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Articles 121 - 150 of 213
Full-Text Articles in Corporate Finance
Firm Litigation Risk And The Insurance Value Of Corporate Social Performance, Ping-Sheng Koh, Cuili Qian, Heli Wang
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 …
The Deterrence Effects Of Vicarious Punishments On Corporate Financial Fraud, Daphne W. Yiu, Yuehua Xu, William P. Wan
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 …
The Allocation Of Employee Stock Option Proceeds, Xin Chang, Yangyang Chen, Chia Mei Shih, Rong Wang
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 …
Morphing: The Linkage Between Inward Private Equity And Outward Venture, Sunny Li Sun, Hao Liang
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 …
Managerial Expertise, Corporate Decisions, And Firm Value: Evidence From Corporate Refocusing, Sheng Huang
Managerial Expertise, Corporate Decisions, And Firm Value: Evidence From Corporate Refocusing, Sheng Huang
Research Collection Lee Kong Chian School Of Business
This paper investigates how managerial expertise—specifically, industry expertise—affects firm value through divestiture. Using CEOs’ managerial experiences in industries throughout their careers as a measure of their industry expertise, I find that CEOs in diversified conglomerates are more likely to divest divisions in industries in which they have less experience. This finding is consistent with CEOs who divest such divisions in order to refocus on those divisions in which they have specialized—that is, to achieve a better match between their expertise and their firms’ retained assets. Firms that divest for a better CEO-firm match experience significant improvements in operating performance, as …
Wealth Management In Singapore, Francis Koh
Wealth Management In Singapore, Francis Koh
Research Collection Lee Kong Chian School Of Business
As early as 2015, Singapore may oust Switzerland as the world’s top finance hub. But the path forward requires adjustments in the strategic direction of individual firms. Wealth management in Singapore is vibrant, growing, challenging.
The Role Of Deferred Pay In Retaining Managerial Talent, Radhakrishnan Gopalan, Sheng Huang, Johan Maharjan
The Role Of Deferred Pay In Retaining Managerial Talent, Radhakrishnan Gopalan, Sheng Huang, Johan Maharjan
Research Collection Lee Kong Chian School Of Business
We examine the role of deferred vesting of stock and option grants in reducing executive turnover. To the extent an executive forfeits all unvested stock and option grants if she leaves the firm, deferred vesting will increase the cost (to the executive) of early exit. Using pay Duration proposed in Gopalan, et al., (forthcoming) as a measure of the length of managerial pay, we find that CEOs and non-CEO executives with longer pay Duration are less likely to leave the firm voluntarily. Employing the vesting of a large prior-year stock/option grant as an instrument for Duration, we find the effect …
Speaking Of Corporate Social Responsibility, Hao Liang, Christopher Marquis, Luc Renneboog, Sunny Li Sun
Speaking Of Corporate Social Responsibility, Hao Liang, Christopher Marquis, Luc Renneboog, Sunny Li Sun
Research Collection Lee Kong Chian School Of Business
We argue that the language spoken by corporate decision makers influences their firms’ social responsibility and sustainability practices. Linguists suggest that obligatory future-time-reference (FTR) in a language reduces the psychological importance of the future. Prior research has shown that speakers of strong FTR languages (such as English, French, and Spanish) exhibit less future-oriented behavior (Chen, 2013). Yet, research has not established how this mechanism may affect the future-oriented activities of corporations. We theorize that companies with strong-FTR languages as their official/working language would have less of a future orientation and so perform worse in future-oriented activities such as corporate social …
What Are Analysts Really Good At?, Rong Wang, Leonardo Madureira, Rong Wang, Tzachi Zach
What Are Analysts Really Good At?, Rong Wang, Leonardo Madureira, Rong Wang, Tzachi Zach
Research Collection Lee Kong Chian School Of Business
Sell-side analysts employ different benchmarks when defining their stock recommendations. For example, a ‘buy’ for some brokers means the stock is expected to outperform its peers in the same sector (“industry benchmarkers”), while for other brokers it means the stock is expected to outperform the market (“market benchmarkers”), or just some absolute return (“total benchmarkers”). We use these benchmarks to analyze the role of stock picking, industry picking and market timing in contributing to the performance of stock recommendations. We are able to do so given that different benchmarks suggest the use of different sets of abilities. Analysis of the …
Optimal Ceo Compensation With Search: Theory And Empirical Evidence, Melanie Cao, Rong Wang
Optimal Ceo Compensation With Search: Theory And Empirical Evidence, Melanie Cao, Rong Wang
Research Collection Lee Kong Chian School Of Business
We integrate an agency problem into search theory to study executive compensation in a market equilibrium. A CEO can choose to stay or quit and search after privately observing an idiosyncratic shock to the firm. The market equilibrium endogenizes CEOs’ and firms’ outside options and captures contracting externalities. We show that the optimal pay-to-performance ratio is less than one even when the CEO is risk neutral. Moreover, the equilibrium pay-to-performance sensitivity depends positively on a firm's idiosyncratic risk and negatively on the systematic risk. Our empirical tests using executive compensation data confirm these results.
