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Articles 181 - 210 of 213
Full-Text Articles in Corporate Finance
The Importance Of Issues Management In International Mergers And Acquisitions, Mark Chong
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
Corporate Financial Policy And The Value Of Cash, Michael Faulkender, Rong Wang
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.
Personal Taxes, Endogenous Default, And Corporate Bond Yield Spreads, Sheen X. Liu, Howard Qi, Chunchi Wu
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 …
Government Ownership And The Performance Of Government-Linked Companies: The Case Of Singapore, James Ang, David K. Ding
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 …
Too Little Or Too Much? Reexamining The Relationship Between Corporate Charitable Giving And Corporate Financial Performance, Heli Wang, Jaepil Choi, Jiatao Li
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 …
The Performance Of Value And Growth Portfolios In East Asia Before The Asian Financial Crisis, David K. Ding, Jia-Leng Chua, Thomas A. Fetherston
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 …
Disproportionate Ownership Structure And Ipo Long-Run Performance Of Non-Soes In China, Xiaoming Wang, Jerry Cao, Jinghua Tang, Gary Gang Tian
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.
Ownership Structure, Investment Behaviour And Firm Performance In Japanese Manufacturing Industries, Eric Gedajlovic, Toru Yoshikawa, Motomi Hashimoto
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 …
Investing In Hedge Funds: Risks, Returns And Performance Measurement, Francis Koh, Winston T. H. Koh, David K. C. Lee, Kok Fai Phoon
Investing In Hedge Funds: Risks, Returns And Performance Measurement, Francis Koh, Winston T. H. Koh, David K. C. Lee, Kok Fai Phoon
Research Collection Lee Kong Chian School Of Business
Hedge funds are collective investment vehicles that are often established with a special legal status that allows their investment managers a free hand to use derivatives, short sell, and exploit leverage to raise returns and cushion risk. We review various issues relating to the investment in hedge funds, which have become popular with high net-worth individuals and institutional investors, as well as discuss their empirical risk and return profiles. The concerns regarding the empirical measurements are highlighted, and meaningful analytical methods are proposed to provide greater risk transparency in performance reporting. We also discuss the development of the hedge fund …
Prospect Theory, Analyst Forecast, And Stock Returns, David K. Ding, Charlie Charoenwong, Raymond Seetoh
Prospect Theory, Analyst Forecast, And Stock Returns, David K. Ding, Charlie Charoenwong, Raymond Seetoh
Research Collection Lee Kong Chian School Of Business
This paper documents how prospect theory can be used to explain stock returns and analysts' forecast behavior. Positive earnings surprises are associated with increases in abnormal returns but negative earnings surprises have only a limited negative impact on returns. We find that analysts display asymmetric behavior towards positive and negative earnings growth. Analysts' forecasts are found to be accurate during periods of positive earnings growth, but overly optimistic during periods of negative earnings growth. Our findings have implications for the structuring of investment products, as well as the role of market timing in their introduction.
How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo
How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo
Research Collection Lee Kong Chian School Of Business
Using a novel and detailed custody trades dataset, this paper analyzes the trading behavior of institutions. Extant studies have examined the effects of past performance on trading by retail investors, day traders, and futures floor traders. Yet very little work has been done on institutions. We find that unlike other investors, institutions take on more risk following an increase in net profit and loss. However, the responses to a gain and loss are highly asymmetric. Institutions aggressively reduce risk in the wake of losses, but only mildly increase risk in the wake of gains. This asymmetry is more pronounced for …
Effects Of Board Structure On Firm Performance: A Comparison Of Japan And Australia, Ingrid Bonn, Toru Yoshikawa, Phillip H. Phan
Effects Of Board Structure On Firm Performance: A Comparison Of Japan And Australia, Ingrid Bonn, Toru Yoshikawa, Phillip H. Phan
Research Collection Lee Kong Chian School Of Business
This article compares the effects of board size, proportion of female directors, proportion of outside directors and average age of directors on firm performance in Japanese and Australian firms. We found that board size and age of directors were negatively associated with the performance of Japanese firms. For Australian firms, outsider ratio and female director ratio were positively associated with performance.
