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Articles 211 - 240 of 665
Full-Text Articles in Corporate Finance
Momentum And Reversal: The Role Of Short Selling, Zhaobo Zhu, Xinrui Duan, Licheng Sun, Jun Tu
Momentum And Reversal: The Role Of Short Selling, Zhaobo Zhu, Xinrui Duan, Licheng Sun, Jun Tu
Research Collection Lee Kong Chian School Of Business
This paper investigates the relation between short selling and momentum. We document that a consistent momentum strategy that buys lightly shorted winners and sells heavily shorted losers exhibits strong short-term momentum and no long-term reversal. In contrast, an inconsistent momentum strategy that buys heavily shorted winners and sells lightly shorted losers experiences weak short-term momentum and persistent long-term reversal. Our results are robust after controlling for firm characteristics, proxy for short-sale constraints, and investor sentiment, as well as an exogenous shock (the Taxpayer Relief Act of 1997). These findings present a new challenge to existing theories of momentum that rely …
Auditor Choice And Information Asymmetry: Evidence From International Syndicated Loans, Zhiming Ma, Derrald Stice, Rencheng Wang
Auditor Choice And Information Asymmetry: Evidence From International Syndicated Loans, Zhiming Ma, Derrald Stice, Rencheng Wang
Research Collection School Of Accountancy
Analyzing a large sample of non-US public firms from 31 countries that obtain private loans, we find that loan syndicates that lend to borrowers that employ Big N auditors are larger and less concentrated and that the lead arrangers and largest investors of these syndicates are able to hold a lower proportion of the loan after issuance. Further analysis demonstrates that this effect exists only in countries with strong creditor rights and in those countries with high levels of societal trust, suggesting that both sound formal and informal institutional factors are prerequisites for lenders and borrowers to benefit from differential …
Readability Of 10-K Reports And Stock Price Crash Risk, Chansog (Francis) Kim, Ke Wang, Liandong Zhang
Readability Of 10-K Reports And Stock Price Crash Risk, Chansog (Francis) Kim, Ke Wang, Liandong Zhang
Research Collection School Of Accountancy
This study shows that less readable 10‐K reports are associated with higher stock price crash risk. The results are consistent with the argument that managers can successfully hide adverse information by writing complex financial reports, which leads to stock price crashes when the hidden bad news accumulates and reaches a tipping point. Cross‐sectional analyses show that the effect of financial reporting complexity on crash risk is more pronounced for firms with persistent negative earnings news or transitory positive earnings news, greater chief executive officer stock option incentives, or lower litigation risk. Finally, accrual manipulation appears to be positively related to …
Marginal Cost Of Risk-Based Capital And Risk-Taking, Tao Chen, Jing Rong Goh, Shinichi Kamiya, Pingyi Lou
Marginal Cost Of Risk-Based Capital And Risk-Taking, Tao Chen, Jing Rong Goh, Shinichi Kamiya, Pingyi Lou
Research Collection School Of Economics
We explore the impact of capital adequacy requirements on financial institutions' risk-taking behavior from a novel perspective. Specifically, we show that an important feature of the risk-based capital (RBC) system a built-in diversification benefit in aggregating risk categories induces moral hazard. We find that insurers that face lower marginal RBC costs of fixed-income (FI) investment tend to purchase riskier Fl securities. This relationship holds even when lower marginal RBC costs result from increased risk in other risk categories, which is an unintended consequence of the RBC's square root rule. Using Hurricanes Katrina and Sandy as exogenous shocks to the RBC …
The Effects Of Corporate Reputation And Compensation Disclosure On Investor Judgments, Poh Sun Seow, Clarence Goh, Gary Pan
The Effects Of Corporate Reputation And Compensation Disclosure On Investor Judgments, Poh Sun Seow, Clarence Goh, Gary Pan
Research Collection School Of Accountancy
Regulators have increased the disclosure requirements of top executives as part of corporate governance reform. This study examines how trust arising from a firm’s corporate reputation will interact with top executive compensation disclosure to influence investor judgments. This study used a 2 X 2 between subjects experimental design, with corporate reputation (good versus bad) and pay ratio (high versus low) as independent variables to test the hypotheses. The key findings show that if the firm with a good corporate reputation discloses a high pay ratio, participants punished the good reputation firm more than the bad reputation firm, demonstrating a negative …
Crossed Wires: Endorsement Signals And The Effects Of Ipo Firm Delistings On Venture Capitalists’ Reputations, David Gomulya, Kyuho Jin, Peggy M. Lee, Timothy G. Pollock
Crossed Wires: Endorsement Signals And The Effects Of Ipo Firm Delistings On Venture Capitalists’ Reputations, David Gomulya, Kyuho Jin, Peggy M. Lee, Timothy G. Pollock
