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Articles 361 - 390 of 665
Full-Text Articles in Corporate Finance
Board Diversity, Firm Risk, And Corporate Policies, Gennaro Bernile, Vineet Bhagwat, Scott Yonker
Board Diversity, Firm Risk, And Corporate Policies, Gennaro Bernile, Vineet Bhagwat, Scott Yonker
Research Collection Lee Kong Chian School Of Business
We examine the effects of diversity in the board of directors on corporate policies and risk. Using a multi-dimensional measure, we find that greater board diversity leads to lower volatility and better performance. The lower risk levels are largely due to diverse boards adopting more persistent and less risky financial policies. However, consistent with diversity fostering more efficient (real) risk-taking, firms with greater board diversity also invest persistently more in R&D and have more efficient innovation processes. Instrumental variable tests that exploit exogenous variation in firm access to the supply of diverse nonlocal directors indicate that these relations are causal.
Slack Resources And The Rent-Generating Potential Of Firm-Specific Knowledge, Heli Wang, Jaepil Choi, Guoguang Wan, John Qi Dong
Slack Resources And The Rent-Generating Potential Of Firm-Specific Knowledge, Heli Wang, Jaepil Choi, Guoguang Wan, John Qi Dong
Research Collection Lee Kong Chian School Of Business
We examine how two types of slack resources relevant to knowledge employees—human resource slack and financial slack at the R&D functional level—influence the rent-generating potential of firm-specific knowledge resources. According to the resource- and knowledge-based views of the firm, firm-specific knowledge resources are critical for generating economic rents for a firm. However, without motivated knowledge employees investing in the corresponding specialized human capital in the process of absorbing and deploying firm-specific knowledge resources, the resource potential for rent generation would be greatly discounted. We argue that human resource slack among knowledge employees and financial slack available for R&D activities affect …
Corporate Reorganisation Of China’S Listed Companies: Winners And Losers, Zinian Zhang
Corporate Reorganisation Of China’S Listed Companies: Winners And Losers, Zinian Zhang
Research Collection Yong Pung How School Of Law
This article is the first empirical study investigating the corporate reorganisation of Chinese domestically-listed companies. Through examining these cases, it challenges the assertion made by most of these corporate reorganisation plans and by Chinese state-run media reports that creditors and general public shareholders were the major beneficiaries. Through an analysis of the data generated from all forth-three such cases, this articles reveals that: First, unsecured creditors could have, on average, received 61.37% more of their claims if the fundamental value distribution principle, the absolute priority norm, could have been complied with in these reorganisations; Second, if the general-public-shareholder-protection scheme issued …
Investor Reactions To Company Disclosure Of High Ceo Pay And High Ceo-To-Employee Pay Ratio: An Experimental Investigation, Khim Kelly, Jean Lin Seow
Investor Reactions To Company Disclosure Of High Ceo Pay And High Ceo-To-Employee Pay Ratio: An Experimental Investigation, Khim Kelly, Jean Lin Seow
Research Collection School Of Accountancy
There is significant debate about the usefulness of disclosing the CEO-to-median employee pay ratio, as required under Section 953(b) of the Dodd-Frank Act in the United States. Using an experiment, we find that disclosing higher-than-industry CEO pay (versus comparable-to-industry CEO pay) marginally decreases perceived CEO pay fairness and perceived workplace climate, which is counteracted by a significant positive effect on perceived CEO attraction/retention ability, although there are no significant indirect effects through these perceptions on perceived investment potential. However, incrementally disclosing a higher-than-industry pay ratio (versus disclosing only higher-than-industry CEO pay) significantly decreases perceived CEO pay fairness and marginally deceases …
The Effect Of Board Independence On Information Asymmetry, Beng Wee Goh, Jimmy Lee, Jeffrey Ng, Kevin Ow Yong
The Effect Of Board Independence On Information Asymmetry, Beng Wee Goh, Jimmy Lee, Jeffrey Ng, Kevin Ow Yong
Research Collection School Of Accountancy
Boards have an important role in ensuring that investors’ interests are protected. Our paper first examines whether the independence of a firm's board affects information asymmetry among investors. We provide evidence that greater board independence leads to lower information asymmetry. Next, we provide evidence that more voluntary disclosure and greater analyst coverage are two underlying mechanisms via which greater board independence reduces information asymmetry. Of the two mechanisms, we find that analyst coverage is more significant in influencing how board independence affects information asymmetry. Overall, our paper contributes to a better understanding of the effect of board independence on information …
Corporate Political Connections And Tax Aggressiveness, Chansog (Francis) Kim, Liandong Zhang
Corporate Political Connections And Tax Aggressiveness, Chansog (Francis) Kim, Liandong Zhang
Research Collection School Of Accountancy
This study investigates the relation between corporate political connections and tax aggressiveness. We study a broad array of corporate political activities, including the employment of connected directors, campaign contributions, and lobbying. Using a large hand-collected data set of U.S. firms' political connections, we find that politically connected firms are more tax aggressive than nonconnected firms, after controlling for other determinants of tax aggressiveness, industry and year fixed effects, and the endogenous choice of being politically connected. Our findings are robust to various measures of political connections and tax aggressiveness. These results are consistent with the conjecture that politically connected firms …
