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Zulkefly Abdul Karim
Ruzita Abdul Rahim
Wai Yan Wong
Siti Farah Dilla Zakaria Editors
Contemporary
Issues in Finance,
Investment
and Banking in
Malaysia
Contemporary Issues in Finance, Investment
and Banking in Malaysia
Zulkefly Abdul Karim · Ruzita Abdul Rahim ·
Wai Yan Wong · Siti Farah Dilla Zakaria
Editors
Contemporary Issues
in Finance, Investment
and Banking in Malaysia
Editors
Zulkefly Abdul Karim Ruzita Abdul Rahim
Faculty of Economics and Management Faculty of Economics and Management
Universiti Kebangsaan Malaysia Universiti Kebangsaan Malaysia
Bangi, Selangor, Malaysia Bangi, Selangor, Malaysia
Wai Yan Wong Siti Farah Dilla Zakaria

Faculty of Economics and Management Faculty of Economics and Management
Universiti Kebangsaan Malaysia Universiti Kebangsaan Malaysia
Bangi, Selangor, Malaysia Bangi, Selangor, Malaysia
ISBN 978-981-99-5446-9 ISBN 978-981-99-5447-6 (eBook)

https://doi.org/10.1007/978-981-99-5447-6
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2024
This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether
the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse
of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and
transmission or information storage and retrieval, electronic adaptation, computer software, or by similar
or dissimilar methodology now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication
does not imply, even in the absence of a specific statement, that such names are exempt from the relevant
protective laws and regulations and therefore free for general use.
The publisher, the authors, and the editors are safe to assume that the advice and information in this book
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the editors give a warranty, expressed or implied, with respect to the material contained herein or for any
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claims in published maps and institutional affiliations.
This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd.
The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721,
Singapore
Foreword
It is with great pleasure that I introduce this collection of articles, a collaborative

effort by researchers from leading institutions in Malaysia. This anthology delves
into the contemporary issues in capital investments, investment in equities and cryp-
tocurrencies and Islamic banking, with a special focus on the Malaysian market and
the influence of recent technological advancements and disruptive forces.
The collection begins with a systematic review of the literature on the role of
technological revolution in corporate governance, emphasising the use of blockchain
and smart contracts to mitigate information asymmetry and enhance governance
practices.
A series of articles provide empirical observations on investments in Malaysian
companies. One study highlights the positive relationship between market senti-
ment and capital investments, where optimistic market sentiment fosters optimism
among firms, and increased long-term investments, while periods of pessimism
lead to decreased capital expenditure. Another article examines the cross-section
of returns in the Malaysian stock market, revealing significant positive size and divi-
dend premia. Additionally, the impact of the COVID-19 pandemic on returns on the
aggregate Malaysian stock market and its sectoral indices are investigated.
Subsequent articles analyse the volatile cryptocurrency market. The first of these
introduces a comparative analysis of cryptocurrencies and stocks, offering founda-
tional perspectives for beginners navigating these alternative investment choices.
Additional articles explore the impact of the COVID-19 pandemic on the perfor-
mance of cryptocurrencies and examine the interaction of Bitcoin with interest
rates and exchange rate movements in countries, including United States, China
and Malaysia.
In the realm of Islamic banking, the anthology explores the evolving landscape
of fintech and its behavioural impact. One article presents a systematic overview
on the effect of Fintech and financial literacy on the adoption of Islamic banking
products and services. The collection also probes more specialised topics such as
online investment adoption, financial literacy within Islamic banking and the ethical
banking behaviour of millennials and Generation Z in Malaysia.
v
vi Foreword
Throughout the collection, the authors provide extensive discussion of the liter-
ature and employ various research methodologies, including systematic literature
reviews and empirical models, to ensure rigorous analyses. These chapters offer
insights into the Malaysian equity market, cryptocurrencies and the changing land-
scape of financial services industry, elucidating their implications for market players.
They demonstrate the growing expertise within the Malaysian research community.
I envision the collection to be beneficial to students and researchers interested
in investments and Islamic banking, particularly those focusing on the Malaysian
context. I commend the authors and editors for their dedication in assembling this
timely and useful anthology. It is a testament to their commitment to advancing
knowledge in these critical areas.
Allaudeen Hameed
Tan Peng Yue Professor of Finance
National University of Singapore
Singapore
Chairholder of Tun Ismail Mohamed
Ali Distinguished Chair (YTI-UKM)
2022–2023, Universiti Kebangsaan
Malaysia, Bangi, Selangor, Malaysia
Preface
This book is a collection of the works that have been conducted by experienced
researchers at Universiti Kebangsaan Malaysia (UKM), Universiti Sains Malaysia
(USM), Universiti Malaysia Sarawak (UNIMAS), Universiti Malaysia Terengganu
(UMT), Universiti Malaya (UM), Universiti Putra Malaysia (UPM), Ministry of
Finance Malaysia (MoF), and Hong Leong Bank Berhad. The main idea is started
based on the collaboration between the Faculty of Economics and Management,
Universiti Kebangsaan Malaysia and Tun Ismail Mohamed Ali Distinguished Chair
(YTI-UKM). The main ideas of this book tackle the contemporary issues on finance,
investment and banking. The first two chapters focus on the issues of corporate finance
which examine the information asymmetric and corporate governance during the era
of Industrial Revolution (IR) 4.0 and the impact of market sentiment on business
fixed investment (capital expenditure). The subsequent five chapters cover issues
on investment and stock market which include the comparison of cryptocurrency
and stock as the investment tool and how the COVID-19 pandemic affected the
stock market and cryptocurrency. The final three chapters delve into the banking
and investment behaviour in the banking industry amidst the disruption of finan-
cial technology (fintech) and fintech start-ups. Various methodologies are used in
this book such as systematic literature review (SLR) and empirical modelling that
can be beneficial for policymakers and relevant agencies. The editors would like to
express their gratitude to all the contributing authors for their great efforts and full
dedication in preparing the manuscripts for the book. We would like to thank all
reviewers for reviewing all manuscripts and providing very constructive feedback.
This research book is also funded by various research grants such as YTI Indus-
trial Grant (code project: EP-2020-005, EP-2020-003), Ministry of Higher Educa-
tion Malaysia (code project: FRGS/1/2018/SS01/UKM/02/2, FRGS/1/2021/SS01/
UKM/02/4) and Faculty of Economics and Management, UKM research grant (code
vii
viii Preface
project: EP-2020-061, EP-2020-007). This book is suitable for postgraduate students,

researchers as well as other social scientists who are working in the area of finance,
investment and banking. Any feedback can be directed to the editors.
Bangi, Malaysia Zulkefly Abdul Karim

January 2024 Ruzita Abdul Rahim
Wai Yan Wong
Siti Farah Dilla Zakaria
Contents
Bridging the Gap Between Information Asymmetry and IR4.0:

A Systematic Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mohd Hasimi Yaacob, Ng Suat Thing, and Norazlan Alias
The Impact of Market Sentiment on Business Fixed Investment
in Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Zulkefly Abdul Karim, Ahmad Yusmadi Yusoff, Bakri Abdul Karim,
and Norlin Khalid
Crypto or Stock? A Comparative Analysis for Beginners . . . . . . . . . . . . . . 37
Wai-Yan Wong, Shu-Fen Chuah, Ai-Xin Lee, and Phui-Chee Chong
The Size Effect in Malaysia’s Stock Returns . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Syajarul Imna Mohd Amin, Aisyah Abdul-Rahman,
and Bakri Abdul Karim
The Impact of the COVID-19 Pandemic on the Malaysian Stock
Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Zulkefly Abdul Karim, Lay Qin Yi, Bakri Abdul Karim,
and Siti Farah Dilla Zakaria
Reaction and Efficiency of the Cryptocurrency Market During
the COVID-19 Pandemic: The Effect of Size and Supply . . . . . . . . . . . . . . 81
Ruzita Abdul Rahim, Nur Arissa Maisarah Nadhri,
Noor Azryani Auzairy, and Syahida Zainal Abidin
Monetary Policy, COVID-19 and Bitcoin: The Tales of 3 Countries . . . . . 105
Noor Azryani Auzairy and Ahmad Ibn Ibrahimy
Fintech, Financial Literacy and Islamic Banks . . . . . . . . . . . . . . . . . . . . . . . 117
Nurul Murshida Benjamin, Aisyah Abdul-Rahman,
and Syajarul Imna Mohd Amin
ix
x Contents
Factors Influencing Online Investment Adoption: A Systematic

Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Siti Aisyah Shari, Aisyah Abdul-Rahman,
and Syajarul Imna Mohd Amin
Millennials and Gen-Z Ethical Banking Behaviour in Malaysia . . . . . . . . 161
Siti Aisyah Zahari, Shahida Shahimi, Suhaili Alma’amun,
and Mohd Mursyid Arshad
Editors and Contributors
About the Editors
Zulkefly Abdul Karim (Ph.D.) currently is a Professor

at the Centre for Sustainable and Inclusive Develop-
ment Studies (SID), Faculty of Economics and Manage-
ment, Universiti Kebangsaan Malaysia (UKM), Bangi,
Selangor, Malaysia. His research interest has focused
on monetary and financial economics, international
finance, applied econometrics and public policy. He
has an outstanding record in publications that have
been published in various journals indexed in Web of
Science (WoS) and SCOPUS. He also holds an admin-
istration post at university level as Chair of Social and
Economic Transformation Research Cluster, Centre for
IDEA-UKM, and also as Editor and Associate Editor for
several journals.
Ruzita Binti Abdul Rahim (Ph.D.) is a Professor

in Corporate Finance at the Centre for Global Busi-
ness and Digital Economy Studies (GloBDE), Faculty
of Economics and Management, Universiti Kebangsaan
Malaysia (UKM), Bangi, Selangor, Malaysia. Her
research interests are investments, corporate finance,
international finance, financial economics, financial
technology (fintech) and digital securities.
xi
xii Editors and Contributors
Wai-Yan Wong (Ph.D.) is a Senior Lecturer at

the Centre for Global Business and Digital Economy
Studies (GloBDE), Faculty of Economics and Manage-
ment, Universiti Kebangsaan Malaysia, Bangi, Selangor,
Malaysia. Her research interest is in the field of corpo-
rate finance, corporate governance and corporate polit-
ical connection. She has published in Finance Research
Letters, Pacific-Basin Finance Journal, Development
Policy Review, and International Journal of Managerial
Finance.
Siti Farah Dilla Zakaria is a senior researcher affil-

iated at Tun Ismail Mohamed Ali Distinguished Chair
(YTI-UKM), Universiti Kebangsaan Malaysia, Bangi,
Selangor, Malaysia. She has graduated with a Master
of Business Administration (M.B.A.) specialising in
Human Resource Management from the Graduate
School of Business, Universiti Kebangsaan Malaysia
(UKM-GSB).
Contributors
Aisyah Abdul-Rahman Faculty of Economics and Management, Universiti

Kebangsaan Malaysia, Bangi, Selangor, Malaysia
Syahida Zainal Abidin Faculty of Economics and Management, Universiti
Norazlan Alias Centre for Governance Resilience and Accountability Studies
(GRACE), Faculty Economics and Management, Universiti Kebangsaan Malaysia,
Bangi, Selangor, Malaysia
Suhaili Alma’amun Faculty of Economics and Management, Universiti
Syajarul Imna Mohd Amin Faculty of Economics and Management, Universiti
Editors and Contributors xiii
Mohd Mursyid Arshad Faculty of Educational Studies, Universiti Putra Malaysia,

