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Articles 571 - 600 of 665
Full-Text Articles in Corporate Finance
Acquisitions Driven By Stock Overvaluation, Leming Lin
Acquisitions Driven By Stock Overvaluation, Leming Lin
Dissertations and Theses Collection (Open Access)
Overvaluation might drive a firm to use its stock to acquire another firm whose stock is not as overpriced. Though hypothetically desirable, these acquisitions create little, if any, value for acquirer shareholders. Two factors impede value creation for acquirer stockholders from these transactions (despite large differences in relative overvaluation at announcement): acquirers paying large premiums to targets, and investors' correction of acquirer overvaluation during the bid period. Furthermore, acquirer CEOs obtain a large amount of new stock and option grants after acquisitions and realize a net gain in wealth, further suggesting that equity overvaluation increases agency costs and the resulting …
Venture Capital Firm's Reputation Effect On Its Start-Up Company's Long Term Operating Performance And Survivorship, Huei Siang Yap
Venture Capital Firm's Reputation Effect On Its Start-Up Company's Long Term Operating Performance And Survivorship, Huei Siang Yap
Dissertations and Theses Collection (Open Access)
In this paper, I tested the effects of three proxies for venture capitalist(VC) reputation on its invested company's long term industry-djusted operating performances (ROA , ROE), market-to-book ratio and survival time (time to delisting) in the aftermarket. VC's market share and VC's IPO share have strong and positive association with the post-IPO long-term performance metrics, and the effects are statistically significant even after accounting for self-selection bias. For long term survivorship of start-up companies, I applied hazard analysis to the IPO company's time to delisting with accelerated failure time (AFT) model as the baseline hazard function, and found that start …
Stakeholder Influences On Diversification: Implications For Shareholders And Stakeholders, Partiban David, Jonathan P. O’Brien, Toru Yoshikawa, Andrew Delios
Stakeholder Influences On Diversification: Implications For Shareholders And Stakeholders, Partiban David, Jonathan P. O’Brien, Toru Yoshikawa, Andrew Delios
Research Collection Lee Kong Chian School Of Business
The article presents the results of research into the relative influence of stakeholders and shareholders on corporate strategic planning in terms of diversification and performance, focusing on concepts such as opportunity cost and rent appropriation. An overview of related previous studies is provided, along with details of the research protocol, which involved data analysis drawn from a sample of Japanese firms and their corporate profits from the years 1990 through 2004. A distinction between transactional and relational ownership is described, which can lead to different priorities in terms of profit and growth.
Asking Tougher Questions In Tough Times, Irving Low, Claudia Eio, See Liang Foo, Yang Hoong Pang, Kwong Sin Leong, John Joseph Williams
Asking Tougher Questions In Tough Times, Irving Low, Claudia Eio, See Liang Foo, Yang Hoong Pang, Kwong Sin Leong, John Joseph Williams
Research Collection School Of Accountancy
The recent wave of corporate governance disasters globally raises many eyebrows and burning questions whether audit committees (ACs) are doing the right things to effectively discharge their roles and responsibilities. To further test the integrity and reputation of the Singapore market as a listing gateway for foreign companies in turbulent times like these, the headlines are also reporting a spate of suspected and actual corporate fraud and scandals involving China-based, Singapore listed companies (commonly referred to as “S-chips”). Many angry investors and the public question whether ACs and independent directors are doing their jobs.