Research Collection Lee Kong Chian School Of Business
Signaling theorists have paid a great deal of attention to the costs of acquiring characteristics that can serve as signals, such as endorsements from reputable third parties. However limited attention has been devoted to the penalty costs associated with providing inaccurate signals and the factors that can exacerbate or attenuate the penalties. In this study, we examine the effect of negative feedback loops on venture capital firms’ reputations that result from the failures (delistings) of the newly-public firms they once endorsed. Drawing on signaling and attribution theories, we argue that endorsements by reputable VC firms create high expectations that, when …
Debt Heterogeneity And Covenants, Yun Lou, Clemens A. Otto
Debt Heterogeneity And Covenants, Yun Lou, Clemens A. Otto
Research Collection School Of Accountancy
Coordination failure among owners of heterogeneous debt types increases distress costs. Covenants reduce expected distress costs by lowering the probability of liquidity shortages, increasing liquidation values, and incentivizing creditor monitoring. We predict and find that new debt contracts include more covenants when borrowers' existing debt structures are more heterogeneous. Our findings suggest that covenants are not only used to address creditor-shareholder conflicts but also to reduce the expected costs of coordination failure among creditors. Further, our results indicate a dynamic component missing from static debt structure models: Debt heterogeneity entails additional covenants (i.e., constraints) when raising future debt.
Recommendations From Sec’S Plain English Handbook: Perspectives From Behavioral Research, Clarence Goh
Recommendations From Sec’S Plain English Handbook: Perspectives From Behavioral Research, Clarence Goh
Research Collection School Of Accountancy
The SEC published the plain English handbook in 1998 with the objective of providing preparers of financial disclosures with a guide to using well-established techniques to create clearer and more informative disclosure documents. The handbook provides various recommendations to preparers of disclosure documents. In this study, I examine and systematically synthesize the extent behavioural research literature that investigates the impact of implementing these recommendations on investors. I do so by developing a framework to systematically examine relevant studies. Overall, the analysis provides important insights from a behavioural perspective into how and why investors react to various recommendations in the SEC’s …
Opinion Shopping To Avoid Going Concern Audit Opinion And Subsequent Audit Quality, Heesun Chung, Catherine Heyjung Sonu, Yoonseok Zang, Jong-Hag Choi
Opinion Shopping To Avoid Going Concern Audit Opinion And Subsequent Audit Quality, Heesun Chung, Catherine Heyjung Sonu, Yoonseok Zang, Jong-Hag Choi
Research Collection School Of Accountancy
Despite regulatory concerns over opinion shopping (OS) behavior, there exists little systematic evidence on the prevalence and consequences of OS to avoid a going concern opinion (GCO). Using Lennox's (2000) framework to identify OS, we find that distressed firms successfully engage in OS to avoid a GCO. Moreover, clients engaging in OS exhibit a higher ex post Type II error rate in audit opinions than clients that do not, and the higher Type II error rate is salient for clients switching auditors for OS but not for clients retaining auditors for OS. We continue to find this asymmetric effect of …
Much Ado About Audit Opinions, Themin Suwardy
Much Ado About Audit Opinions, Themin Suwardy
Research Collection School Of Accountancy
In a commentary, SMU Associate Professor of Accounting (Practice) and Dean of Postgraduate Professional Programmes Themin Suwardy opined that with a better understanding of the various types of modified audit opinions, investors can react appropriately to the news of companies failing to get a clean opinion. He added that investors should ask tougher questions about key audit matters at annual general meetings in order to get a more rounded and informed picture of a company’s financial and operating status.
Informed Options Trading Prior To Bankruptcy Filings, Li Ge, Jianfeng Hu, Mark Humphery-Jenner, Tse-Chun Lin
Informed Options Trading Prior To Bankruptcy Filings, Li Ge, Jianfeng Hu, Mark Humphery-Jenner, Tse-Chun Lin
Research Collection Lee Kong Chian School Of Business
Prior evidence on pre-bankruptcy-filing informed trade is mixed. The inconclusive findings might result from the sole focus on stock trading. We reassess the presence of pre-filing informed and insider trades by examining the information content of options trading before bankruptcy announcements. We find that bankruptcy filing returns are not significantly related to pre-filing insider stock trading. However, filing returns are significantly negatively related to pre-filing insider and informed options trading. The informational content of options trading reduces with options illiquidity and the amount of information impounded into pre-filing stock prices.
