Corporate Finance Commons^™

Multinational Platforms And Legitimacy Spillovers, Sali Li, Maximilian Stallkamp, Noman Shaheer, Liang Chen

Research Collection Lee Kong Chian School Of Business

Multinational platforms (MNPs), such as TikTok, Grab, and Airbnb, are facing sig nificant legitimacy challenges in foreign markets. While some of these challenges are similar to those experienced by conventional multinational enterprises (MNEs), the platform-based business models of MNPs, which create value primarily through networks of external users and complementors, rather than through hierarchically controlled foreign subsidiaries, lead to unique legitimacy challenges and open up novel strategies for overcoming them. We explore how MNPs can leverage legiti macy spillovers from their complementors to overcome legitimacy challenges and establish credibility in new markets. We propose that effective governance and stra tegic …

Politically Connected Firms And The Cash Flow Sensitivity Of Cash: International Evidence, Yuanto Kusnadi

Research Collection School Of Accountancy

This paper examines the role of political connections on the cash flow sensitivity of cash using a sample of international firms. The finding reveals that the cash flow sensitivity of cash is lower for politically connected firms than their non-connected counterparts, which is supportive of the precautionary motive of cash holdings. Further analyses reveal that the result is driven by political connections that are made through the directors of the firms and with members of parliament, as well as by differences in country-level institutional infrastructure. Overall, the empirical results corroborate that of previous studies on the relevance of the precautionary …

Discretionary Dissemination On Twitter, Richard M. Crowley, Wenli Huang, Hai Lu

Research Collection School Of Accountancy

The study provides large-scale descriptive evidence on the timing and nature of corporate financial tweeting. Using an unsupervised machine learning approach to analyze 24 million tweets posted by S&P 1500 firms from 2012 to 2020, we find that firms are more likely to tweet financial information around significantly negative or positive news events, such as earnings announcements and the filing of financial statements. This convex U-shaped relation between the likelihood of posting financial tweets and the materiality of accounting events becomes stronger over time. Whereas research based on early samples concludes that firms are less likely to disseminate financial information …

Public Enforcement Through Independent Directors, Xiaoxi Li, Pingui Rao, Yong George Yang, Heng Yue

Research Collection School Of Accountancy

We examine how public enforcement and private enforcement interact to contain self-dealing activities in emerging markets. Using data from China, we find that firms receiving comment letters concerning related party transactions (RPTs) from stock exchanges significantly reduce their RPTs in subsequent years. We further find that (1) the subsequent reduction in RPTs is more pronounced when independent directors have higher career or reputation concerns and (2) independent directors are more likely to dissent or resign if their firms do not significantly reduce RPTs after receiving RPT comment letters, especially if they have high reputation concerns. Our study sheds light on …

Big Data Analytics And Management Forecasting Behavior, Beng Wee Goh, Na Li, Tharindra Ranasinghe

Research Collection School Of Accountancy

This paper investigates whether the use of Big Data analytics by firms has a spillover effect on management forecasting behavior. Insights provided by Big Data could potentially improve firms’ ability to forecast earnings (supply channel) and investor demand for earnings information is likely higher for firms engaging in data analytics (demand channel). Using a text-based measure of firms’ commitments to and usage of Big Data analytics, we find that Big Data analytics usage is positively associated with the propensity to issue management earnings forecasts. Consistent with the “supply channel” explanation, we find that Big Data analytics usage is positively associated …

Essays On Corporate Finance, Su Hee Yun

Dissertations and Theses Collection (Open Access)

Chapter 1. The impact of ESG disasters on Green and Brown firms

I investigate the effect of a firm’s prior ESG reputation on the market impact of ESG incidents. I find that firms with a better ESG reputation, i.e., higher ESG ratings, experience less negative stock-market reactions and analysts' forecast revisions compared to firms with a poorer ESG reputation. But managers of Greener firms, when producing earnings guidance, do not forecast a lower impact of these incidents on future earnings. Similarly, actual decreases in future earnings following these incidents are not significantly different between Green and Brown firms. Altogether, the …

Informativeness Of Key Audit Matters: Evidence From China, Beng Wee Goh, Kiat Bee Jimmy Lee, Dan Li, Muzhi Wang