Does Size Matter In The Hedge Fund Industry?, Song Wee Melvyn Teo
Does Size Matter In The Hedge Fund Industry?, Song Wee Melvyn Teo
Research Collection Lee Kong Chian School Of Business
We document a negative and convex relationship between hedge fund size and future risk-adjusted returns. Small hedge funds outperform large hedge funds by 3.65 percent per year after adjusting for risk. This over performance is not driven by fund age, leverage, serial correlation, or self-selection biases. The capacity constraints manifest across various investment styles and regions. In particular, they are strongest for funds managed by multiple principals who trade small, illiquid securities, suggesting that the observed diseconomies can be traced to price impact and hierarchy costs (Stein, 2002). While investors direct disproportionately more capital to smaller funds, they do not …
Managerial Ownership And Firms' Information Environment, Soongsoo Han, Tony Kang, Gerald Lobo
Managerial Ownership And Firms' Information Environment, Soongsoo Han, Tony Kang, Gerald Lobo
Research Collection School Of Accountancy
We examine the relation between managerial stock ownership and the firm’s information environment. We focus on three dimensions of the information environment: total, public, and private information precision (Barron, Kim, Lim and Stevens 1998). Our results suggest that firms’ total and public information precision are positively related to managerial ownership. In contrast, there is no clear pattern in private information precision across different levels of managerial ownership. We also observe that managerial ownership has a greater impact on the firm’s public information environment after the implementation of Regulation Fair Disclosure, suggesting that the regulation was effective in improving the firms’ …
Profitability Analysis Of Chinese Listed Firms: 1992-2004, Jianjun Niu, Heng Yue, Guohua Jiang
Profitability Analysis Of Chinese Listed Firms: 1992-2004, Jianjun Niu, Heng Yue, Guohua Jiang
Research Collection School Of Accountancy
This research collects and analyses the profitability data of Chineselisted companies from 1992 to 2004. Results show that, on average, theprofitability of Chinese listed companies has declined over the period. Post-IPOearnings also exhibit a downward trend. A further analysis reveals that changes inlisted firms’ profitability ratio follow a strong mean reversion pattern.
Managerial Ownership, Corporate Monitoring And Audit Pricing, Soongsoo Han, Julia Higgs, Tony Kang
Managerial Ownership, Corporate Monitoring And Audit Pricing, Soongsoo Han, Julia Higgs, Tony Kang
Research Collection School Of Accountancy
We study whether managerial ownership and corporate monitoring (board quality and analyst coverage) relate to audit pricing. Managerial ownership has been identified as a fraud risk factor under SAS 99. However, the role of ownership is not clear. Under an alignment view, high levels of stock ownership align management with shareholders. Under an entrenchment view, high levels of ownership may motivate management to be self interested. Corporate monitoring, as measured by analyst coverage and overall board quality (Gomper’s index), are associated with information quality. Audit pricing will be affected to the extent that auditors perceive monitoring as being relevant to …
Ceo Characteristics, Ceo-Firm Match And Corporate Refocus Value, Sheng Huang
Ceo Characteristics, Ceo-Firm Match And Corporate Refocus Value, Sheng Huang
Research Collection Lee Kong Chian School Of Business
This paper investigates how CEO characteristics affect firm value through divestiture. Using a novel dataset tracking CEO’s career path, from which CEO’s talent and expertise are reasonably inferred, I find when CEOs have differing abilities across divisions of conglomerates, they more likely divest divisions that they are less qualified to manage, and focus on divisions of better match with their talents and expertise. The better match of their talents with firms’ retained assets is the source of value creation from refocusing divestiture. Divestitures that increase corporate focus but not improve the talent-asset match do not create value in long run. …
Analyst Coverage And The Cost Of Raising Equity Capital: Evidence From Underpricing Of Seasoned Equity Offerings, Robert M. Bowen, Xia Chen, Qiang Cheng
Analyst Coverage And The Cost Of Raising Equity Capital: Evidence From Underpricing Of Seasoned Equity Offerings, Robert M. Bowen, Xia Chen, Qiang Cheng
Research Collection School Of Accountancy
Theorists have long recognized that information asymmetry among investors adversely affects the cost of raising equity capital (e.g., Diamond and Verrecchia 1991). When there is information asymmetry, relatively uninformed investors are reluctant to trade because of higher potential loss from transacting with informed investors (e.g., Glosten and Milgrom 1985; Kyle 1985). To trade, uninformed investors demand compensation for the risks of trading with informed investors (O’Hara 2003). In the case of issuing new equity, firms must issue shares at a discount to overcome the reluctance of uninformed investors. Such discounting leads to smaller proceeds to the firm and a higher …
