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Articles 391 - 420 of 665

Full-Text Articles in Corporate Finance

When Everyone Misses On The Same Side: Debiased Earnings Surprises And Stock Returns, Chin-Han Chiang, Wei Dai, Jianqing Fan, Harrison Hong, Jun Tu Jun 2015

When Everyone Misses On The Same Side: Debiased Earnings Surprises And Stock Returns, Chin-Han Chiang, Wei Dai, Jianqing Fan, Harrison Hong, Jun Tu

Research Collection Lee Kong Chian School Of Business

In event studies of capital market efficiency, an earnings surprise has historically been measured by the consensus error, defined as earnings minus the consensus or average of professional forecasts. The rationale is that the consensus is an accurate measure of the market’s expectation of earnings. But since forecasts can be biased due to conflicts of interest and some investors can see through these conflicts, this rationale is flawed and the consensus error a biased measure of an earnings surprise. We show that the fraction of forecasts that miss on the same side (FOM), by ignoring the size of the misses, …

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An Investigation Of Credit Borrower Concentration, Heng Yue, Pingui Rao, Jigao Zhu May 2015

An Investigation Of Credit Borrower Concentration, Heng Yue, Pingui Rao, Jigao Zhu

Research Collection School Of Accountancy

Credit borrower concentration arises when a bank or financial institution lends a large amount of its funds to a few large borrowers. We find that borrower concentration is positively related to non-performing loans and negatively related to financial performance. We also find that the voting power of bank’s controlling shareholder is positively related to the borrower concentration. The evidence is consistent with the view that controlling shareholders divert resources away from banks by extending a high volume of loans to a few related parties, which leads to high borrower concentration. Further evidence indicates that some seemingly unrelated large borrowers, as …

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Investment, Duration, And Exit Strategies For Corporate And Independent Venture Capital-Backed Start-Ups, Bing Guo, Yun Lou, David Perez-Castrillo May 2015

Investment, Duration, And Exit Strategies For Corporate And Independent Venture Capital-Backed Start-Ups, Bing Guo, Yun Lou, David Perez-Castrillo

Research Collection School Of Accountancy

We propose a model of investment, duration, and exit strategies for start-ups backed by venture capital (VC) funds that accounts for the high level of uncertainty, the asymmetry of information between insiders and outsiders, and the discount rate. Our analysis predicts that start-ups backed by corporate VC funds remain for a longer period of time before exiting and receive larger investment amounts than those financed by independent VC funds. Although a longer duration leads to a higher likelihood of an exit through an acquisition, a larger investment increases the probability of an IPO exit. These predictions find strong empirical support.

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Corporate Tax Aggressiveness And Managerial Rent Extraction: Evidence From Insider Trading, Sung Gon Chung, Beng Wee Goh, Kiat Bee Jimmy Lee, Terry J. Shevlin May 2015

Corporate Tax Aggressiveness And Managerial Rent Extraction: Evidence From Insider Trading, Sung Gon Chung, Beng Wee Goh, Kiat Bee Jimmy Lee, Terry J. Shevlin

Research Collection School Of Accountancy

Recent studies argue that aggressive forms of tax avoidance can be used to facilitate managerial rent extraction from shareholders (e.g., Desai 2004; Desai and Dharmapala 2006; Desai et al. 2007). Despite this agency view of tax avoidance receiving increasing attention in the literature, there is limited empirical evidence that managers actually extract rents generated from tax avoidance activities. In this paper, we examine the association between corporate tax aggressiveness and managerial rent extraction in the form of insider trading profitability. We document that, on average, insider purchase profitability, but not sale profitability, is significantly higher in more tax aggressive firms. …

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Internal Control And Operational Efficiency, Qiang Cheng, Beng Wee Goh, Jae Bum Kim Apr 2015

Internal Control And Operational Efficiency, Qiang Cheng, Beng Wee Goh, Jae Bum Kim

Research Collection School Of Accountancy

In this study, we examine whether and how internal control over financial reporting affects firm operational efficiency. We find that operational efficiency, derived from the frontier analysis, is significantly lower among firms with material weaknesses in internal control relative to firms without such weaknesses. We document some evidence suggesting that effective internal control leads to greater operational efficiency through reducing the likelihood of misappropriation of corporate resources and through enhancing the quality of internal reports for decision making. We also document that smaller firms benefit more from having effective internal control in terms of operational efficiency. In addition, we find …

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Audit Committees And Financial Reporting Quality In Singapore, Kwong Sin Leong, Jiwei Wang, Themin Suwardy, Yuanto Kusnadi Apr 2015

Audit Committees And Financial Reporting Quality In Singapore, Kwong Sin Leong, Jiwei Wang, Themin Suwardy, Yuanto Kusnadi

Research Collection School Of Accountancy

No abstract provided.

