Moslem Peymany; Amir Hossein Erza; Farnaz Seifi
Abstract
The relationship between risk and return is not symmetric under different circumstances. As the prospect theory describes, the value function which passes through the reference point is steeper for losses than gains (asymmetric risk appetite). But such an asymmetrical risk aversion could be traced in ...
Read More
The relationship between risk and return is not symmetric under different circumstances. As the prospect theory describes, the value function which passes through the reference point is steeper for losses than gains (asymmetric risk appetite). But such an asymmetrical risk aversion could be traced in different periods of investment and market boom and bust cycles behind the reference point. Moreover, investors’ asymmetric behavior is different regarding various risks, such as market risk, illiquidity risk, and credit risk. This paper examines the asymmetric investors' reaction to various risks in Tehran Stock Exchange (TSE) both in recession and growth from 2011 through 2016. Evidence reveals that although all three kinds of risks are relevant, especially illiquidity risk, risk factors’ explanation power in the bullish market is less than the bearish one. This indicates that investors tend to show an asymmetric reaction to risk in up and downswing markets. The asymmetric behavior is also predominant due to investors’ weak attention to the market risk in a growing market in opposition to a recessive market condition that turns out to be an important risk consideration. The results of this study can help investors to consider asymmetrical behavior effect when they are making their minds on investment decisions.
Ali Heidari; Ezatollah Abbasian; Farzaneh Khalili
Abstract
It has been widely stated in the theoretical literature that political connections increase the value of organizations. Political connections may have both a positive and negative effect on the performance of the bank. Politically connected banks may have better access to financing, timely liquidity ...
Read More
It has been widely stated in the theoretical literature that political connections increase the value of organizations. Political connections may have both a positive and negative effect on the performance of the bank. Politically connected banks may have better access to financing, timely liquidity support from the central bank or banks which are connected with other political organizations and reduction in the pressure of legal authorities if such a reduction is possible, such as the easy passage of legal inspection. A politically connected bank can also use communications to exchange assistance to achieve the organization's goals. Therefore, answering the question of whether banks' political connections have a positive or negative impact on their financial performance cannot be answered with certainty. This study attempts to investigate the effects of interactions between politically connected CEO (PCCEO), independent directors, and credit risk of banks in an emerging country context where corporate governance systems appear weak. In this study, to collect the required data, we use the information database of Codal publishers for the listed banks in the Tehran Stock Exchange and the information existing in the performance report of the Iranian banks for public banks that collected by the Iran Banking Institute. For the investigation of this issue, we employ the SGMM method (System Generalized Method of Moments) or in other words, dynamic GMM approach, and we find politically connected boards to exert significant influence on credit risk.