Client Conservatism And Auditor-Client Contracting, Mark L. Defond, Chee Yeow Lim, Yoonseok Zang
Client Conservatism And Auditor-Client Contracting, Mark L. Defond, Chee Yeow Lim, Yoonseok Zang
Research Collection School Of Accountancy
We find that auditors of more conservative clients charge lower fees, issue fewer going concern opinions, and resign less frequently, consistent with more conservative clients imposing less engagement risk on their auditors. Using path analysis, we find evidence that both inherent risk and auditor business risk explain these associations. Also consistent with conservatism reducing auditor business risk, we find that client conservatism is associated with fewer lawsuits against auditors and with fewer client restatements. Taken together, our results are consistent with auditors viewing client conservatism as an important determinant of engagement risk that, in turn, affects auditor-client contracting decisions. Our …
Open Market Share Repurchase Programs And Corporate Governance: Company Performance, Gary Caton, Jeremy Goh, Yen Teik Lee, Scott C. Linn
Open Market Share Repurchase Programs And Corporate Governance: Company Performance, Gary Caton, Jeremy Goh, Yen Teik Lee, Scott C. Linn
Research Collection Lee Kong Chian School Of Business
Payout policies based on share repurchase programs provide greater flexibility than do those based on cash dividends. We develop and test an empirical model in which strongly-governed companies outperform weakly-governed companies after announcing share repurchase programs. Our findings include positive associations between strong governance and both post-announcement adjusted operating performance and abnormal stock returns. The results are robust to sample selection bias, different sample criteria, governance measurement, and various control variables. In addition, governance strength is associated with larger post-announcement changes in CEO incentive compensation and merger and acquisition activity, both of which we argue are consistent with strongly-governed companies …
A State-Stewardship View On Executive Compensation, Hao Liang, Luc Renneboog, Sunny Li Sun
A State-Stewardship View On Executive Compensation, Hao Liang, Luc Renneboog, Sunny Li Sun
Research Collection Lee Kong Chian School Of Business
We take a state-stewardship view on corporate governance and executive compensation in economies with strong political involvement, where state-appointed managers act as responsible ‘stewards’ rather than ‘agents’ of the state. We test this view on China and find that Chinese managers are remunerated not for maximizing equity value but for increasing the value of state-owned assets. Managerial compensation depends on political connections and prestige, and on the firms’ contribution to political goals. These effects were attenuated since the market-oriented governance reform. In a social welfare perspective, such compensation stimulates not the maximization of shareholder value but the preservation of the …
Insider Trading Restrictions And Corporate Risk-Taking, Yuanto Kusnadi
Insider Trading Restrictions And Corporate Risk-Taking, Yuanto Kusnadi
Research Collection School Of Accountancy
This paper examines the effect of insider trading restrictions on corporate risk-taking. Using a cross-country sample of 38 countries over the 1990 to 2003 period, we find that corporate risk-taking is positively related to insider trading restrictions. This finding is robust to alternative regression specifications and sample periods, to the use of alternative measures of insider trading restrictions and risk-taking incentives, and to controls for possible endogeneity. Further investigation suggests that the relation between insider trading restrictions and corporate risk-taking is influenced by cross-sectional differences in stock market development and legal origin, and that the increase in risk-taking is beneficial …
The Bright Side Of Political Uncertainty: The Case Of R&D, Julian Atanassov, Brandon Julio, Tiecheng Leng
The Bright Side Of Political Uncertainty: The Case Of R&D, Julian Atanassov, Brandon Julio, Tiecheng Leng
Research Collection Lee Kong Chian School Of Business
We examine the relationship between political uncertainty and R&D investment by exploiting the timing of U.S. gubernatorial elections as a source of plausibly exogenous variation in uncertainty. In contrast to the literature documenting negative effects of political uncertainty on real investment, we find that uncertainty over government policy encourages firm-level R&D. Firms increase R&D investments by an average of 4.6% in election years relative to non-election years. The uncertainty effect is stronger in hotly contested elections, in politically sensitive and hard-to-innovate industries, and in firms subject to higher growth options and greater product market competition. Our findings suggest that, as …
Navigating The “Patent-Cliff”: The Role Of Corporate Real Estate In The Life Science Industry, Clarence Goh
Navigating The “Patent-Cliff”: The Role Of Corporate Real Estate In The Life Science Industry, Clarence Goh
Research Collection School Of Accountancy
The Life Science industry is standing on the edge of a “patent cliff.” In 2015, the world’s biggest pharmaceutical firms stand to lose up to US$47.5 billion in revenues from the expiry of the patents of some of their biggest blockbuster drugs. For example, Celebrex – an arthritis drug which contributed almost US$3 billion to Pfizer’s revenues in 2014 – is set to see its patent expire later this year, opening it up to competition from “generic” alternatives which are often sold at much cheaper prices.