Serdang, Selangor, Malaysia
Noor Azryani Auzairy Faculty of Economics and Management, Universiti
Nurul Murshida Benjamin Faculty of Economics and Management, Universiti
Phui-Chee Chong Faculty of Economics and Management, Universiti Kebangsaan
Shu-Fen Chuah Faculty of Business, Economics and Social Development, Univer-
siti Malaysia Terengganu, Kuala Terengganu, Terengganu, Malaysia
Ahmad Ibn Ibrahimy Faculty of Business and Economics, Universiti Malaya,
Kuala Lumpur, Malaysia
Bakri Abdul Karim Faculty of Business and Economics, Universiti Malaysia
Sarawak, Kota Samarahan, Sarawak, Malaysia
Zulkefly Abdul Karim Faculty of Economics and Management, Universiti
Norlin Khalid Faculty of Economics and Management, Universiti Kebangsaan
Ai-Xin Lee School of Management, Universiti Sains Malaysia, Penang, Malaysia
Nur Arissa Maisarah Nadhri Faculty of Economics and Management, Universiti
Ruzita Abdul Rahim Faculty of Economics and Management, Universiti
Shahida Shahimi Faculty of Economics and Management, Universiti Kebangsaan
Siti Aisyah Shari Faculty of Economics and Management, Universiti Kebangsaan
Ng Suat Thing Faculty Economics and Management, Universiti Kebangsaan
Wai-Yan Wong Faculty of Economics and Management, Universiti Kebangsaan
Mohd Hasimi Yaacob Centre for Governance Resilience and Accountability
Studies (GRACE), Faculty Economics and Management, Universiti Kebangsaan
Lay Qin Yi Hong Leong Bank Berhad, Kuala Lumpur, Malaysia
Ahmad Yusmadi Yusoff Ministry of Finance Malaysia, Putrajaya, Malaysia
xiv Editors and Contributors
Siti Aisyah Zahari Faculty of Economics and Management, Universiti Kebangsaan

Siti Farah Dilla Zakaria Tun Ismail Ali Distinguished Chair (YTI-UKM), Univer-
siti Kebangsaan Malaysia, Bangi, Selangor, Malaysia
Bridging the Gap Between Information
Asymmetry and IR4.0: A Systematic
Literature Review
Mohd Hasimi Yaacob, Ng Suat Thing, and Norazlan Alias
Abstract With the growing literature on information asymmetry and industry 4.0
(IR4.0), a systematic review of the application of IR4 on mitigating information
asymmetry is inevitable. Most of the existing literature focuses on management
and computer science, and limited study links the analysis directly to the impact of
technology on mitigating information asymmetry in corporate governance. There-
fore, this study aims to fill in the literature gaps by refining and identifying the
linkage between adoption IR4.0 or enabling technologies of IR4.0 (Blockchain,
Cyber-Physical System (CPS), Internet of Things (IoT) and Cloud Computing)
related to mitigating information asymmetry. Firstly, the systematic review found
521 research articles from Scopus and Web of Science database and analysed nine
articles based on inclusion and exclusion criteria. The review analysis found that
blockchain technology plays a vital contribution in representing the enabling tech-
nologies of IR4.0. Most of the review analysis discussed blockchain technology on
mitigating information asymmetry in corporate governance. Only one review article
discussed widely with enabling technologies of IR4.0 on mitigating information
asymmetry. However, the management field report was discussed too widely with
theory and concepts related to computer science literature. Therefore, this study will
focus on the discussion of blockchain technology on mitigating information asym-
metry. The findings conclude that the enabling technologies of IR4.0 will mitigate
information asymmetry in corporate governance in the form of enabling open infor-
mation transactions, decentralised governance, representing faithfulness of financial
reporting, promote smart contracts, and enhance market competitiveness and social
welfare. Finally, this study emphasised a framework based on the systematic literature
review which suggested that IR4.0 will be a new mechanism to mitigate information
M. H. Yaacob (B) · N. Alias

Centre for Governance Resilience and Accountability Studies (GRACE), Faculty Economics and
Management, Universiti Kebangsaan Malaysia, Bangi, Selangor, Malaysia
e-mail: [email protected]
N. S. Thing
Faculty Economics and Management, Universiti Kebangsaan Malaysia, Bangi, Selangor,
Malaysia
© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 1
Z. Abdul Karim et al. (eds.), Contemporary Issues in Finance, Investment and Banking
in Malaysia,
https://doi.org/10.1007/978-981-99-5447-6_1
2 M. H. Yaacob et al.
asymmetry in the corporate governance, which will directly influence the intention
of the corporate governance players to mitigate information asymmetry.
Keywords Information asymmetry · Industry 4.0 · Blockchain · Corporate

governance
1 Introduction
This study examines the impact of the adoption industry 4.0 on mitigating infor-
mation asymmetry in corporate governance. This article also tries to identify the
linkage between the adoption industry 4.0 and the effects on mitigating informa-
tion asymmetry. Based on our knowledge, this issue had not been addressed yet
in the systematic literature review. Since twentieth century, information asymmetry
remains an unresolvable problem in corporate governance. Major prior studies deter-
mined that an individual tends to be involved in information asymmetry for the sake
of their benefits or relies on the organisation’s objective (e.g., Connelly et al., 2011;
Hagedoorn, 2006; Zaheer & Soda, 2009). For instance, management manipulating
accruals, constructing transactions, and disclosing false information to mislead infor-
mation users (Healy & Palepu, 2001; Lie, 2005). The issue of information asymmetry
brings negative consequences to corporate governance, such as impacts on decision-
making and business growth. Hence, organisations have to find solutions to mitigate
information asymmetry. The organisation had mitigating information by adopting
a rewarding system, monitoring system, etc. However, information asymmetry still
being unresolvable. Therefore, there are necessities to adopt disruptive technology to
improve the resolutions of mitigating information asymmetry. By adopting industry
4.0, this will impact on the traditional methods of industrial production, corporate
governance, and business regulations. Therefore, it will further improve corporate
performance and leads the organisation into the new edge.
The terms of industry 4.0 or the fourth industrial revolution are based on inte-
grating the systems through big data, the emergence of analytics and business-
intelligence capabilities, generating new forms of human–machine interaction, and
improvements in the transferring digital instructions to the physical world. Thus,
brings a new value chain and management level across the products’ life cycle
(Baur & Kagermann, 2013; Wee, 2015). Many prior studies examined that adopting
industry 4.0 will decentralise corporate governance, and the disclosed informa-
tion would be high transparency, traceable, and tamperproof (e.g., Yu et al., 2019).
However, a question of whether the adoption industry 4.0 will mitigate the problem
of information asymmetry is unclear.
Notwithstanding its benefits, when we look into the literature of information
asymmetry and industry 4.0 itself, there are limited study links between the manage-
ment literature and computer science literature. From the perspective of management
literature, prior studies have focused on studying the antecedent conditions that will
lead information asymmetry, the motivation, resolutions on mitigating information
Bridging the Gap Between Information Asymmetry and IR4.0 … 3
asymmetry, and the impacts of information asymmetry towards the organisations.

However, the literature of adoption disruptive technology on mitigating information
asymmetry is limited in the management literature. On the other hand, from the
viewpoint of industry 4.0 literature, most of the prior studies mainly focus on intro-
ducing, technology applied, research and development (R&D), opportunities and
challenges on IR4 (e.g. Ghobakhloo, 2018; Moktadir et al., 2018; Zhou et al., 2015).
While most of the existing literature focuses on computer science, limited study
links the analysis directly to technology’s impact on mitigating information asym-
metry in corporate governance. Therefore, a systematic literature review on adoption
industry 4.0 related to mitigating information asymmetry is necessary. The discus-
sion in the article can improve our understanding of the linkage between industry
4.0 on mitigating information asymmetry in corporate governance.
The remainder of the article is structured as follows. Section 2 presents the liter-
ature review of information asymmetry and industry 4.0. Section 3 discusses the
methodology. Section 4 discusses the linkage between the adoption industry 4.0 on
mitigating information asymmetry. Section 5 concludes.
2 Literature Review
2.1 Information Asymmetry
Information asymmetry is defined as a condition wherein there is an imbalance

of information between two parties in a relationship (Akerlof, 1970). Information
asymmetry exists in all exchange relationship, including commerce relationship
(Hambrick & Manson, 1984). Previous studies have explored information asym-
metry in various ways with different theories. Bacharach (1989) examined that
information asymmetry plays a mechanism role in Bacharach’s theoretical models,
which will impact the flow of independent to dependent variables. Stinglitz (2002)
depicted information asymmetry as a condition wherein different party gains different
information towards a thing.
Moreover, Connelly et al. (2011) further explained that information asymmetry
is a type of private information, in which information-rich actors tend to involve
in self-interest activity. Therefore, prior studies examined that information asym-
metry is a mechanism that can be arbitrarily used by actors to pursue self-interest.
Despite the dynamic research on information asymmetry theory, extensive research
studies towards information asymmetry are sufficient to prove that information asym-
metry is a severe problem in corporate governance. For instance, Healy and Palepu
(2001) reported that capital markets and organisations encounter losses consequences
of corporate disclosure related to information asymmetry. Bergh et al. (2019) justified
that information asymmetry made a severe risk to the organisation.
Information asymmetry became a severe problem in corporate governance, partic-

ularly from the aspect of agency theory. Therefore, numerous researchers have iden-
tified various solutions on solving information asymmetry. According to Bergh et al.
(2019), the answers of organisations’ information asymmetry can be classified into
two: (i) reduce information asymmetry and (ii) increase information asymmetry
for the sake of self-benefits. Eisenhardt (1989) and Jensen (1983) explained that
outcome-based incentives could reduce information asymmetry. Gomez-Mejia and
Balkin (1992) supported it by explaining that monitoring systems are considered a
costly and challenging system, which some agent has high autonomy, independence,
and highly specialised information. However, Abrahamson and Park (1994) argued
that agent would be unable to deceive their principal, which will directly reduce infor-
mation asymmetry problem by monitoring the agent’s behaviour. Moreover, some
authors argue that information asymmetry can be reduced by using incentives to
gather and disclose information (e.g., Heeley et al., 2007; Madhok & Tallman, 1998).
Furthermore, according to Bovivie et al. (2016), information asymmetry occurs as a
result of information concealing behaviours. The above argument shows that solu-
tion for information asymmetry remains unclear and needs further investigation. The
answer could lie in the adoption of a new technology mechanism to reduce infor-
mation asymmetry while minimising unanticipated cost and risk. This study aims
to better understand the adoption of this new technology mechanism in solving the
issue of information asymmetry.
2.2 Industry 4.0 and Its Enabling Technologies
The concept of industry 4.0 (IR4.0) was manifested at the Germany Hanover Fair
in 2011 then officially declared as Germany National Strategy in 2013. IR4.0 is
also called an industrial revolution, smart manufacturing, industrial internet, and
smart product. Prior studies like Kagermann et al. (2013) claimed that the world
started to aggressively engage in research and funding programs towards IR4.0 in
order to take a pioneering role in the manufacturing industries. Although there is
still no unanimous agreement in adopting the definition of IR4.0, Baur and Wee
(2015) describe IR4.0 or the fourth stage of industrialisation as “the next phase in the
digitisation of the manufacturing sector, driven by four disruptions: the astonishing
rise in data volumes, computational power, and connectivity, especially new low-
power wide-area networks; the emergence of analytics and business-intelligence
capabilities; new forms of human–machine interaction such as touch interfaces and
augmented-reality systems; and improvements in transferring digital instructions to
the physical world, such as advanced robotic and 3-D printing.” Moreover, Zhou
et al. (2015) depicted that the integrations of IR4.0, horizontal integration, vertical
integration, and end-to-end integration will bring interconnection with man-to-man to
machine, machine-to-machine, or service-to-service. Therefore, IR4.0 will influence
the traditional methods of industrial production and corporate governance business
regulations.
There are numerous methods to apply technologies in the implementation

