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Articles 1 - 22 of 22
Full-Text Articles in Finance and Financial Management
What's Ahead For 2007? Knowledge@Wharton Network Surveys The Globe, Knowledge@Smu
What's Ahead For 2007? Knowledge@Wharton Network Surveys The Globe, Knowledge@Smu
Knowledge@SMU
On the financial front, 2006 has been a pretty good year all around. Stock markets in many countries have rallied, energy prices have fallen, inflation is relatively low and growth in GDP ranges from respectable to robust. But the economies of most countries also face a number of threats -- some predictable, some not -- that could derail recent gains in our increasingly connected global markets. What's ahead for 2007 in the U.S., India, Europe, Latin America, China and other parts of the world? We offer a roundup of reports from the Knowledge@Wharton Network, including India Knowledge@Wharton, Universia Knowledge@Wharton and …
The Association Between Earnings Quality And Regulatory Report Opinions In The Accounting Industry, Tracey Chunqi Zhang, Katherine Gunny
The Association Between Earnings Quality And Regulatory Report Opinions In The Accounting Industry, Tracey Chunqi Zhang, Katherine Gunny
Research Collection School Of Accountancy
We compare the outcome of two different information systems – self regulation versus private sector regulation – in the accounting industry. Under the Sarbanes-Oxley Act, Public Company Accounting Oversight Board (PCAOB) inspections replaced American Institute of Certified Public Accountants (AICPA) peer reviews of auditors. Peer review opinions are useful with respect to decisions about hiring and firing of auditors (Hilary and Lennox, 2005); therefore, the question remains what are the benefits of incurring the cost to replace a selfregulatory system with a private regulatory agency. We examine the usefulness of these two information systems at distinguishing earnings quality at firms …
The Effect Of The Options Backdating Scandal On The Stock-Price Performance Of 110 Accused Companies, Gennaro Bernile, Gregg A. Jarrell, Howard Mulcahey
The Effect Of The Options Backdating Scandal On The Stock-Price Performance Of 110 Accused Companies, Gennaro Bernile, Gregg A. Jarrell, Howard Mulcahey
Research Collection Lee Kong Chian School Of Business
Since academic scholars and the Wall Street Journal reported widespread evidence indicating that option grants to executives were backdated, an avalanche of news stories followed documenting this ever-widening corporate scandal. In this study we ask: "How do disclosures of backdating affect shareholder value?" We closely examine 110 companies listed in the Wall Street Journal's Perfect Payday webpage, collecting all news stories related to options backdating. We find that shareholders of these 110 companies suffer on average significant stock-price declines, ranging between 20% and 50%. Moreover, these losses do not seem to be due to temporary overreactions (at least so far). …
Choice Of Currency By East Asia Bond Issuers, David Fernandez, Simon Klassen
Choice Of Currency By East Asia Bond Issuers, David Fernandez, Simon Klassen
Research Collection Lee Kong Chian School Of Business
In discussing bond markets in Asia, academics and policymakers typically begin by noting that the Asian crisis of 1997-98 in part resulted from the underdevelopment of the region’s domestic bond markets and the resultant currency and duration mismatches. When assessing the progress made in developing these markets in the post-crisis years, academics and policymakers usually observe that, while several domestic currency government bond markets have moved ahead, corporate bond markets have lagged (Asian Development Bank (2002), Reserve Bank of Australia (2003)). The policy conclusion is therefore often drawn: to prevent another Asian crisis, Asian bond markets must be further developed.
How Can Employers Improve Defined Contribution Plans?, Knowledge@Smu
How Can Employers Improve Defined Contribution Plans?, Knowledge@Smu
Knowledge@SMU
If 401(k)s and similar plans are the main way Americans invest for retirement, how can employers improve them? By making enrollment automatic, minimizing the use of the employer's stock, expanding the role of annuities and improving employees' financial knowledge, according to a set of recommendations issued by the Financial Economists Roundtable, a group of about 50 prominent economists, including several Wharton faculty members.