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 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 …
Segment Disclosure Transparency And Internal Capital Market Efficiency: Evidence From Sfas No. 131, Young Jun Cho
Segment Disclosure Transparency And Internal Capital Market Efficiency: Evidence From Sfas No. 131, Young Jun Cho
Research Collection School of Accountancy
Using the adoption of SFAS 131, I examine the effect of segment disclosure transparency on internal capital market efficiency. SFAS 131 requires firms to define segments as internally viewed by managers, thereby improving the transparency of managerial actions in internal capital allocation. I find that diversified firms that improved segment disclosure transparency by changing segment definitions upon adoption of SFAS 131 experienced an improvement in capital allocation efficiency in internal capital markets after the adoption of SFAS 131. In addition, I find that the improvement in internal capital market efficiency was greater for firms that suffered more severe agency problems …
Corporate Real Estate’S Rising Profile In The Banking And Finance Industry, Clarence Goh
Corporate Real Estate’S Rising Profile In The Banking And Finance Industry, Clarence Goh
Research Collection School Of Accountancy
Seven years after the financial crisis, profits have returned to the banking and finance industry – statistics compiled by the Federal Deposit Insurance Corporation (FDIC) for banks in the US showed that overall industry profits hit near record highs in 2014.
Economic Freedom, Investment Flexibility, And Equity Value: A Cross-Country Study, Chih-Ying Chen, Peter F. Chen, Qinglu Jin
Economic Freedom, Investment Flexibility, And Equity Value: A Cross-Country Study, Chih-Ying Chen, Peter F. Chen, Qinglu Jin
Research Collection School Of Accountancy
Prior studies show that equity value has convex relations with earnings and book value of equity, respectively, due to growth and adaptation options (Burgstahler and Dichev 1997a; Zhang 2000). These studies, however, do not consider the role of institutions in affecting firms' ability to exercise growth and adaptation options. In this study, we investigate whether these convex relations vary with the degree of a country's economic freedom, which may influence the frictions and costs of exercising these options. We develop four hypotheses: In countries with greater economic freedom, (1) a firm's capital investment in response to profitability is greater; (2) …
Ceo Contractual Protection And Managerial Short-Termism, Xia Chen, Qiang Cheng, Alvis K. Lo, Xin Wang
Ceo Contractual Protection And Managerial Short-Termism, Xia Chen, Qiang Cheng, Alvis K. Lo, Xin Wang
Research Collection School Of Accountancy
How to address managerial short-termism is an important issue for companies, regulators, and researchers. We examine the effect of CEO contractual protection, in the form of employment agreements and severance pay agreements, on managerial short-termism. We find that firms with CEO contractual protection are less likely to cut R&D expenditures to avoid earnings decreases and are less likely to engage in real earnings management. The effect of CEO contractual protection is both statistically and economically significant. We further find that this effect increases with the duration and monetary strength of CEO contractual protection. The cross-sectional analyses indicate that the effect …
Default Clauses In Debt Contracts, Ningzhong Li, Yun Lou, Florin Vasvari
Default Clauses In Debt Contracts, Ningzhong Li, Yun Lou, Florin Vasvari
Research Collection School Of Accountancy
We examine the determinants of events of default clauses in syndicated loan and bond contracts, provi- sions that allow lenders to request the repayment of principal and to terminate lending commitments. We document significant variation in the use of default clauses and their restrictiveness within the same type of lending contract but also across loans and bonds. We find that default clauses in public bond contracts are less restrictive than those in syndicated loan contracts. We also document that two ex ante proxies for bankruptcy costs, the level of intangible assets and capitalized research and development expenditures at the time …