Privatizing Telecoms And Residual State Influence On Financial Performance, Burkhard N. Schrage, Paul M. Vaaler
Privatizing Telecoms And Residual State Influence On Financial Performance, Burkhard N. Schrage, Paul M. Vaaler
Research Collection Lee Kong Chian School Of Business
We test competing theoretical perspectives explaining likely shareholder returns from material investment decisions announced by privatizing telecommunications firms (telecoms) with varying levels of residual state ownership. A principal-agent perspective suggests that decrease in residual state ownership in privatizing telecoms leads to more positive shareholder returns. Over time, this effect increases. An alternative credible privatization perspective suggests that retention of substantial (though not controlling) residual state ownership leads to more positive shareholder returns, but only in the short run. Over time this ownership effect fades quickly. We examine empirical support for these competing perspectives with an event study analyzing cumulative abnormal …
The Performance Implications Of Ownership Driven Governance Reform, Toru Yoshikawa, Phillip H. Phan
The Performance Implications Of Ownership Driven Governance Reform, Toru Yoshikawa, Phillip H. Phan
Research Collection Lee Kong Chian School Of Business
This paper explores the performance impact of recent changes in foreign shareholdings and boardroom reforms in Japan. Empirical research on the impact of reform on the Japanese corporate governance system could provide useful lessons for their European counterparts who are themselves facing similar pressures to reform. We found that although participation of outside directors in strategic decision-making was associated with positive stock returns, the increase in the ratio of outside directors, the separation of the board members and executive officers, and the reduction of board size were not related to firm performance.
Estimating Credit Risk Premia, Kian Guan Lim
Estimating Credit Risk Premia, Kian Guan Lim
Research Collection Lee Kong Chian School Of Business
This paper investigates the nature of the credit risk premium adjustments in the Jarrow-Lando-Turnbull model of credit risk spreads. The adjustments relate the equivalent martingale measures to the empirical measures of unconditional transition probabilities. We provide a modi ed version of the risk adjustment that allows a linear partition of the credit spread into an unconditional default component, a recovery component, and the risk premium adjustment. The risk adjustments are related to conditional default risk, illiquidity risk, and other factors not related to recovery e ects. The log-transform of these risk adjustments can be speci ed as linear regressions on …
Asymptotic Dynamics And Value-At-Risk Of Large Diversified Portfolios In A Jump-Diffusion Market, Kian Guan Lim, Xiaoqing Liu, Kai Chong Tsui
Asymptotic Dynamics And Value-At-Risk Of Large Diversified Portfolios In A Jump-Diffusion Market, Kian Guan Lim, Xiaoqing Liu, Kai Chong Tsui
Research Collection Lee Kong Chian School Of Business
This paper studies the modelling of large diversi ed portfolios in a nancial market with jump-di usion risks. The portfolios considered include three categories: equal money-weighted portfolios, risk minimizing portfolios, and market indices. Reduced-form dynamics driven jointly by one Brownian Motion and one Poisson process are derived for the asymptotics of such portfolios. We prove that derivatives written on a portfolio can be priced by treating the asymptotic dynamics as the underlying process if the number of assets in the portfolio is su ciently large. Analytical and Monte Carlo Value-at-Risk (VaR) can be computed for the portfolios based on their …
Stimulating Firm-Specific Investment Through Risk Management, Heli Wang, Jay B. Barney, Jeffrey J. Reuer
Stimulating Firm-Specific Investment Through Risk Management, Heli Wang, Jay B. Barney, Jeffrey J. Reuer
Research Collection Lee Kong Chian School Of Business
This article suggests a rationale for firm risk management that has been largely ignored in financial economics literature. It presents an argument for harnessing the influence of a company’s stakeholders who, whether as employees, suppliers or customers, make a valuable investment specific to the company. Such investments are crucial for a firm’s competitive advantage, yet because they are firm-specific and therefore cannot be transformed or transferred, stakeholders are often concerned about the risks involved in making them. A company’s efforts to manage risk can therefore persuade stakeholders to make even greater firm-specific investments, bringing benefits to shareholders and stakeholders alike.