of IR4.0. These technologies include the cyber-physical system (CPS), Internet
of Things (IoT), cloud computing, blockchain, and other related technologies
(Gobakhloo, 2018; Xu et al., 2018). Xu et al. (2018) explored that IR4.0 is mainly
dependent on the use of CPS, IoT and cloud computing. Meanwhile, Viyasitavat
et al. (2018) explained that blockchain is one of the core technologies applied in
IR4.0. In this study, we will only examine a few core technologies that are particu-
larly significant, such as IR4.0, CPS, IoT, cloud computing, and blockchain. In the
context of IR4.0, IoT usually refers to the Industrial Internet of Things (IIoT) (Wang
et al., 2016). The function is similar to IoT, enabling physical objects to communi-
cate with each other and further share information and coordinate decisions (Ashton,
2009). CPS is defined as a collection of transformative technologies that enables the
connection between the operations of physical assets and computational capabilities
(e.g., Lee et al., 2015; Mladineo et al., 2017; Varghese & Tandur, 2014).
Moreover, the implementation of cloud computing allows all data to be stored
in a private and public cloud server. Viryasitavat et al. (2018) further explained
that blockchain provides a solution which can build trust, reduce costs, and accel-
erate transactions in business process management (BPM) framework for service
composition in IR4.0. Prior studies show an in-depth explanation of what enables
the technologies of IR4.0. However, there is a gap in the literature in explaining how
these enabling technologies in IR4.0 can solve the issues of corporate governance,
in particular, information asymmetry. Therefore, this study aims to understand better
how these enabling technologies can help to solve information asymmetry.
3 Methodology
All studies involving information asymmetry and the applied technology of industry
4.0 were identified via two world-renowned indexed electronic databases: Web of
Science (WoS) and Scopus, using the following search strings: (“information asym-
metry”) AND (“industry 4.0” OR “industrial revolution” OR “smart manufactur-
ing” OR “industrial internet” OR “smart product”) OR (“cyber-physical system”
OR “CPS*” OR “internet of things” OR “IoT*” OR “cloud computing” OR
“blockchain”). A research article was considered eligible for inclusion if: (1) it is in
the Finance area; (2) technology of industry 4.0 was applied to study the information
asymmetry issue; and (3) it is a peer-reviewed article. These types of articles are
only limited to those written in English. Initial searches were conducted in August
2019 and then updated in September 2019 to ensure that all 1990 to September 2019
papers were included.
In phase 1, a total of 521 peer-reviewed research articles were retrieved at this
stage. Restricting the search to WoS and SCOPUS means our review is not exhaustive
and provides only a sample of the literature on information asymmetry in the finance
area and in IR4.0. In phase 2, we scanned titles and abstracts to select articles with
clear relevance to information asymmetry issues and the implied use of industry 4.0
technique. Twenty-two papers were retained and went through full-text review, of
which, nine articles fulfilled the inclusion criteria. Seven articles were retrieved from
Web of Science and two journal articles from SCOPUS, of which, no papers were
common to the two databases as shown in Fig. 1.
Records identified through

Identification
database searching
(n = 521 )
Records after duplicates removed

(n = 520 )
Screening
Records screened Records excluded

(n = 520 ) (n =0 )
Full-text articles assessed

for eligibility
Eligibility
(n =21 )
Studies included in
qualitative synthesis
(n =9 )
Included
Fig. 1 Research framework

4 The Role of IR 4.0 Technology in Mitigating Information

Asymmetry
From the systematic literature review, most of the articles discussed the blockchain
technology—one of the enabling technologies in IR 4.0. This section explains
the integration of blockchain to mitigate information asymmetry in corporate
governance.
4.1 Open Information Transactions
Blockchain potentially mitigates the traditional information transaction asymme-

tries. Prior studies emphasised that blockchain systems play a significant role in
accounting and supply chain transactions. The transaction information of accounting
and supply chain would be visible to all blockchain participants kept in public
ledgers or consortium-based quasi-public ledgers. In general, the peer-to-peer public
blockchain system is fully decentralised. Anyone has the authority to access and view
the transactions to ensure the availability of information is authentic. Therefore, all
transaction information would be publicly exposed and solves the information trans-
action asymmetries. On the other hand, according to New Institutional Economics
(NIE), blockchain technology enables anyone to share information in a transparent
manner without the need for a centralised clearinghouse. Hence, with the excep-
tion of the accounting and supply chain systems, some organisations have applied
blockchain in their governance aid system to reduce information asymmetry and
increase effectiveness (O’Leary, 2017, 2018; Reinsberg, 2018).
4.2 Decentralised Governance
Blockchain and smart contracts can disrupt the traditional organisational gover-
nance structures. Conventional corporate governance systems tend to be centralised,
with different hierarchical top-down command and degrees of rule-setting decision-
making. Agent tends to be involved in self-beneficial activities by using their
authority, and ignoring the instruction from the principal. The blockchain system
introduces a decentralised and spontaneous coordination with resolving the problem
of traditional centralised governance, known as the principal-agent dilemma (infor-
mation asymmetry). In a simple form, blockchain enables a database system in
which decentralised agents or institutions can record information and maintain it. For
instance, the Schelling points (a kind of blockchain solution) allow people to converge
on a mutually consistent decision framework, in the absence of direct communi-
cation and centralised coordination. Moreover, blockchain technology enhances a
responsible and accurate record keeper, reducing the problem of manipulation and
tampering. Hence, blockchain and smart contracts might exterminate information

asymmetry by introducing new ways of coordinating activities. The activities such
as task allocation, coordination, and supervision of a group of people who share
common economic interests are geographically distributed, without the necessity
of a centrally managed organisation (Cong & He, 2019; Eling & Lehmann, 2018;
O’Leary, 2017; Shermin, 2017).
4.3 Representational Faithfulness of Financial Reporting
Stakeholders find it challenging to establish whether financial reporting information

represents what it purports due to information asymmetry and agency problems. In
theory, insiders use to mislead outside capital providers about the entity’s financial
positions and operating performance to obtain more capital or out of personal inter-
ests of insiders. Thus, the emergence and development of financial accounting and
independent auditing to solve information asymmetry. However, it cannot wholly
solve due to conflicting interests between insiders and outsiders, the denseness of
accounting and auditing, and non-independence of the auditing, financial accounting,
and external auditing. Blockchain technology creates a new Accounting Information
System (AIS), which can address the information asymmetry and agency problems
inherent in financial reporting and audit. These systems will enhance the represen-
tational faithfulness of financial reporting. The blockchain records and validates
the information in a decentralised way. The entire process does not require any
authority intermediaries, and the blockchain technology guarantees the information
to be transparent, secure, tamperproof, and reliable. As a result, the application of
blockchain technology in financial accounting can make firm’s accounting process
transparent, improve the quality of external reporting information, and effectively
reduce the information asymmetry between firms and outside investors. In the short
run, the blockchain technology could be used as a platform for firms to voluntarily
disclose information, which is high-quality signalling that enables firms to solve
the trust problem with investors. In the long run, the application will impact finan-
cial accounting, effectively reducing the errors in disclosure, increasing the quality of
accounting information, and mitigating information asymmetry. In sum, this concept
will reduce the agency problems and costs inherent in financial reporting and audit
and enhance the financial reporting system’s credibility and transparency (McCallig
et al., 2019; Yu et al., 2019).
4.4 Smart Contracts
The problem of incomplete contracts is one of the challenges of governance as they

cannot specify all contingencies such as information asymmetry and agency slack.
Blockchain technology enables smart contract with some codes that run on top of a
blockchain (Diedrich, 2016). In theory, smart contracts can bind parties effectively
to mitigate uncertainty in relational contracting. In smart contracts, the parties will
lose their stake resources if they did not behave compliant with not following through
on its promise to provide an incentive or information. Moreover, the smart contracts
will evaluate and verify whether a party complies with the terms and regulations.
Once the smart contract has been set up, this immutable transaction record between
the involved parties is verifiable and traceable. Hence, blockchain, notably smart
contracts, mainly provides a mechanism for bringing trusted data which can reduce
uncertainty around contract enforcement, while also decreasing information asym-
metry by providing an impeachable record of transactions (Reinsberg, 2018; Yu et al.,
2019).
4.5 Enhance Market Competitiveness and Social Welfare
Blockchain enables a decentralised record-keeper to decrease manipulation and

misreport with allowing better and efficient information aggregation. This infor-
mation distribution process changes the information environment and the economic
behaviours of blockchain participants. Blockchain technologies will mitigate infor-
mation asymmetry as a barrier to entering the market and greater the competition
while enhancing the welfare and consumer surplus. In the traditional world, market
players are not able to observe about their competitive business activities. In contrast,
blockchain enables the market players to infer the aggregate business condition by
serving as record-keepers (a system in the blockchain) and detecting deviations in any
collusion equilibrium because the information is open and transparent. The market
players (blockchain node) can observe all trade information in the exchange and all
incoming exchange transactions. With this information, the market player can exploit
the information asymmetry between what they can see and other market players, then
enhance market competitiveness. However, even though the blockchain can mitigate
information asymmetry barrier and encouraging entry for market players, it can also
lead to greater collusive behaviour (Cong & He, 2019; Freund & Stanko, 2018).
5 Discussions
As mentioned, the issue of information asymmetry is common but its impact on

corporate governance is not well researched. This is a significant problem for both
shareholders and stakeholders. Information asymmetry commonly related to an indi-
vidual tends to involve information asymmetry for the sake of own benefits or to
realise organisation’s goals (e.g., Connelly et al., 2011; Hagedoorn, 2006; Zaheer &
Soda, 2009). The loopholes in management had created various opportunities for
corporate governance player to be involved in information asymmetry. Thus, the
Adoption of IR 4.0 Technology
Information Asymmetry Orientation The Intention on Solving Information Asymmetry
Fig. 2 Proposed framework
corporate governance players tend to lack initiative on mitigating information asym-