Is Stock Price Rounded For Economic Reasons In The Chinese Market, Yan He, Chunchi Wu
Is Stock Price Rounded For Economic Reasons In The Chinese Market, Yan He, Chunchi Wu
Research Collection Lee Kong Chian School Of Business
This paper investigates whether trading and quoting prices are rounded for both economic and cultural reasons on the Shanghai and Shenzhen Stock Exchanges in China. We find that the close, bid, and ask prices of domestic shares are rounded to the nearest 10s and 5s for economic reasons, and the last decimal point of prices clusters on 8 for cultural reasons. The cross-sectional variation in 10-cent and 5-cent rounding can be well explained by price and inverse of square root of trading volume, whereas the clustering on 8 can hardly be ascribed to economic variables. The cross-sectional variation in execution …
Which Daily Price Is Less Noisy?, Christopher Ting
Which Daily Price Is Less Noisy?, Christopher Ting
Research Collection Lee Kong Chian School Of Business
The daily efficient price is the price that would prevail if the market were frictionless. I show that volume-weighted average price (VWAP) provides a less noisy estimate for the unobservable efficient price as compared to the closing price. The variance of daily returns computed with VWAPs is smaller than that computed with closing prices. The difference between these two realized variances is economically significant. The volatility of log closing price change tends to understate the beta risk and Sharpe ratio. A higher noise level in the closing price leads to derivative prices that favor option and volatility-related swap writers.
Financial Value Of Brands In Mergers And Acquisitions: Is Value In The Eye Of The Beholder?, Cem Badahir, Sundar G.Bharadwaj, Rajendra Kumar Srivastava
Financial Value Of Brands In Mergers And Acquisitions: Is Value In The Eye Of The Beholder?, Cem Badahir, Sundar G.Bharadwaj, Rajendra Kumar Srivastava
Research Collection Lee Kong Chian School Of Business
Firms frequently engage in merger and acquisition deals. In these transactions, brands account for significant but differential proportions of overall transaction value. Extant marketing literature on financial value of brands focuses on drivers of financial value only within a firm. However, in a merger and acquisition context, value of brands also depends on how their new owners might leverage them in the marketplace. This study identifies and empirically tests both the target and acquirer characteristics that affect the value of target firm’s brands in mergers and acquisitions. Furthermore, the authors examine the moderating role of deal type and target firm …
Asian Market Microstructure, David K. Ding, Charlie Charoenwong
Asian Market Microstructure, David K. Ding, Charlie Charoenwong
Research Collection Lee Kong Chian School Of Business
Along with the rapidly burgeoning Asian economy, the financial markets in the region have seen spectacular development during the past few decades. Several recent statistics will best illustrate their success. Net capital flows to Asia and Pacific over 1999 to 2003 constituted 40% of total flows to emerging markets and about 13.9% of the world's FDI flows. Over 90% of net capital flows to the Asia Pacific region has been in the form of equity and portfolio investment. By the end of 2004, Asia's share (including Japan) in world equity market capitalization has grown to 21%, with a total market …
Do Accurate Earnings Forecasts Facilitate Superior Investment Recommendations?, Roger Loh, G. Mujtaba Mian
Do Accurate Earnings Forecasts Facilitate Superior Investment Recommendations?, Roger Loh, G. Mujtaba Mian
Research Collection Lee Kong Chian School Of Business
We find that analysts who issue more accurate earnings forecasts also issue more profitable stock recommendations. The average factor-adjusted return associated with the recommendations of analysts in the highest accuracy quintile exceeds the corresponding return for analysts in the lowest accuracy quintile by 1.27% per month. Our findings provide indirect empirical support for valuation models in the accounting and finance literatures (e.g., Ohlson, 1995) that emphasize the role of future earnings in predicting stock price movements. Our results also suggest that imperfectly efficient markets reward information gatherers, such as security analysts, for their costly activities in generating superior earnings forecasts.
Loss Function Asymmetry And Forecast Optimality: Evidence From Individual Analysts' Forecasts, Stanimir Markov, Min Yen Tan
Loss Function Asymmetry And Forecast Optimality: Evidence From Individual Analysts' Forecasts, Stanimir Markov, Min Yen Tan
Research Collection School Of Accountancy
We examine the optimality of quarterly earning forecasts issued by individual analysts. When we conduct Ordinary Least Squares (OLS) and Least Absolute Deviations (LAD) analyses, which assume loss function symmetry, we reject the null of forecast optimality at 5% significance level more than 5% of the time. Relaxing the symmetry assumption reduces the frequency of rejections below 5%. We demonstrate that the cross-sectional variation in the asymmetry parameter of the loss function is related to analyst employment. Overall, our evidence is consistent with the joint hypothesis of asymmetric loss and forecast optimality rather than the alternative of symmetric loss and …
Employee Incentives To Make Firm Specific Investment: Implications For Resource-Based Theories Of Corporate Diversification, Heli Wang, Jay B. Barney
Employee Incentives To Make Firm Specific Investment: Implications For Resource-Based Theories Of Corporate Diversification, Heli Wang, Jay B. Barney
Research Collection Lee Kong Chian School Of Business
We argue that the risk associated with the value of a firm's core resources has an impact on employee decisions to make firm-specific investments, independent of the threat of opportunism that might exist in a particular exchange. We further explore mechanisms firms may adopt to mitigate the employee incentive problem stemming from the risk associated with core resource value. These arguments shed new light on resource-based theories of corporate diversification.