Political Connection And Firm Value, James S. Ang, David K. Ding, Tiong Yang Thong
Political Connection And Firm Value, James S. Ang, David K. Ding, Tiong Yang Thong
Research Collection Lee Kong Chian School Of Business
We study the effect of political connection (PC) on company value in an environment where low PC is due to better institutions and not confounded by favorable social/cultural factors. We find that in Singapore, the only country that fits this description, PC in general adds little to the value of a company. However, in industries that are subject to more stringent government regulations, PC appears to be somewhat important. Robustness checks show that alternative PC variables give rise to similar results, and the addition of control variables do not drastically change the findings. Politically connected firms have higher managerial ownership …
Acquisitions Driven By Stock Overvaluation: Are They Good Deals?, Fangjian Fu, Leming Lin, Micah Officer
Acquisitions Driven By Stock Overvaluation: Are They Good Deals?, Fangjian Fu, Leming Lin, Micah Officer
Research Collection Lee Kong Chian School Of Business
Theory and recent evidence suggest that overvalued firms can create value for shareholders if they exploit their overvaluation by using their stock as currency to purchase less overvalued firms. We challenge this idea and show that, in practice, overvalued acquirers significantly overpay for their targets. These acquisitions do not, in turn, lead to synergy gains. Moreover, these acquisitions seem to be concentrated among acquirers with the largest governance problems. CEO compensation, not shareholder value creation, appears to be the main motive behind acquisitions by overvalued acquirers.
How Capital Structure Influences Diversification Performance: A Transaction Cost Perspective, Jonathan O'Brien, Parthiban David, Toru Yoshikawa, Andrew Delios
How Capital Structure Influences Diversification Performance: A Transaction Cost Perspective, Jonathan O'Brien, Parthiban David, Toru Yoshikawa, Andrew Delios
Research Collection Lee Kong Chian School Of Business
Extant theories agree that debt should inhibit diversification, but predict opposing performance consequences. While agency theory predicts that debt should lead to higher performance for diversifying firms, transaction cost economics (TCE) predicts that more debt will lead to lower performance for firms expanding into new markets. Our empirical tests on a large sample of Japanese firms support TCE by showing that firms accrue higher returns from leveraging their resources and capabilities into new markets when managers are shielded from the rigors of the market governance of debt, particularly bond debt. Furthermore, we find that the detrimental effects of debt are …
Which Board Interlocks Matter? The Impact Of Managerial Power, Legitimacy, And Family Power On The Adoption Of Stock Option Pay, Toru Yoshikawa, Jung Wook Shim, A. Tuschke
Which Board Interlocks Matter? The Impact Of Managerial Power, Legitimacy, And Family Power On The Adoption Of Stock Option Pay, Toru Yoshikawa, Jung Wook Shim, A. Tuschke
Research Collection Lee Kong Chian School Of Business
Inter-organizational relationships and the networks they create are an important mechanism for the transfer of knowledge and learning. Network ties enable the transfer of experiential knowledge – for instance of vicarious information through board interlocks. While we know that organizational learning occurs and is influenced by factors like the strength of ties and a firm’s position in the network, it is still unclear what causes the firm to act on the information gained through network ties. We build on prior studies on the impact of interlocking board ties ion the adoption of new practices and analyze the effects of different …
How Important Are Earnings Announcements As An Information Source?, Sudipta Basu, Truong Duong, Stanimir Markov, Eng Joo Tan
How Important Are Earnings Announcements As An Information Source?, Sudipta Basu, Truong Duong, Stanimir Markov, Eng Joo Tan
Research Collection Lee Kong Chian School Of Business
In a competitive information market, no single information source is likely to dominate all other sources collectively, but a single source can dominate all or most other sources individually. We explore whether earnings announcements constitute such a dominant source using Ball and Shivakumar’s R2 metric: the proportion of the variation in annual returns explained by earnings announcement returns. We find that earnings announcement R2 is 11% -- higher than the corresponding R2 of returns on days with dividend announcements, management forecasts, preannouncements, 10-K and 10-Q filings and amendments. Only the four largest realized absolute daily returns in a year match …
