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Full-Text Articles in Business
Capital Structure Deviation And Speed Of Adjustment, Tarun Mukherjee, Wei Wang
Capital Structure Deviation And Speed Of Adjustment, Tarun Mukherjee, Wei Wang
Business Faculty Publications
As a firm deviates from its target leverage, marginal bankruptcy costs change at a faster speed than marginal tax shield. This renders the speed of adjustment (SOA) of capital structure an increasing function of the starting deviation from the target. Adopting a bootstrapping-based estimation, we confirm the existence of such heterogeneity in SOA that is statistically significant and economically nontrivial. Typically, if Firm A is one standard deviation (about 17%) and Firm B is two standard deviations away from their leverage targets, then B’s SOA is 41% greater than that of A, and the half life of B’s leverage deviation …
Asset Pricing, Jump Risk, And China's B-Share Discount Puzzle, Haigang Zhou, John Qi Zhu
Asset Pricing, Jump Risk, And China's B-Share Discount Puzzle, Haigang Zhou, John Qi Zhu
Business Faculty Publications
This study examines whether differential systematic risks, along with other competing explanations, account for cross-sectional variations in B-share discounts in China, using both cross-sectional and panel data analysis. Results show strong evidence that variations in A-share systematic risks are positively related to variations in B-share discount after controlling for various competing explanations. No evidence shows a correlation between variations in B-share systematic risks and variations in B-share discounts. These findings survive various robustness checks. The study further decomposes total systematic risk into continuous and jump components. Regression results indicate that variations in B-share discounts are explained mostly by variations in …
Integrated Risk Study For Chinese Commercial Banks With Fuzzy Comprehensive Appraisal Method, Hongmei Li, Haigang Zhou
Integrated Risk Study For Chinese Commercial Banks With Fuzzy Comprehensive Appraisal Method, Hongmei Li, Haigang Zhou
Business Faculty Publications
The Basel Capital Accord II proposes that commercial banks should supervise not only credit risk but also market risk, liquidity risk and operational risk. Using the fuzzy comprehensive appraisal method based on the Basel Capital Accord II, this paper measures the integrated risk of Chinese commercial banks. Our results indicate that the average values of the four types of risks are higher than the integrated risk of the four risks, indicating an overestimated whole risk. Our results illustrate the importance of considering the correlation between the different risk sources in order to efficiently allocate financial resources.
The Asymmetric Impacts Of Good And Bad News On Opinion Divergence: Evidence From Revisions To The S&P 500 Index, Jin Yu, Haigang Zhou
The Asymmetric Impacts Of Good And Bad News On Opinion Divergence: Evidence From Revisions To The S&P 500 Index, Jin Yu, Haigang Zhou
Business Faculty Publications
Motivated by the ambiguity theory of Epstein and Schneider (2003, 2008), we hypothesize that investors' beliefs on the prospects of firms converge upon the arrival of bad news, but do not converge - or even further diverge - on the arrival of good news. We expect firms with high divergence in opinions to experience lower stock returns around the announcements of bad news but not for good news. Using revisions to the S&P 500 index between 1962 and 2008 as information events, we find overwhelming support for the hypothesis. The results are robust to controlling for alternative hypotheses of price …