Editorial

Welcome to the fourth issue of the International Journal of Management and Economics in 2023. In this issue, we present six empirical papers written by authors representing numerous Polish universities and institutions.

In the first paper, Katarzyna Byrka-Kita, Mateusz Czerwiński, and Aurelia Bajerska investigate the link between the rule of law and equity returns in posttransitional economies. By applying several rule of law proxies for national legal frameworks and justice system quality as proxies of the rule of law principle, they show that the country-level judicial system quality is an important driver of company market performance and that posttransition countries with lower rule of law measures exhibit higher returns on equity than those with better measures. Their results support the idea that since poor governance and country instability increase agency and transaction costs and decrease growth prospects and profitable projects available to companies, the risk premium demanded by investors increases, leading to higher equity returns.

The next paper was prepared by Tomasz Berent and Maciej Śniechowski. The authors validate the existence of an extensively documented secular upward trend in corporate cash holding. They find no trace of a trend for Poland and believe most trends for the United States come from the cash piling toward the end of the sample period. At best, the U.S. trend applies merely to small firms. The authors believe cash holding is a period-dependent time-varying variable that also depends on external shocks (e.g., the pandemic or tax regulations). They show that a simple addition of macro data (e.g., GDP) vastly improves models focused only on optimal cash holding and firm-specific characteristics.

The third paper by Michał Comporek aims to analyze the earnings quality of high-share liquidity companies from Poland, Romania, and Hungary whose activities are outside the finance sector. The author assesses earnings quality (earnings persistence, predictability, and accruals quality) using the Kruskal–Wallis test, U Mann–Whitney test, Wilcoxon signed ranks test, and Spearman rank correlation coefficients. The paper demonstrates that companies listed on the Bucharest Stock Exchange tend to provide higher earnings quality than other firms in the CEEplus index. There was a noticeable domination of managerial practices aimed at managing the earnings downward. This also happened in 2020, i.e., the period negatively affected by the COVID pandemic.

In the fourth paper, Dominika Brózda-Wilamek aims to evaluate the topology properties (the geographical and sectoral structure) of the global cross-border mergers and acquisitions (CBM&A) network. A quantitative study is conducted by using the social network analysis (SNA) method. The article shows that in 1990–2021, the United States, the United Kingdom, Germany, Canada, and France occupied the most central place in the network. From the beginning of the 21st century, there has also been a marked increase in the importance of Asian countries, with China and India receiving a large inflow of foreign capital. In turn, entities from Hong Kong, Singapore, Japan, and China heavily invested abroad through M&A. From a sectoral perspective, mainly entities that operated in financial, industrial, basic materials, technology, and consumer cyclical sectors made transactions in the global CBM&A network.

The fifth paper was written by Joanna Szlęzak-Matusewicz, Michał Bernardelli, Paweł Felis, Marcin Jamroży, Elżbieta Malinowska-Misiąg, Jacek Lipiec, and Grzegorz Otczyk. It examines the convergence of tax systems in Central and Eastern European countries (CEECs) during 1995–2018. The authors identify the factors that influence the taxation system and trends in income taxation in the CEECs by adapting the hidden Markov model approach. Four indicators have been used: (1) current taxes on income, wealth, etc. (% of GDP); (2) taxes on the income or profits of corporations (% of GDP); (3) taxes on the income or profits of corporations (% of total); and (4) taxes on individual or household income (% of GDP). The study demonstrates that many CEECs have reduced income taxation, mainly by lowering tax rates. Both convergence and divergence have been identified among the CEECs over the period considered. The speed of these processes based on employed variables varied depending on both exogenous and endogenous factors.

In the last paper, Małgorzata Iwanicz-Drozdowska, Karol Rogowicz, and Paweł Smaga examine how generations X, Y, and Z might react to market-moving events over short- and long-term horizons to maintain an optimal balance among risk, return, and investor preferences. The authors use data on selected global assets and several types of economic and non-economic events for 2000–2021, applying the mean–variance optimization procedure. They find that in optimal portfolios, fixed-income assets dominate and are the main driver of portfolio adjustments. Portfolios with short-term horizons with less risk-averse investors and those for generation Z are the most reactive to analyzed types of events. None of the events per se creates an extraordinary opportunity to increase returns.

I hope that all papers included in the current issue of the IJME will be a good reading and a source of inspiration at the beginning of the new year 2024.