The Effect Of Taxes On The Pricing Of Defaultable Debt, Kian Guan Lim, Fenghua Song, Mitchell Craig Warachka
The Effect Of Taxes On The Pricing Of Defaultable Debt, Kian Guan Lim, Fenghua Song, Mitchell Craig Warachka
Research Collection Lee Kong Chian School Of Business
Empirical studies have documented the dependence of corporate credit spreads on default risk, equity premiums, and taxes. However, taxes have previously not been incorporated into reduced-form credit risk models. Therefore, we first extend the existing literature by considering a default intensity that depends on taxes as well as the default-free short rate and a market index. Consequently, we establish a theoretical basis to explain previous empirical findings regarding the significant impact of taxation on defaultable bond prices. Unlike previous models, tax implications for defaultable debt cannot be constructed from a sum of tax effects on zero coupon bonds. Our empirical …
Social Entrepreneurship In Singapore (German Version), Wee Liang Tan, Teck Meng Tan
Social Entrepreneurship In Singapore (German Version), Wee Liang Tan, Teck Meng Tan
Research Collection Lee Kong Chian School Of Business
No abstract provided.
Alternative Corporate Governance Systems In Japanese Firms: Implications For A Shift To Stockholder-Centered Corporate Governance, Toru Yoshikawa, Phillip H. Phan
Alternative Corporate Governance Systems In Japanese Firms: Implications For A Shift To Stockholder-Centered Corporate Governance, Toru Yoshikawa, Phillip H. Phan
Research Collection Lee Kong Chian School Of Business
In Asia, the recent catastrophic decline in regional stock markets, continuing currency crisis and failures of major financial institutions and industrial corporations have increased domestic and international interest in corporate governance. Nowhere is this greater than in Japan where financial institution reform has catapulted this to the fore. Agency theory and institutional theory, together with comparative case examples, are used in a study to derive some propositions on the dynamics of changing corporate governance systems in Japanese firms. The study argues for the co-existence of stakeholder and shareholder-centered corporate governance systems in Japan. This argument has an important implication for …
Pricing Options Using Implied Trees, Kian Guan Lim, Da Zhi
Pricing Options Using Implied Trees, Kian Guan Lim, Da Zhi
Research Collection Lee Kong Chian School Of Business
No abstract provided.
Is The Term Premium A Risk Premium?, Louis H. Ederington, Jeremy C. Goh
Is The Term Premium A Risk Premium?, Louis H. Ederington, Jeremy C. Goh
Research Collection Lee Kong Chian School Of Business
This paper explores whether excess holding period returns on long vis-a-vis short-term securities behave in a manner that is consistent with (1) market efficiency, (2) the time-varying-term-premium variant of the expectations hypothesis, and (3) theories of the term premium that view it as a reward for risk bearing. Both traditional and modern theories of the term premium imply that it should evolve fairly slowly over time as attitudes toward risk and/or perceived covariances with wealth or consumption change. This implies that this period's term premium should have some predictive ability for next period's. However, we find that this quarter's ex-post …
Private Placement Of Common Equity And Earnings Expectations, Jeremy C. Goh, Michael Gombola, Hai Wei Lee, Feng Ying Liu
Private Placement Of Common Equity And Earnings Expectations, Jeremy C. Goh, Michael Gombola, Hai Wei Lee, Feng Ying Liu
Research Collection Lee Kong Chian School Of Business
Earnings forecast revisions by analysts subsequent to the announcement of private equity placements are examined. Results show that analysts make significant upward revisions to their forecasts for current-year earnings. Furthermore, these forecast revisions are significantly related to announcement-period abnormal returns, but not to the risk changes accompanying the equity placement. These findings are consistent with the information hypothesis, which suggests that private equity placements convey favorable information about future earnings.