Social Capital, Informal Governance, And Post-Ipo Firm Performance: A Study Of Chinese Entrepreneurial Firms, Jerry X. Cao, Yuan Ding, Hua Zhang
Social Capital, Informal Governance, And Post-Ipo Firm Performance: A Study Of Chinese Entrepreneurial Firms, Jerry X. Cao, Yuan Ding, Hua Zhang
Research Collection Lee Kong Chian School Of Business
This paper explores the links between entrepreneurs' social capital and post-IPO firm performance in China's unique capital market and regulatory setting. Using hand-collected data on entrepreneurs' political connections and firm financial information, we construct original measures for various types of social capital and examine their roles in determining the accounting and financial performance of entrepreneurial firms after an IPO. On one hand, firm accounting performance is enhanced by entrepreneurs' bridging social capital, such as political connections or a willingness to share power with external investors. On the other hand, bonding social capital such as intra-group related party transactions causes performance …
Can Us Economic Variables Predict Chinese Stock Market?, Jeremy Goh, Fuwei Jiang, Jun Tu, Yuchen Wang
Can Us Economic Variables Predict Chinese Stock Market?, Jeremy Goh, Fuwei Jiang, Jun Tu, Yuchen Wang
Research Collection Lee Kong Chian School Of Business
In the last few decades, we observed a significant increase in global economic activities and these activities may have an impact on both China's economy and stock market. Given the potential impact, we empirically examine whether US economic variables are leading indicators of the Chinese stock market. Prior to China joining the World Trade Organization (WTO) in the end of 2001, we find no statistical relationship between US economic variables and the Chinese stock market returns. However, we find US economic variables have statistically significant predictive power for periods after China's admission into the WTO. In addition, we show that …
Social Networks And Risk Taking: Evidence From Corporate Control Activities, Yen Teik Lee
Social Networks And Risk Taking: Evidence From Corporate Control Activities, Yen Teik Lee
Research Collection Lee Kong Chian School Of Business
This paper investigates the impact of social ties between the Chief Executive Officer (CEO) andboard members on corporate risk-taking in mergers and acquisitions (M&As) and on shareholdervalue. Using a measure of CEO-director connections in a large sample of U.S. firms from 2000 to2010, we document that boardroom connections lower firm acquisitiveness. If connected CEOsundertake M&As, they are less likely to choose focus acquisitions, and more likely to pay in stock.CEO-board connections do not enhance firm value in M&As. Higher levels of boardroomconnection are associated with lower announcement returns and lower subsequent return on assets.Our results are robust to alternative explanations …
Analysts' Industry Expertise, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach
Analysts' Industry Expertise, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach
Research Collection Lee Kong Chian School Of Business
Industry expertise is an important aspect of sell-side research. We explore this aspect using a novel dataset of industry recommendations, which are often issued by strategy analysts. We study sell-side analysts' ability to rank industries relative to each other (across-industry expertise), and how it relates to analysts' ability to rank firms in a particular industry (within-industry expertise). We find that analysts express more optimism towards industries with higher levels of investment, past profitability, and past returns. Analysts exhibit across-industry expertise, as portfolios based on industry recommendations generate abnormal returns over both short and long horizons, beyond what would be explained …
Political Connections And Corporate Diversification In Emerging Economies: Evidence From China, Weiwen Li, Ai He, Hailin Lan, Daphne W. Yiu
Political Connections And Corporate Diversification In Emerging Economies: Evidence From China, Weiwen Li, Ai He, Hailin Lan, Daphne W. Yiu
Research Collection Lee Kong Chian School Of Business
Drawing upon the resource-based view, this study examines how political connections affect corporate diversification in an emerging economy. Data from a sample of 1,280 Chinese public firms over 2002-2005 show a strong positive relationship between political connections and corporate diversification. We also find that the positive relationship between political connections and corporate diversification is moderated by the level of state ownership in firms and the level of regional institutional development. Theoretical and managerial implications are discussed.