metry due to their benefits. Hence, information asymmetry is still unresolvable and
has negative consequences even though prior studies try to minimise information
asymmetry. However, earlier studies argue that there are necessities to adopt tech-
nology in this technology era, thereby mitigating information asymmetry. There-
fore, this study fills the research gaps and answers whether adoption IR4.0 will
mitigate the problem of information asymmetry. This study concludes and suggests
that IR4.0 will be a new mechanism to alleviate information asymmetry in corpo-
rate governance. The adoption of IR4.0 will increase corporate governance players’
intention to mitigate information asymmetry by enabling open information trans-
action, decentralised governance, representing faithfulness of financial reporting,
and promoting smart contracts. Hence, without the necessity of a centrally managed
organisation, the corporate governance players have no opportunity to involve in
information asymmetry activity for the sake of self-benefits or the organisation. On
the other hand, blockchain technology’s role enables the corporate transaction to
be transparent, improves information quality, and effectively reduces information
asymmetry between insider and outsider. Therefore, we suggest that the adoption
of IR4.0 in corporate governance will boost the intention of solving information
asymmetry and mitigate information asymmetry. The framework below shows that
the adoption of IR4.0 technology will mitigate information asymmetry and increase
their intention of solving information asymmetry (Fig. 2).
6 Summary and Conclusion
This study applied a systematic literature review to present the influence of IR4.0 in
corporate governance and provided a set of empirical research related to the reso-
lutions of information asymmetry in the area of corporate governance. Most of the
prior studies focus IR4.0 on the area of computer science. There is limited study
that links the analysis directly to the impact of technology on solving information
asymmetry in corporate governance. However, some of the previous studies have
emphasised how the influences of enabling technologies in corporate governance do
not entirely focus on information asymmetry issues. Hence, prior studies have rarely
addressed qualitative and systematic preferences. Notably, the literature does not
have systematic study-related integration of IR4.0 on mitigating information asym-
metry in corporate governance. Therefore, this study integrated all related articles to
address those dilemmas from prior studies.
The findings conclude that enabling technologies of IR4.0 will mitigate infor-
mation asymmetry of corporate governance in the form of enabling open informa-
tion transactions, decentralised governance, representing faithfulness of financial
reporting, promoting smart contracts, and enhancing market competitiveness and
social welfare. The enabling technologies of IR4.0 will decentralise governance.
Hence, this decentralised and spontaneous coordination will resolve the problem
of information asymmetry. Also, IR4.0 enables open information transactions that
anyone can share, access, and amend information in a fully transparent manner
without centralised clearinghouse, meanwhile providing a representational faithful-
ness of financial reporting. Moreover, the decentralised record-keeper encourages
entry for market players, and improves social welfare. Smart contracts, known as one
of the enabling technologies of IR4.0, provide a mechanism for bringing trusted data
which can reduce uncertainty around contract enforcement. Specifically, this study
emphasised a framework based on a systematic literature review. The framework
suggested that IR4.0 will be a new mechanism to mitigate information asymmetry in
corporate governance. It will directly influence the intention of corporate governance
players to mitigate information asymmetry.
Acknowledgements This research project was funded by the YTI-UKM Distinguish Chair (EP-
2020-007) Universiti Kebangsaan Malaysia.
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The Impact of Market Sentiment
on Business Fixed Investment in Malaysia
Zulkefly Abdul Karim, Ahmad Yusmadi Yusoff, Bakri Abdul Karim,

and Norlin Khalid
Abstract Understanding how market sentiment reflects the firm investment deci-
sion (capital expenditure) is crucial for businesses to make a proper investment
strategy. This is because investor sentiment and firms’ investment decision-making
lie behind the reasoning that a firm’s investment selection forms the most crucial part
of its overall business decisions. Thus, this study examines how market sentiment,
measured by Business Condition Index (BCI) and Consumer Sentiment Index (CSI),
reflects Malaysian firms’ investment from 2000 to 2018. This study applies a system
generalised method of moment (GMM) technique with 673 firms’ unbalanced panel
data. Due to global uncertainty and market downturn, an investor’s confidence level
can change from optimism to infectious pessimism. When the market is pessimistic,
investors’ confidence becomes negative, leading to a decline in capital expenditure
(CAPEX). The findings show that both market sentiment indicators significantly
influence private firms’ investment. Higher market sentiment indices create optimism
for firms and increase business fixed investment.
Keywords Market sentiment · Firm investment · Systematic GMM · Tobin Q ·

Investment
Z. A. Karim (B) · N. Khalid

Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi, Selangor,
Malaysia
e-mail: [email protected]
A. Y. Yusoff
Ministry of Finance Malaysia, Putrajaya, Malaysia
B. A. Karim
Faculty of Business and Economics, Universiti Malaysia Sarawak, Kota Samarahan, Sarawak,
Malaysia
© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2024 15
Z. Abdul Karim et al. (eds.), Contemporary Issues in Finance, Investment and Banking
in Malaysia,
https://doi.org/10.1007/978-981-99-5447-6_2
16 Z. A. Karim et al.
1 Introduction
Market sentiment, which portrays investors’ irrational expectations towards invest-

ment performance, has been a central focus of the economic research, as it holds the
key to making sound investment decisions (Cuomo et al., 2018; Haritha & Rishad,
2020; Moseki & Rao, 2018). The financial market’s uncertainties and complexi-
ties have influenced how investors perceive an investment instrument’s future prof-
itability, affecting its price, hence overall performance. Understanding how investors
feel about any investment equity is crucial to help them seize better opportunities
since such information can expose investors’ investment preferences (Kenneth &
Statman, 2000). For that reason, scholars have been exploring the correlation between
market sentiment and investment returns, intending to find the empirical evidence
of market sentiment’s impact on the financial market; the significance of market
sentiment in the investment performance; and the best indices to capture the market
sentiment (Chen et al., 2020; Chowdhury et al., 2021; Danso et al., 2019).
However, as much as scholars want to unlock insights into how market senti-
ment plays a role in yielding investment performance, market sentiment analysis is
certainly not an easy task. The intangibility of investors’ feelings or beliefs towards
the stock market makes it challenging to precisely measure the investors’ confidence
in a particular asset or the stock market. Moreover, the financial market is a complex
system of key players and investors whose mindsets are influenced by numerous
factors, including price history, economic reports, and other external factors, adding
more to quantifying the market sentiment (Stauffer & Sornette, 1999). Past studies
have used different indicators to represent market sentiment in their empirical anal-
yses. Some examples are; Consumer Confidence Index (Schmeling, 2009; Wang,
2018), Conference Board’s Consumer Confidence Index (CCI) (Ho & Hung, 2009),
market liquidity (Baker & Stein, 2004), and Baker and Wurgler’s index (Yu & Yuan,
2011). Creating an investment sentiment index by exacting principal components
from several proxy variables suggested, is often associated with choosing suitable
proxies (Baker & Wurgler, 2006). Meanwhile, some countries require other proxies
of market sentiment depending on their actual market conditions and rules (Chen
et al., 2020). A study by Chaiyuth et al. (2019) revealed that investor sentiment
proxy by trading volume also plays an essential role in stock market activities.
However, the relationships between investor sentiment and stock market activities
are different between developed and developing markets. Interestingly, the developed
stock markets over-react more to the search volume than developing markets.
The growing importance of understanding the relationship between investor senti-
ment and firms’ investment decision-making lies behind the reasoning that a firm’s
investment selection forms the most crucial part of its overall business decisions.
Hence, it is only relevant to identify the investor sentiment’s direct impact on firms’
investment decisions. Good market sentiment will encourage the managers to rein-
vest and encourage the participation of new investor in the market due to the positive
expectation of the future profit. Meanwhile, the Malaysian financial market has not
The Impact of Market Sentiment on Business Fixed Investment in Malaysia 17
been excluded from the effect of market sentiment. The investment-sentiment litera-
ture for the Malaysian case has shown that investors’ confidence in the stock market
significantly influences stock market returns (Tuyon et al., 2016; Zainudin et al.,
2019). Furthermore, scholars have extended market sentiment by investigating how
such a sentiment drives firm investment decisions (Dang & Xu, 2018; Danso et al.,
2019; Du & Hu, 2020; Zhaohui & Wensheng, 2013; Zhu et al., 2017). Nevertheless,
despite the proliferation of market sentiment and firm investment studies as seen in
the literature, there has been minimal research on such studies for Malaysia’s case.
Jiun Chia et al. (2020) have examined COVID-19 and Movement Control Order
(MCO) on Malaysian equity return.
In the Malaysian context, private sector investment is more volatile than other
aggregate demand components. The ratio of private sector investment as a percentage
of GDP was higher at 27% in 2000. However, the rate dropped in 2009 to 18%, the
lowest level due to the 2007/2008 Global Financial Crisis (GFC). Capital expendi-
ture was up and down, recorded at 26% in 2016 before falling below 24% in 2018.
Both market sentiment indicators fell below 100 points in 2008/2009 due to the GFC
but showed a positive momentum after 2010 to rise above 100 points. Thus, exam-
ining how the movement in BCI and CSI has been reflected in the capital investment
(firm-level) is crucial to understand further how the firm investment responds to
market sentiment. Thus, given this background, the main objectives of this study are
three-folds. First, it examines the determinants of Malaysian listed firms’ investment
decisions by focusing on the role of market sentiment indicators. Second, it exam-
ines how small and big firms’ investment decisions behave differently in response
to market sentiment and other firm-specific variables. Third, it analyses the long-
run response of the firms-level investment spending to market sentiment and other
variables.
This study contributes to potential stakeholders and the literature in the following
ways. First, it shall have implications for investors and traders in planning their invest-
ment decisions prudently and for policymakers’ relevance to precisely implementing
a monetary policy to stabilise the market sentiment. Firms need to invest in proper
capital investment strategies because its decision will affect their future performance.
In contrast, stabilising the market sentiment is crucial for the monetary authority to
minimise the fluctuation of the capital investment and stabilise the aggregate expen-
diture and domestic price level. Second, to the literature, this study extends the
Malaysian market sentiment by focusing on the impact of market sentiment proxied
by BCI and CSI on capital expenditure (CAPEX) of Malaysia’s publicly listed firms,
relying on a recent dataset (2000 to 2018) and an extensive sample of publicly listed
firms (673 firms). This study also augments the Tobin-Q investment model by control-
ling firm characteristics such as size, asset tangibility, growth, and cash flow. Third,
this study employs a recent dynamic panel GMM model to capture short-run and
long-run relationships among variables. The dynamic panel technique can illustrate
the dependent variable’s lagged effect or temporal dependency on the explanatory
variables, which indicates that its past realisations determine the dependent variable.
The remaining of this chapter is organised as follows. Section 2 summarises
the related theory on investment and organised the literature debates regarding the
determinants of firm-level investment. Section 3 focuses on the research method-

ology and econometric specification, whereas Sect. 4 summarises the main empirical
findings using dynamic panel data. Section 5 concludes and discusses some policy
implications of the new findings.
2 Market Sentiment and Investment Decision
2.1 Theoretical Perspective
The theory of market sentiment affecting investment decisions has been explored by
a few researchers, such as Barberis et al. (1998), Daniel et al. (1998), Hong and Stein
(1999), and Chari et al. (2017). Based on their studies, investors tend to overreact
or underreact to the news prevailing in the stock market. Optimistic news can drive
investors to an exaggerated optimism about the future; therefore, their overreaction
can lead to increased stock prices. Contrariwise, when news announcements are
likely to contradict optimism, it may lead to lower returns (Barberis et al., 1998).
Markets become more dynamic as many investors enter them; therefore, intuition
alone in making a decision will cause errors and losses in some cases (Hirshleifer,
2015; Norman et al., 2017). The decision maker’s emotions drove the firm investment
decision depending on the situation or event (Hribar et al., 2017).
Gao and Suess (2012) constructed their sentiment index based on six proxies:
changes in implied volatility and skewness, first differences in Chicago Board
Options Exchange Volatility Index (CBOE’s VIX) and Chicago Board Options
Exchange Skewness indexes (CBOE’s SKEW), changes in closed-end fund
discounts, first-day returns of IPOs, changes in trading volume, and changes in the
dividend premium. Meanwhile, Baker and Wurgler (2007) formed a composite index
of sentiment based on the common variation in six underlying proxies for sentiment:
the closed-end fund discount, New York Stock Exchange (NYSE) share turnover,
the number and average first-day returns on Initial Public Offering (IPOs), the equity
share in new issues, and the dividend premium. Ishijima et al. (2015) built an index
of the Nikkei market sentiment, a popular newspaper in Japan. Zhou (2018) reviewed
various investor sentiment measures and applications based on market data, surveys,
text, and news media. He concluded that there is a need to produce more accurate
sentiment measures that yield a systematic sentiment factor explaining the cross-
section of asset returns. This approach is vital to understanding how sentiment has
been used in practice and affects prices, enhances the economic value of sentiment
information, and understands the corresponding risk premium. Thus, investor senti-
ment shall not be taken lightly; it must be analysed and evaluated to consider the
information forecasted before making an investment decision.
Investor sentiment reveals the movements in financial markets dictated by the
psychological perception of operations or trades (Concetto and Ravazzolo, 2019).
Extensive studies have been done on market sentiment, but most studies are on the
relationship or effect of market sentiment on other important financial and economic