Earnings Restatements, Changes In Ceo Compensation, And Firm Performance, Qiang Cheng, David Farber
Earnings Restatements, Changes In Ceo Compensation, And Firm Performance, Qiang Cheng, David Farber
Research Collection School Of Accountancy
Prior research finds that earnings restatements are linked to CEOs' excessive option-based compensation and equity holdings. In this paper, we investigate whether firms that experience earnings restatements recontract with their CEOs to reduce their option-based compensation and if so, whether this leads to improved firm performance. Based on 289 restatement firms over the period 1997–2001, we find that the proportion of CEOs' compensation in the form of options declines significantly in the two years following the restatement. Furthermore, we document that this reduction is accompanied by a decrease in the riskiness of investments, as reflected in lower stock return volatility …
Managerial Ownership And Firms' Information Environment, Soongsoo Han, Tony Kang, Gerald Lobo
Managerial Ownership And Firms' Information Environment, Soongsoo Han, Tony Kang, Gerald Lobo
Research Collection School Of Accountancy
We examine the relation between managerial stock ownership and the firm’s information environment. We focus on three dimensions of the information environment: total, public, and private information precision (Barron, Kim, Lim and Stevens 1998). Our results suggest that firms’ total and public information precision are positively related to managerial ownership. In contrast, there is no clear pattern in private information precision across different levels of managerial ownership. We also observe that managerial ownership has a greater impact on the firm’s public information environment after the implementation of Regulation Fair Disclosure, suggesting that the regulation was effective in improving the firms’ …
Does Earnings Quality Affect Information Asymmetry: Evidence From Trading Costs, Nilabhra Bhattacharya, Hemang Desai, Kumar Venkataraman
Does Earnings Quality Affect Information Asymmetry: Evidence From Trading Costs, Nilabhra Bhattacharya, Hemang Desai, Kumar Venkataraman
Research Collection School Of Accountancy
The adverse consequences of poor earnings quality have been the subject of significant debate among academics, practitioners and regulators. However, the empirical evidence on pricing implications of earnings quality is sparse and controversial. We examine one potential consequence of poor earnings quality - its impact on information asymmetry. We document that poor earnings quality increases the adverse selection risk as manifested in trading costs and lowers liquidity in financial markets. Both innate and discretionary components of earnings quality contribute significantly to information asymmetry. Further, poor earnings quality exacerbates information asymmetry around earnings announcements, especially for firms where earnings represent the …
Search For Optimal Ceo Compensation: Theory And Empirical Evidence, Melanie Cao, Rong Wang
Search For Optimal Ceo Compensation: Theory And Empirical Evidence, Melanie Cao, Rong Wang
Research Collection Lee Kong Chian School Of Business
We integrate an agency model with dynamic search equilibrium to study three important issues concerning executive compensation. We show that 1) the equilibrium pay-to-performance sensitivity depends positively on a firm’s specific risk, and negatively on its systematic risk, which offers a plausible explanation for the inconclusive empirical relationship between the pay-to-performance sensitivity and a firm’s total risk; 2) a growing economy simultaneously induces the growth in executive compensation and firm size; 3) the faster growth of executive compensation relative to the growth of firm size in the past decade is mostly due to the increase in firms’ specific risks.
Cross-Country Analysis Of Auditor Specialization Premium: Effect Of Legal, Extra-Legal And Political Environments, Sirinidhi Bin, M. Hossain, Chee Yeow Lim
Cross-Country Analysis Of Auditor Specialization Premium: Effect Of Legal, Extra-Legal And Political Environments, Sirinidhi Bin, M. Hossain, Chee Yeow Lim
Research Collection School Of Accountancy
Previous literature has provided mixed evidence of a premium in audit fee for industry-specialist auditors in US and other developed countries. In this cross-country study spanning twelve non-US countries, we provide evidence of such a premium in the international context, implying that specialist auditors provide a higher level of investor assurance than non-specialists. Further, we show that the average audit fee in countries with effective legal, extra-legal and political institutions is higher but the specialization premium is lower than in other countries. We interpret this finding as evidence that while effective institutions increase the demand for average level of audit …