Disclosure Of Pending Lawsuits And Bond Terms, Yun Lou
Disclosure Of Pending Lawsuits And Bond Terms, Yun Lou
Research Collection School Of Accountancy
I examine the effect of the disclosure of pendinglawsuits in 10-K/Q filings on the contractual terms of newly issued bonds. Ifind that firms’ decision to disclose pending lawsuits and the amount ofdisclosed information (i.e., the level of disclosure) have opposite effects.Specifically, firms that disclose a higher proportion of their pending lawsuitsface higher yields and are more likely to include default clauses pertaining tocourt judgments in the bond prospectuses. However, within the subsample offirms that disclose their lawsuits, I find that firms with a higher level of disclosureregarding their pending lawsuits are rewarded with lower yields. This evidencesuggests that bond investors …
An Analysis Of Z-Scores And Performance: Manufacturing Companies In Hong Kong, S.L. Foo, Shaakalya Pathak
An Analysis Of Z-Scores And Performance: Manufacturing Companies In Hong Kong, S.L. Foo, Shaakalya Pathak
Research Collection School Of Accountancy
Hong Kong is a key leading economy in the Asia Pacific region. This study examines the relationship between the financial health, as measured by the Altman Z-Score, and corporate performance, as measured by the Return on Equity (ROE), of listed manufacturing companies in this market. A linear regression has been conducted between these variables to determine the magnitude and direction of their relationships. The trends of Z-Scores over a five-year period have also been analysed. The analysis covers the period from 2013 to 2017 (inclusive) and yields a statistically positive correlation between ROE and the Z-Score for the market. Hong …
Corporate Tax Aggressiveness And Insider Trading, Sung Gon Chung, Beng Wee Goh, Kiat Bee Jimmy Lee, Terry Shevlin
Corporate Tax Aggressiveness And Insider Trading, Sung Gon Chung, Beng Wee Goh, Kiat Bee Jimmy Lee, Terry Shevlin
Research Collection School Of Accountancy
We examine the association between corporate tax aggressiveness and theprofitability of insider trading under the assumption that insider tradingprofits reflect managerial opportunism. We document that insider purchaseprofitability, but not sales profitability, is significantly higher on average inmore tax aggressive firms. We also find that the positive association between taxaggressiveness and insider purchase profitability is attenuated for firms withmore effective monitoring and is accentuated for firms with a more opaqueinformation environment.In addition, we provide empirical evidence that tax aggressiveness issignificantly associated with greater insider sales volume in the fiscal yearprior to a stock price crash. Finally, we find that the association …
Do Corporate Site Visits Impact Stock Prices?, Qiang Cheng, Fei Du, Brian Yutao Wang, Xin Wang
Do Corporate Site Visits Impact Stock Prices?, Qiang Cheng, Fei Du, Brian Yutao Wang, Xin Wang
Research Collection School Of Accountancy
We examine the stock price impact of corporate site visits using a unique dataset of site visits to listed firms in China. Our main findings are as follows. First, the market reaction around corporate site visits is statistically and economically significant and is stronger for group visits, visits conducted by mutual fund managers, visits covering accounting and finance topics, visits to firms with poor information environments, and visits to manufacturing firms. Second, the stock returns around site visits are positively associated with firms’ future performance. Third, the changes in visiting funds’ holdings are more predictive of firms’ future performance than …
Corporate Governance: Avoid The Groupthink Pitfall, Themin Suwardy
Corporate Governance: Avoid The Groupthink Pitfall, Themin Suwardy
Research Collection School Of Accountancy
Consensus due to similar personal backgrounds, lack of diversity in views and failure to see things from others’ perspective can lead to bad decisions.