Opaque Financial Reporting Due To Unemployment Concerns, Jeffrey Ng, Tharindra Ranasinghe, Guifeng Shi, Holly I. Yang
Opaque Financial Reporting Due To Unemployment Concerns, Jeffrey Ng, Tharindra Ranasinghe, Guifeng Shi, Holly I. Yang
Research Collection School Of Accountancy
This paper examines the link between rank-and-file employees’ unemployment concerns and financial reporting opacity. Following Agrawal and Matsa (JFE, 2013), we use exogenous variations in state unemployment insurance benefits to capture changes to unemployment concerns. We find that when unemployment concerns are lower, there is less opaque financial reporting. This relation is stronger when workers face higher unemployment risk, labor union participation is high, and executives have higher equity incentives. Using Tobin’s Q to capture firm value, we also find that the economic rationale to engage in opaque financial reporting reduces when unemployment benefits are high. Our findings suggest that …
Opaque Financial Reporting Due To Unemployment Concerns, Jeffrey Ng, Tharindra Ranasinghe, Guifeng Shi, Holly I. Yang
Opaque Financial Reporting Due To Unemployment Concerns, Jeffrey Ng, Tharindra Ranasinghe, Guifeng Shi, Holly I. Yang
Research Collection School Of Accountancy
This paper examines the link between rank-and-file employees’ unemployment concerns and financial reporting opacity. Following Agrawal and Matsa (JFE, 2013), we use exogenous variations in state unemployment insurance benefits to capture changes to unemployment concerns. We find that when unemployment concerns are lower, there is less opaque financial reporting. This relation is stronger when workers face higher unemployment risk, labor union participation is high, and executives have higher equity incentives. Using Tobin’s Q to capture firm value, we also find that the economic rationale to engage in opaque financial reporting reduces when unemployment benefits are high. Our findings suggest that …
Data And Analytics In Corporate Real Estate: Do You Have The Right Talent?, Clarence Goh
Data And Analytics In Corporate Real Estate: Do You Have The Right Talent?, Clarence Goh
Research Collection School Of Accountancy
Is the lack of suitable data and analytics talent in your corporate real estate (CRE) team preventing you from contributing to the wider business strategy?
Fair Value Hierarchy Measures: Post-Implementation Evidence On Ifrs 7, Pearl Tan
Fair Value Hierarchy Measures: Post-Implementation Evidence On Ifrs 7, Pearl Tan
Research Collection School Of Accountancy
Using a balance sheet valuation model, this study examines if information on the fair value hierarchy of on-balance sheet financial assets and financial liabilities are incorporated in the market’s valuation of companies’ equities in Singapore. The results of the study show significant associations between as-reported Level 1 and Level 2 fair value measures of financial assets and market values. However, the results are not significant for Level 3 fair value measures of financial assets and each of the three levels of fair value measures of financial liabilities. The results also show that returns are more positively associated with as-reported gains …
Home Away From Home: Geography Of Information And Local Investors, Gennaro Bernile, Alok Kumar, Johan Sulaeman
Home Away From Home: Geography Of Information And Local Investors, Gennaro Bernile, Alok Kumar, Johan Sulaeman
Research Collection Lee Kong Chian School Of Business
We develop a 10K-based measure of spatial variation in the availability of value-relevant information that reflects the multi-dimensional nature of firm location. Spatially distributed information generates location-based information asymmetries that affect institutional portfolio decisions and performance. Institutions overweigh firms with greater local economic exposure and earn superior returns on corresponding trades, even for firms not headquartered locally. These patterns are stronger among harder-to-value stocks. Consistent with local informational advantage, local investor performance increases with the local exposure of individual stock holdings and her portfolio as a whole, and more so when her portfolio is more heavily tilted toward local stocks.