Government Ownership And The Performance Of Government-Linked Companies: The Case Of Singapore, James Ang, David K. Ding
Government Ownership And The Performance Of Government-Linked Companies: The Case Of Singapore, James Ang, David K. Ding
Research Collection Lee Kong Chian School Of Business
In an emerging economy, the alternative to government control is often no governance. We investigate the governance structure of government-linked companies (GLCs) in Singapore under the ownership/control structure of Temasek Holdings, the government holding entity, which typically owns substantial cash flow rights but disproportional control rights and exercises no operational control. We compare the financial and market performance of GLCs with non-GLCs, where each has a different set of governance structure, the key difference being government ownership. We show that Singaporean GLCs have higher valuations and better corporate governance than a control group of non-GLCs. The results hold even when …
Empirical Evidence On Jurisdictions That Adopt Ifrs, Ole-Kristian Hope, Justin Jin, Tony Kang
Empirical Evidence On Jurisdictions That Adopt Ifrs, Ole-Kristian Hope, Justin Jin, Tony Kang
Research Collection School Of Accountancy
International Financial Reporting Standards (IFRS) have recently been adopted in a number of jurisdictions, including the European Union. Despite the importance of IFRS in the context of global accounting standards harmonization, little is known regarding what institutional factors influence countries' decisions to voluntarily adopt IFRS. This issue is relevant to standard-setters because a better understanding of the motivations for adoption will enable them to promote IFRS more effectively to countries that currently do not employ IFRS. Consistent with bonding theory, we find that countries with weaker investor protection mechanisms are more likely to adopt IFRS. Our evidence also shows that …
The Impact Of Financial Market And Resale Market On Firm Strategies, Zhiling Guo, Andrew B. Whinston
The Impact Of Financial Market And Resale Market On Firm Strategies, Zhiling Guo, Andrew B. Whinston
Research Collection School Of Computing and Information Systems
The ever-increasing use of information technology (IT) in business transactions greatly expands firms? exposure to different electronic markets. This paper provides a framework to understand how firms can leverage different strategies across external financial markets and an internal resale market to improve overall profitability. We develop a model in which a group of risk-averse retailers sell a homogeneous product to their respective uncertain consumer markets. We study a scenario where an internal resale market can be constructed among the retailers and outside financial markets can be used to improve their ability to manage uncertainty. We identify strategies for retailers operating …
Capital Structure Dynamics And Stock Returns, Jie Cai, Zhe Zhang
Capital Structure Dynamics And Stock Returns, Jie Cai, Zhe Zhang
Research Collection Lee Kong Chian School Of Business
Many finance theories predict that the capital structure affects firm value, which implies that the changes in leverage have an impact on stock returns. Most of the existing literature however has been focusing on the determinants of the capital structure. Using a sample of U.S. public firms during 1975-2002, we document a significantly negative effect of leverage changes on next-quarter stock returns. This effect remains significant after controlling for other firm characteristics such as ROE, book-to-market, firm size, and past returns. We propose and test several hypotheses to explain the observed effect. We find that the negative effect is stronger …
Indirect Inference For Dynamic Panel Models, Christian Gourieroux, Peter C. B. Phillips, Jun Yu
Indirect Inference For Dynamic Panel Models, Christian Gourieroux, Peter C. B. Phillips, Jun Yu
Research Collection Lee Kong Chian School Of Business
It is well-known that maximum likelihood (ML) estimation of the autoregressive parameter of a dynamic panel data model with fixed effects is inconsistent under fixed time series sample size (T) and large cross section sample size (N) asymptotics. The estimation bias is particularly relevant in practical applications when T is small and the autoregressive parameter is close to unity. The present paper proposes a general, computationally inexpensive method of bias reduction that is based on indirect inference (Gouriéroux et al., 1993), shows unbiasedness and analyzes efficiency. The method is implemented in a simple linear dynamic panel model, but has wider …
Conceptualization Of Trust, Commitment, And Understanding The Relationships Between Trust, Commitment, And Willingness To Try Internet Banking Services, Siew Tong Fock, Hian Chye Koh