Sell-Order Liquidity And The Cross-Section Of Expected Stock Returns, Michael Brennan, Tarun Chordia, Avanidhar Subrahmanyam, Qing Tong
Sell-Order Liquidity And The Cross-Section Of Expected Stock Returns, Michael Brennan, Tarun Chordia, Avanidhar Subrahmanyam, Qing Tong
Research Collection Lee Kong Chian School Of Business
We estimate buy- and sell-order illiquidity measures (lambdas) for a comprehensive sample of NYSE stocks. We show that sell-order liquidity is priced more strongly than buy-order liquidity in the cross-section of equity returns. Indeed, our analysis indicates that the liquidity premium in equities emanates predominantly from the sell-order side. We also find that the average difference between sell and buy lambdas is generally positive throughout our sample period. Both buy and sell lambdas are significantly positively correlated with measures of funding liquidity such as the TED spread as well option implied volatility.
Aspirations, Innovation, And Corporate Venture Capital: A Behavioral Perspective, Vibha Gaba, Shantanu Bhattacharya
Aspirations, Innovation, And Corporate Venture Capital: A Behavioral Perspective, Vibha Gaba, Shantanu Bhattacharya
Research Collection Lee Kong Chian School Of Business
This study takes an organizational decision-making perspective to examine when firms are likely to utilize CVC units as a mechanism for externalizing R&D. We draw insights from the behavioral theory of the firm to argue that managerial aspirations for innovation-related goals are an important driver of CVC initiatives within firms. We test our argument by examining both the adoption and termination of CVC units for a sample of information technology firms from 1992 to 2003. Results show that a firm is more likely to adopt and less likely to terminate a CVC unit when its innovation performance is closest to …
Spin-Offs And Operating Performance, Gary L. Caton, Jeremy C. Goh, Frank Kerins
Spin-Offs And Operating Performance, Gary L. Caton, Jeremy C. Goh, Frank Kerins
Research Collection Lee Kong Chian School Of Business
This study examines the relation between changes in industry-adjusted operating performance associated with corporate spin-offs and the market’s assessment of the spin-off as either a value increasing or value decreasing activity. I find that the average change in industry-adjusted operating performance associated with my sample of spin-offs is not significantly different from zero. However, I also present evidence suggesting that this average result is misleading because some spin-offs appear to be value increasing while others are value decreasing. I establish that a positive and significant relation exists between parent company revaluation and a) the change in industry-adjusted operating performance of …
An Improved Test For Statistical Arbitrage, Robert Jarrow, Melvyn Teo, Yiu Kuen Tse, Mitch Warachka
An Improved Test For Statistical Arbitrage, Robert Jarrow, Melvyn Teo, Yiu Kuen Tse, Mitch Warachka
Research Collection Lee Kong Chian School Of Business
We improve upon the power of the statistical arbitrage test in Hogan, Jarrow, Teo, and Warachka (2004). Our methodology also allows for the evaluation of return anomalies under weaker assumptions. We then compare strategies based on their convergence rates to arbitrage and identify strategies whose probability of a loss declines to zero most rapidly. These strategies are preferred by investors with finite horizons or limited capital. After controlling for market frictions and examining convergence rates to arbitrage, we find that momentum and value strategies offer the most desirable trading opportunities.
