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Singapore Management University

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Articles 601 - 630 of 665

Full-Text Articles in Corporate Finance

The Size Of Venture Capital And Private Equity Fund Portfolios, Gennaro Bernile, Douglas Cumming, Evgeny Lyandres Sep 2007

The Size Of Venture Capital And Private Equity Fund Portfolios, Gennaro Bernile, Douglas Cumming, Evgeny Lyandres

Research Collection Lee Kong Chian School Of Business

We propose a model that examines the optimal size of venture capital and private equity fund portfolios. The relationship between a VC and entrepreneurs is characterized by double-sided moral hazard, which causes the VC to trade off larger portfolios against lower values of portfolio companies. We analyze the structural relations between the VC's optimal portfolio structure and entrepreneurs' and VC's productivities, their disutilities of effort, the value of a successful project, and the required initial investment in a venture. We also test the model's predictions using a small proprietary dataset collected through a survey targeted to VC and private equity …

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Auditor Locality, Audit Quality And Audit Pricing, Jong-Hag Choi, Jeong-Bon Kim, Aini Qiu, Yoonseok Zang Aug 2007

Auditor Locality, Audit Quality And Audit Pricing, Jong-Hag Choi, Jeong-Bon Kim, Aini Qiu, Yoonseok Zang

Research Collection School Of Accountancy

No abstract provided.

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Exploring The Role That Forecast Surprise And Forecast Error Play In Determining Management Forecast Precision, Jong-Hag Choi, Linda Myers, Yoonseok Zang, David Ziebart Aug 2007

Exploring The Role That Forecast Surprise And Forecast Error Play In Determining Management Forecast Precision, Jong-Hag Choi, Linda Myers, Yoonseok Zang, David Ziebart

Research Collection School Of Accountancy

No abstract provided.

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Systematic Share Price Fluctuations After Bankruptcy Filings And The Investors Who Drive Them, Mark C. Dawkins, Nilabhra Bhattacharya, Linda Smith Bamber Jun 2007

Systematic Share Price Fluctuations After Bankruptcy Filings And The Investors Who Drive Them, Mark C. Dawkins, Nilabhra Bhattacharya, Linda Smith Bamber

Research Collection School Of Accountancy

Beginning in the 1990s, firms often continue to trade on the major national exchanges after Chapter 11 bankruptcy filings. For bankruptcies filed from 1993-2003, we find that the more negative the filing period price reaction, the more favorable the immediate post- filing returns, on average. This reversal is not attributable to bid-ask bounce, it holds after controlling for other factors associated with post-filing returns, and it appears more attributable to the activities of large traders than to small traders. Supplementary tests reveal that the pattern of post-filing returns differs significantly for bankruptcies filed in bull versus bear markets. Bankruptcies filed …

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Bonding To The Improved Disclosure Environment In The Us: Firms Listing Choices And Their Capital Market Consequences, Ole-Kristian Hope, Tony Kang, Yoonseok Zang Jun 2007

Bonding To The Improved Disclosure Environment In The Us: Firms Listing Choices And Their Capital Market Consequences, Ole-Kristian Hope, Tony Kang, Yoonseok Zang

Research Collection School Of Accountancy

This paper examines whether the current reporting and disclosure requirements for foreign registrants in the United States affect foreign firms' decisions to list on a U.S. exchange. We find that while firms from a weak disclosure environment are more likely to cross-list and either trade over-the-counter or be placed privately among institutional investors, they are less likely to list on an exchange in which firms are required to comply with U.S. GAAP. This is consistent with the idea that the decrease in the potential private control benefits accruing to managers discourages them from listing on an organized exchange. We further …

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Who Trades On Pro Forma Earnings Information?, Nilabhra Bhattacharya, Erv Black, Ted Christensen, Rick Mergenthaler May 2007

Who Trades On Pro Forma Earnings Information?, Nilabhra Bhattacharya, Erv Black, Ted Christensen, Rick Mergenthaler

