Journal of Economics, Finance and Administrative Science

Editorial: 59th issue of the Journal of Economics, Finance and Administrative Science

2025-05-13T22:08:20+00:00

We are pleased to present the 59th issue of the Journal of Economics, Finance and Administrative Science (JEFAS), featuring groundbreaking research across diverse domains of finance and economics. Each paper in this issue has undergone our rigorous double-blind peer review process, ensuring the highest standards of academic excellence while providing actionable insights for practitioners and policymakers.

DOI: https://doi.org/10.1108/JEFAS-05-2025-337

The impact of behavioral biases on investment decisions: a serial mediation analysis

2025-05-13T22:15:58+00:00

Purpose

The purpose of this study is to investigate the impact of behavioral biases on investment decisions through a serial mediation of overconfidence and disposition effects.

Design/methodology/approach

The authors assess the behavioral biases affecting the investment decisions of life insurance policyholders through the serial mediation of overconfidence and disposition effects using a structured questionnaire. The study included 501 life insurance policyholders who were selected using a snowball sampling technique.

Findings

The results of this study revealed that behavioral biases influence the investment decisions of life insurance policyholders. The results also support the serial mediation model, where behavioral biases influence the investment decisions of life insurance policyholders via overconfidence and disposition effects.

Research limitations/implications

This study makes a theoretical contribution to the field of behavioral finance by exploring the influences of behavioral biases on investment decisions. It also introduces overconfidence and disposition effects as serial mediators between behavioral biases and investment decisions. The study will be helpful for researchers, academicians and policymakers in the development of a more comprehensive model in the area of behavioral finance and in raising awareness regarding those biases among policyholders in order to improve their investment strategy.

Originality/value

This study has extended the ongoing simple mediation model by integrating overconfidence and disposition effects in a serial mediation model between behavioral biases and investment decisions. The study will contribute to the area of behavioral finance, as it is the first time this particular study has been conducted according to the authors’ knowledge.

DOI: https://doi.org/10.1108/JEFAS-08-2023-0243

Utility under the Dark Tetrad

2025-05-14T09:39:28+00:00

Purpose

Literature on psychology highlights four traits that shape an amoral and antisocial personality: Machiavellianism, narcissism, psychopathy and sadism. Together, these personality traits form the Dark Tetrad. In this study, the standard intertemporal utility maximization model is reassessed from the point of view of a representative economic agent endowed with the Dark Tetrad personality traits.

Design/methodology/approach

The approach followed in this paper consists of identifying how each of the Dark Tetrad traits might be logically associated with the dynamic utility problem, as well as exploring, in the context of the model, the implications, for consumption and utility, of admitting the presence of such traits in individuals’ personalities.

Findings

It is found that, typically, dark personalities penalize consumption growth, even when such traits are interpreted directly and positively contributing to the utility of the agent. It is also found that in economies with two or more interacting agents, the dark traits might have a mutually destructive nature.

Originality/value

Economics is going through a smooth revolution in the direction of becoming an eminently behavioral science. Most of the traditional economic models, based on the idea of the hyper-rational agent, are being replaced or complemented by a different view of the homo-economicus, in which, among other things, personality matters. This paper offers a novel contribution in this direction.

DOI: https://doi.org/10.1108/JEFAS-07-2022-0164

Exploring the asymmetric relationship between macroeconomic factors and corporate profitability in the MSCI Colombia index

2025-05-14T09:47:22+00:00

Purpose

This study aims to explore the asymmetric effects of macroeconomic factors on the profitability of large-cap companies in an emerging country like Colombia, using the Morgan Stanley Capital International (MSCI) Colombia index as the basis.

Design/methodology/approach

We employ a combination of singular spectrum analysis (SSA) and principal component analysis (PCA) to identify and estimate four key macroeconomic factors that account for approximately 47.8% of Colombia's macroeconomy. These factors encompass indicators related to inflation and cost of living, foreign trade and exchange rate, employment and labor force and trade and production in Colombia. We utilize the distributed lag nonlinear model (DLNM) to analyze the asymmetric relationships between these factors and corporate profitability, considering different scenarios and lags.

Findings

Our analysis reveals that there are indeed asymmetric relationships between the identified macroeconomic factors and corporate profitability. These relationships exhibit variability over time and lags, indicating the nuanced nature of their impact on corporate performance.

Originality/value

This study contributes to the existing literature by applying a novel methodology that combines SSA and PCA to identify macroeconomic factors within the Colombian context. Additionally, our focus on asymmetric relationships and their dynamic nature in relation to corporate profitability, using DLNM, adds original insights to the research on this subject.