Corporate Philanthropy And Corporate Financial Performance: The Roles Of Social Response And Political Access, Heli Wang, Cuili Qian
Corporate Philanthropy And Corporate Financial Performance: The Roles Of Social Response And Political Access, Heli Wang, Cuili Qian
Research Collection Lee Kong Chian School Of Business
Corporate philanthropy is expected to positively affect firm financial performance because it helps firms gain sociopolitical legitimacy, which enables them to elicit positive stakeholder responses and to gain political access. The positive philanthropy-performance relationship is stronger for firms with greater public visibility and for those with better past performance, as philanthropy by these firms gains more positive stakeholder responses. Firms that are not government-owned or politically well connected were shown to benefit more from philanthropy, as gaining political resources is more critical for such firms. Empirical analyses using data on Chinese firms listed on stock exchanges from 2001 to 2006 …
Forecasting Bond Risk Premia Using Technical Analysis, Choo Yong, Jeremy Goh, Fuwei Jiang, Jun Tu, Guofu Zhou
Forecasting Bond Risk Premia Using Technical Analysis, Choo Yong, Jeremy Goh, Fuwei Jiang, Jun Tu, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
While economic variables have been used extensively to forecast the U.S. bond risk premia, little attention has been paid to the use of technical indicators which are widely employed by practitioners. In this paper, we fill this gap by studying the predictive ability of using a variety of technical indicators vis-a-vis the economic variables. We find that the technical indicators have statistically and economically significant in- and out-of-sample forecasting power. Moreover, we find that utilizing information from both technical indicators and economic variables substantially increases the forecasting performances relative to using just economic variables.
The Impact Of Brand Quality On Shareholder Wealth, Sundar G. Bharadwaj, Kapil R. Tuli, Andre Bonfer
The Impact Of Brand Quality On Shareholder Wealth, Sundar G. Bharadwaj, Kapil R. Tuli, Andre Bonfer
Research Collection Lee Kong Chian School Of Business
This study examines the impact of brand quality on three components of shareholder wealth, stock returns, systematic risk and idiosyncratic risk. The study finds that brand quality enhances shareholder wealth as unanticipated changes in brand quality are positively associated with stock returns and negatively related to changes in idiosyncratic risk. However, unanticipated changes in brand quality can also erode shareholder wealth as they have a positive association with changes in systematic risk. The study introduces a contingency theory view to the marketing-finance interface by analyzing the moderating role of two factors that are widely followed by investors. The results show …
Streaks In Earnings Surprises And The Cross-Section Of Stock Returns, Roger Loh, Mitchell Craig Warachka
Streaks In Earnings Surprises And The Cross-Section Of Stock Returns, Roger Loh, Mitchell Craig Warachka
Research Collection Lee Kong Chian School Of Business
No abstract provided.
Acquisitions Driven By Stock Overvaluation: Are They Good Deals?, Fangjian Fu, Leming Lin, Micah Officer
Acquisitions Driven By Stock Overvaluation: Are They Good Deals?, Fangjian Fu, Leming Lin, Micah Officer
Research Collection Lee Kong Chian School Of Business
Overvaluation may motivate a firm to use its stock to acquire a target whose stock is not as overpriced (Shleifer and Vishny (2003)). Though hypothetically desirable, these acquisitions in practice create little, if any, value for acquirer shareholders. Two factors often impede value creation: payment of a large premium to the target and lack of economic synergies in the acquisition. We find that overvaluationdriven stock acquirers suffer worse operating performance and lower long-run stock returns than control firms that are in the same industry, similarly overvalued at the same time, have similar size and Tobin’s q, but have not pursued …
Do Merger-Related Operating Synergies Exist?, Gennaro Bernile, Scott W. Bauguess
Do Merger-Related Operating Synergies Exist?, Gennaro Bernile, Scott W. Bauguess
Research Collection Lee Kong Chian School Of Business
Executives frequently forecast large operating efficiency gains from mergers. Using these projections, we study the impact of operating synergies on merger performance. Investors' reaction to mergers varies directly with the availability of these forecasts and the gains they imply, and post-merger operating performance increases with the predictable component of forecasted synergies based on deal characteristics. The realized improvements, however, do not depend on the availability of forecasts or the surprise they convey, and post-merger stock returns reconcile discrepancies between investors' ex ante beliefs and mergers' ex post performance related to management forecasts. Overall, the evidence supports the neoclassical view that …