Board Reputation And Financial Reporting Quality,
2011
Singapore Management University
Board Reputation And Financial Reporting Quality, Dan Segal
Research Collection School Of Accountancy
This study uses a new measure of board reputation that is based on the market value of other companies on which board members serve, and examines whether board reputation has a causal effect on monitoring as reflected in financial statement reporting quality. A negative causal effect is expected if reputable directors are ineffective monitors because they are too busy or they choose to cater to management, whereas a positive causal effect is expected if reputable directors are more experienced and subject to significant reputation penalties in the case of a financial reporting failure. An alternative explanation is that reputation does …
The Agency Problem, Corporate Governance, And The Asymmetrical Behavior Of Selling, General, And Administrative Costs,
2011
Singapore Management University
The Agency Problem, Corporate Governance, And The Asymmetrical Behavior Of Selling, General, And Administrative Costs, Hai Lu, Hai Lu, Theodore Sougiannis
Research Collection School Of Accountancy
Selling, general, and administrative (SG&A) costs represent a significant proportion of thecosts of business operations. On average, the SG&A costs to total assets ratio is 27 percent,compared to the research and development (R&D) to total assets ratio of 3 percent(Banker, Huang, and Natarajan 2011). Due to the importance of SG&A costs, practitionerspay close attention to controlling SG&A spending. Understanding SG&A cost behaviorand the role of managers in adjusting the costs is thus important to researchers andpractitioners. Recent empirical research indicates that SG&A costs behave asymmetrically,that is, they increase more rapidly when demand increases than they decline when demanddecreases (Anderson, Banker, …
Intangible Investments And The Pricing Of Corporate Sga Expenses,
2011
Kennesaw State University
Intangible Investments And The Pricing Of Corporate Sga Expenses, Rongbing Huang, Gim S. Seow, Joe S. Shangguan
Faculty Articles
This study examined whether the market fully prices the reported Selling, General, and Administrative (SGA) expenses when this item includes an intangible investment component. For a sample of intangible investment-intensive firms, we showed that their SGA expenses benefit future operating performances. Evidence suggests some degree of market inefficiency in the pricing of SGA expenses and the intangible investment component. Furthermore, the financial analysts do not appear to appreciate fully the future benefits of the component in their earnings forecasts. Finally, the pertinent disclosures in firms’ annual reports are so inadequate as to attenuate the market mispricing, suggesting a significant room …
Comprehensive Income Reporting: Fasb Decides Location Matters,
2011
Kennesaw State University
Comprehensive Income Reporting: Fasb Decides Location Matters, Dennis Chambers
Faculty Articles
The article reports on Accounting Standards Update (ASU) 2011-05 issued by the Financial Accounting Services Board (FASB) in June 2011. It states that the standard requires all companies to report comprehensive income and components either in one continuous statement or in two separate, but consecutive, net income and other comprehensive income statements.In both cases, companies must reportedly now report in an income statement-type location for total comprehensive income.
Cfos Versus Ceos: Equity Incentives And Crashes,
2011
City University of Hong Kong
Cfos Versus Ceos: Equity Incentives And Crashes, Jeong-Bon Kim, Yinghua Li, Liandong Zhang
Research Collection School Of Accountancy
Using a large sample of U.S. firms for the period 1993-2009, we provide evidence that the sensitivity of a chief financial officer's (CFO) option portfolio value to stock price is significantly and positively related to the firm's future stock price crash risk. In contrast, we find only weak evidence of the positive impact of chief executive officer option sensitivity on crash risk. Finally, we find that the link between CFO option sensitivity and crash risk is more pronounced for firms in non-competitive industries and those with a high level of financial leverage.
The Impact Of Brand Quality On Shareholder Wealth,
2011
University of Georgia
The Impact Of Brand Quality On Shareholder Wealth, Sundar G. Bharadwaj, Kapil R. Tuli, Andre Bonfer
Research Collection Lee Kong Chian School Of Business
This study examines the impact of brand quality on three components of shareholder wealth, stock returns, systematic risk and idiosyncratic risk. The study finds that brand quality enhances shareholder wealth as unanticipated changes in brand quality are positively associated with stock returns and negatively related to changes in idiosyncratic risk. However, unanticipated changes in brand quality can also erode shareholder wealth as they have a positive association with changes in systematic risk. The study introduces a contingency theory view to the marketing-finance interface by analyzing the moderating role of two factors that are widely followed by investors. The results show …
Building Structured Products: Like Manufacturing A Complex, Abstract Car,
2011
Singapore Management University
Building Structured Products: Like Manufacturing A Complex, Abstract Car, Singapore Management University
Perspectives@SMU
What are structured products, and how do they fit in with clients' needs and the banks' range of services? Experts from Standard Chartered Bank's (SCB) structuring business provided their take at SMU's Lee Kong Chian School of Business Public Lecture.
