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Full-Text Articles in Business
Identifying Ineffective Monitors From Securities Class Action Lawsuits, Chi Shen Wei, Lei Zhang
Identifying Ineffective Monitors From Securities Class Action Lawsuits, Chi Shen Wei, Lei Zhang
Research Collection Lee Kong Chian School Of Business
We identify “ineffective” institutional monitors based on the prevalence of occurrences of securities class-action lawsuits in their overall portfolio. We find that firms with a higher representation of such institutional investors among the firms’ large shareholders have a greater likelihood of future litigation and experience more negative market reactions upon such litigation filings. These firms exhibit other unfavorable governance outcomes including poorer acquisitions and lower CEO turnover-performance sensitivity. We find suggestive evidence that ineffective monitoring may be a result of higher operational risk.
Institutional Trading During A Wave Of Corporate Scandals: 'Perfect Payday'?, Gennaro Bernile, Johan Sulaeman, Qin Wang
Institutional Trading During A Wave Of Corporate Scandals: 'Perfect Payday'?, Gennaro Bernile, Johan Sulaeman, Qin Wang
Research Collection Lee Kong Chian School Of Business
This paper examines the role of institutional trading during the option backdating scandal of 2006-2007. Unlike their inability to anticipate other corporate events, institutional investors as a group display negative abnormal trading imbalances (i.e., buy minus sell volumes) in anticipation of firm-specific backdating exposures. Consistent with informed trading, the underlying trades earn positive abnormal short- and long-term profits. Moreover, the negative abnormal imbalances are larger in magnitude when backdating is likely a more severe issue. Local institutions, in particular, display negative trading imbalances earlier in event-time and earn consistently higher trading profits than non-local institutions. Although we find some evidence …
Local Business Cycles And Local Liquidity, Gennaro Bernile, George Korniotis, Alok Kumar, Qin Wang
Local Business Cycles And Local Liquidity, Gennaro Bernile, George Korniotis, Alok Kumar, Qin Wang
Research Collection Lee Kong Chian School Of Business
This study examines whether state-level economic conditions affect the liquidity of local firms. We find that liquidity levels of local stocks are higher (lower) when the local economy has performed well (poorly). This relation is stronger when local financing constraints are more binding, the local information environment is more opaque, and local institutional ownership levels and trading intensity are higher. Overall the evidence supports the notion that the geographical segmentation of U.S. capital markets generates predictable patterns in local liquidity.
Institutional Investors And The Informational Efficiency Of Prices, Ekkehart Boehmer, Eric K. Kelley
Institutional Investors And The Informational Efficiency Of Prices, Ekkehart Boehmer, Eric K. Kelley
Research Collection Lee Kong Chian School Of Business
Using a broad panel of NYSE-listed stocks between 1983 and 2004, we study the relation between institutional shareholdings and the relative informational efficiency of prices, measured as deviations from a random walk. Stocks with greater institutional ownership are priced more efficiently, and we show that variation in liquidity does not drive this result. One mechanism through which prices become more efficient is institutional trading activity, even when institutions trade passively. But efficiency is also directly related to institutional holdings, even after controlling for institutional trading, analyst coverage, short selling, variation in liquidity, and firm characteristics.
The Implications Of Debt Heterogeneity For R&D Investment And Firm Performance, Parthiban David, Jonathan P. O'Brien, Toru Yoshikawa
The Implications Of Debt Heterogeneity For R&D Investment And Firm Performance, Parthiban David, Jonathan P. O'Brien, Toru Yoshikawa
Research Collection Lee Kong Chian School Of Business
An assumption in prior research is that debt is homogeneous and provides inappropriate governance for R&D investments. We argue that debt is heterogeneous: although transactional debt does indeed impose strict contractual constraints that provide inappropriate governance for R&D investments, relational debt has very different characteristics that provide more appropriate governance. Using a sample of Japanese firms, we find that firms that align their debt structures with their R&D investments perform better than those that are misaligned. Furthermore, firms tend to align their debt structure with R&D investments, but only after deregulation permits relatively free access to various types of debt.
Ownership Structure, Investment Behaviour And Firm Performance In Japanese Manufacturing Industries, Eric Gedajlovic, Toru Yoshikawa, Motomi Hashimoto
Ownership Structure, Investment Behaviour And Firm Performance In Japanese Manufacturing Industries, Eric Gedajlovic, Toru Yoshikawa, Motomi Hashimoto
Research Collection Lee Kong Chian School Of Business
Using data spanning the 1996-98 fiscal years of 247 of Japan's largest manufacturers, we empirically evaluate the extent to which a firm's investment behaviour and financial performance are influenced by its ownership structure. To do so, we examine six distinct categories of Japanese shareholders: foreign investors, investment funds, pension funds, banks and insurance companies, affiliated companies and insiders. Our findings strongly indicate that the relationship between the equity stakes of a particular category of investor and a firm' s financial performance and investment behaviour is considerably more complex than is depicted in simple principal-agent representations. Such a result emphasizes the …
How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo
How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
Using a novel and detailed custody trades dataset, this paper analyzes the trading behavior of institutions. Extant studies have examined the effects of past performance on trading by retail investors, day traders, and futures floor traders. Yet very little work has been done on institutions. We find that unlike other investors, institutions take on more risk following an increase in net profit and loss. However, the responses to a gain and loss are highly asymmetric. Institutions aggressively reduce risk in the wake of losses, but only mildly increase risk in the wake of gains. This asymmetry is more pronounced for …