Scaled Pca: A New Approach To Dimension Reduction, Dashan Huang, Fuwei Jiang, Guoshi Tong, Guofu Zhou
Scaled Pca: A New Approach To Dimension Reduction, Dashan Huang, Fuwei Jiang, Guoshi Tong, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
The notion that bond risk premium varies with business cycles is challenged once real time macro data are used. In this paper, we argue that the macro factors extracted by using the standard PCA are not the most relevant for forecasting bond risk premium, because the PCA factors are designed to explain the most variation of macro data instead of the variation of bond risk premium. With the latter objective in mind, we propose a scaled PCA (sPCA) approach, which incorporates the information in bond risk premium in the factor extraction procedure. The real time macro sPCA factors have much …
A One-Size-Fits-All Approach To Corporate Governance Codes And Compliance By Smaller Listed Firms: An Examination Of Companies Listed In Hong Kong And Singapore, Christopher C. H. Chen
A One-Size-Fits-All Approach To Corporate Governance Codes And Compliance By Smaller Listed Firms: An Examination Of Companies Listed In Hong Kong And Singapore, Christopher C. H. Chen
Research Collection Yong Pung How School Of Law
This article examines the impact of a one-size-fits-all corporate governance code on smaller listed firms, which should have fewer resources to hire more qualified independent directors for their boards and board committees. After examining data from a sample of companies listed in Hong Kong and Singapore, we find some limited support for these resources-based arguments. While smaller firms do not necessarily have a lower proportion of board members who are independent directors, some evidence suggests that smaller firms do pay less to independent directors and that these directors have to serve on multiple board committees. Although many larger firms also …
The Economics Of Managerial Taxes And Corporate Risk-Taking, Chris Armstrong, Stephen Glaeser, Sterling Huang, Daniel Taylor
The Economics Of Managerial Taxes And Corporate Risk-Taking, Chris Armstrong, Stephen Glaeser, Sterling Huang, Daniel Taylor
Research Collection School Of Accountancy
We examine the relation between managers’ personal income tax rates and their corporate investment decisions. Using plausibly exogenous variation in federal and state tax rates, we find a positive relation between managers’ personal tax rates and their corporate risk-taking. Moreover—and consistent with our theoretical predictions—we find that this relation is stronger among firms with investment opportunities that have a relatively high rate of return per unit of risk, and stronger among CEOs who have a relatively low marginal disutility of risk. Importantly, our results are unique to senior managers’ tax rates––we do not find similar relations for middle-income tax rates. …
Not Clawing The Hand That Feeds You: The Case Of Co-Opted Boards And Clawbacks, Sterling Huang, Chee Yeow Lim, Jeffrey Ng
Not Clawing The Hand That Feeds You: The Case Of Co-Opted Boards And Clawbacks, Sterling Huang, Chee Yeow Lim, Jeffrey Ng
Research Collection School Of Accountancy
We examine how board co-option, defined as the fraction of the board comprising directors appointed after the CEO assumed office, is related to clawback adoption. We find that co-opted boards have a lower probability of adopting clawback provisions. Further, the negative association between board co-option and clawback adoption is more pronounced when at least one co-opted member is on the compensation committee and when there is a higher likelihood that a clawback provision will be triggered. Finally, we find that board co-option is an important mechanism through which longer-tenured CEOs reduce the likelihood of clawback adoption.
Overseas Listing Location And Cost Of Capital: Evidence From Chinese Firms Listed In Hong Kong, Singapore, And The United States, Warrington College Of Business, Frank Weikai Li, Central University Of Finance And Economics
Overseas Listing Location And Cost Of Capital: Evidence From Chinese Firms Listed In Hong Kong, Singapore, And The United States, Warrington College Of Business, Frank Weikai Li, Central University Of Finance And Economics
Research Collection Lee Kong Chian School Of Business
As at the end of 2012, more than 600 nonstate-owned Chinese firms were listed in overseas stock markets. We find that Chinese firms listed in the US have the lowest cost of capital when compared to those listed in Hong Kong and Singapore, and these results hold when controlling for firm characteristics and the endogeneity of listing locations. Cross-sectional tests indicate that listing in the US is more beneficial to those firms which face higher information asymmetry and agency costs. Overall, our evidence supports the view that the institutional environment has a first-order impact on a firm’s cost of capital.