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Financial Health And Corporate Performance Of Listed Manufacturing Companies In Hong Kong And Singapore – A Comparative Study Of The Two Asian Tigers, Foo S.L. Apr 2015

Financial Health And Corporate Performance Of Listed Manufacturing Companies In Hong Kong And Singapore – A Comparative Study Of The Two Asian Tigers, Foo S.L.

Research Collection School Of Accountancy

Hong Kong and Singapore are two leading economies in Asia Pacific. 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 these two markets. A linear regression was conducted between these variables to determine the magnitude and direction of their relationships. The trends of Z-Scores over a fourteen-year period are also analyzed. The analysis covers the period from 2000 to 2013(inclusive) and yielded a statistically positive correlation between ROE and the Z-Score for both markets. Singapore and Hong Kong …

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Executive Compensation And Regulation Imposed Governance: Evidence From The California Non-Profit Integrity Act (2004), Sandip Dhole, Saleha B. Khumawala, Sagarika Mishra, Tharindra Ranasinghe Mar 2015

Executive Compensation And Regulation Imposed Governance: Evidence From The California Non-Profit Integrity Act (2004), Sandip Dhole, Saleha B. Khumawala, Sagarika Mishra, Tharindra Ranasinghe

Research Collection School Of Accountancy

This study examines the impact of the California Nonprofit Integrity Act of 2004 on CEO compensation costs in affected organizations. Contrary to the stated objective of the Act that executive compensation is “just and reasonable,” we find that CEO compensation costs for affected nonprofits during the post-regulation periods have increased by about 6.3 percent when compared with a control group of comparable unaffected nonprofits. In addition, the relative increase in CEO compensation appears to come from nonprofits that have experienced greater regulatory cost increases. We do not find evidence that the Act resulted in a change in CEO pay performance …

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Splitting Specified Foreign Sourced Income Between Tax Exempt And Taxable Portions: An Optimal Solution (Part 3 Of 3), Teng Aun Khoo, Clement Kai Guan Tan Mar 2015

Splitting Specified Foreign Sourced Income Between Tax Exempt And Taxable Portions: An Optimal Solution (Part 3 Of 3), Teng Aun Khoo, Clement Kai Guan Tan

Research Collection School Of Accountancy

No abstract provided.

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Political Connections And Firm Value: Evidence From The Regression Discontinuity Design Of Close Gubernatorial Elections, Quoc-Anh Do, Yen Teik Lee, Bang D. Nguyen Mar 2015

Political Connections And Firm Value: Evidence From The Regression Discontinuity Design Of Close Gubernatorial Elections, Quoc-Anh Do, Yen Teik Lee, Bang D. Nguyen

Research Collection Lee Kong Chian School Of Business

Using the regression discontinuity design of close gubernatorial elections in the U.S., we identify a significant and positive impact of the social networks of corporate directors and politicians on firm value. Firms connected to elected governors increase their value by 3.89%. Political connections are more valuable for firms connected to winning challengers, for smaller and financially dependent firms, in more corrupt states, in states of connected firms’ headquarters and operations, and in closer, smaller, and active networks. Post-election, firms connected to the winner receive significantly more state procurement contracts and invest more than do firms connected to the loser.

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Investor Sentiment Aligned: A Powerful Predictor Of Stock Returns, Dashan Huang, Fuwei Jiang, Jun Tu, Guofu Zhou Mar 2015

Investor Sentiment Aligned: A Powerful Predictor Of Stock Returns, Dashan Huang, Fuwei Jiang, Jun Tu, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

We propose a new investor sentiment index that is aligned with the purpose of predicting the aggregate stock market. By eliminating a common noise component in sentiment proxies, the new index has much greater predictive power than existing sentiment indices have both in and out of sample, and the predictability becomes both statistically and economically significant. In addition, it outperforms well-recognized macroeconomic variables and can also predict cross-sectional stock returns sorted by industry, size, value, and momentum. The driving force of the predictive power appears to stem from investors' biased beliefs about future cash flows.

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Isca Pre-Budget Survey Findings 2015: Insights From The Accounting And Business Community, Clarence Goh Feb 2015

Isca Pre-Budget Survey Findings 2015: Insights From The Accounting And Business Community, Clarence Goh

Research Collection School Of Accountancy

Recent forecasts by the International Monetary Fund (IMF) estimate that the global economy will grow by 3.8% in 2015. While this represents an improvement from the 3.3% growth forecasted for 2014, growth in 2015 is expected to be hampered by persistent weakness in the Eurozone and slowdowns in major emerging markets.