Research Collection School Of Accountancy

In recent years, many companies have emphasized adjusted‐GAAP earnings numbers in their quarterly press releases. While managers use different names to describe these nonstandard earnings metrics, the financial press frequently refers to them as “pro forma” earnings. Managers and other advocates of pro forma reporting argue that these disclosures provide a clearer picture of companies' core earnings. On the other hand, regulators, policymakers, and the financial press often allege that managers' pro forma earnings disclosures are opportunistic attempts to mislead investors. Recent evidence suggests that while many pro forma earnings disclosures are altruistically motivated, some may represent managers' attempts to …

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The Effect Of Financial Hedging On The Incentives For Corporate Diversification: The Role Of Stakeholder Firm-Specific Investments, Sonya Seongyeon Lim, Heli Wang Apr 2007

The Effect Of Financial Hedging On The Incentives For Corporate Diversification: The Role Of Stakeholder Firm-Specific Investments, Sonya Seongyeon Lim, Heli Wang

Research Collection Lee Kong Chian School Of Business

Financial hedging and corporate diversification are often considered substitutive means of risk management, implying that rapid development of financial hedging markets will yield less need for firms to manage risk through costly diversification. Building on a stakeholder-based view of risk management, we show that financial hedging and corporate diversification are more often complementary than substitutive. Financial hedging reduces a firm’s systematic risk, encouraging firm-specific investment by stakeholders. Larger firmspecific investment loads excessive idiosyncratic risk on the stakeholders, increasing the benefits of reducing idiosyncratic risk through diversification. Therefore, financial hedging can increase a firm’s incentives to manage risk through diversification.

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Comprehensive Income, Future Earnings, And Market Mispricing, Jong-Hag Choi, Somnath Das, Yoonseok Zang Mar 2007

Comprehensive Income, Future Earnings, And Market Mispricing, Jong-Hag Choi, Somnath Das, Yoonseok Zang

Research Collection School Of Accountancy

No abstract provided.

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Liquidity, Credit Risk And Pricing Of Corporate Bond, Xiaoli Sun Jan 2007

Liquidity, Credit Risk And Pricing Of Corporate Bond, Xiaoli Sun

Dissertations and Theses Collection (Open Access)

Employing a comprehensive database on transactions of corporate bonds issued by corporations, agencies and financial institutions, we compare the different liquidity measures--bid-ask spread, zero-return percentage, Amihud illiquidity factor for the corporate bond market. The criteria of judging is based on the explanatory power of different liquidity measures in determining yield spread over the benchmark curve (equivalent-maturity Treasury bond or notes). The conclusion is that liquidity plays a role in determining corporate bond yield spread. There are significant differences in the explanatory power of the different liquidity measures; among the liquidity measures, zero-return percentage works best. Preliminary findings, based on the …

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Insider Trading And Voluntary Disclosures, Qiang Cheng, Kin Lo Dec 2006

Insider Trading And Voluntary Disclosures, Qiang Cheng, Kin Lo

Research Collection School Of Accountancy

We hypothesize that insiders strategically choose disclosure policies and the timing of their equity trades to maximize trading profits, subject to the litigation costs associated with disclosure and insider trading. Accounting for endogeneity between disclosures and trading, we find that when managers plan to purchase shares, they increase the number of bad news forecasts to reduce the purchase price. In addition, this relation is stronger for trades initiated by chief executive officers than for those initiated by other executives. Confirming this strategic behavior, we find that managers successfully time their trades around bad news forecasts, buying fewer shares beforehand and …

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The Effect Of The Options Backdating Scandal On The Stock-Price Performance Of 110 Accused Companies, Gennaro Bernile, Gregg A. Jarrell, Howard Mulcahey Dec 2006

The Effect Of The Options Backdating Scandal On The Stock-Price Performance Of 110 Accused Companies, Gennaro Bernile, Gregg A. Jarrell, Howard Mulcahey