DOI: https://doi.org/10.1108/JEFAS-08-2023-0234

Taking ESG strategies for achieving profits: a dynamic panel data analysis

2025-05-14T10:10:24+00:00

Purpose

The goal is to investigate the relationship between financial performance and environmental, social and governance (ESG) indicators and disclosures for a sample of Latin American firms.

Design/methodology/approach

Dynamic panel data regressions are used to analyze a sample of 114 companies listed on the Latin American Integrated Market, MILA (Chile, Colombia, Mexico and Peru) for the period 2011–2020. The Altman Z-score and Piotroski F-score are used as indicators of the probability of default and comprehensive financial strength. Models are developed in which the relationship between economic value added (EVA) and Jensen’s alpha are evaluated against firms’ ESG practices.

Findings

A direct relationship between ESG strategies and financial performance was found. Better practices and transparency in ESG are related to lower probability of bankruptcy, greater financial strength, greater EVA and superior risk-adjusted returns.

Research limitations/implications

ESG data were obtained from the Bloomberg system based on a methodology that may differ from other sources. The sample covers four Latin American countries and large corporations. Independent variables were selected for their perceived validity, given their frequent use in previous studies.

Practical implications

Evidence for company management regarding the importance of strengthening ESG practices and reporting should be part of their balanced scorecards. For investors, the results support the importance of evaluating ESG practices in asset selection.

Originality/value

The present study is the first research to present empirical evidence on the relationship between ESG scores and disclosures for MILA countries, using a comprehensive set of financial performance indicators (Altman Z-scores, Piotroski F-scores, EVA and Jensen’s alpha).

DOI: https://doi.org/10.1108/JEFAS-02-2023-0030

Are private banks more sensitive to changes in reserve requirements? Evidence from an emerging market

2025-05-14T12:00:26+00:00

Purpose

This article explores the effects of monetary policy rates and interest rate structures on bank profitability.

Design/methodology/approach

We studied 65 Indian commercial banks over time, including economic cycles, consolidation and the Great Financial Crisis. We categorized commercial banks by ownership (public, private or foreign) and predicted how they will react to monetary policy changes. We employed the instrumental variable estimate approach and panel Granger causality tests to give evidence of the direction of causation in the monetary policy and bank performance nexus.

Findings

Private and international banks, we believe, are more sensitive to changes in reserve requirements because they are more effective at maintaining statutory reserves. Private and international banks are more susceptible to repo rate fluctuations than state banks. In contrast, public banks are more sensitive to bank rates because they are more likely than private and international banks to use the bank rate window of accommodation.

Originality/value

We studied the impact of monetary policy rates on bank performance within the banking-dominated financial system of an emerging economy – a focus that has not been previously explored. There has been little research into the connection between monetary policy rates and bank performance in emerging markets, notably in India.

DOI: https://doi.org/10.1108/JEFAS-11-2022-0261

Categorizing world regional art prices by artistic movement: an analysis of Latin American art

2025-05-14T12:23:37+00:00

Purpose

The literature on the potential benefits of art investing has yet to consider the effects of categorizing world regional art markets (e.g. Latin American art) by artistic styles or movements (e.g. Latin American surrealism, Latin American conceptual art, etc.). We propose that such categorization should be carried out and analyze the Latin American art market as an example.

Design/methodology/approach

Eleven artistic style price indices within the Latin American art market (30,288 artworks created by 293 artists and sold at auction between 1970 and 2014) are estimated using hedonic regressions: Abstract-geometric, abstract-informal, conceptual, costumbrismo, cubism, figurative, muralism, landscape, surrealism, nineteenth century and avant-garde. We find that several variables that rely on the corresponding Latin American art movement index have a significant relationship with painting prices.

Findings

There is significant variation in the financial performance of the various price indices for Latin American art styles: the conceptual (10.33% annual real return), abstract geometric (1.97%), cubism (0.97%) and costumbrismo (0.91%) movements overperformed a market that exhibited an aggregate negative cumulated real return of 0.9% during the sample period. The average correlation between each of the styles was only 0.12. The estimated price index for paintings sold at Christie's and Sotheby's clearly outperformed the index estimated for the other auction houses, and we also found that paintings created by Latin American women artists yielded higher returns.

Practical implications

Our results have practical applications for investors, collectors, auction houses and policymakers.

Originality/value

This is the first paper to highlight the need to decompose art price indices by artistic movements at the regional level.

DOI: https://doi.org/10.1108/JEFAS-02-2024-0065

Going long, going short, issue or liquidate? Corporate debt maturity of Mexican public firms

2025-05-14T12:38:10+00:00

Purpose

This paper studies the determinants of the debt maturity of Mexican-listed companies by analysing the effects on the extensive (issuing or liquidating debt) and the intensive (debt maturity renegotiation) margins.