The Corporate Ethics Audit: To Prevent And Detect Management Fraud, Internal Auditors Must Have A Sound Understanding Of Human Behavior,
2011
University of Dayton
The Corporate Ethics Audit: To Prevent And Detect Management Fraud, Internal Auditors Must Have A Sound Understanding Of Human Behavior, Sridhar Ramamoorti, R. Luke Evans
Accounting Faculty Publications
In theory, management is responsible not only for designing and implementing strong systems of internal control but also confirming their continued effectiveness over time through monitoring activities. Yet, management override of these monitoring activities — -Soften described as the Achilles' heel of internal controls — is a growing trend at the executive level, as indicated by both of The Committee of Sponsoring Organizations of the Treadway Commission's fraud studies of 1998 and 2010. When the “overseer” becomes the perpetrator of fraud, how do shareholders protect themselves? Indeed, as the Roman satiric poet Decimus Juvenal wrote, “But who will guard the …
Acquisitions Driven By Stock Overvaluation: Are They Good Deals?,
2011
Singapore Management University
Acquisitions Driven By Stock Overvaluation: Are They Good Deals?, Fangjian Fu, Leming Lin, Micah Officer
Research Collection Lee Kong Chian School Of Business
Overvaluation may motivate a firm to use its stock to acquire a target whose stock is not as overpriced (Shleifer and Vishny (2003)). Though hypothetically desirable, these acquisitions in practice create little, if any, value for acquirer shareholders. Two factors often impede value creation: payment of a large premium to the target and lack of economic synergies in the acquisition. We find that overvaluationdriven stock acquirers suffer worse operating performance and lower long-run stock returns than control firms that are in the same industry, similarly overvalued at the same time, have similar size and Tobin’s q, but have not pursued …
Streaks In Earnings Surprises And The Cross-Section Of Stock Returns,
2011
Singapore Management University
Streaks In Earnings Surprises And The Cross-Section Of Stock Returns, Roger Loh, Mitchell Craig Warachka
Research Collection Lee Kong Chian School Of Business
No abstract provided.
Credit Fluctuations And Lodging Firms: An Investigation Of The Differing Capital Structures In The Us Lodging Industry,
2011
University of Nevada, Las Vegas
Credit Fluctuations And Lodging Firms: An Investigation Of The Differing Capital Structures In The Us Lodging Industry, Dipendra Singh
UNLV Theses, Dissertations, Professional Papers, and Capstones
This study empirically investigates the effect of credit availability and firm size on the leverage of lodging industry in United States using a 3 X 2 factorial Multivariate Analysis of Variance (MANOVA). Three time points of differing credit availability (Low, High, and Average) were identified using Case-Shiller home price index. Leverage, Net Leverage, and Short-to-Long-Term debt ratios of large and small US lodging firms were analyzed at these differing credit availability time points to assess any significant differences. Specifically, this study attempts to find whether there is an interaction effect of credit availability and firm size on the leverage of …
Fdi In Central And Eastern Europe: Business Environment And Current Fdi Trends In Poland,
2011
Embry-Riddle Aeronautical University
Fdi In Central And Eastern Europe: Business Environment And Current Fdi Trends In Poland, Lucyna Kornecki
Accounting, Economics, Finance, and Information Sciences - Daytona Beach
The Central and Eastern European Countries (CEEC) acknowledge foreign direct investment (FDI) as an essential tool in the development and modernization of their economies. The first part of this paper centers on economic stability and FDI inflows in the CEE indicating the Polish leadership in inward FDI inflow. The section of this study focuses on Poland and provides a description of business environment and current FDI trends in Poland. It analyzes the factors influencing the inward FDI in Poland, such as: economic stability, cost of labor, EU membership, regulatory framework. It presents the current FDI trends in Poland, such as: …
Do Merger-Related Operating Synergies Exist?,
2011
Singapore Management University
Do Merger-Related Operating Synergies Exist?, Gennaro Bernile, Scott W. Bauguess
Research Collection Lee Kong Chian School Of Business
Executives frequently forecast large operating efficiency gains from mergers. Using these projections, we study the impact of operating synergies on merger performance. Investors' reaction to mergers varies directly with the availability of these forecasts and the gains they imply, and post-merger operating performance increases with the predictable component of forecasted synergies based on deal characteristics. The realized improvements, however, do not depend on the availability of forecasts or the surprise they convey, and post-merger stock returns reconcile discrepancies between investors' ex ante beliefs and mergers' ex post performance related to management forecasts. Overall, the evidence supports the neoclassical view that …
Executive Equity Compensation And Earnings Management: A Quantile Regression Approach,
2011
Singapore Management University
Executive Equity Compensation And Earnings Management: A Quantile Regression Approach, Chih-Ying Chen, Ming-Yuan Li
Research Collection School Of Accountancy