Research Collection Lee Kong Chian School Of Business

Since academic scholars and the Wall Street Journal reported widespread evidence indicating that option grants to executives were backdated, an avalanche of news stories followed documenting this ever-widening corporate scandal. In this study we ask: "How do disclosures of backdating affect shareholder value?" We closely examine 110 companies listed in the Wall Street Journal's Perfect Payday webpage, collecting all news stories related to options backdating. We find that shareholders of these 110 companies suffer on average significant stock-price declines, ranging between 20% and 50%. Moreover, these losses do not seem to be due to temporary overreactions (at least so far). …

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Institutional Holdings And Analysts’ Stock Recommendations, Qiang Cheng, Xia Chen Oct 2006

Institutional Holdings And Analysts’ Stock Recommendations, Qiang Cheng, Xia Chen

Research Collection School Of Accountancy

Prior studies document that institutional investors outperform the mar- ket. We investigate whether this superior performance is partly derived from institutional investors use of sell-side analysts stock recommenda- tions. First, we find that the quarterly change in institutional ownership is positively correlated with consensus recommendations. After control- ling for other determinants of institutional holdings, the quarterly change in institutional ownership is on average 0.90 percent higher for firms with favorable recommendations than for those with unfavorable recommendations. Second, using large trades to proxy for institutional trading, we find that there are more buyer-initiated than seller-initiated large trades around favorable recommendations …

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The Association Between Audit Quality And Abnormal Audit Fees, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang Aug 2006

The Association Between Audit Quality And Abnormal Audit Fees, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang

Research Collection School Of Accountancy

Using a sample of 9,820 firm-year observations over the 2000-2003 period, this paper examines whether, and how, audit quality proxied by unsigned discretionary accruals is associated with abnormal audit fees, i.e., actual audit fees in excess of expected, normal audit fees. The results of various regressions reveal that the association between the two is insignificant for the full sample, significantly positive for the subsample of clients with positive abnormal fees, and insignificantly negative for the subsample of clients with negative abnormal fees. The above results suggest that auditors’ incentives to compromise audit quality differ systematically for more profitable clients (with …

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Corporate Financial Policy And The Value Of Cash, Michael Faulkender, Rong Wang Aug 2006

Corporate Financial Policy And The Value Of Cash, Michael Faulkender, Rong Wang

Research Collection Lee Kong Chian School Of Business

We examine the cross-sectional variation in the marginal value of corporate cash holdings that arises from differences in corporate financial policy. We begin by providing semi-quantitative predictions for the value of an extra dollar of cash depending upon the likely use of that dollar, and derive a set of intuitive hypotheses to test empirically. By examining the variation in excess stock returns over the fiscal year, we find that the marginal value of cash declines with larger cash holdings, higher leverage, better access to capital markets, and as firms choose greater cash distribution via dividends rather than repurchases.

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The Importance Of Issues Management In International Mergers And Acquisitions, Mark Chong Aug 2006

The Importance Of Issues Management In International Mergers And Acquisitions, Mark Chong

Research Collection Lee Kong Chian School Of Business

Issues management is the strategic use of issues analysis and strategic responses to help organizations make adaptations needed to achieve harmony and foster mutual interests within the communities in which they operate (Heath, 1997, p. 3). It seeks to build, maintain and repair relationships with an organizationÆs stakeholders by keeping surveillance for threats and opportunities in the environment that can affect success in achieving organizational mission and goals (Heath, 2002). Accordingly, organizations modify corporate policy, shape legislation or influence public opinion to synchronize themselves with the prevailing or emerging climate of public opinion and sensitivity

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Personal Taxes, Endogenous Default, And Corporate Bond Yield Spreads, Sheen X. Liu, Howard Qi, Chunchi Wu Jun 2006

Personal Taxes, Endogenous Default, And Corporate Bond Yield Spreads, Sheen X. Liu, Howard Qi, Chunchi Wu

Research Collection Lee Kong Chian School Of Business

Term structure models have often been criticized for failing to explain satisfactorily the yield spread between corporate and Treasury bonds. A potential problem is that the personal tax effect is ignored in these models. In this paper, we employ a structural model to investigate the role of personal taxes on both debt and equity returns in capital structure decisions and assess their impact on corporate bond yield spreads. It is shown that personal taxes affect the firm's optimal capital structure, and the tax premium explains a substantial portion of yield spreads, especially for high-grade bonds. The predictive ability of the …