Audit Partner Tenure, Audit Firm Tenure, And Discretionary Accruals: Does Long Auditor Tenure Impair Earnings Quality?, Chih-Ying Chen, Chan-Jane Lin, Yu-Chen Lin
Audit Partner Tenure, Audit Firm Tenure, And Discretionary Accruals: Does Long Auditor Tenure Impair Earnings Quality?, Chih-Ying Chen, Chan-Jane Lin, Yu-Chen Lin
Research Collection School Of Accountancy
Mandatory audit partner relation has been adopted in some countries while audit firm rotation is still being debated in many places. Most of the extant research on the relation between auditor tenure and earnings quality provides evidence at the audit firm level. However, since audit firm tenure is correlated with partner tenure and audit firm rotation is more costly than partner rotation, it is important to know whether earnings quality is related to audit firm tenure, partner tenure, or both. We investigate this issue using a sample of Taiwanese companies for which the audit report must be signed by two …
The Association Between Excess Audit Fees And Audit Quality: A Us-Uk Comparison, Soongsoo Han, Tony Kang, Yong Keun Yoo
The Association Between Excess Audit Fees And Audit Quality: A Us-Uk Comparison, Soongsoo Han, Tony Kang, Yong Keun Yoo
Research Collection School Of Accountancy
Prior studies that examine the association between excess audit fees and audit quality (measured by discretionary accruals) using US data fail to document a significant association. However, there is no convincing explanation for this result to date. In this study, we test a cancellation hypothesis, which suggests that the non-association might be due to the cancellation effect between the risk-effort effect and the bonding effect that excess fees capture. To the extent that excess fees capture the compensation for effort the auditor puts in for a risky client, which is not captured in the existing audit fee models (the risk-effort …
Do Family Firms Provide More Or Less Voluntary Disclosure?, Xia Chen, Shuping Chen, Qiang Cheng
Do Family Firms Provide More Or Less Voluntary Disclosure?, Xia Chen, Shuping Chen, Qiang Cheng
Research Collection School Of Accountancy
We examine the voluntary disclosure practices of family firms. We find that, compared to nonfamily firms, family firms provide fewer earnings forecasts and conference calls, but more earnings warnings. Whereas the former is consistent with family owners having a longer investment horizon, better monitoring of management, and lower information asymmetry between owners and managers, the higher likelihood of earnings warnings is consistent with family owners having greater litigation and reputation cost concerns. We also document that family ownership dominates nonfamily insider ownership and concentrated institutional ownership in explaining the likelihood of voluntary disclosure. Using alternative proxies for the founding family's …
Governance Role Of Auditors And Legal Environment: Evidence From Corporate Disclosure Transparency, Sam Han, Tony Kang, Yong Keun Yoo
Governance Role Of Auditors And Legal Environment: Evidence From Corporate Disclosure Transparency, Sam Han, Tony Kang, Yong Keun Yoo
Research Collection School Of Accountancy
This study examines whether auditor size associates with disclosure transparency. Given thatprior studies generally focus on discretionary accruals to investigate the relation betweenauditor size and financial reporting quality, there is little evidence on how auditor size relates toother attributes of reporting quality. Further, studies that examine this associationinternationally produce mixed results as to how auditor size relates to reporting quality indifferent legal origins. Focusing on corporate disclosure transparency (i.e., disclosure levels), wefind that auditor size and disclosure level are positively associated across countries and that theassociation is stronger in code law regimes than in common law regimes. The latter findingsupports …
Non-Audit Service Fees And Audit Quality: The Impact Of Auditor Specialization, Chee Yeow Lim, Hun-Tong Tan
Non-Audit Service Fees And Audit Quality: The Impact Of Auditor Specialization, Chee Yeow Lim, Hun-Tong Tan
Research Collection School Of Accountancy
We posit that the effect of non-audit fees on audit quality is conditional on auditor industry specialization. Industry specialist auditors are more likely than nonspecialists to be concerned about reputation losses and litigation exposure, and to benefit from knowledge spillovers from the provision of non-audit services. We find evidence that audit quality measured by increased propensity to issue going-concern opinion, increased propensity to miss analysts' forecasts, as well as higher earnings-response coefficients increases with the level of non-audit services acquired from industry specialist auditors compared to nonspecialist auditors.