variables. The market sentiment influences a foreign investor before deciding whether
to proceed with an investment. Hassan et al. (2016) examined investor sentiment
toward Foreign Direct Investment (FDI). They found that investor sentiment has
a positive bidirectional relationship with FDI, surpassing all other macroeconomic
variables regarding the impact on FDI. Malaysia must create good market sentiment
conditions to attract more foreign sources as an emerging economy. Consistent with
our argument, Hassan et al. (2016) suggested that Malaysia must positively impact
the local and regional economy and financial development as an impetus for foreign
investors to invest in Malaysia as an emerging country. The high and low market
sentiment are essential indicators for an emerging market since market sentiment
has a positive relationship with firms’ investment and affects countries’ performance
in attracting FDI.
2.2 Previous Empirical Evidence
The sentiment is one of the essential behavioural risks reflected in the stock market
(Tuyon et al., 2016). Market sentiment affects various areas of finance and the
economy as it is responsible for the volatility of stock prices in the market, which may
include macroeconomic factors such as inflation, FDI, unemployment, and income
(Raza, 2015; Raza & Jawaid, 2014; Raza et al., 2015). These sentiments do not
follow the necessary knowledge or statistics; they rely on general market informa-
tion or particular market trends (Raza et al., 2019). Zhu et al. (2017) found that
market sentiment affects firm investment through top management decisions. For
example, top management teams’ irrational investment decisions cater to investor
sentiment and ignore the feasibility of companies’ projects and conditions. Overcon-
fident managers believe that they can generate greater profit from their investment
ventures. This overconfidence often leads to overinvestment (Ben-David et al., 2013;
Campbell et al., 2011; Goel & Thakor, 2008; Graham et al., 2013; Malmendier & Tate,
2008; Pikulina et al., 2017). As a result, they overvalue their investment ventures and
incorrectly interpret negative net present value (NPV) projects as value-creating (Kim
et al., 2016). Therefore, the companies’ stock prices collapse due to continuously
undertaking negative NPV projects, which leads to the company’s bad performance.
Besides, the manager’s overconfidence may affect the crash risk if the manager is
more dominant in the top management team, mainly if there are more significant
differences in the investor.
On the other hand, Tuyon et al. (2016) found that sentiment captures price overre-
action, which is corrected in the short-run as in two-sized portfolios. Besides, Jiang
et al. (2018) stated that market sentiment affects firms’ top management’s invest-
ment decisions. Danso et al. (2019) found that market sentiment and firm investment
positively correlate using alternative investment measures. They also observed that
the sentiment-investment relationship is significant and positive across all models,
even after dealing with possible endogeneity issues. Research on market sentiment
supports the role of psychological and cognitive biases in influencing firms’ corpo-
rate decisions. Top management teams are not rational; they may make investment
decisions that cater to investor sentiment and ignore the feasibility of projects and
companies’ conditions to some extent (Danso et al., 2019; Zhu et al., 2017).
Zhou (2018) argued that investor sentiment shows the gap between the asset’s
valuation and its economic bases, which can be measured from various sources
such as market surveys and official documentation. Mushinada and Veluri (2018)
found that the post-investment analysis is necessary for the investment to correct
the errors from previous behavioural estimates. Market participants’ behaviour is
heterogeneous due to the assumptions regarding risks and returns and induces market
noise. The findings contradict the idea that efficient markets will make the informa-
tion sufficient if the investor behaves rationally. Meanwhile, Dang and Xu (2018)
further found that market sentiment affects R&D investments through its influence
on manager sentiment. Market sentiment is imperative to firms’ investment levels.
The effect of market sentiment on firm investment is amplified when there is an influx
of free cash flow and unused debt capacity. Besides, Danso et al. (2019) found that
excess cash flow reinforces the sentiment-investment relationship, intensifying the
manager’s choice to invest more during high sentiment periods. Otherwise, market
sentiment can be valuable in driving firms’ investment decisions. Researchers also
found evidence of the relationship between investors’ sentiment and firm investment
even for IPO performance (Danso et al., 2019; Giannini et al., 2017; Zalina et al.,
2019; Zhu et al., 2017). Market sentiment undoubtedly affects firm managers’ deci-
sions to invest. Increases in market sentiment may cause investors to increase their
investments in higher-risk fund categories and reduce their investments in safer funds
(Hilliard et al., 2019). Human factors such as judgement and behaviour (optimism
or pessimism) hold an essential position in a firm. Even with information in hand,
managers responsible for investing in the future face an absolute risk that must be
dealt with.
In the Malaysian context, studies relating to firm investment determinants highly
concentrate on capital structure and financial constraints (Abdulazeez et al., 2020;
Ismail et al., 2016; Ramli et al., 2019). Malaysia and the investors have unique
features such as culture and government institutions comparable to other developing
and developing countries in the market (Vuong & Suzuki, 2020). Furthermore, well-
developed and functioning bonds in Malaysia are compatible with developing an
equity market (Matemilola et al., 2018). Ramli et al. (2019) suggested that capital
structure is vital in managerial decisions. The study about market sentiment which
affects firm investment in Malaysia is relatively understudied. Zainudin et al. (2019)
focus on Malaysian IPO firms, while Tuyon et al. (2016) have studied the role of
investor sentiment in the Malaysian stock market. Their principal findings revealed
a positive long-term and short-term relationship, which is more pronounced in a
big company and cyclical industry in the market. The sentiment data from news
prevailing in the market is considered reliable information to the investor (Kuan
et al., 2017). Besides, Zainudin et al. (2019) support the notion of investor sentiment
and timing theory as a valid phenomenon in Malaysia.
Given this background, this present study differs from the previous studies, partic-
ularly in the Malaysian context, in the following ways. First, compared with the
previous study that has concentrated on the impact of market sentiment on stock
return, this study extends the literature by focusing on market sentiment (BCI and
CSI) on firm-level investment spending. Second, although Karim and Azman-Saini
(2013) have modelled the determinants of firm-level investment in Malaysia, their
study has not considered the role of both market sentiments, namely, BCI and CSI.
Third, this present study has used more recent data (up to 2018) and large firm
size (673 firms) to better understand how market sentiment reflects the investment
decision by controlling firm-specific variables.
3 Research Methodology
According to Toit and Moolman (2003), there are four main investment models:
the accelerator model, cash-flow model, neoclassical model, and Tobin’s Q model.
However, the most widely used investment model is Tobin’s Q model (Harrison et al.,
2004; Laeven, 2002) and is also commonly used in empirical studies (Bharadwaj
et al., 1999). One of Tobin’s Q model advantages is that it can calculate the firm’s
past and expected future performance. Tobin’s Q is calculated as the ratio of market
value to the book value of total assets. This ratio shows the importance of investments
in a firm. Tobin’s Q above 1 indicates that the firm has expanded in value and
managed accurately. It means higher economic performance (Copeland & Weston,
1988). An essential strength of Tobin’s Q model is that it shows the present value of
expected future profits. For this reason, the study employs the Q investment model in
investigating the relationship between market sentiment and firm capital investment
in Malaysia. The baseline model used in this study can be represented as follows:
I nvestment i,t =∝ +β1 T obin Q i,t + β2 Sentiment i,t + β3 X i,t + ωi + μt + εi,t

(1)
In Eq. (1), i denotes the ith firm, and t represents the fiscal year. Investment as
the dependent variable is firm capital expenditure (CAPEX). The use of CAPEX
to proxy the firm’s investment is in line with many previous studies, for example,
Chirinko et al. (1999), Bhagat et al. (2005), Karim and Azman-Saini (2013), and
Ismail and Yunus (2015). The market performance indicator Tobin’s Q measures firm
performance in the stock market (Koo & Maeng, 2005). Singhal et al. (2016) found
that higher Tobin’s Q ratios are related to firms’ higher future operating performance.
The sentiment variable was based on the Malaysian Institute of Economic Research
(MIER), Business Sentiment Index (BSI), and Customer Sentiment Index (CSI) and
counted as a yearly average of the past four quarters of data. X is the vector of the
control variables employed in the analysis, α and β are parameters, ωi is a firm-fixed
effect, and μt is a year-fixed effect, and εi,t is the errors term. All continuous variables
are tested using Cook distance to mitigate outliers’ effect (Cook, 2000). Finally, to
deal with potential reverse causality between dependent and independent variables,
this study follows existing literature (e.g. Danso et al., 2019) by considering the
lagged dependent variables by one period (I N V i,t−1 ). Thus, the baseline model in
Eq. (1) can be rewritten as follows:
I N V i,t = ∝ I N V i,t−1 + β1 Q i,t + β2 Sentiment i,t + β3 G R O W i,t +

β4 C F i,t + β5 T AN G i,t + ωi + μt + εi,t (2)
In Eq. (2), INV refers to CAPEX as a percentage of the previous capital stock
(PPE), Q refers to the firm performance measured by Tobin’s Q, GROW is the one-
year growth rate of sales, CF is the cash flow, which is defined as operating income
plus depreciation, and TANG is asset tangibility, which is the ratio of property, plant,
and equipment to the value of total assets.
3.1 Data and Variables
This study used the sample of companies listed on the Main Market of Bursa Malaysia
(Malaysian Bourse) from 2000 to 2018. The financial data have been collected from
Thompson Reuters Datastream, and the sentiment index is obtained from the MIER
survey. The data for a listed firm represents various sub-sectors of the economy, such
as construction, food production, industrial, household goods and home construction,
general industry and retail, technical hardware and equipment, software and computer
services, finance, support services, travel, and leisure, personal goods, oil equipment
services, oil and gas production, REIT and services, and a few other sectors. The raw
data went through a refining process. First, financial firms were excluded because they
are high in cash flow but low in capital expenditure (Karim & Azman-Saini, 2013);
therefore, only non-financial firms were considered. Second, only firms consecutively
present for at least five years (2014–2018) were considered to ensure that a sufficient
number of lags was available for the explanatory variables. This selection is also
essential to avoid data reduction because of the data transformation process and the
selection of the instrument choice for the dynamic panel data. Third, firms with many
missing values were deleted as it can cause discontinuities if not dropped. Fourth,
the Cook’s distance outlier test (Cook, 2000) was used to detect outliers influencing
the estimation results. After refining the data, the data became an unbalanced panel,
representing 673 firms or 7595 firm-year observations.
3.2 Variables Measurement
In line with Danso et al. (2019), this study also uses several control variables likely
to affect firm investment, such as firm size, asset tangibility, growth, and cash flow.
3.2.1 Splitting the Sample
To further explore the heterogeneous effects of market sentiment on firm investment,

the sample is divided into two size categories: small and medium and large firms.
There are a few ways that firms can be segmented. Laeven (2002) and Rungsomboon
(2005) segmented firms according to their total assets, while Zainudin et al. (2019)
and Danso et al. (2019) measured firm size as the natural log of total sales, and Gupta
et al. (2017) controlled firm size using the natural logarithm of market value. This
study divides the firms using their index size classification based on the definition
used by Tuyon et al. (2016), Baker and Wurgler (2007), and Bursa Malaysia. The
firms are segregated into small and medium capital firms and large capital firms. The
small and medium cap category refers to firms with a market capitalisation of up to
RM2 billion, while large-cap firms have above RM2 billion. Segmenting the firms
according to their market capitalisation resulted in 60 large-cap firms and 613 small
and medium-cap firms.
3.2.2 Variable Definitions
a. Investment (INVi,t )
This section briefly explains the definitions of variables used in this study.
Capital expenditure is measured in domestic currency (Malaysian Ringgit) at
current market prices following extant literature (e.g., Chirinko et al. (1999), Bhagat
et al. (2005), and Karim and Azman-Saini (2013). The dependent variable was
measured as the current-period investment spending for a firm i at time t, which
included the capital expenditure (CAPEX) on property, plant, and equipment (PPE)
for the current year as a percentage of the previous PPE. Thus, the ratio of investment
as a percentage of previous capital stock can be rewritten as follows:
C AP E X
I N V i,t = (3)
l.P P E
b. Tobin’s-Q (Qi,t )
The independent variable for firm performance at the beginning of period t, Q is

measured by dividing total debt and market capitalisation by total firm assets. This
definition of Q is used in Koo and Maeng (2005). Singhal et al. (2016) found that
higher Tobin’s Q ratios are related to firms’ higher future operating performance.
(tdebt + mcap)
Q i,t = (4)
tasset
c. Market sentiment
Business Sentiment Index (BSI).