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An Anatomy Of State Control In The Globalization Of State-Owned Enterprises, Hao Liang, Bing Ren, Sunny Li Sun Feb 2015

An Anatomy Of State Control In The Globalization Of State-Owned Enterprises, Hao Liang, Bing Ren, Sunny Li Sun

Research Collection Lee Kong Chian School Of Business

Integrating agency theory with institutional analysis in international business, we propose a state-control perspective to analyze government-control mechanisms in emerging economies’ globalization of state-owned enterprises (SOEs). We identify two types of state control that influence SOEs’ globalization decisions and the degree of globalization: state ownership control and executives’ political connections, both of which are contingent upon the home country’s evolving institutional environments. Using a two-step corporate globalization decision model and 17,272 firm-year observations of non-financial, Chinese-listed companies, we find a strong impact of both types of state control on SOEs’ globalization, although the impacts differ between the periods before and …

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Momentum Life Cycle Around The World, Frank Weikai Li, K. C. John Wei Feb 2015

Momentum Life Cycle Around The World, Frank Weikai Li, K. C. John Wei

Research Collection Lee Kong Chian School Of Business

The momentum life cycle (MLC) hypothesis first proposed by Lee and Swaminathan (2000) applies also to global markets. Early-stage strategies significantly outperform the late-stage and conventional strategies in most countries. Individualism culture is positively associated with late-stage but unrelated to early-stage momentum profitability, suggesting that early- and late-stage momentums are driven by different underlying mechanisms. Consistent with Stein’s (2009) model that arbitrageurs could amplify mispricing, we find that late-stage momentum profits are more pronounced in countries with lower limits to arbitrage. Furthermore, we find that the MLC also applies to exchange traded funds in the United States.

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Active Cds Trading And Managers’ Voluntary Disclosure, Jae Bum Kim, Pervin K. Shroff, Dushyantk Umar Vyas, Regina Wittenberg Moerman Jan 2015

Active Cds Trading And Managers’ Voluntary Disclosure, Jae Bum Kim, Pervin K. Shroff, Dushyantk Umar Vyas, Regina Wittenberg Moerman

Research Collection School Of Accountancy

No abstract provided.

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Short Selling Pressure, Stock Price Behavior, And Management Forecast Precision: Evidence From A Natural Experiment, Yinghua Li, Liandong Zhang Jan 2015

Short Selling Pressure, Stock Price Behavior, And Management Forecast Precision: Evidence From A Natural Experiment, Yinghua Li, Liandong Zhang

Research Collection School Of Accountancy

Using a natural experiment (Regulation SHO), we show that short selling pressure and consequent stock price behavior have a causal effect on managers' voluntary disclosure choices. Specifically, we find that managers respond to a positive exogenous shock to short selling pressure and price sensitivity to bad news by reducing the precision of bad news forecasts. This finding on management forecasts appears to be generalizable to other corporate disclosures. In particular, we find that, in response to increased short selling pressure, managers also reduce the readability (or increase the fuzziness) of bad news annual reports. Overall, our results suggest that maintaining …

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The Inclusion Of General Counsel In Top Management And Tax Avoidance, Beng Wee Goh, Jimmy Lee, Jeffrey Ng Dec 2014

The Inclusion Of General Counsel In Top Management And Tax Avoidance, Beng Wee Goh, Jimmy Lee, Jeffrey Ng

Research Collection School Of Accountancy

We examine whether the inclusion of general counsel in top management is associated with a firm’s tax avoidance. We find that firms with general counsel as part of the top management team have lower GAAP effective tax rate, more uncertain tax positions, a higher likelihood of engaging in tax shelter activities, and more tax haven countries in which the firm reports a significant subsidiary, relative to firms without a general counsel in top management. In addition, we find that among firms with general counsel in top management, tax avoidance is greater when (1) the general counsel has tax-related expertise, (2) …

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Cfo Alert: Do You Know What Your Board Audit Committee Is Up To?, Clarence Goh Dec 2014

Cfo Alert: Do You Know What Your Board Audit Committee Is Up To?, Clarence Goh

Research Collection School Of Accountancy

In October 2014, American Realty Capital Properties – one of the largest real estate investment trusts in the US – stunned the market. Its CEO, David Kay, disclosed that the company had overstated its income in the first quarter of the year – and that executives chose not to correct the error in the second quarter “in order to conceal the error.”

