester, level of advance, gender or the kind of university where they belong (public or private). <![CDATA[Creation of shared value in cooperatives: informal institutions’ perspective of small-sized banana growers from Colombia]]> Abstract Purpose: This study aims to identify informal institutions for bottom-of-the-pyramid (BoP) business models in the agricultural sector through the case study of banana growers’ cooperatives. Design/methodology/approach: A case study of six banana cooperatives from Colombia was conducted. The research followed a mixed design, using both qualitative and quantitative data and the application of structural equations. Findings: This study shows that social capital, networking and alliances are essential in BoP businesses. Originality/value: Authors defined a model of informal institutional factors for the generation of economic and social value in inclusive business, using the new institutional theory and the conceptual development of BoP in agri-business. <![CDATA[Strategic perspective of error management the role of leadership and an error management culture: a mediation model]]> Abstract Purpose: Errors are inevitable, resulting from the human condition itself, system failures and the interaction of both. It is essential to know how to deal with their occurrence, managing them. However, the negative tone associated with them makes it difficult for most organizations to talk about mistakes clearly and transparently, for fear of being harmed, preventing their detection, treatment and recovery. Consequently, errors are not managed, remaining accumulated in the system, turning into successive failures. Organizations need to recognize the inevitability of errors, making the system robust, through leadership and an organizational culture of error management. This study aims to understand the role of these influencing variables in an error management approach. Design/methodology/approach: In this paper methodology of a quantitative nature based on a questionnaire survey that analyses error management, leadership and the organizational culture of error management of 380 workers in Portuguese companies. Findings: The results demonstrate that leadership directly influences error management and indirectly through the organizational culture of error management, giving this last variable a mediating role. Originality/value: The study covers companies from different sectors of activity on a topic that is little explored in Portugal, but part of the daily life of organizations, which should deserve greater attention from directors and managers, as they assume a privileged position to promote and develop error management mechanisms. Error management must be the daily work of leaders. This study contributes to theoretical knowledge and business practice on error management. <![CDATA[Airports’ public infrastructure and sources of inefficiency]]> Abstract Purpose: The Spanish airport system contains several regional airports within an amenity distance and alternative travel modes. Profitable airports cross-subsidise small airports, which are not required for regional development or connectivity. Airports are government-owned and centralised-managed by Spanish Airports and Air Navigation (AENA, for its Spanish acronym). This study aims to analyse the probability of an under-used public infrastructure and the AENA’s managerial ability as per the financial sustainability of the network in the long term. Design/methodology/approach: The national regulatory framework determines the airports’ environment. Six airports revealed unobserved heterogeneity, avoiding model misspecification. The framework is defined through proxies of the singularities of the Spanish framework: public investments and geographical specifications. The stochastic frontier analysis model follows two time-varying specifications, accounting for airports’ environmental factors, to ensure the robustness of the results to differ from the inefficiency caused by AENA and external factors. Findings: Airports’ infrastructure capacity and traffic are not correlated; regional airports become a financial burden for the system unless they specialise or differentiate. Proxies defining the airports’ context are relevant. Because airports do not compete for airlines and passengers, there are too many regional airports with little traffic, resulting in disused public infrastructure that falls far short of improving connectivity and regional development. Originality/value: This study contributes to paying attention to the characteristics of the regulatory framework, such as management strongly centralised in AENA, airport charges decided by the owner, lack of competition and lack of an independent regulatory entity. Another original contribution considers reliable capital measures (airports’ infrastructure). <![CDATA[Cultural communication differences in initial public offering documentation: the case of China]]> Abstract Purpose: Written communication differences across cultures can set the tone for effective or disastrous business relationships. Although English has been the go-to language in business, managers from different countries can significantly differ in how they convey the firms' information. This study explored these differences by examining the documentation presented by foreign corporations as part of their initial public offering (IPO) in the USA, particularly Chinese firms. Design/methodology/approach: This work examined cultural-related differences in written communications by looking at foreign corporations' descriptions of their strengths, strategies and challenges included in F-1 documents submitted to the Securities and Exchange Commission (SEC) as part of the IPO process. The sample consisted of 97 American depositary receipts (ADRs) identified in the Bank of New York Mellon's ADR directory from 2003 to 2015. Findings: This study found that Chinese firms significantly differ from other countries' firms in depicting their strengths, strategies and challenges. Research limitations/implications: Limitations have to do with the sample size. Future research may address this by considering other depositary markets, not just the USA. Originality/value: The results will be significant for potential ADRs investors; they must be conscious of these differences in the written documentation submitted by Chinese firms compared to other foreign firms. The market should also be aware of these differences, as the Chinese seem less open to sharing information about the under spinning of their operations and financial prospects.