The BSI is constructed from surveys conducted on over 350 manufacturing

businesses incorporated locally and foreign manufacturers operating in Malaysia,
covering 11 industries. The BSI index gives advanced information that permits infer-
ences drawn regarding emerging economic trends. The quarterly data are taken from
the Malaysian Institute of Economic Research (MIER). However, for this study, we
average the figure yearly.
d. Customer Sentiment Index (CSI)
The CSI is a series of surveys conducted quarterly on a sample of over 1200 house-
holds in peninsular Malaysia to gauge consumer spending trends and sentiments.
Consumer behaviour reflects the income level and general economic conditions.
Respondents are asked about perceptions of their household’s current and expected
financial positions and their employment outlook. The survey also seeks to uncover
general economic conditions such as inflation from the consumers’ perspective. The
quarterly data are taken from the MIER. However, for this study, we average the
figure yearly.
e. Growth (GROW)
Firm growth (GROW) refers to the one-year growth rate of sales, that is sales or
revenue of the current period divided by revenue of the previous period (t–1). This
calculation follows extant literature such as Zhu et al. (2017) and Danso et al. (2019).
salesv t
G R O W i,t = ( )−1 (5)
salesv t−1
Tangibility (TANG): Asset tangibility is the ratio of PPE to the book value of total
assets (tasset) (see Zainudin et al. 2019), as follows:
PPE
T AN G i,t = (6)
tasset
Cash flow (CF): Cash flow is defined as operating income plus depreciation
(OPRM) calculated at the beginning of period t as a percentage of the previous PPE.
Depreciation includes total depreciation, amortisation, and depletion. This variable
is used to measure the degree of market imperfections caused by financial constraints
and is measured in Malaysian Ringgit. The calculation follows extant literature such
as Karim and Azman-Saini (2013).
(O P R M + Dep)
C F i,t = (7)
l.P P E
3.3 GMM Estimation
Panel data estimation has been increasingly used in economic and other social studies
(Gujarati, 2003). Hsiao (2006) found that this development is partly contributed by
the availability of panel data sets and partly by the individual researcher’s rapid
growth in computational power. Law (2018) indicates that panel data are (i) able to
control for individual heterogeneity; (ii) allow more information on data sets; (iii)
suitable for studying the dynamics of the adjustment process; and (iv) identification
of parameters. Using a dynamics model is crucial for recovering consistent estimates
of other parameters. Thus, this study employs a dynamic panel data estimation to
examine the relationship among interest variables. According to Nickell (1982),
correlation creates a large sample bias in estimating a lagged dependent variable
coefficient that is not mitigated with increasing N (number of individual units). An
OLS estimator will result in upward bias since correlation does not increase with
increasing N, producing biased results due to the endogeneity problem.
Endogeneity is a problem when there is a correlation between the X variable and
the model’s error term. It may arise due to the omission of explanatory variables
from the regression. This issue will result in the error term being correlated with
the explanatory variables, violating a fundamental assumption behind ordinary least
squares (OLS) regression analysis. Endogeneity bias can cause inconsistent estimates
and incorrect inferences, contributing to misleading conclusions and inappropriate
theoretical interpretations. Blundell and Bond (1998) suggested a system estimation
of the generalised method of moments (system GMM). This model solves all three
endogeneity types: omitted variables, simultaneity, and selection bias. The fixed
effects estimator will result in a downward bias where the tendency which decreases
with larger t would yield consistent coefficients in the absence of serial correlation.
Using the unbiased estimator GMM technique provides an excellent solution to the
problem. Specifically, the GMM uses all the linear moment conditions specified by
the model. The GMM estimators are robust concerning the non-normality of the
dependent variable (Blundell & Bond, 1998).
Choosing the optimal instrument set may lead to several instruments that are
more than the number of observations. Therefore, this study applies the J-test of
over-identifying restrictions to evaluate the validity of instruments used in esti-
mation. The validity of instruments can be assured if the residuals do not exhibit
second-order serial correlation. This property can be achieved by testing the second-
order autocorrelation (AR(2)) using the Arellano-Bond (1991) tests. Another test
is Sargan’s over-identifying restrictions, which tests the validity of the moment
conditions imposed in the GMM (Blundell et al., 2000). The null hypotheses of
these tests indicate the validity of the models. Therefore, if the nulls failed to be
rejected at least at the 10% significance level, though the nulls are true, the instru-
ment variables are considered valid. For removing firm-specific effects in Eq. (1),
Arellano and Bover (1995) proposed a forward orthogonal deviation transformation
or a forward Helmert’s procedure. This transformation subtracts the mean of future
observations in the sample from the first T–1 observation. This procedure will remove
the firm-specific effect. Its main advantage is to preserve sample size in panels with
gaps.
Roodman (2009) stated that the system GMM could generate instrument prolif-
eration effectively. Too many GMM system instruments can overfit an endogenous
variable and weaken the Hansen test for the joint instrument validity. Therefore, to
deal with instrument overfit, this study uses two techniques to lessen the number
of instruments. First, only certain lags are used as instruments rather than all the
available lags. Second, the instruments are combined into smaller sets by collapsing
the block of the instruments’ matrix. This technique was used by previous studies
such as Karim and Azman-Saini (2013) and Roodman (2009).
4 The Impact of Market Sentiments on Firms-Level

Investment
Table 1 reports the short-run coefficients of firm-level investment spending deter-

minants using the one-step system GMM estimation for the whole sample period.
The results show that the business sentiment index’s coefficient is statistically signif-
icant at the 5% level. The coefficient of 0.0147 indicates that a 1% increase in the
business sentiment index (BSI) causes the firms’ investment spending to increase by
0.0147%. The consumer sentiment index’s (CSI) coefficient has also been statisti-
cally significant at 5%. The coefficient of 0.0146 indicates that a 1% increase in the
consumer sentiment index causes firm investment spending to increase by 0.0146%.
Thus, the significant and positive effect of both the business sentiment index and the
consumer sentiment index on firms’ investment in Malaysia supports the notion that
the sentiment index influences firms’ investment decisions.
The significant and positive effects of both market sentiment indicators, BCI and
CSI, provide some implications for the economic and financial aspects of the firms.
First, in terms of the economic aspect, the significant effects of BCI and CSI on
capital expenditure (INV) provide the investor and the policymakers some insight
to ensure that the capital expenditure is not volatile according to the changes in
market sentiment. This conjecture is because capital expenditure is more volatile
than other aggregate demand components, in which market conditions influence
investment decisions. Thus, policymakers should prioritise ensuring a good business
environment and consumer sentiment in stabilising the firm capital expenditure.
Second, in terms of the financial aspect, stability in BCI and CSI is very important for
the firm’s top management in planning their sources of capital expenditure, whether
from internal financing (cash flow) or external financing (borrowing). This finding
is because both sources of funding have a different financial risk to the firm, thus
needing the top management to choose the fund accordingly to expand their business.
Meanwhile, the Q ratio is also statistically significant at the 5% significance
level, positive for both market sentiment indicators. The results show that a 1%
increase in the Q ratio leads to a rise in firm investment spending by 0.0486%. Thus,
Table 1 System GMM estimation for the whole sample