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Government Ownership And The Performance Of Government-Linked Companies: The Case Of Singapore, James Ang, David K. Ding Feb 2006

Government Ownership And The Performance Of Government-Linked Companies: The Case Of Singapore, James Ang, David K. Ding

Research Collection Lee Kong Chian School Of Business

In an emerging economy, the alternative to government control is often no governance. We investigate the governance structure of government-linked companies (GLCs) in Singapore under the ownership/control structure of Temasek Holdings, the government holding entity, which typically owns substantial cash flow rights but disproportional control rights and exercises no operational control. We compare the financial and market performance of GLCs with non-GLCs, where each has a different set of governance structure, the key difference being government ownership. We show that Singaporean GLCs have higher valuations and better corporate governance than a control group of non-GLCs. The results hold even when …

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Under-Pricing And Long-Run Performance Of Initial Public Offerings In Developing Markets, Sze Wei Daniel Ong Jan 2006

Under-Pricing And Long-Run Performance Of Initial Public Offerings In Developing Markets, Sze Wei Daniel Ong

Dissertations and Theses Collection (Open Access)

The transition from being a private company to a public one is one of the most important events in the life of a firm. It is also one of particular interest to institutional investors, and the transition is facilitated through the initial public offering (IPO) process. The IPO provides a fresh source of capital that is critical to the growth of the firm and provides the founder and other shareholders such as venture capitalists a liquid market for their shares. From an institutional investor's perspective, the IPO provides an opportunity to share in the rewards of the growth of the …

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Impact Of Gender And Ethnic Composition Of South African Boards Of Directors On Intellectual Capital Performance, Jean-Luc Wolfgang Mitchell Van Der Zahn Jan 2006

Impact Of Gender And Ethnic Composition Of South African Boards Of Directors On Intellectual Capital Performance, Jean-Luc Wolfgang Mitchell Van Der Zahn

Research Collection School Of Accountancy

This study examines the association between the gender and ethnic composition of boards of directors and firm performance in a transitional nation. In contrast to prior research that largely focuses on firm performance within a financial context, this study concentrates on intellectual capital performance. Using data collected from 84 South African, empirical results indicate a positive association between the percentage of female and non-white directors on the board and a firm’s intellectual capital performance. Additional analysis shows the designation of female directors as an insider has a negative effect of intellectual capital performance. Designation of female and non-white directors as …

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Accounting Restatements: Are They Always Bad News For Investors?, Dan Segal, Jeffrey L. Callen, Joshua Livnat Jan 2006

Accounting Restatements: Are They Always Bad News For Investors?, Dan Segal, Jeffrey L. Callen, Joshua Livnat

Research Collection School Of Accountancy

This study investigates a large sample of financial statement restatements over the period 1986-2001, and compares restatements caused by changes in accounting principles to those caused by errors. Typically, investors perceive restatements as negative signals due to three potential reasons: (a) the restatement indicates problems with the accounting system that may be manifestations of broader operational (and managerial) problems, (b) the restatement causes downward revisions in future cash flows expectations, and (c) the restatement indicates managerial attempts to cover up income decline through “cooking the books.” We provide evidence that market reactions to restatements due to errors are generally negative. …

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Accounting Conservatism And Managerial Incentives, Young Koan Kwon Nov 2005

Accounting Conservatism And Managerial Incentives, Young Koan Kwon

Research Collection School Of Accountancy

There are two sources of agency costs under moral hazard: (1) distortions in incentive contracts and (2) implementation of suboptimal decisions. In the accounting literature, the relation between conservative accounting and agency costs of type (1) has received considerable attention (cf. Watts 2002). However, little appears to be known about the effects of accounting conservatism on agency costs of type (2) or trade-offs between agency costs of types (1) and (2). The purpose of this study is to examine this void. In a principal-agent setting in which the principal motivates the agent to expend effort using accounting earnings, this study …

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Client, Industry And Country Factors Affecting Choice Of Big N Industry Expert Auditors, Michael Ettredge, Soo Young Kwon, Chee Yeow Lim Sep 2005