Research Collection School Of Accountancy

This study examines whether the key audit matters (KAMs) disclosed in expanded audit reports as a part of recent regulatory reforms are informative for investors in an emerging economy setting. Using the recent adoption of expanded audit reports for firms listed exclusively in Mainland China, we find robust evidence that the abnormal trading volume and earnings response coefficients (ERCs) are higher and that stock price synchronicity is lower during the postadoption than preadoption period. In additional tests, we find evidence that KAMs are more informative for non-state-owned enterprises (non-SOEs), smaller firms, and firms with a smaller analyst following. Finally, we …

Cds Channels Of Influence On Discretionary Accruals, Hao Cheng, Kian Guan Lim

Research Collection Lee Kong Chian School Of Business

Existing studies indicated that firm debt holders can use the credit default swap (CDS) market to hedge their credit risk, and thus they would reduce their monitoring of the firms, leading to largely distressed firms shirking and increasing positive abnormal earnings accruals. Besides providing insurance, however, the CDS spreads also perform price discovery of credit risk information sought by trade creditors and potential lenders who are not protected. High absolute abnormal discretionary accruals or bad earnings quality, especially negative abnormal accruals, would lead adverse CDS price signals that are very costly to the firm. This compels the firm under nondistressed …

An Investigation On The Effects Of Fund Manager’S Narcissism On Fund Performance, Ning Zhou

Dissertations and Theses Collection (Open Access)

As the capital market continues to expand, the benefits of securities investment funds have become increasingly prominent. However, for investors, selecting the right investment fund from numerous options can be more challenging than directly choosing stocks. The process of seeking investment opportunities also involves selecting the right fund manager, a step often underestimated by investors. Research in behavioral finance indicates that fund managers tend to exhibit irrational decision behavior under immense pressure and uncertain investment outcomes. Narcissism as a psychological trait may influence fund managers’ decision-making behavior. This study, through questionnaires and empirical analysis, examines the narcissistic traits of Chinese …

Prosocial Ceos, Corporate Policies, And Firm Value, Mei Feng, Weili Ge, Zhejia Ling, Wei Ting Loh

Research Collection School Of Accountancy

This paper examines how chief executive officers' (CEOs') prosocial tendency influences corporate policies and firm value. We use individuals' involvement with charitable organizations as a proxy for prosocial tendency. We find that, compared to firms with non-prosocial CEOs, firms with prosocial CEOs have lower executive subordinate turnover, implement more employee-friendly policies, experience higher customer satisfaction, and engage in more socially responsible activities. We also find that firms with prosocial CEOs have higher value and lower risk, partly due to the corporate policies adopted by prosocial CEOs. These results are corroborated when we compare changes in corporate policies and firm value …

To Protect Or To Hide: An Investigation On Corporate Redacted Disclosure Motives Under New Fast Act Regulation, Yan Ma, Qian Mao, Nan Hu

Research Collection School Of Computing and Information Systems

China adopted amendments allowing companies to redact filings without prior approval in 2016. Leveraging this change as a quasi-nature experiment, we explore whether managers utilize redacted information to withhold bad information in the more lenient regulatory environment. Our investigation uncovers a significant shift in managerial behavior: Since 2016, managers incline to employ redactions to obscure negative news rather than safeguarding proprietary data. Furthermore, we find that the poorer firm performance and a higher cost of equity are associated with the redacted disclosures after 2016, suggesting that investors perceive an increase in firm-specific risk attributed to withholding bad news through redactions.

When Do Corporate Good Deeds Become A Burden? The Role Of Corporate Social Responsibility Following Negative Events, Changhyun Kim, Yoonseok Zang, Heli Wang, Kate Niu

Research Collection School Of Accountancy

This study investigates the differential roles of corporate social responsibility (CSR) in the context of negative events. By categorizing CSR and negative events by their respective stakeholder groups, primary and secondary stakeholders, we theorize and test differential impacts of CSR and their interaction effects with different types of negative events. We propose that, while CSR toward secondary stakeholders offers the monotonous risk-tempering effect, CSR toward primary stakeholders has heterogeneous effects when facing negative events. Specifically, the effect of CSR toward primary stakeholders varies with the type of negative events. When negative events are associated with secondary stakeholders in the domain …

