Corporate Finance Commons^™

When Positive Sentiment Is Not So Positive: Textual Analytics And Bank Failures, Aparna Gupta, Cheng Lu, Majeed Simaan, Mohammed J. Zaki

Department of Accounting and Finance Faculty Scholarship and Creative Works

We examine U.S. publicly traded bank holding companies (BHCs) that failed during the 2007–2009 global financial crisis. Using consolidated data at the BHC level and 10-K filings, we investigate the determinants of bank failures during this period using nonlinear machine learning (ML). The in-sample analysis demonstrates that 90% of the failed banks can be classified during 2007–2009. In addition, our sensitivity analysis for interpretable ML shows that net tone is among the top five important features. However, the power of tone/text is less evident when we consider predictive (out-of-sample) analysis. While nonlinear ML models such as random forest and support …

Low Beta Anomaly In Some European Emerging Markets, Tadeusz Winkler-Drews, Mateusz Mogilski

Journal of Banking and Financial Economics

The aim of the study was to identify the low beta anomaly and analyse the causes of its occurrence in five European emerging markets that were components of the MSCI Emerging Markets Europe index in the period 2010–2019. It was hypothesized that the determinants of the low beta anomaly in the analysed markets are factors from at least two of the three categories of variables. Using the Betting Against Beta model proposed by A. Frazzini and L. H. Pedersen (2014), we found that this phenomenon was not identified in three markets, but occurred in the remaining two markets, for which …

Real Earnings Management Among Industries: Does Market Competition Matter?, Michał Comporek

Journal of Banking and Financial Economics

This paper investigates real earnings management (REM) practices in public non-financial companies listed on the Warsaw Stock Exchange (WSE) from 2014 to 2023, focusing on sectoral differences and the influence of market competition. REM, defined as deviations from normal business operations aimed at manipulating reported earnings, can distort financial information and harm long-term firm value. This study contributes to the existing literature in two key ways. First, it examines variations in abnormal levels of production costs, sales, and discretionary expenditures – REM proxies based on Roychowdhury’s methodology – across sectors classified according to the WSE’s industry framework. This sectoral classification, …

Too Many Mergers? The Golden Parachute As A Driver Of M&A Activity In The 21st Century, Jeffrey N. Gordon

Faculty Scholarship

This Article argues that the corporate governance regime in the United States has produced a level of mergers and acquisition activity greater than the social optimum because of the current version of the “golden parachute,” a super-bonus payoff to a target CEO. In the late nineteenth through the twentieth century, M&A activity was characterized by “waves” that reflected adaptations to changing external environment, whether the efficient production frontier, regulatory constraints, or capital market developments. Economically-motivated parties saw the opportunities in changing the boundaries of the firm; successful first-movers spawned imitators, hence a wave, which eventually subsided, often alongside deteriorating capital …

Where Intangibles Travel: Essays On The Tax-Motivated Geography Of Innovation And Capital, Xuerui Kou

Dissertations and Doctoral Documents, University of Nebraska-Lincoln, 2023–

This dissertation explores how taxation and institutional environments shape the global strategies of United States multinational enterprises (MNEs), with a particular focus on intangible assets and the cross-border allocation of innovation. Positioned at the intersection of international trade, public economics, and innovation studies, the three chapters collectively examine firm responses to international tax incentives and regulatory asymmetries.

Chapter 1 introduces the motivation and theoretical foundations of the dissertation, reviews related literature, and outlines the core research questions and empirical strategies. It highlights the increasing policy and academic interest in the geographic mobility of intangible capital, particularly in the context of …

Is R&D Rivalry Slowing The Growth Of Productive Firms?, Yoshiki Ando, James Bessen, Xiupeng Wang

Research Collection School Of Economics

The reallocation of jobs to more productive firms is a substantial component of aggregate productivity growth, yet job reallocation rates have declined substantially in the United States. This paper explores the hypothesis that greater technological rivalry has exacerbated adjustment costs, slowing reallocation. Using microdata at the US Census and estimates of technological rivalry in firm growth regressions, we find that technological rivalry slows firm responses to productivity shocks. Firms do not expand as rapidly in the face of higher obsolescence risk. Estimating counterfactual firm growth from 1997-2018, we find that growing technological rivalry accounts for most of the decline in …

The Role Of Microfinance In Improving Global Economy, Khamphou Milayome

Doctoral Dissertations (DBA)

This study investigates microfinance’s role in enhancing the global economy by examining its impact on economic growth, unemployment, and political stability. Secondary data from MIX Market and WDI were used in this study to assess these relationships. Multiple regression was conducted with EViews software to test regression models with the independent variables related to microfinance and microfinance institutions (MFIs). Using the data from South Asia and Southeast Asian countries, this study finds that microfinance significantly improves economic growth, reduces the unemployment rate, and strengthens political stability. Microeconomic variables used in the study are borrowing amounts and the cost per borrower. …