Client, Industry And Country Factors Affecting Choice Of Big N Industry Expert Auditors, Michael Ettredge, Soo Young Kwon, Chee Yeow Lim

Research Collection School Of Accountancy

This study investigates client choice of industry specialist auditors from among the Big N (Big 4 or 5) in an international (non-U.S.) setting. We investigate client-specific, industry-level and country-level factors hypothesized to enhance or decrease Big N clients' demand for industry expertise. Using data for 29 countries and 14 broad industries from 1993-2005, we find that international client choice of industry specialist Big N auditors is positively associated with client size, client growth opportunities, and client capital intensity. The choice of industry specialists from among the Big N is more prevalent in countries where levels of investor protection, quality of …

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Too Little Or Too Much? Reexamining The Relationship Between Corporate Charitable Giving And Corporate Financial Performance, Heli Wang, Jaepil Choi, Jiatao Li Aug 2005

Too Little Or Too Much? Reexamining The Relationship Between Corporate Charitable Giving And Corporate Financial Performance, Heli Wang, Jaepil Choi, Jiatao Li

Research Collection Lee Kong Chian School Of Business

How do corporate charitable contributions affect corporate financial performance? Instrumental stakeholder theory posits that corporate giving can lead to high levels of corporate financial performance through improved stakeholder relations. In contrast, agency theory suggests that corporate giving diverts valuable corporate resources and inhibits corporate financial performance. Extant empirical studies that have examined the relationship found inconclusive results. We depart from and extend the existing literature in two main aspects. First, building upon the instrumental stakeholder argument and agency perspective, we develop the argument that there is an inverse U-shaped relationship between corporate charitable giving and corporate financial performance. Second, we …

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Firm Ownership Structure And Intellectual Capital Disclosures, Stephen Firer, S. M. Williamson May 2005

Firm Ownership Structure And Intellectual Capital Disclosures, Stephen Firer, S. M. Williamson

Research Collection School Of Accountancy

The primary purpose of this study is to investigate the association between three ownership structure characteristics and voluntary intellectual capital (IC) disclosure practices. Data for this study is hand collected from the 2000 annual reports of 390 Singapore publicly traded firms. Empirical results indicate Singapore publicly traded firms more closely owned were less likely to voluntarily disclose IC related information than were those where executive directors had smaller holdings in the entity. Finally, findings indicate government linked corporations (GLCs) will likely make more voluntary IC disclosures than non-GLCs. Overall, this study makes several unique contributions to the literature. First, the …

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Audit Quality, Legal And Disclosure Environments, And Analysts' Forecast Accuracy: Some International Evidence, Jong-Hag Choi, Tony Kang, Young Koan Kwon, Yoonseok Zang May 2005

Audit Quality, Legal And Disclosure Environments, And Analysts' Forecast Accuracy: Some International Evidence, Jong-Hag Choi, Tony Kang, Young Koan Kwon, Yoonseok Zang

Research Collection School Of Accountancy

In this study, we investigate the relation between the quality of external audit and earnings predictability of firms situated in different legal and disclosure environments around the world. In a sample of multinational firms cross-listed in the United States, we find that the association between audit quality and forecast accuracy is stronger in weak legal and disclosure environments than in strong legal and disclosure environments. We interpret these results as suggesting that audit service can serve as an alternative device to improve market participants' information environment in weak legal and disclosure environments.

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The Performance Of Value And Growth Portfolios In East Asia Before The Asian Financial Crisis, David K. Ding, Jia-Leng Chua, Thomas A. Fetherston Mar 2005

The Performance Of Value And Growth Portfolios In East Asia Before The Asian Financial Crisis, David K. Ding, Jia-Leng Chua, Thomas A. Fetherston