Customer's Short Positions And Supplier's Investment Decisions, Xia Chen, Guojin Gong, Shuqing Luo
Customer's Short Positions And Supplier's Investment Decisions, Xia Chen, Guojin Gong, Shuqing Luo
Research Collection School Of Accountancy
Short interest contains valuable information about a firm’s business fundamentals. We investigate whether such information affects business partners’ real investment decisions in the supply-chain setting. We predict and find that a supplier’s future investments (including inventory, R&D, and tangible asset investments) decrease with its customer’s current short interest. This negative relation is stronger when the supplier faces greater difficulty in assessing its customer’s business fundamentals and when short interest is more likely to indicate longlasting deterioration in the customer’s fundamentals. Additional analysis does not support the alternative explanation that the supplier adjusts investments in response to unfavorable information obtained via …
Why Do U.S. Firms Invest Less Over Time?, Fangjian Fu, Sheng Huang, Rong Wang
Why Do U.S. Firms Invest Less Over Time?, Fangjian Fu, Sheng Huang, Rong Wang
Research Collection Lee Kong Chian School Of Business
The ratio of capital expenditure to total assets of U.S. firms decreases by more than half from 1980 to 2012. The decline in capital investment is pervasive; it has occurred for firms in most industries and is robust to firms of different sizes, investment opportunities, profitability, accesses to external financing, and expenses on R&D or acquisitions. Existing theories of corporate investment fall short in explaining the decline trend. The decline is also not explained by time variation in firm characteristics, industry composition, and public listing cohorts, or by corporate lifecycle. Our further evidence suggests that it is related to the …
Density Forecast Evaluation For Dependent Financial Data: Theory And Applications, Aurobindo Ghosh, Anil K. Bera
Density Forecast Evaluation For Dependent Financial Data: Theory And Applications, Aurobindo Ghosh, Anil K. Bera
Research Collection Lee Kong Chian School Of Business
In this paper, we propose a formal test for density forecast evaluation in presence of dependent data. Apart from accepting or rejecting the tested model, our smooth test identifies the possible sources (such as the location, scale and shape of the distribution) of rejection, thereby helping in revising the initial model. We also propose how to augment the smooth test to investigate explicit forms of dependence in the data within the same test framework. An extensive application to S&P 500 returns indicate capturing time-varying volatility and non-gaussianity significantly improve the performance of the model. Although we are dealing with index …
The Persistence Of Long-Run Abnormal Returns Following Stock Repurchases And Offerings, Fangjian Fu, Sheng Huang
The Persistence Of Long-Run Abnormal Returns Following Stock Repurchases And Offerings, Fangjian Fu, Sheng Huang
Research Collection Lee Kong Chian School Of Business
The long-run abnormal returns following both stock repurchases and seasoned equity offerings disappear for the events in 2003–2012. The disappearance is associated with the changing market environment: increased institutional investment, decreased trading costs, improved liquidity, and enhanced regulations on corporate governance and information disclosure. In response to the more efficient pricing of stocks, firms become less opportunistic in stock repurchases and offerings. Recent events of stock repurchases and offerings are motivated more by business-operating reasons than to exploit mispricing. Both external market factors and internal firm factors contribute to the disappearance of the postevent abnormal returns. Our findings on the …
Does Increased Board Independence Reduce Earnings Management? Evidence From Recent Regulatory Reforms, Qiang Cheng, Xia Chen, Xin Wang
Does Increased Board Independence Reduce Earnings Management? Evidence From Recent Regulatory Reforms, Qiang Cheng, Xia Chen, Xin Wang
Research Collection School Of Accountancy
In this paper, we examine whether recent regulatory reforms requiring majority board independence are effective in reducing earnings management. Firms that did not have a majority of independent directors prior to the reforms (referred to as non-compliance firms) are required to increase their board independence. We find that overall, compared to the other firms, noncompliance firms do not experience a significant decrease in the extent of earnings management from prior to the reforms to afterwards. However, we find that non-compliance firms with low information acquisition cost experience a significant reduction in earnings management compared with the other firms. The results …
Does Increased Board Independence Reduce Earnings Management? Evidence From The Recent Regulatory Reform, Xia Chen, Qiang Cheng, Xin Wang
Does Increased Board Independence Reduce Earnings Management? Evidence From The Recent Regulatory Reform, Xia Chen, Qiang Cheng, Xin Wang
Research Collection School Of Accountancy
We examine whether recent regulatory reforms requiring majority board independence reduce the extent of earnings management. Firms that did not have a majority of independent directors before the reforms (referred to as noncompliant firms) are required to increase their board independence. We find that, while noncompliant firms on average do not experience a significant decrease in earnings management after the reforms compared to other firms, noncompliant firms with low information acquisition cost experience a significant reduction in earnings management. The results are similar when we examine audit committee independence and when we use alternative proxies for information acquisition cost and …