Do Poison Pills Increase Firm Risk?, Thomas Turk, Jeremy C. Goh, Candace Ybarra
Do Poison Pills Increase Firm Risk?, Thomas Turk, Jeremy C. Goh, Candace Ybarra
Research Collection Lee Kong Chian School Of Business
Management scholars have argued that an active takeover market discourages risk-taking by managers and that takeover defenses serve to counter the risk-reducing pressures of an active takeover market. This study employs the Black and Scholes Option Pricing Model to determine whether or not adoption of poison pill securities increases investor perceptions of firm risk. The results provide evidence that the Option-Implied Standard Deviations of common stock returns increase significantly on the poison pill adoption date, on average. Furthermore, the implied standard deviations remained significantly above pre-adoption levels for several days after the poison pill adoption, suggesting that the perceived increase …
The Impact Of Investor Protection Law On Takeovers: The Case Of Leveraged Buyouts, Jerry Cao, Douglas J. Cumming, Jeremy Goh, Meijun Qian, Xiaoming Wang
The Impact Of Investor Protection Law On Takeovers: The Case Of Leveraged Buyouts, Jerry Cao, Douglas J. Cumming, Jeremy Goh, Meijun Qian, Xiaoming Wang
Research Collection Lee Kong Chian School Of Business
This paper examines the impact of investor protection on the value creation of LBOs. We find that target shareholders’ wealth gain is higher in countries with better investor protection. The impact of investor protection on takeover premium is larger for LBO than non-LBO transactions. We also find evidence suggesting that club LBOs are not priced lower than non-club deals after accounting for endogeneity problem. These results suggest that investor protection law may act as an important safeguard for minority shareholders in LBO transactions.
The Implications Of Debt Heterogeneity For R&D Investment And Firm Performance, Parthiban David, Jonathan P. O'Brien, Toru Yoshikawa
The Implications Of Debt Heterogeneity For R&D Investment And Firm Performance, Parthiban David, Jonathan P. O'Brien, Toru Yoshikawa
Research Collection Lee Kong Chian School Of Business
An assumption in prior research is that debt is homogeneous and provides inappropriate governance for R&D investments. We argue that debt is heterogeneous: although transactional debt does indeed impose strict contractual constraints that provide inappropriate governance for R&D investments, relational debt has very different characteristics that provide more appropriate governance. Using a sample of Japanese firms, we find that firms that align their debt structures with their R&D investments perform better than those that are misaligned. Furthermore, firms tend to align their debt structure with R&D investments, but only after deregulation permits relatively free access to various types of debt.
Too Little Or Too Much? Untangling The Relationship Between Corporate Philanthropy And Corporate Financial Performance, Heli Wang, Jaepil Choi, Jiatao Li
Too Little Or Too Much? Untangling The Relationship Between Corporate Philanthropy And Corporate Financial Performance, Heli Wang, Jaepil Choi, Jiatao Li
Research Collection Lee Kong Chian School Of Business
What is the relationship between corporate philanthropy and corporate financial performance? Some scholars argue that corporate philanthropy facilitates stakeholder cooperation and helps secure access to critical resources controlled by those stakeholders, suggesting that corporate philanthropy should be positively associated with corporate financial performance. In contrast, other scholars take a negative stance, suggesting that corporate philanthropy diverts valuable corporate resources and tends to inhibit corporate financial performance. Existing empirical studies have not found conclusive evidence on the corporate philanthropy-financial performance relationship. Integrating and extending existing perspectives, this study develops the argument that the relationship between corporate philanthropy and financial performance is …
The Association Between Audit Fees And Auditors' Opinions On Internal Control Weakness Under Section 404 Of The Sox, Jong-Hag Choi, Jeong-Bon Kim, Soo Young Kwon, Yoonseok Zang
The Association Between Audit Fees And Auditors' Opinions On Internal Control Weakness Under Section 404 Of The Sox, Jong-Hag Choi, Jeong-Bon Kim, Soo Young Kwon, Yoonseok Zang
Research Collection School Of Accountancy
The Section 404 of Sarbanes-Oxley Act (SOX) requires top management toestablish, maintain, and regularly evaluate the effectiveness of the internal controlover financial reporting (ICOFR), and obtain an auditor’s attestation. In this paper, weidentify 232 firms that received “Ineffective” audit opinion on the effectiveness ofICOFR due to one or more material weakness in internal control (WIC). We examinethe association between audit fees and the WIC for pre- and post-SOX period. Wefind that highly levered clients with the WIC paid greater audit fees even in the preSOXperiod and continuously paid the high fees in post-SOX period, whereas theloss-making clients with WIC paid …