The Effect Of Pcaob Inspections On Corporate Innovation: Evidence From Deficiencies About The Valuation Of Intangibles, Jungbae Kim

Research Collection School Of Accountancy

I examine the economic consequences on corporate innovation when PCAOB inspections cite auditors for insufficient procedures in auditing the valuation of intangibles. I find that the clients of deficient auditors recognize larger and timelier impairments of intangibles, suggesting that affected auditors increase scrutiny about the valuation of intangibles in subsequent audits. This effect obtains only for valuation-related deficiencies and is salient for the clients of auditors who receive such deficiencies repeatedly. I also document real effects that the clients of deficient auditors exhibit less use of external mergers and acquisitions—which yield recognizable intangibles whose valuation is subject to increased auditor …

Corporate Technological Patent And Financing Accessibility - An Empirical Analysis Based On Startups, Tao Xu

Dissertations and Theses Collection (Open Access)

Technological innovation is not only central to competition among firms but also a crucial driver of economic growth. The process of corporate technological innovation often demands substantial financial support. However, due to information asymmetry and capital constraints, tech startups encounter numerous obstacles in sustaining innovation. Venture capital is instrumental in fostering continuous corporate innovation, providing essential financial support for innovative activities, and playing a key role in achieving core technological breakthroughs. As a significant manifestation of corporate innovative technology, patents can mitigate the information asymmetry between startups and investors by creating a positive patent signal from diverse perspectives. Therefore, investigating …

Financial Literacy And Ipo Underpricing, Xiaoran Jia, Kiridaran G. Kanagaretnam, Chee Yeow Lim, Gerald J. Lobo

Research Collection School Of Accountancy

Using an international sample of IPO firms and two country-level measures of financial literacy, we find strong evidence that financial literacy is negatively associated with IPO underpricing. In cross-sectional analyses, we find that the effect of financial literacy in reducing IPO underpricing is more pronounced when the information environment is less transparent. Employing path analysis, we document that information friction, firm transparency, and stock market participation are mechanisms that mediate this relationship. Our study contributes to and extends the literature by providing strong evidence that citizens' financial literacy has an important and consistent influence on IPO underpricing.

The Governance Of Director Compensation, Lily Fang, Sterling Huang

Research Collection School Of Accountancy

The average total compensation of directors in U.S.-listed companies was $342,030 in 2020, 5.06 times the median household income. Directors set their own pay, giving rise to potential self-dealing. We argue and document that in the presence of self-dealing, external mechanisms such as legal standards act as effective means of governance. Following a landmark Delaware court ruling that subjected director pay to a more stringent legal standard, Delaware-incorporated firms reduced director compensation relative to non-Delaware firms and experienced positive and non-transient stock price reactions. Our results indicate that proper governance of director compensation enhances firm value.

Intrafirm Knowledge Sharing In The Investment Research Industry, Artur Hugon, An-Ping Lin, Stanimir Markov

Research Collection School Of Accountancy

We study interdepartment knowledge sharing in an investment research setting where the benefits are potentially significant for the brokerage and the capital market, but so are the frictions impeding it. Using hand-collected data on equity analyst access to in-house debt research expertise, we find significant benefits to equity analysts in the form of improved ability to forecast cash flows and to anticipate credit rating downgrades. Moreover, we find evidence that access to management and research expertise underlie in-house debt analysts' capacity to generate information beneficial to equity analysts. Finally, these benefits exist only in the presence of a collaborative brokerage …

The Effects Of Perceived Cultural Conflicts On Employee Retention After Mergers And Acquisitions, Chengpeng Luan

Dissertations and Theses Collection (Open Access)

With China’s deepening medical reform, the state has introduced a series of regulatory policies, which has set off a frenzy of mergers and acquisitions in the medical device industry. Small and medium-sized device distribution companies with small scale and weak strength have closed. Large and powerful large medical device distribution enterprises seize the opportunity to expand mergers and acquisitions rapidly.