Independent variables Business sentiment index (BSI) Consumer sentiment index (CSI)
Coef S.E p-value Coef S.E p-value
Lagged INV 0.179 (0.111) 0.107 0.179 (0.111) 0.107
Q 0.0486*** (0.0162) 0.003 0.0486*** (0.0162) 0.003
BSI, log 0.0147** (0.00590) 0.013
CF –0.00382 (0.00440) 0.385 –0.00382 (0.00440) 0.385
GROW 0.0281 (0.0263) 0.286 0.0281 (0.0263) 0.286
TANG –0.102** (0.0493) 0.040 –0.102** (0.0493) 0.040
CSI, log 0.0146** (0.00585) 0.013
Year Dummies Yes
Number of observations 7465 7465
Number of groups 673 673
Observations per group avg 11.09 11.09
Number of instruments 76 76
Number of firms 673 673
AR(2): p-value 0.132 0.135
Hansen test: p-value 0.111 0.103
Notes Robust standard (S.E) errors in parentheses. Asterisks ***, **, and * indicates significant at
1%, 5%, and 10%, respectively
these findings indicate the importance of the q ratio in influencing firms’ investment
spending. Asset tangibility is also statistically significant at the 5% significance level
but with a negative sign, in which a 1% increase leads to a decrease in firm investment
spending by 0.102%. These findings indicate that higher asset tangibility reduces
the firms’ investment spending. The full sample results in Table 1 suggest that the
business sentiment index, consumer sentiment index, q ratio, and asset tangibility
are essential in influencing firm-level investment spending.
Table 2 provides the short-run coefficients of the determinants of firm-level invest-
ment spending for large sample firms. From the table, the results also show that both
the business sentiment index and consumer sentiment index are statistically signifi-
cant at a 5% significance level. Both coefficients are positive, indicating that the good
market sentiment (optimist sentiment) leads the higher firms’ investment. Simultane-
ously, the effect of asset tangibility on firms’ investment spending is also statistically
significant at a 5% significance level for both models but negatively. This result means
that the higher asset tangibility, the lower firms’ capital investment. The results also
show a positive and significant lag dependent on firms’ investment, indicating that
the previous year’s investment significantly influences the current year’s investment.
However, the results show that the q factor is insignificant for both models for large
sample firms.
Table 3 reports the short-run coefficients of firms’ investment spending determi-
nants for small and medium sample firms. Results in Table 2 are consistent with
Another random document with
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of revelation. But again we catch ourselves sermonizing: to the
diagram.
Fossils from the London Clay.
1. Tellina crassa.
2. Chama squamosa.
3. Turritella imbricataria.
4. Fusus asper.
5. Pleurotoma colon.
6. Murex tubifer.
7. Aporhais pes-pelicani.
8. Voluta luctator (or luctatrix).
9. Trochus monolifer: the necklace trochus.
10. Venericardia cor-avium.
11. Fusus bulbiformis: the bulb fusus.
These fossils we obtained from the neighbourhood of
Christchurch; and as these sheets were being written, we received
from Dr. Mantell’s “Geological Excursions in the Isle of Wight,” the
following appropriate description of them: “The numerous marine
fossil shells which are obtained from this part of the coast of
Hampshire, are generally known as Hordwell fossils; but it is
scarcely necessary to remark, that they almost entirely belong to the
London clay strata, and are procured from Barton cliffs. These fossils
are most conveniently obtained from the low cliff near Beacon
Bunny, and occur in greatest abundance in the upper part of the dark
green sandy clay. There are generally blocks of the indurated
portions of the strata on the beach, from which fossils may be
extracted. A collection of Hordwell fossils, consisting of the teeth of
several species of sharks and rays, bones of turtles, and a great
variety of shells, may be purchased at a reasonable price of Jane
Webber, dealer in fossils, Barton cliff, near Christchurch.”—(P. 124.)
Before leaving the Eocene, or rather the London clay of the
Eocene, we will give a drawing of a fossil in our possession. The
drawing opposite represents a piece of fossil wood, pierced through
and through by Teredinæ, a boring mollusk allied to the Teredo,
which still proves so destructive to our vessels. Although the wood is
converted into a stony mass, and in some parts covered by calcareous
matter, the same as is found in the septaria, so common in these
beds, to which we shall presently direct attention, still the grain and
woody texture are most distinct. This wood was once probably
floating down what we now call the Thames, when these piercing,
boring mollusks seized hold upon it, penetrated its soft texture, and
lived, moved, and had their being down at the bottom of the river in
their self-constructed chambers. Time rolled on, and the log of wood
is floated upon the shore, and there it lies to harden and to dry; again
the log is drifted away, and, buried in some soft bed of clay, is
preserved from rotting. In process of time it again sees the light; but
now saturated by argillaceous material, and when hardened by the
sun, becomes the petrifaction such as we see it.
WOOD PERFORATED RY TEREDINA PERSONATA, LONDON
CLAY.
Here let us refer to the septaria, of which we have just spoken; two
specimens lie before us, which we will briefly describe. In one (1) the
clay is in distinct lozenge-shaped masses of a blue colour, while veins
of calcareous spar or crystallized carbonate of lime surround these,
which are capable of a beautiful marble-like polish; in the other (2)
the clay is of the same colour, only in larger proportions, and the
spar is of a deep brown colour, while here and there portions of iron
pyrites may be seen; they become beautiful ornaments in a room
when cut and polished. It should be added, that the septaria are not
without their economic uses, being extensively used as cement after
being stamped and burnt.
SEPTARIA
Here we may leave this brief sketch of the Eocene, or lowest beds
of the Tertiary. A new creation has been introduced to our view; and
although we still wait for the coming of man—the lord and
interpreter of all—the contemplation of these successive acts and
centres of creation fills our minds with renewed admiration and
reverence of Him for whom, and by whom, and to whom are all
things. Thus “even Geology, while it has exhumed and revivified long
buried worlds, peopled with strange forms in which we can feel little
more than a speculative interest, and compared with which the most
savage dweller in the wilderness of the modern period—jackal,
hyæna, or obscene vulture—is as a cherished pet and bosom friend,
has made for us new bonds of connexion between remote regions of
the earth as it is, on account of which we owe it a proportionate share
of gratitude.”[117]
No. II.—The Miocene.
We shall briefly pass over this period. At Bordeaux, Piedmont, and
in Lisbon, this formation is seen; as well as in various other parts of
the Continent of Europe. The supposition of Geology is, that during
this period “whole regions of volcanoes burst forth, whose lofty but
now tranquil cones can be seen in Catalonia, in Spain, in France,
Switzerland, Asia, and in America. The Alps, the Carpathian
Mountains, and other lofty ranges were at this period partially
upheaved. The researches of Sir Robert Murchison have established
this fact, by his finding deep beds of limestone, characteristic of the
Tertiary period, on the summit of one of the loftiest of the Alps, fully
ten thousand feet above the level of the sea.”
No. III.—The Pliocene Period.
This term has already been explained. We shall only detain the
reader by a few words respecting the organic remains that
characterize this formation. In England it is confined to the eastern
part of the county of Suffolk, where it is called “Crag.” This is a mere
provincial name, given particularly to those masses of shelly sand
which are used to fertilize lands deficient in calcareous matter. The
geological name given to this strata is the “Red or Coralline Crag;”
and it is so called on account of the deep ferruginous colour its fossils
have through extensive oxidization of iron. We give drawings of the
fossils of the Red Crag, obtained from the neighbourhood of Ipswich.
FOSSILS FROM THE RED
CRAG, NEAR IPSWICH.
1. Venericardia senilis.
2. Turritella.
3. Patella æqualis.
4. Cyprea.
5. Paludina lenta.
6. Pectunculus variabilis.
7. Murex.
8. Fusus contrarius.
9. Buccinum elongata.
10. Venericardia scalaris.
11. Voluta lamberti.
12. Fusus asper.
13. Pectunculus pilosus.
But these are not the only fossils of this period; it is here we meet,
and that for the first time, with the highest form of animal life with
which the researches of geology have made us acquainted. We have
traced life in various forms in the different rocks that have passed
under our rapid survey, and in all we have seen a wondrous and most
orderly gradation. We began with the coral zoophytes, and from
them proceeded to the mollusks and crustacea of the hypogene
rocks; ascending, we discovered “fish with glittering scales,”
associated with the crinoids and cryptogamous plants of the
secondary series of rocks; and then we arrive where we are now,
among the true dicotyledonous and exogenous plants and trees, with
the strange birds and gigantic quadrupeds of the tertiary period. But
the student must not imagine that even the fossils of this epoch bring
him up to the modern era, or the reign of man; for even in the
tertiary system numberless species lived and flourished, which in
their turn became extinct, to be succeeded by others long before
man, the chief of animals and something more, made his
appearance, to hold dominion over these manifold productions of
creative skill and power. But amidst these creations,
“God was everywhere, the God who framed
Mankind to be one mighty human family,
Himself their Father, and the world their home.”
It would be altogether beside the purpose of this preliminary

treatise to enter into any details respecting the animals that have
been found in such abundance in the Norwich Crag, that it has been
called the “Mammaliferous Crag.” Those who desire full and deeply
interesting information on this question should consult Owen’s noble
work, entitled “British Fossil Mammals and Birds,” where, under the
respective divisions of Eocene, Miocene, and Pliocene, he will see a
complete chart of our riches in the possessions of a past creation. For
the discovery of the Siberian Mammoth so often quoted, we shall
refer to the same work, page 217, &c.; from which we shall only quote
one brief extract, illustrative of the abundance of these remains in
our own coasts in the ages past.
“Mr. Woodward, in his ‘Geology of Norfolk,’ supposes that
upwards of two thousand grinders of the mammoth have been
dredged up by the fishermen of the little village of Happisburgh in
the space of thirteen years. The oyster-bed was discovered here in
1820; and during the first twelve months hundreds of the molar
teeth of mammoths were landed in strange association with the
edible mollusca. Great quantities of the bones and tusks of the
mammoth are, doubtless, annually destroyed by the action of the
waves of the sea. Remains of the mammoth are hardly less numerous
in Suffolk, especially in the pleistocene beds along the coast, and at
Stutton;—they become more rare in the fluvio-marine crag at
Southwold and Thorp. The village of Walton, near Harwich, is
famous for the abundance of these fossils, which lie along the base of
the sea-cliffs, mixed with bones of species of horse, ox, and deer.”[118]
SKELETON OF THE MEGATHERIUM CUVIERI

(AMERICANUM).
All the animals of this period are called theroid animals: from
therion, a wild beast; and looking at the skeletons as they have been
arranged from the few existing fossils, or from nearly complete
materials—a matter not of guess-work, but of the most rigid
application of the principles of comparative anatomy—we stand
astounded at the prodigious sizes of these mammoths of the tertiary
era. There is the deinotherium, or fierce wild beast; the
palæotherium, or ancient wild beast; the anoplotherium, or
unarmed wild beast, and others. We give above a drawing of the well-
known megatherium, or great wild beast, to be seen in the British
Museum, and add the following from Mantell’s Guide to the Fossils
of the British Museum:—“This stupendous extinct animal of the sloth
tribe was first made known to European naturalists by a skeleton,
almost entire, dug up in 1789, on the banks of a river in South
America, named the Luxon, about three miles south-east of Buenos
Ayres. The specimen was sent to Madrid, and fixed up in the
Museum, in the form represented in numerous works on natural
history. A second skeleton was exhumed at Lima, in 1795; and of late
years Sir Woodbine Parish, Mr. Darwin, and other naturalists have
sent bones of the megatherium, and other allied genera, to England.
The model of the megatherium has been constructed with great care
from the original bones, in the Wall-cases 9, 10, and in the Hunterian
Museum. The attitude given to the skeleton, with the right arm
clasping a tree, is, of course, hypothetical; and the position of the
hinder toes and feet does not appear to be natural. Altogether,
however, the construction is highly satisfactory; and a better idea of
the colossal proportions of the original is conveyed by this model,
than could otherwise be obtained.”[119]
SKELETON OF THE MASTODON OHIOTICUS, FROM NORTH

AMERICA.
(Height, 9½ feet; length, 20 feet.)
We give below a drawing of the “Mastodon Ohioticus;” for the

following account of which we are indebted to the same source. It
will be found in Room 6, figure 1.—“This fine skeleton was purchased
by the trustees of the British Museum of Albert Koch, a well-known
collector of fossil remains; who had exhibited, in the Egyptian Hall,
Piccadilly, under the name of the Missourium, or Leviathan of the
Missouri, an enormous osteological monster, constructed of the
bones of this skeleton, together with many belonging to other
individuals—the tusks being fixed in their sockets so as to curve
outwards on each side of the head. From this heterogeneous
assemblage of bones, those belonging to the same animal were
selected, and are articulated in their natural juxtaposition.”[120]
FOSSIL HUMAN SKELETON, FROM GUADALOUPE.

(The original 4 feet 2 inches long, by 2
feet wide.)
PLAN OF THE CLIFF AT GAUDALOUPE.
In Wall-case D of the British Museum, may be seen a fossil

skeleton of a human being, brought from the island of Guadaloupe,
the consideration of which must for ever remove any idea that may
exist about man being contemporaneous with the theroidal
mammals of which we have been speaking.[121] Professor Whewell has
remarked that the “gradation in form between man and other
animals is but a slight and unimportant feature in contemplating the
great subject of the origin of the human race. Even if we had not
revelation to guide us, it would be most unphilosophical to attempt
to trace back the history of man, without taking into account the
most remarkable facts in his nature: the facts of civilization, arts,
government, speech—his traditions—his internal wants—his
intellectual, moral, and religious constitution. If we will attempt a
retrospect, we must look at all these things as evidence of the origin
and end of man’s being; and we do thus comprehend, in one view,
the whole of the argument—it is impossible for us to arrive at an
origin homogeneous with the present order of things. On this
subject, the geologist may, therefore, be well content to close the
volume of the earth’s physical history, and open that divine record
which has for its subject the moral and religious nature of man.”
“Mysterious framework of bone, locked up in the solid marble,—
unwonted prisoner of the rock! an irresistible voice shall yet call thee
out of thy stony matrix. The other organisms, thy partners in the
show, are incarcerated in the lime for ever,—thou but for a term.
How strangely has the destiny of the race to which thou belongest re-
stamped with new meanings the old phenomena of creation!... When
thou wert living, prisoner of the marble, haply as an Indian wife and
mother, ages ere the keel of Columbus had disturbed the waves of the
Atlantic, the high standing of thy species had imparted new
meanings to death and the rainbow. The prismatic arch had become
the bow of the covenant, and death a great sign of the unbending
justice and purity of the Creator, and of the aberration and fall of the
living soul, formed in the Creator’s own image,—reasoning,
responsible man.”[122]
FINIS:—THE GEOLOGIST’S DREAM.
ALARM, BUT NO DANGER.