Japanese Corporate Governance: Structural Change And Financial Performance, Asli M. Colpan, Toru Yoshikawa, Takashi Hikino, Hiroaki Miyoshi
Japanese Corporate Governance: Structural Change And Financial Performance, Asli M. Colpan, Toru Yoshikawa, Takashi Hikino, Hiroaki Miyoshi
Research Collection Lee Kong Chian School Of Business
This paper analyzes institutional and legal changes related to corporate governance and their impact on financial performance in Japan since the second half of the 1990s. We attempt to address two issues systematically: (1) how much the governance reforms of Japanese firms transformed the conventional system of alliance capitalism and managerial control; and (2) what economic outcomes those governance changes have yielded. As the Commercial Code and other legal and institutional frameworks were revised, Japanese firms experienced shifts in terms of stock ownership, corporate control and managerial organizations. Our empirical results show that the influence of new ownership composition and …
Legal Systems And Earnings Quality: The Role Of Auditor Industry Specialization, Chee Yeow Lim, Soo Young Kwon, Patricia Mui Siang Tan
Legal Systems And Earnings Quality: The Role Of Auditor Industry Specialization, Chee Yeow Lim, Soo Young Kwon, Patricia Mui Siang Tan
Research Collection School Of Accountancy
This paper extends prior studies in auditor industry specialization to an international setting and examines if the impact of industry specialist auditors on earnings quality is dependent on the legal environments. Using data for 28 countries over 20 industries from 1993 to 2003, we find that clients of industry specialist auditors have lower discretionary current accruals and higher earnings response coefficients than clients of nonspecialist auditors. In addition, we find that the impact of auditor industry specialization on earnings quality increases as the legal environment weakens. Collectively, the results suggest that the benefits from engaging the services of industry specialist …
Monitoring: Which Institutions Matter?, Xia Chen, Jarrad Harford, Kai Li
Monitoring: Which Institutions Matter?, Xia Chen, Jarrad Harford, Kai Li
Research Collection School Of Accountancy
Within a cost–benefit framework, we hypothesize that independent institutions with long-term investments will specialize in monitoring and influencing efforts rather than trading. Other institutions will not monitor. Using acquisition decisions to reveal monitoring, we show that only concentrated holdings by independent long-term institutions are related to post-merger performance. Further, the presence of these institutions makes withdrawal of bad bids more likely. These institutions make long-term portfolio adjustments rather than trading for short-term gain and only sell in advance of very bad outcomes. Examining total institutional holdings or even concentrated holdings by other types of institutions masks important variation in the …
Do Direct Cash Flow Disclosures Help Predict Future Operating Cash Flows And Earnings?, Steven Francis Orpurt, Yoonseok Zang
Do Direct Cash Flow Disclosures Help Predict Future Operating Cash Flows And Earnings?, Steven Francis Orpurt, Yoonseok Zang
Research Collection School Of Accountancy
Motivated by recent FASB, IASB and CFA Institute comments, we extend the scant literature on direct method cash flow disclosures by exploring their predictive ability. A primary stated purpose of the direct method is to better forecast future operating performance. To test this purpose, we use a FERC (future ERC) methodology, finding that firms voluntarily producing direct method statements reflect more information about future earnings in their current stock returns than other firms. Supporting our FERC analysis, we document that substantial articulation errors exist when direct method cash flow components are estimated from either indirect method cash flow statements or …
Are Us Family Firms Subject To Agency Problems? Evidence From Ceo Turnover And Firm Valuation, Xia Chen, Zhonglan Dai
Are Us Family Firms Subject To Agency Problems? Evidence From Ceo Turnover And Firm Valuation, Xia Chen, Zhonglan Dai
Research Collection School Of Accountancy
This paper investigates the impact of the founding family's presence in US public firms on the extent of agency problems related to CEO turnover decisions and on firm valuations after poor performance. In particular, we focus on three types of US public firms: family CEO firms, professional CEO family firms (family firms managed by a hired CEO outside the founding family), and non-family firms. We hypothesize that, the agency problem arising from the expropriation of small shareholders by large shareholders in family CEO firms and the agency problem arising from the separation of ownership and control in non-family firms, lead …