High Flying Adored: How Ceo Narcissism Influences Firms’ Responses To Above-Aspiration Performance With Risky Organizational Change, Korcan Kavusan, Daniel Mack, Matthew P. Mount, Gokhan Ertug

Research Collection Lee Kong Chian School Of Business

Research Summary: Research on performance feedback presents conflicting views on how above-aspiration performance influences organizational change. Some studies argue that it constrains change due to a lack of organizational motivation, while others suggest that it enables change by expanding managerial discretion. Reconciling these perspectives, we suggest that managers’ narcissistic tendencies can fundamentally alter how a firm responds to above-aspiration performance. We theorize and find evidence that high-narcissism CEOs respond to above-aspiration performance with more acquisitions—attention-generating actions that align with their self-enhancement motives, while under similar conditions low-narcissism CEOs avoid acquisitions, due to their uncertainty and risk. Our findings highlight the …

Participant Empowerment, Inclusivity, And Social Justice: A Review Of Meng Tian’S Arts-Based Research Methods For Educational Researchers, Niway Ayalew Adimasu

The Qualitative Report

In reviewing Arts-Based Research Methods for Educational Researchers by Meng Tian (2023), I found a priceless resource for contemporary scholars wishing to add cutting-edge arts-based techniques to their qualitative research inquiries. This book offers a thorough examination of how artistic mediums like poetry, theater, and visual arts can be used to investigate the emotional, psychological, and cultural aspects of education that conventional research frequently ignores. It does this by fusing theoretical understanding with helpful advice. The book focuses on participant empowerment, inclusivity, and ethical considerations when working with vulnerable populations highlights the book’s commitment to social justice, making it especially …

Economic Consequences Of Public Pension Accounting Regulation Changes: Evidence From Housing Markets And Local Economies, Grace Haoqing Fan

Research Collection School Of Accountancy

I examine whether, and through which channels, government pension accounting regulations affect local housing markets and economies. Using both a contiguous border-county approach across multiple states and a single-state study in California, I find that regions exposed to more severe state-level pension underfunding experience lower housing market growth after the introduction of Government Accounting Standards Board (GASB) regulations 67 and 68, which significantly enhance the transparency of public pension underfunding. The effect is more pronounced in states heavily impacted by the new regulations and in counties more reliant on state funding. Further analyses suggest that the observed effect is driven …

Can Esg Reduce Credit Risk? An Empirical Investigation Across Asean-5 Markets, Arrafif Pratama Zaini, Maria Ulpah

The Indonesian Capital Market Review

Based on stakeholder theory and signaling theory, companies with strong ESG performance send signals to various stakeholders, thus building trust and influencing better credit risk evaluation. This study empirically examines the effect of Environmental, Social, and Governance (ESG) performance on the credit risk of non-financial public companies in ASEAN-5 countries (Indonesia, Malaysia, Philippines, Singapore, and Thailand) over the period 2019-2023. Corporate credit risk is measured using 2 main approaches: the accounting-based and market-based models. Merton's KMV model calculates the probability of default (PD) using a market-based approach. In contrast, the Altman Z-Score predicts bankruptcy risk based on financial ratios in …

The Impact Of Effective Tax Rate And Cash Effective Tax Rate On The Capital Structure, Nguyen Vinh Khuong Dr., Tran Thao Vy, Nguyen Phuong Anh, Pham Thi Anh Hong, Bui Thi Ngoc Trinh, Cao Phuong Uyen

The Indonesian Capital Market Review

The study examines the impact of tax avoidance on the capital structure of listed companies on the Vietnam’s stock market. Conducting GLS regression testing and analysis through data of 657 enterprises listed on the two stock exchanges of Hanoi and Ho Chi Minh City in the period from 2015 to 2022. Research results have shown that initially, when businesses carry out tax avoidance, it will reduce the capital structure of the business because the marginal benefits received from tax avoidance are lower than the marginal costs from tax avoidance. However, after businesses carry out tax avoidance and the benefits from …

Underpricing Of The Malaysian Initial Public Offerings (Ipos), Wahidah Shari

The Indonesian Capital Market Review

This study evaluates the short-term performance of 469 Malaysian IPOs between 2002 and 2020. Previous studies have found that IPOs are underpriced in the short-term yet underperform in the long term. The short-term underpricing describes the phenomenon characterized by a significant increase from the offer price to the first day of closing price. The finding shows that Malaysian IPOs are significantly underpriced by 24.6% using offer-to-close return (OTC), which confirms the findings reported in previous literature. Separating OTC to offer-to-ask (OTA) and ask-to-close (ATC) indicates that a significant positive return is observed only in the OTA period but not in …

Misinformation Regulations: Early Evidence On Corporate Social Media Strategy, Richard M. Crowley, Yun Lou, Samuel T. Tan, Liandong Zhang