CHAPTER XIII.
SCRIPTURE AND GEOLOGY; OR, APPARENT
CONTRADICTIONS RECONCILED.
“By Him were all things created, that are in heaven, and that are in earth,
visible and invisible, whether they be thrones, or dominions, or
principalities, or powers; all things were created by Him, and for Him;
and He is before all things, and by Him all things consist.”—Paul.
We have in the course of the previous volume alluded to certain

discrepancies, supposed to exist between the statements of Scripture,
and the teachings of Geology. We have more than once intimated our
intention of discussing at some length these questions, that have so
long been tabooed by truly religious people, and often needlessly
exaggerated by those who have possessed a “microscopic eye,” in the
discovery of the weak points of Christian faith or opinion. Dropping
the convenient and euphonious form of egotism, which allows
sovereigns and authors to adopt the plural, we shall crave to stand
before our readers in our personal and singular, rather than in our
impersonal and plural, form of speech.
To the reader let me first say, that while I do not wish to appear
before him as an advocate, as if I held a brief or had a retaining fee
on behalf of Moses, I nevertheless feel rather keenly that the
“reverend” put before my name may give something like this aspect
to all my remarks. It may be thought, and that honestly enough, that
because mine is the clerical profession, I am bound, per fas aut
nefas, to contend for the authority of Scripture. It may be thought—
in fact, it is daily alleged against us—that the particular “stand-point”
we occupy is an unfair one, inasmuch as a preacher is bound to “stick
to the Bible;” and indeed that he always comes to it with certain à
priori conclusions, that to a great extent invalidate his reasonings,
and destroy the morality of his arguments.
Possibly there may be more truth in this than any of us dream of:
fas est ab hoste doceri. I therefore make no professions of honesty,
and appeal to no one’s feelings; let us go and look at the Bible, and at
the earth’s crust, and be guided by our independent researches.
Should this happen to be read by any one whose mind is out of joint
with Scripture; who no longer reposes with satisfaction on the old
book of his childhood and his youth; who has begun to fear,—
perhaps to think that it is only a collection of “cunningly devised”
fables; and who is on the verge of giving up Christianity and all “that
sort of thing;” to such an one I shall speak, supposing him to be as
honest in his doubts as I am in my convictions. I cannot deal with
man as if he had no right to doubt; I have never yet “pooh-poohed”
any one’s unbelief; but I have always striven to regard all doubts
expressed in courteous phrase, as the result of investigation, even
though it may be partial, as the fruit of study, although it may have
been misguided, and as the painful conclusions of a thinking mind,
and not cherished for the sake of “having a fling” at moral truth or a
righteous life, or at the mothers and sisters whose life “remote from
public haunt” has saved them from ever doubting the truth of
revelation.
Doubting and scorning are very opposite phases of mind: we here
address the doubter; with the scorner we have nothing to do; if
ridicule is his substitute for argument, by all means let him enjoy it;
and if calling names is his substitute for patient investigation, let
him enjoy that pastime also—hard words break no bones; but for the
doubter, for the man who has his honest difficulties, and finds large
stumbling-blocks in the path of unresisting acquiescence in
household faiths, for such an one I have much to say in this chapter,
if he will read it,—to him I stretch forth my hand in cordial greeting,
and invite him to examine evidence, and consider facts; and then,
whatever may be the result, whether I shake his doubts or he shake
my faith, we shall at least have acted a manly and a straightforward
part. At any rate, we ought ever to meet as friends, and to be candid
and forbearing, as men liable to err through manifold besetments
and biasses.
Having thus thrown myself upon my reader’s candour, by a clear
avowal of the spirit in which such controversies ought to be
conducted, let us together proceed to the purpose of this chapter.
Between Geology and Scripture interpretation there are apparent
and great contradictions—that all admit: on the very threshold of our
future remarks, let us allow most readily that between the usually
recognised interpretations of Scripture and the well-ascertained facts
of Geological science, there are most appalling contradictions; and
the questions arising thence are very important, both in a scientific
and in a theological point of view. Is there any method of
reconciliation, by which the harmony of the facts of science with the
statements of the Bible can be shown? Where is the real solution to
be found? Are we mistaken in our interpretations, or are we
mistaken in our discoveries? Have we to begin religion again de
novo, or may the Bible and the Book of Nature remain just as we
have been accustomed to regard them; both as equally inspired
books of God, waiting only the service and worship of man, their
priest and interpreter?
These are questions surely of no common importance. Neither the
Christian nor the doubter act a consistent part in ignoring them.
Should the Christian say, “I want no teachings of science: I want no
learned phrases and learned researches to assist me in
understanding my Bible: for aught I care, all the ‘ologies’ in the world
may perish as carnal literature: I know the Book is true, and decline
any controversy with the mere intellectual disputant;” and if the
Christian should go on to add, as probably he would in such a state of
mind, and as, alas! too many have done to the lasting disgust and
alienation of the thoughtful and intelligent: “These are the doubts of
a ‘philosophy falsely so called:’ science has nothing to do with
Revelation: they have separate paths to pursue; let them each go
their own way: and should there come a collision between the two,
we are prepared to give up all science once and for ever, whatever it
may teach, rather than have our views upon Revelation disturbed:”—
now, if the Christian talks like that, he is acting a most unwise part.
He is doing in his limited sphere of influence what the Prussian
Government intended to have done when Strauss’ “Life of Christ”
appeared. It was the heaviest blow that unbelief had ever struck
against Christianity, and the Government of Prussia with several
theological professors were disposed to prosecute its author, and
forbid the sale of the book. But the great Neander deprecated this
course, as calculated to give the work a spurious celebrity, and as
wearing the aspect of a confession that the book was unanswerable.
He advised that it should be met, not by authority, but by argument,
believing that the truth had nothing to fear in such a conflict. His
counsel prevailed, and the event has shown that he was right.
If, on the other hand, the doubter should say, “The intelligence of
the day has outgrown our household faiths; men are no longer to be
held in trammels of weakness and superstition, or to be dragooned
into Religion;—the old story about the Bible, why, you know we can’t
receive that, and look upon those compilations that pass by that
name as divinely inspired Books; we have long since been compelled
to abandon the thought that Christianity has any historic basis, or
that its Books have any claim upon the reverence or faith of the
nineteenth century, as of supernatural origin.”
To such an one I should say, that this begging of the question, this
petitio principii, is no argument; these are statements that require
every one of them a thorough demonstration before they are
admitted; you deny the Christian one single postulate: you deny him
the liberty of taking anything for granted; and then begin yourself
with demanding his assent unquestioned to so large a postulate as
your very first utterance involves, “that the intelligence of the age has
outgrown our household faiths.” Before you proceed you must prove
that; and we must know what is meant by those terms, before we can
stand upon common ground, and hold anything like argument upon
these debated points.
From such general observations let us come to the precise objects
before us: Geology and Scripture are supposed to be at variance
specially on three points. The age of the earth: the introduction of
death: and the Noachian Deluge. These apparent contradictions are
the most prominent difficulties, and cause the most startling doubts
among those who imagine Science to be antagonistic to Christian
revelation. I propose to devote a little attention to each of these
questions, while I endeavour honestly to show how, in my opinion,
apparent contradictions may be reconciled. The questions are these,
to state them in a popular form: 1. Is the world more than 6,000
years old? and if it is, how are the statements of Scripture and
Geology to be reconciled? 2. Was death introduced into the world
before the fall of man? and if it was, how are the truths of Scripture
on this question to be explained? and, 3. What was the character of
the Noachian Deluge? was it partial or universal? and what are the
apparent discrepancies in this case, between science and the Bible?
Perhaps before I proceed a step further I ought to add that, in my
belief, the age of the earth, so far as its material fabric, i.e. its crust, is
concerned, dates back to a period so remote, and so incalculable, that
the epoch of the earth’s creation is wholly unascertained and
unascertainable by our human arithmetic; whether this is
contradicted in the Scripture, is another question.
With regard to the introduction of death, I believe that death upon
a most extensive scale prevailed upon the earth, and in the waters
that are under the earth, ages, yea countless ages, before the creation
of man—before the sin of any human being had been witnessed; that
is what Geology teaches most indisputably: whether the Scriptures
contradict this statement, is another question.
With regard to the Noachian Deluge, I believe that it was quite
partial in its character, and very temporary in its duration; that it
destroyed only those animals that were found in those parts of the
earth then inhabited by man; and that it has not left one single shell,
or fossil, or any drift or other remains that can be traced to its action.
Whether the Scriptures teach any other doctrine, is another question.
By this time the ground between us is narrowed, and I may
probably anticipate that I shall have objections to answer, or
misapprehensions to remove, quite as much on the part of those who
devoutly believe, as on the part of those who honestly doubt the
Christian Scriptures.
First then,
I. How old is the world? How many years is it since it was called
into being, as one of the planets? How many centuries have elapsed
since its first particle of matter was created?
The answer comes from a thousand voices, “How old? why, 6,000
years, and no more, or closely thereabouts! Every child knows that;—
talk about the age of the world at this time of day, when the Bible
clearly reveals it!”
Now I ask, Where does the Bible reveal it? Where is the chapter
and the verse in which its age is recorded? I have read my Bible
somewhat, and feel a deepening reverence for it, but as yet I have
never read that. I see the age of man recorded there; I see the
revelation that says the human species is not much more than 6,000
years old; and geology says this testimony is true, for no remains of
man have been found even in the tertiary system, the latest of all the
geological formations. “The Bible, the writings of Moses,” says Dr.
Chalmers, “do not fix the antiquity of the globe; if they fix any thing
at all, it is only the antiquity of the species.”
It may be said that the Bible does not dogmatically teach this
doctrine of the antiquity of the globe; and we reply, Very true; but
how have we got the idea that the Bible was to teach us all physical
science, as well as theology. Turretin went to the Bible for
Astronomy: Turretin was a distinguished professor of theology in his
day, and has left behind him large proofs of scholarship and piety.
Well, Turretin went to the Bible, determined to find his system of
astronomy in it; and of course he found it. “The sun,” he says, “is not
fixed in the heavens, but moves through the heavens, and is said in
Scripture to rise and to set, and by a miracle to have stood still in the
time of Joshua; if the sun did not move, how could birds, which
often fly off through an hour’s circuit, be able to return to their
nests, for in the mean time the earth would move 450 miles?” And if
it be said in reply, that Scripture speaks according to common
opinion, then says Turretin, “We answer, that the Spirit of God best
understands natural things, and is not the author of any error.”
We smile at such “ecclesiastical drum” noise now, and we can well
afford to do so: but when people go to the Bible, determined to find
there, not a central truth, but the truths of physics, in every
department of natural science, are we to be surprised that they come
away disappointed and angry? As Michaelis says, (quoted by Dr.
Harris, in his “Man Primeval,” p. 12,) “Should a stickler for
Copernicus and the true system of the world carry his zeal so far as to
say, that the city of Berlin sets at such an hour, instead of making
use of the common expression, that the sun sets at Berlin at such an
hour, he speaks the truth, to be sure, but his manner of speaking it is
pedantry.”
Now, this is just the way to make thoughtful men unbelievers: and
we will not adopt that plan, because it is not honest, neither is it

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Keywords Information asymmetry · Industry 4.0 · Blockchain · Corporate

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Records identified through

Records after duplicates removed

Records screened Records excluded

Full-text articles assessed

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4 The Role of IR 4.0 Technology in Mitigating Information

4.1 Open Information Transactions

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Adoption of IR 4.0 Technology

Information Asymmetry Orientation The Intention on Solving Information Asymmetry

Fig. 2 Proposed framework

corporate governance players tend to lack initiative on mitigating information asym-

6 Summary and Conclusion

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Zulkefly Abdul Karim, Ahmad Yusmadi Yusoff, Bakri Abdul Karim,