Prior research has investigated the association between executive equity compensation and earnings management but the evidence is not conclusive. We investigate this question using the quantile regression approach which allows the coefficient on the independent variable (equity compensation) to shift across the distribution of the dependent variable (earnings management). Based on a sample of 18,203 U.S. non-financial firm-year observations from 1995 to 2008, we find that chief executive officer (CEO) equity compensation is positively associated with the absolute value of discretionary accruals at all quantiles of absolute discretionary accruals, but the association becomes weaker as the quantile decreases. The association …
Political Connection And Firm Value,
2011
Florida State University
Political Connection And Firm Value, James S. Ang, David K. Ding, Tiong Yang Thong
Research Collection Lee Kong Chian School Of Business
We study the effect of political connection (PC) on company value in an environment where low PC is due to better institutions and not confounded by favorable social/cultural factors. We find that in Singapore, the only country that fits this description, PC in general adds little to the value of a company. However, in industries that are subject to more stringent government regulations, PC appears to be somewhat important. Robustness checks show that alternative PC variables give rise to similar results, and the addition of control variables do not drastically change the findings. Politically connected firms have higher managerial ownership …
Leverage Change, Debt Overhang, And Stock Prices,
2011
Drexel University
Leverage Change, Debt Overhang, And Stock Prices, Jie Cai, Zhe Zhang
Research Collection Lee Kong Chian School Of Business
We document a significant and negative effect of the change in a firm's leverage ratio on its stock prices. We find that the negative effect is stronger for firms that have higher leverage ratios, higher likelihood of default, and face more severe financial constraints. Moreover, firms with an increase in leverage ratio tend to have less future investment. These findings are consistent with Myers' (1977) debt overhang theory that an increase in leverage may lead to future underinvestment, thus reducing a firm's value.
Disproportional Ownership Structure And Pay-Performance Relationship In China,
2011
Singapore Management University
Disproportional Ownership Structure And Pay-Performance Relationship In China, Jerry Cao, Xiaofei Pan, Gary Tian
Research Collection Lee Kong Chian School Of Business
This paper examines the impact of ownership structure on executive compensation in China's listed firms. We find that the cash flow rights of ultimate controlling shareholders have a positive effect on the pay-performance relationship, while a divergence between control rights and cash flow rights has a significantly negative effect on the pay-performance relationship. We divide our sample based on ultimate controlling shareholders' type into state owned enterprises (SOE), state assets management bureaus (SAMB), and privately controlled firms. We find that in SOE controlled firms cash flow rights have a significant impact on accounting based pay-performance relationship. In privately controlled firms, …
Corporate Tax Avoidance And Stock Price Crash Risk: Firm-Level Analysis,
2011
City University of Hong Kong
Corporate Tax Avoidance And Stock Price Crash Risk: Firm-Level Analysis, Jeong-Bon Kim, Yinghua Li, Liandong Zhang
Research Collection School Of Accountancy
Using a large sample of U.S. firms for the period 1995-2008, we provide strong and robust evidence that corporate tax avoidance is positively associated with firm-specific stock price crash risk. This finding is consistent with the following view: Tax avoidance facilitates managerial rent extraction and bad news hoarding activities for extended periods by providing tools, masks, and justifications for these opportunistic behaviors. The hoarding and accumulation of bad news for extended periods lead to stock price crashes when the accumulated hidden bad news crosses a tipping point, and thus comes out all at once. Moreover, we show that the positive …
Firm Structure And Corporate Cash Holdings,
2011
Singapore Management University
Firm Structure And Corporate Cash Holdings, Venkat Subramaniam, Tony Tang, Heng Yue, Xin Zhou
Research Collection School Of Accountancy
We analyze whether the organizational structure of firms (i.e., whether a firm is diversified or focused) affects their cash holdings. Using Compustat firm level and segment-level data, we find that diversified firms hold significantly less cash than their focused counterparts. Our results are robust to industry adjustments at the segment level and to different factors previously found to be important determinants of cash holdings. Using time-series, cross-sectional, and additional robustness tests we are able to attribute the lower cash holdings among diversified firms to complementary growth opportunities across the different segments of these firms and the availability of active internal …
An Analysis Of Japanese Earnings Forecast Revisions With Application To Seasoned Equity Offerings,
2011
University of Oklahoma
An Analysis Of Japanese Earnings Forecast Revisions With Application To Seasoned Equity Offerings, Gary L. Caton, Justin S. P. Chan, Jeremy C. Goh, Sheng Yung Yang
Research Collection Lee Kong Chian School Of Business
Using the bootstrap method, we explore the characteristics of revisions in Japanese earnings forecast data. We find that forecast revisions exhibit a downward trend over time as the actual earnings announcement date approaches, and are serially correlated with three significant lags. Using these characteristics we develop a model to estimate abnormal forecast revisions, and illustrate the model's use with a sample of Japanese companies announcing seasoned equity offerings (SEOs). In contrast to results obtained by studies using American data, our findings indicate significant positive upward revisions when Japanese firms announce an SEO.