Research Collection School Of Accountancy

Against the backdrop of an increasing threat of misinformation on social media, several countries have enacted regulations to curb the spread of misinformation. This study examines how corporate social media strategy responds to misinformation regulations. Using a large cross-country dataset of corporate tweets and a stacked regression analysis, we show that misinformation regulations lead to less corporate social media disclosure. This result suggests that by deterring misinformation, these regulations reduce firms’ need to use social media to counteract its adverse effects. Additional analyses show that the effect is more pronounced among countries with higher social media usage and countries with …

Information Production By Institutions And Information Extraction By Underwriters In Hybrid Ipo Auctions, Thomas J. Chemmanur, Pengfei Ma, Qianqian Yu

Research Collection Lee Kong Chian School Of Business

We analyze the informational properties of hybrid IPO auctions using a large and unique database of institutional bids from Chinese IPO auctions. We find strong evidence of information production by institutions about the intrinsic values of IPO firms and of underwriters extracting and using this information in IPO pricing. The IPO offer price is more sensitive to bids from institutions able to produce more precise information. In particular, the offer price is more sensitive to bids from domestic institutions, compared to bids from foreign institutions who likely have less knowledge or experience about the Chinese firms and financial market due …

The Impact Of Cost Leadership On Financial Distress Mediated Environmental, Social, And Governance, Steven Asher, Meythi Meythi, Riki Martusa, Rapina Rapina

Jurnal Akuntansi dan Keuangan Indonesia

Background: This study investigates the mediating role of environmental, social, and governance (ESG) performance in the relationship between cost leadership and financial distress among companies in Indonesia. Methods: Using path analysis, the research analyzed a sample of 43 firms listed on the Indonesia Stock Exchange from 2018 to 2022. Findings: The findings indicate that cost leadership positively affected ESG; however, no direct relationship was observed between cost leadership or ESG and financial distress. The mediation analysis reveals that ESG acted as a mediator, linking cost leadership to a reduced risk of financial distress. Conclusion: These results highlight the importance of …

Individual Or Team Analyst Reports? The Organization Of Analyst Research Activities, Xia Chen, Ning Jia, Dan Wang

Research Collection School Of Accountancy

Given the importance of research resource allocation within brokerage firms, we examine key factors that influence the issuance of individual vs. team analyst reports. Using a comprehensive sample of analyst reports from China for the 2008-2021 period, we find that this decision is influenced by (1) the brokerage firm's client interests, whereby firms held by the brokerage firm's mutual fund clients and firms that are the brokerage firm's underwriting clients receive more team than individual reports from the brokerage firm, and (2) the nature of corporate events, whereby routine events receive more team reports and nonroutine events receive more individual …

Capacity Investment In The Presence Of Correlated Demand And Production Resource Uncertainties And Its Implications For Financial Hedging, Onur Boyabatli, Guiyun Feng

Research Collection Lee Kong Chian School Of Business

In manufacturing firms, besides demand uncertainty, capacity investment decisions may also be subject to uncertainty in the availability of a production resource (e.g., budget or commodity component) which may become constraining for manufacturing. When the production resource uncertainty is tied to a financial index (e.g., asset or commodity price), the firm can enter into financial hedging contracts at the time of capacity investment to engineer this uncertainty. Our paper characterizes the optimal capacity investment and hedging decisions and examines how production resource uncertainty impacts the firm’s decisions, profitability, and the value of hedging. We identify three key drivers of these …

Bogging Down Investors: An Unintended Consequence Of Litigation Risk, Siwen Fu, Ke Wang, Liandong Zhang, Liu Zheng

Research Collection School Of Accountancy

Securities litigation risk is a well-recognized yet underexplored source of financial reporting complexity or unreadability. This study examines the effect of litigation risk on the readability of corporate financial reports. The 1999 Silicon Graphics Inc. (SGI) court ruling unexpectedly reduced litigation risk for firms within the Ninth Circuit Court's jurisdiction. Using a difference-in-differences design centered on the SGI court ruling, we find that, while the readability of financial reports generally declines over the sample period, treated firms in the Ninth Circuit experience a comparatively smaller decline in readability than control firms in other states after the ruling. Put differently, treated …

Institutional Dual-Holders And Corporate Disclosures: A Natural Experiment, Lin Cheng, Qiang Cheng, Liwei Weng, Mark Yuzhi Yan

Research Collection School Of Accountancy

This study examines the impact of the presence of institutional dual-holders, whose portfolios hold both loans and equity securities of the same firms, on those firms' voluntary disclosures. Using mergers between institutional shareholders and lenders to the same firms as exogenous shocks to identify firms with institutional dual-holders that have high relative equity ownership, we document that such firms are less likely to provide management forecasts and disclose fewer voluntary 8-K items. In cross-sectional analyses, we find that the reduction in voluntary disclosures is more pronounced when institutional dual-holders have higher board representation and when firms have lower litigation risk. …