Societal Trust And Corporate Tax Avoidance, Kiridaran Kanagaretnam, Jimmy Lee, Chee Yeow Lim, Gerald Lobo
Societal Trust And Corporate Tax Avoidance, Kiridaran Kanagaretnam, Jimmy Lee, Chee Yeow Lim, Gerald Lobo
Research Collection School Of Accountancy
Using aninternational sample of firms from 25 countries and a country-level index for societal trust, we document that societal trust is negatively associated with tax avoidance, even after controlling for other institutional determinants, such as home country legal institutions and tax system characteristics.We explore the effects of two country-level institutional characteristics—strength of lega linstitutions and capital market pressure—on the relation between societal trust and tax avoidance. We find that the relation between trust and tax avoidance is less pronounced when legal institutions in a country are stronger and is more pronounced when capital market pressure is stronger. Finally, we examine …
Dual-Class Shares In Singapore – Where Ideology Meets Pragmatism, Pey Woan Lee
Dual-Class Shares In Singapore – Where Ideology Meets Pragmatism, Pey Woan Lee
Research Collection Yong Pung How School Of Law
This article seeks to understand the rationale for and potential implications of the introduction of dual class shares (DCS) in Singapore. It does so by first considering the theoretical as well as evidential arguments for and against the use of DCS, followed by a survey on the reception (or otherwise) of such structures in four common law jurisdictions with vibrant capital markets, viz., Canada, the United States, United Kingdom and Hong Kong. It observes that the chief argument cited by business founders to justify the use of DCS structures is the desire to enhance a firm’s long-term profitability by shielding …
Don's Column: Revised Conceptual Framework For Financial Reporting (Part 2), Pearl Hock-Neo Tan
Don's Column: Revised Conceptual Framework For Financial Reporting (Part 2), Pearl Hock-Neo Tan
Research Collection School Of Accountancy
Fresh Perspectives in Recognition, Measurement and Disclosures
Studying The Relationship Between Performance And Z-Scores For Manufacturing Firms In Singapore, See Liang Foo, Shaakalya Pathak
Studying The Relationship Between Performance And Z-Scores For Manufacturing Firms In Singapore, See Liang Foo, Shaakalya Pathak
Research Collection School Of Accountancy
Singapore is a key leading economy in the Asia Pacific region. This study examines the relationship between the financial health, as measured by the Altman Z-Score, and corporate performance, as measured by the Return on Equity (ROE), of listed manufacturing companies in this market. A linear regression has been conducted between these variables to determine the magnitude and direction of their relationships. The trends of Z-Scores over a five-year period have also been analysed.The analysis covers the period from 2013 to 2017 (inclusive) and yields a statistically positive correlation between ROE and the Z-Score for the market. Singapore registered relatively …
Don’S Column: Singapore Corporate Tax Rate: Is It Really A Flat Rate?, Teng Aun Khoo, Clement Tan Kai Guan
Don’S Column: Singapore Corporate Tax Rate: Is It Really A Flat Rate?, Teng Aun Khoo, Clement Tan Kai Guan
Research Collection School Of Accountancy
As there is only one corporate tax rate (CTR) in Singapore, it may appear that the Singapore CTR is a single flat rate, currently 17%. However, after taking into account the availability of the partial tax exemption (PTE)scheme, the start-up tax exemption (SUTE) scheme and the corporate income tax rebate (CITR) in Singapore, all of which have an effect of lowering a company’s tax payable, the seemingly flat Singapore CTR is not what it seems to be. Instead, it translates to various progressive tax rates for different tiers of normal chargeable income (NCI).
Don's Column: Revised Conceptual Framework For Financial Reporting (Part 1), Pearl Hock-Neo Tan
Don's Column: Revised Conceptual Framework For Financial Reporting (Part 1), Pearl Hock-Neo Tan
Research Collection School Of Accountancy
In March 2018, the International Accounting Standards Board (IASB) issued the revised Conceptual Framework for Financial Reporting (CF 2018) after five years of deliberation since the Discussion Paper was first issued. CF 2018 is immediately applicable to the IASB and International Financial Reporting Standards (IFRS) Interpretations Committee.
New Factors Wanted: Evidence From A Simple Specification Test, Ai He, Dashan Huang, Guofu Zhou
New Factors Wanted: Evidence From A Simple Specification Test, Ai He, Dashan Huang, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
In this paper, we examine the pricing errors (PEs) of three kinds of factor models: a) six well known ones– the CAPM, the Fama-French three-factor model, the Carhart four-factor model, the Fama-French five-factor model, the Hou-Xue-Zhang Q-factor model, and the Stambaugh-Yuan mispricing-factor model; b) principal component factors of sixty-two anomalies; c) extracted statistical factors. We find that there is a systematic PE reversal pattern. A spread portfolio that buys stocks in the bottom PE decile and sells stocks in the top PE decile earns significant abnormal returns across all the models, implying that none of them is adequate in explaining …
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.
Leveling The Playing Field Between Large And Small Institutions: Evidence From The Sec’S Xbrl Mandate, Nilabhra Bhattacharya, Young Jun Cho, Jae B. Kim
Leveling The Playing Field Between Large And Small Institutions: Evidence From The Sec’S Xbrl Mandate, Nilabhra Bhattacharya, Young Jun Cho, Jae B. Kim
Research Collection School Of Accountancy
We investigate how XBRL adoption affects smaller institutions’ access to financial statement information relative to their larger counterparts. We examine three aspects of trading responsiveness: abnormal trading volume, response speed to 10-K information, and decision to trade immediately following the 10-K filing. With regard to all three aspects of trading responsiveness, we find that small institutions’ responsiveness to 10-K news increases significantly more relative to the change experienced by large institutions from the pre- to post-XBRL periods. We further document that small institutions’ stock picking skills in the 10-K filing period increase more compared to those of large institutions following …