Research Collection Lee Kong Chian School Of Business

We examine value and growth portfolios in seven East Asian countries just before the onslaught of the 1997 Asian Financial Crisis. The value premiums in these countries, except in Indonesia, Taiwan, and Thailand, are found to be mainly positive. After controlling for firm size, risk, liquidity, and growth potential, we find higher returns among value stocks with a small firm size and low growth potential in Hong Kong and Malaysia. In Japan and Singapore, higher returns are found in growth portfolios with a small firm size and low growth potential. Growth stocks in Taiwan with a small firm size, and …

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Disproportionate Ownership Structure And Ipo Long-Run Performance Of Non-Soes In China, Xiaoming Wang, Jerry Cao, Jinghua Tang, Gary Gang Tian Feb 2005

Disproportionate Ownership Structure And Ipo Long-Run Performance Of Non-Soes In China, Xiaoming Wang, Jerry Cao, Jinghua Tang, Gary Gang Tian

Research Collection Lee Kong Chian School Of Business

This paper examines the relationship between ownership structures and IPO long-run performance of non-SOEs in China. Although non-SOEs underperform the market in general after IPO but the poor performance is mainly caused by the IPOs with ownership control wedge. Non-SOEs with one share one vote structure outperform those with control-ownership wedge by 30% for three years post-IPO performance in adjusted buy-and-hold returns. Non-SOEs with control-ownership wedge have higher frequency of undertaking value-destroying related party transactions. These findings suggest that non-SOEs need to improve corporate governance such as disproportionate ownership structure to better safeguard the interest of long-run shareholders.

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The Role Of Analysts’ Forecasts In Accounting-Based Valuation: A Critical Evaluation, Qiang Cheng Jan 2005

The Role Of Analysts’ Forecasts In Accounting-Based Valuation: A Critical Evaluation, Qiang Cheng

Research Collection School Of Accountancy

This paper critically evaluates the use of analysts forecasts in accounting-based valuation. Specifically, I assess the usefulness and the limitation of analysts forecasts in predicting future earnings and in explaining the market-to-book ratio, in light of a comprehensive set of 22 explicit information items, including: economic rent proxies, conservative accounting proxies, earnings quality signals, transitory earnings proxies, industry characteristics, and risk and growth proxies. While analysts forecasts capture 45–83% of the information from these sources depending on model specifications, they do not appear to fully incorporate certain information items. In particular, proxies for conservative accounting and transitory earnings are incrementally …

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Domestic And Foreign Earnings, Stock Return Variability, And The Impact Of Investor Sophistication, Dan Segal, Jeffrey L. Callen, Ole-Kristian Hope Jan 2005

Domestic And Foreign Earnings, Stock Return Variability, And The Impact Of Investor Sophistication, Dan Segal, Jeffrey L. Callen, Ole-Kristian Hope

Research Collection School Of Accountancy

We examine the importance of foreign earnings relative to domestic earnings for a sample of U.S. multinationals using variance decomposition. Our methodology represents an alternative and complementary approach over the prior literature, which is based on traditional regressions and earnings response coefficients. We document that domestic earnings are more important in explaining the variance of unexpected returns than are foreign earnings and that the relative importance of domestic earnings is a decreasing function of investor sophistication. Last, we classify institutional investors as either short- or long-term oriented following Bushee [1998]. We find that the variance contribution of foreign earnings increases …

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Ownership Structure, Investment Behaviour And Firm Performance In Japanese Manufacturing Industries, Eric Gedajlovic, Toru Yoshikawa, Motomi Hashimoto Jan 2005

Ownership Structure, Investment Behaviour And Firm Performance In Japanese Manufacturing Industries, Eric Gedajlovic, Toru Yoshikawa, Motomi Hashimoto

Research Collection Lee Kong Chian School Of Business

Using data spanning the 1996-98 fiscal years of 247 of Japan's largest manufacturers, we empirically evaluate the extent to which a firm's investment behaviour and financial performance are influenced by its ownership structure. To do so, we examine six distinct categories of Japanese shareholders: foreign investors, investment funds, pension funds, banks and insurance companies, affiliated companies and insiders. Our findings strongly indicate that the relationship between the equity stakes of a particular category of investor and a firm' s financial performance and investment behaviour is considerably more complex than is depicted in simple principal-agent representations. Such a result emphasizes the …

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