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Cross-Listings And Corporate Cash Savings: International Evidence, Yuanto Kusnadi Dec 2014

Cross-Listings And Corporate Cash Savings: International Evidence, Yuanto Kusnadi

Research Collection School Of Accountancy

This paper examines foreign firms that are cross-listed on the U.S. stock exchanges and finds that they exhibit higher cash savings sensitivity to stock price than their non-cross-listed counterparts. This finding is robust even after controlling for alternative regression specifications and samples, country-level institutional infrastructures, different listing types, and the endogeneity of the cross-listing decision. Further cross-sectional tests reveal that the increase in cash savings sensitivity to stock price is more pronounced for cross-listed firms with stock prices that are more informative, which is consistent with the influence of the managerial learning channel. The empirical evidence sheds more light on …

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How Firms Respond To Financial Restatement: Ceo Successors And External Reactions, David Gomulya, Warren Boeker Dec 2014

How Firms Respond To Financial Restatement: Ceo Successors And External Reactions, David Gomulya, Warren Boeker

Research Collection Lee Kong Chian School Of Business

Although past studies have paid considerable attention to firms' reputations, few have investigated the actions that firms take following a reputation-damaging event. We identify firms involved in financial earnings restatements and examine whether naming a successor CEO with specific qualities serves to signal the seriousness of a firm's efforts to restore its reputation. Using theories of market signaling, we argue that attributes of successor CEOs significantly influence the reactions of key external constituencies. In particular, firms with more severe restatement tend to name successors who have prior CEO or turnaround experience and a more elite education. The naming of such …

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Auditor Switching For Opinion Shopping, And Subsequnt Audit Quality And Audit Fee: Evidence From Post-Sox Period, Jong-Hag Choi, Heesun Chung, Catherine Heyjung Sonu, Yoonseok Zang Nov 2014

Auditor Switching For Opinion Shopping, And Subsequnt Audit Quality And Audit Fee: Evidence From Post-Sox Period, Jong-Hag Choi, Heesun Chung, Catherine Heyjung Sonu, Yoonseok Zang

Research Collection School Of Accountancy

Theory suggests that firms engage in opinion shopping to obtain better audit opinions. However, there is scarce evidence on the economic consequences of the opinion shopping behaviors. In this paper, we examine the effect of auditor switches for opinion shopping on audit quality and audit fees. Using 30,333 firm-year observations over the 2004-2012 period in the U.S., we first document evidence that firms switch their auditors in search for better audit opinions. Next, we find that the audit quality of clients that switch auditors for opinion shopping is significantly lower than that of clients that did not switch auditors or …

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Dynamic Advantage, Stephen Wyatt Nov 2014

Dynamic Advantage, Stephen Wyatt

Asian Management Insights

Reaping the advantages of a global resource network.

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Governance Matter: Morningstar Stewardship Grades And Mutual Fund Performance, Jerry X. Cao, Aurobindo Ghosh, Jeremy Goh, Wee Seng Ng Nov 2014

Governance Matter: Morningstar Stewardship Grades And Mutual Fund Performance, Jerry X. Cao, Aurobindo Ghosh, Jeremy Goh, Wee Seng Ng

Research Collection School Of Economics

Mutual fund investors have the arduous task of disentangling luck from ability of mutual fund managers’ performance. In this paper we investigate the role of mutual fund corporate governance (measured by Morningstar Stewardship grade) in mutual fund performance. We propose an objective data-driven corporate governance score based on principal components of Morningstar Stewardship Grades. Furthermore, we establish corporate governance scores have Granger Causality on long-term risk-adjusted returns. The findings suggest that corporate governance grades of mutual funds carry information content beyond the usual star rating measures for predicting long-term mutual fund performance and provide an effective tool for selecting funds.

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Ceo Optimism And Incentive Compensation, Clemens A. Otto Nov 2014

Ceo Optimism And Incentive Compensation, Clemens A. Otto

Research Collection Lee Kong Chian School Of Business

I study the effect of chief executive officer (CEO) optimism on CEO compensation. Usingdata on compensation in US firms, I provide evidence that CEOs whose option exercisebehavior and earnings forecasts are indicative of optimistic beliefs receive smaller stockoption grants, fewer bonus payments, and less total compensation than their peers. Thesefindings add to our understanding of the interplay between managerial biases andremuneration and show how sophisticated principals can take advantage of optimisticagents by appropriately adjusting their compensation contracts.