Transparency Of Ownership And Control In Germany, Marco Becht, Ekkehart Boehmer
Transparency Of Ownership And Control In Germany, Marco Becht, Ekkehart Boehmer
Research Collection Lee Kong Chian School Of Business
We first analyze legal provisions relating to corporate transparency in Germany. We show that despite the new securities trading law (WpHG) of 1995, the practical efficacy of disclosure regulation is very low. On the one hand, the formation of business groups involving less regulated legal forms as intermediate layers can substantially reduce transparency. On the other hand, the implementation of the law is not practical and not very effective. We illustrate these arguments using several examples of WpHG filings. To illustrate the importance of transparency, we show next that German capital markets are dominated by few large firms accounting for …
Cross Sectional Variation Of The Effect Of Bond Rating Changes On Stock Prices, Jeremy C. Goh, Louis H. Ederington
Cross Sectional Variation Of The Effect Of Bond Rating Changes On Stock Prices, Jeremy C. Goh, Louis H. Ederington
Research Collection Lee Kong Chian School Of Business
Previous research has found that the stock market reacts negatively to bond rating downgrades and that downgrades tend to follow periods of negative returns, indicating that at least some downgrades are partially predictable. Hypothesizing that the reaction to a downgrade depends on both the implications for cash flows and the degree of surprise, we explore how the reaction to downgrade announcements varies across bond issues. We find that the equity market reacts much more negatively to bond rating downgrades to and within the speculative bond category than to downgrades within the investment grade category. Within the speculative category, the reaction …
Bond Rating Agencies And Stock Analysts: Who Knows What When?, Louis H. Ederington, Jeremy C. Goh
Bond Rating Agencies And Stock Analysts: Who Knows What When?, Louis H. Ederington, Jeremy C. Goh
Research Collection Lee Kong Chian School Of Business
Both bond ratings agencies and stock analysts evaluate publicly traded companies and communicate their opinions to investors. Comparing the timelines of each, it is found that Granger causality flows both ways. While most bond downgrades are preceded by declines in actual and forecasting earnings, both actual earnings and forecasts of future earnings tend to fall following downgrades. Although part of this post-downgrade forecast revision can be attributed to negative news regarding actual earnings, most appears to be reaction to the downgrade itself. Little change is found in actual earnings following upgrades. Analysts, however, tend to increase their forecasts of future …
Market-Based Assets And Shareholder Value: A Framework For Analysis, Rajendra Kumar Srivastava, Tasadduq A. Shervani, Liam Fahey
Market-Based Assets And Shareholder Value: A Framework For Analysis, Rajendra Kumar Srivastava, Tasadduq A. Shervani, Liam Fahey
Research Collection Lee Kong Chian School Of Business
The authors develop a conceptual framework of the marketing-finance interface and discuss its implications for the theory and practice of marketing. The framework proposes that marketing is concerned with the task of developing and managing market-based assets, or assets that arise from the commingling of the firm with entities in its external environment. Examples of market-based assets include customer relationships, channel relationships, and partner relationships. Market-based assets, in turn, increase shareholder value by accelerating and enhancing cash flows, lowering the volatility and vulnerability of cash flows, and increasing the residual value of cash flows. ABSTRACT FROM AUTHOR Copyright of Journal …
Is A Bond Rating Downgrade Bad News, Good News, Or No News For Stockholders?, Choo Yong, Jeremy Goh, Louis H. Ederington
Is A Bond Rating Downgrade Bad News, Good News, Or No News For Stockholders?, Choo Yong, Jeremy Goh, Louis H. Ederington
Research Collection Lee Kong Chian School Of Business
We examine the reaction of common stock returns to bond rating changes. While recent studies find a significant negative stock response to downgrades, we argue that this reaction should not be expected for all downgrades because: (1) some rating changes are anticipated by market participants and (2) downgrades because of an anticipated move to transfer wealth from bondholders to stockholders should be good news for stockholders. We find that downgrades associated with deteriorating financial prospects convey new negative information to the capital market, but that downgrades due to changes in firms' leverage do not.
Taxonomic Mental Models In Competitor Definition, Joseph F. Porac, Howard Thomas
Taxonomic Mental Models In Competitor Definition, Joseph F. Porac, Howard Thomas
Research Collection Lee Kong Chian School Of Business
In this article, a cognitive approach to the problem of competitor definition is outlined, which begins with a discussion of the information-processing demands implied by current models of competitive strategy. How decision makers simplify the competitive environment by using a mental model of competitive groups is then discussed. Finally, the implications of a cognitive approach for the classifying organizations and organizational adaptation are commented on.
Dividend Policy And Tax Structure, Kian Guan Lim
Dividend Policy And Tax Structure, Kian Guan Lim
Research Collection Lee Kong Chian School Of Business
We show that a certain class of progressive tax structure induces an optimal dividend policy which is autogressive in nature. The theoritical model is consistent with empirically observed dividend policies.