Conceptualization Of Trust, Commitment, And Understanding The Relationships Between Trust, Commitment, And Willingness To Try Internet Banking Services, Siew Tong Fock, Hian Chye Koh
Research Collection Lee Kong Chian School Of Business
This paper examines trust and commitment and their antecedents and consequences within the context of Internet banking, based on data collected from a survey of 500 Singapore undergraduates. After the establishment of a conceptual model that links trust and commitment to the willingness to try Internet banking, the empirical findings show that higher levels of trust and commitment are significantly associated with a greater willingness to try Internet banking. The paper also investigates security, ethics, privacy, openness, the speed of response, quality of information, regulatory control, technology advancement, and reputation as determinants of trust. Of these, security, regulatory control, technology …
Intraday Stock Prices, Volume, And Duration: A Nonparametric Conditional Density Analysis, Anthony S. Tay, Christopher Ting
Intraday Stock Prices, Volume, And Duration: A Nonparametric Conditional Density Analysis, Anthony S. Tay, Christopher Ting
Research Collection School Of Economics
We investigate the distribution of high-frequency price changes, conditional on trading volume and duration between trades, on four stocks traded on the New York Stock Exchange. The conditional probabilities are estimated nonparametrically using local polynomial regression methods. We find substantial skewness in the distribution of price changes, with the direction of skewness dependent on the sign of trade. We also find that the probability of larger price changes increases with volume, but only for trades that occur with longer durations. The distribution of price changes vary with duration primarily when volume is high.
Information Value Of Credit Ratings In Asia Ex-Japan Markets, Chen Zhou
Information Value Of Credit Ratings In Asia Ex-Japan Markets, Chen Zhou
Dissertations and Theses Collection (Open Access)
This study investigates the information value of credit ratings by exploring the relationship between ratings and security price. Unlike previous studies, we concentrate on the major markets ex-Japan in Asia. We begin with an investigation of rating reclassification as well as credit watch placement events by three leading international rating agencies. We show that markets with differing level of sophistication behave differently. Specifically, South Korea and Hong Kong are found to respond in a similar manner. Indonesia shows possible ign of information leakage. In the cases of Malaysia and Thailand, significant and positive equity price responses exist for upgrades, suggesting …
Predicting A Currency Crisis Alternative Approaches And Applications To The Philippines, Fernando Antonio Iv Castillo
Predicting A Currency Crisis Alternative Approaches And Applications To The Philippines, Fernando Antonio Iv Castillo
Dissertations and Theses Collection (Open Access)
An arrival of a currency crisis can be anticipated through a comprehensive and properly specified Early Warning System (“EWS”). The costs that entail with experiencing a currency crisis far exceed the costs of spending a considerable amount of time to developing an EWS. In a report done by the IMF(1998), they estimated that emerging economies suffer an 8% cumulative loss in real output during a severe currency crisis. Likewise, evidence suggests that a simple look at traditional market indicators of currency and default risks will not provide much advance warning of an impending currency crisis. In a study done by …
Conflicts Of Interest And Stock Recommendations: The Effects Of The Global Settlement And Related Regulations, Rong Wang, Ohad Kadan, Leonardo Madureira, Tzachi Zach
Conflicts Of Interest And Stock Recommendations: The Effects Of The Global Settlement And Related Regulations, Rong Wang, Ohad Kadan, Leonardo Madureira, Tzachi Zach
Research Collection Lee Kong Chian School Of Business
Prior research has shown that sell-side analysts in general, and especially those facing conflicts of interest driven by investment bank relationships, issue overly optimistic recommendations. This paper studies the effect of regulations on sell-side analysts’ research. These regulations — Rule NASD 2711, Rule NYSE 472, and the “Global Analyst Research Settlement” — attempted to mitigate the interdependence between the research and the investment bank departments of US brokerage houses. The results suggest that the regulations have partially achieved their goal of curbing the conflicts of interest’s influence over analysts’ stock recommendations. After the adoption of the new regulations, the likelihood …