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Internal Control And Operational Efficiency, Qiang Cheng, Beng Wee Goh, Jae Bum Kim Oct 2014

Internal Control And Operational Efficiency, Qiang Cheng, Beng Wee Goh, Jae Bum Kim

Research Collection School Of Accountancy

In this study, we examine whether and how internal control over financial reporting affects firmoperational efficiency. We find that operational efficiency, derived from the frontier analysis, issignificantly lower among firms with material weaknesses in internal control relative to firmswithout such weaknesses. We document some evidence suggesting that effective internal controlleads to greater operational efficiency through reducing the likelihood of misappropriation ofcorporate resources and through enhancing the quality of internal reports for decision making.We also document that smaller firms benefit more from having effective internal control in termsof operational efficiency. In addition, we find that the market appears to understand the …

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Firm Litigation Risk And The Insurance Value Of Corporate Social Performance, Ping-Sheng Koh, Cuili Qian, Heli Wang Oct 2014

Firm Litigation Risk And The Insurance Value Of Corporate Social Performance, Ping-Sheng Koh, Cuili Qian, Heli Wang

Research Collection Lee Kong Chian School Of Business

This paper advances the risk management perspective that superior social performance enhances firm value by serving as an ex ante valuable insurance mechanism. We posit that good social performance is more valuable as an insurance mechanism for firms with higher litigation risks. Moreover, value generation of corporate social performance (CSP) depends on whether a firm has gained pragmatic legitimacy (i.e., a firm's financial health) and moral legitimacy (i.e., whether or not a firm operates in a socially contested industry) among its stakeholders. We find that the value of CSP as insurance against litigation risk is practically significant, adding 2 to …

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Morphing: The Linkage Between Inward Private Equity And Outward Venture, Sunny Li Sun, Hao Liang Sep 2014

Morphing: The Linkage Between Inward Private Equity And Outward Venture, Sunny Li Sun, Hao Liang

Research Collection Lee Kong Chian School Of Business

Private equity is impacting global economies and competitive landscapes of multinational enterprises (MNEs). In this pioneer research, we first find an important new pattern of globally interfirm connections: the inward private equity investment likes to promote Chinese firms’ outward venture, or an inward-outward linkage. Under this inward-outward linkage, after received investment from private equity, Chinese emerging MNEs are likely to restructure board, rebuild the top management team, reconfiguring resource, reframe the industry structure and alter competitive dynamics, thus, modify their strategies in outward ventures, such as accelerating the internationalization speed, locating more outward ventures in developed economies, and engaging complex …

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Family Firm Research: A Review, Qiang Cheng Sep 2014

Family Firm Research: A Review, Qiang Cheng

Research Collection School Of Accountancy

This article reviews family firm studies in the finance and accounting literature, primarily those conducted using data from the United States and China. Family owners have unique features such as concentrated ownership, long investment horizon, and reputation concerns. Given the distinguishing features of family ownership and control, family firms face unique agency conflicts. We discuss the agency problems in family firms and review the findings of recent family firm studies. We call for more research to understand the unique family effects and encourage more research on Chinese family firms. Part I of the article discusses the fundaments of family firms: …

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The Allocation Of Employee Stock Option Proceeds, Xin Chang, Yangyang Chen, Chia Mei Shih, Rong Wang Sep 2014

The Allocation Of Employee Stock Option Proceeds, Xin Chang, Yangyang Chen, Chia Mei Shih, Rong Wang

Research Collection Lee Kong Chian School Of Business

We separate equity issuance proceeds into two parts: option proceeds generated by employee stock option exercises and non-option proceeds engendered by all other forms of equity issues. We document that over the period 1998-2013, the aggregate amount of option proceeds exceeds that of non-option proceeds for a large sample of U.S. firms. In particular, firms allocate option proceeds predominantly to cash holdings, followed by investment and equity repurchase, while non-option proceeds are mainly allocated to investment and cash holdings. Further analysis shows that financial constraints affect the allocation of equity issuance proceeds by shifting the use of option proceeds away …

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The Deterrence Effects Of Vicarious Punishments On Corporate Financial Fraud, Daphne W. Yiu, Yuehua Xu, William P. Wan Sep 2014

The Deterrence Effects Of Vicarious Punishments On Corporate Financial Fraud, Daphne W. Yiu, Yuehua Xu, William P. Wan

Research Collection Lee Kong Chian School Of Business

This study extends the research on corporate financial fraud by developing a new perspective on the deterrence effects of vicarious punishments premised on social learning theory. We posit that firms vicariously learn about punishments from their peers by picking up modeling cues, environmental cues, and social cues in the inhibitive learning process, thus being deterred from committing future fraudulence. Using a matched sample of 604 observations of Chinese listed firms between 2002 and 2008, our findings show that an observing firm is deterred from committing fraud if the peers in its industry are caught and punished. We further find that …

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