Based on the researcher's work experience and data availability, this paper takes an MNC company, M, acquisition of a high-quality local company, K, as the research object. Based on the actual operation of the medical device industry, combined with the …

"Just Beat It" Do Firms Reclassify Costs To Avoid The Base Erosion And Anti-Abuse Tax (Beat) Of The Tcja?, Stacie O. Laplante, Christina M. Lewellen, Daniel P. Pynch, David M. P. Samuel

Research Collection School Of Accountancy

This study examines whether multinational corporations (MNCs) reclassify related-party payments to avoid the new base erosion and anti-abuse tax (BEAT). The Tax Cuts & Jobs Act of 2017 included the BEAT to combat income shifting from the U.S. to foreign entities. An exclusion in the tax law provides MNCs an incentive to reclassify related-party payments as cost of goods sold. We use a triple-difference design that leverages the BEAT filing threshold of $500 million in revenue and the parent company’s location to document increases in the unconsolidated sales of foreign subsidiaries of MNCs subject to BEAT relative foreign subsidiaries of …

Efficiency And Sustainability Of Bond Market: Evidence From Aftermarket Trading Of Us Corporate Bond Offerings, Lisa (Zongfei) Yang, Choo Yong, Jeremy Goh

Research Collection Lee Kong Chian School Of Business

We find that for bond offerings that are non-self-marketed, there is a significantly larger proportion of institutional-sized sell trades than buy. In stark contrast, for self-marketed offerings by underwriters, immediate post-offer trading is characterized by a larger proportion of institutional-sized buy trades than sell. We also find evidence suggesting that retail investors, who are initially shut out of the offering deals, buy bonds in the secondary market at a higher price. Our evidence suggests that certain institutional investors receiving allocations of non-self-marketed offerings flip them for a quick profit. The systematic disparity in aftermarket trading immediately following self-marketed versus non-self-marketed …

Diversification Strategies And Corporate Financial Distress: The Impact Of Monetary Tightening And Ipo Timing, Yingcen Zhang

Dissertations and Theses Collection (Open Access)

Diversification as a strategic objective has become increasingly pursued by many enterprises. However, whether diversification truly brings robust business operations and risk dispersion effects remains a focal point of attention in both academic and practical realms. This study, grounded in Chinese practice, empirically examines the relationship between corporate diversification and financial distress and further discusses the interactive impact of monetary policy tightening and diversification on corporate financial distress.

Empirical analysis results indicate a positive correlation between corporate diversification and financial distress in China. This finding suggests that diversification may not always confer the advantage of risk dispersion to enterprises; it …

Institutions And Corporate Tax Evasion: A Review Of The Literature And A Methodological Exploration, Kiridaran Kanagaretnam, Jimmy Lee, Chee Yeow Lim, Gerald J. Lobo

Research Collection School Of Accountancy

We first review the recent research published in JIAR on the influence of international institutions on accounting practices and follow it with a discussion of the literature studying the influence of institutions on tax avoidance and tax evasion. We then explore a new methodological approach that draws on the theory of institutional hierarchy proposed by Williamson (2000) and examine the relative importance of three broad types of institutions (informal, formal and media) in curtailing perceived tax evasion activities. We contribute to the international accounting literature by summarizing the recent research that addresses tax avoidance and tax evasion and providing preliminary …

Segment Disaggregation And Equity-Based Pay Contracts, Young Jun Cho, Hojun Seo

Research Collection School Of Accountancy

We study the role of segment disaggregation in equity-based pay contracts in diversified firms. Disaggregated segment disclosures can improve the observability of managerial actions in internal capital markets and thus increase implicit incentives for managers to allocate resources as desired by shareholders, substituting for explicit incentives provided to CEOs. We use the adoption of Statement of Financial Accounting Standards No. 131 as an identification strategy and find that firms affected by this segment reporting mandate significantly decreased the provision of equity-based incentives in the post-adoption period, especially for firms with higher operating volatilities. This effect is also more pronounced for …

Investor Reaction To Spacs' Voluntary Disclosures, Vincent Castellani, Karl A. Muller, K.J. Park

Research Collection School Of Accountancy

SPACs are formed to combine with and provide a private firm public trading status and a capital infusion. Firms that enter the public market through a SPAC combination are believed to possess greater voluntary disclosure discretion than traditional IPOs as they obtain their public trading status through a merger. Consistent with regulators’ concerns, recent research finds that SPACs use this discretion opportunistically by issuing optimistic guidance. This study examines how investors respond to these disclosures. We find that optimistic projections increase retail purchasing, which is higher than that of institutional purchasing. Additionally, we find that investors partially see through the …