Design/methodology/approach

This study, using a Tobit model for panel data and measuring maturity as a time variable, shows that size, liquidity and leverage, among other firm characteristics, as well as the market interest rate, explain debt maturity. Additionally, the study employs the McDonald and Moffitt decomposition to determine whether the explanatory variables of maturity have a more significant effect on the decision to issue or liquidate debt or on debt maturity renegotiations.

Findings

The results obtained highlight that the market interest rate negatively affects debt maturity. On the other hand, variables like size, liquidity, collateral and leverage demonstrate a positive relationship with the dependent variable. In addition, the extensive margin has a higher impact on corporate debt than the intensive margin, suggesting that firms prefer to liquidate or issue new debt rather than renegotiate preexisting contracts.

Research limitations/implications

The main limitation of this study is the use of an unbalanced panel. The lack of data limits the application of specific methodologies suggested by the literature as a way to test the robustness of the estimates.

Originality/value

First of all, this study adds empirical evidence of debt maturity decisions by publicly traded firms in a middle-income country such as Mexico to the existing literature on maturity choice. Second, the study treats debt maturity as a time-censored, limited variable. Finally, the authors have used the McDonald and Moffitt (1980) methodology to decompose the effect of each independent variable into extensive and intensive margins.

DOI: https://doi.org/10.1108/JEFAS-03-2024-0082

Does trading mechanism shape cross-market integration? Evidence from stocks and corporate bonds on the Tel Aviv Stock Exchange

2025-05-14T13:33:46+00:00

Purpose

This study investigates the influence of trading mechanisms on cross-market integration between stocks and corporate bonds on the Tel Aviv Stock Exchange (TASE) during the COVID-19 crisis. Unlike the worldwide practice of trading corporate bonds on an over-the-counter (OTC) market, TASE uses a limit-order-book (LOB) for both stocks and bonds, potentially creating unique volatility dynamics through direct information spillover. We analyze the volatility dynamics and spillover effects between TASE’s stock and corporate bond markets.

Design/methodology/approach

We employ an exponential general autoregressive conditional heteroskedastic (EGARCH)(1,1) model to assess the impact of stock market fear, measured by implied volatility, on Tel-Bond 20 Index returns and volatility. A bivariate diagonal Baba-Engle-Kraft-Kroner (BEKK) model is also applied to capture time-series integration and cross-volatility spillovers between the TA-35 Index (stocks) and the Tel-Bond 20 Index (corporate bonds), especially during financial stress.

Findings

The EGARCH model reveals a significant contagion effect, with increased stock market fear lowering corporate bond returns and increasing bond volatility. It also indicates a leverage effect, where negative shocks disproportionately amplify bond volatility. Diagonal BEKK results confirm strong cross-market volatility persistence, especially during crises, highlighting substantial financial contagion between stocks and bonds in TASE. While TASE’s market design improves the overall market quality, these findings underscore the LOB trading mechanism in facilitating financial contagion and systemic risk.

Practical implications

The LOB trading in TASE facilitates direct information flow, intensifying volatility spillover and cross-market integration, with the degree of integration fluctuating based on market conditions. Investors and managers should consider alternative hedging strategies during volatile periods, as stock market sentiment significantly impacts bond stability. Regulators should assess how trading mechanisms affect market integration and risk, especially during periods of distress.

Originality/value

This study offers new insights into how trading mechanisms influence cross-market dynamics, contributing to the literature on market design and financial contagion.

DOI: https://doi.org/10.1108/JEFAS-11-2023-0262

Investor sentiment and equity mutual fund performance in Brazil

2025-05-14T13:41:04+00:00

Purpose

Focusing on the Brazilian equity mutual fund industry, this study analyzes whether including the investor sentiment index in asset pricing models is important for explaining fund alpha.

Design/methodology/approach

The investor sentiment index and risk factors in the Fama and French (1993) and Carhart (1997) models were estimated, the risk-adjusted performance of a sample of equity mutual funds in Brazil was evaluated, and a United States (US) sample was included for a complementary perspective. The sample period spans 2010–2019 for Brazil and 2010–2018 for the US.

Findings

The results contrasted with those evidenced in the US, where the sentiment index was an important factor in explaining the probability of alpha occurrence, especially in the case of winner funds, defined as those exhibiting a positive and statistically significant alpha at the 5% level. Overall, the findings suggest that, in the Brazilian market, pricing models incorporating investor sentiment as an additional factor fail to adequately capture the outperformance probability of equity mutual funds. These results suggest that the factors influencing fund performance may differ between the two countries and highlight the relevance of developing more suitable investor sentiment indicators for emerging markets.

Originality/value

This study examines the impact of the sentiment index on the performance of equity mutual funds in Brazil, specifically its influence on alpha generation.

DOI: https://doi.org/10.1108/JEFAS-12-2023-0280