Common Ownership And Analyst Forecasts, Qiang Cheng, Shuqing Luo, Jinping Zhang

Research Collection School Of Accountancy

We examine the effect of the common ownership relation between brokerage houses and the firms covered by their analysts (referred to as co-owned brokerage houses, co-owned firms, and connected analysts, respectively) on analyst forecast performance. Common ownership can help the connected analysts have better access to co-owned firms, leading to higher-quality analyst research. However, common owners have incentives for higher valuation of the co-owned firms and thus can exert pressure on the connected analysts to issue optimistically biased research reports for these firms. We find that common ownership improves analyst forecast accuracy. This result is robust to a difference-in-differences design …

Female Ceos And Investment Efficiency In The Vietnamese Market, Jun Myung Song, Chune Young Chung

Sim Kee Boon Institute for Financial Economics

This paper proposes female CEOs’ overconfidence and risky behavior stem from gender stereotype threats. Using two subsamples from Vietnam—firms in the Northern and Southern regions—we empirically show that female CEOs in the North, where there is less gender stereotyping, tend to overinvest relative to male CEOs. However, in the South, they are indifferent. Additional analysis reinforces the main finding that female CEOs in the North tend to take more risks even when dealing with market volatility and uncertainty (e.g., the COVID-19 pandemic). Such risky behaviors do not deteriorate firm value but, instead, possibly improve firm performance.

Monetary Transmission And Government Investment In China, Qian Han, Zhaogang Song, Yufei Yuan, Yuanhang Zhao

Research Collection Lee Kong Chian School Of Business

The quantity measure of money supply—the M2 growth, in particular—has been used as the intermediate target of monetary policy in China since 2000. We document three findings on the transmission of money supply shocks to firm investment and financing over the period from 1998 to 2016. First, positive money supply shocks have significant negative effects on firm investment and do not have consistent impacts on firm financing, contradicting the standard monetary transmission mechanism. Second, using short-term global capital flows as an exogenous money supply factor, we recover the standard positive effect of money supply shocks on firm investment and financing, …

How Commonality Persists? (Through Investors' Sentiment And Attention), Chyng Wen Tee, Raja Velu, Zhaoque Zhou

Research Collection Lee Kong Chian School Of Business

Studies on commonality generally attribute the variation in asset returns to the variation in order flows. In this research study, we show that order flows do not predict asset returns, rather their relationship have been static over time. Thus we model both returns and the order flows as endogenous variables, and use investors' sentiment and attention as exogenous factors via a reduced-rank regression. We provide empirical evidence to demonstrate that cross-sectional commonality in attention (sentiment) is linearly (nonlinearly) associated with both returns and order flows at the intraday level, while the sentiment and attention measures themselvesexhibit a nonlinear mutual relationship, …

The Impact Of Equity Incentive Executive Compensation On Corporate Performance, Bing Ruan

Dissertations and Theses Collection (Open Access)

The management rights and ownership of modern enterprises are often separated. Enterprise owners, i.e. shareholders, pursue the maximization of enterprise profits, while enterprise managers pursue the maximization of their own interests. This leads to conflicts between the two parties in the process of pursuing the maximization of their respective interests. To address the inconsistency of interests in principal-agent relationships, effective corporate governance mechanisms are needed. The equity incentive system is one of the important means for modern enterprises to implement effective human capital management. Its purpose is to bind the personal interests of management with the interests of the enterprise, …

Audit Adjustments And The Discontinuity In Earnings Distribution Around Zero, Chu Yeong Lim, Themin Suwardy, Tracey Chunqi Zhang

Research Collection School Of Accountancy

Accounting researchers have documented that a discontinuity exists in earnings distribution around zero. However, there is considerable debate among researchers whether the earnings discontinuity around zero is caused by earnings management. We aim to shed light on the earnings discontinuity debate by examining the impact of audit adjustments on the distribution of earnings using a unique dataset from Singapore containing both recorded and waived adjustments. We find that audit adjustments do not reduce the discontinuity of earnings distribution around zero. This affirms that the results of Lennox et. al (2016) based on pre-tax earnings also apply to post-tax earnings and …