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Articles 31 - 60 of 213
Full-Text Articles in Corporate Finance
Outsourcing Climate Change, Rui Dai, Rui Duan, Hao Liang, Lilian Ng
Outsourcing Climate Change, Rui Dai, Rui Duan, Hao Liang, Lilian Ng
Research Collection Lee Kong Chian School Of Business
This paper examines whether and how firms combat climate change. Our study provides robust evidence that firms outsource part of their carbon emissions to foreign suppliers and shows how internal and external stakeholders significantly shape firms' environmental policies. Furthermore, firms tend to seek a foreign supplier and decrease their emission abatement efforts as pressure to reduce domestic emissions intensifies. These firms are also less incentivized to develop green technologies. Finally, we find that outsourcing emissions has real and economic consequences, with investors demanding a higher carbon premium for their exposures to carbon risks associated with increased outsourced emissions.
Socially Responsible Corporate Customers, Rui Dai, Hao Liang, Lilian Ng
Socially Responsible Corporate Customers, Rui Dai, Hao Liang, Lilian Ng
Research Collection Lee Kong Chian School Of Business
Corporate customers are an important stakeholder in global supply chains. We employ several unique international databases to test whether socially responsible corporate customers can infuse similar socially responsible business behavior in suppliers. Our findings suggest a unilateral effect on corporate social responsibility (CSR) only from customers to suppliers, an evidence further supported by exogenous variation in customers’ close-call CSR proposals and by product scandals. Customers exert influence on suppliers’ CSR through positive assortative matching and their decision-making process. Enhanced collaborative CSR efforts help improve operational efficiency and firm valuation of both customers and suppliers but increase only the customers’ future …
The Profitability Of Warrant Issuers: An Empirical Investigation Of Single Stock And Index Warrants, Ichaya Wongnapakarn, Arnat Leemakdej, Chiyachantana N. Chiraphol, Pattarawan Prasarnphanich, Eakapat Manitkajornkit
The Profitability Of Warrant Issuers: An Empirical Investigation Of Single Stock And Index Warrants, Ichaya Wongnapakarn, Arnat Leemakdej, Chiyachantana N. Chiraphol, Pattarawan Prasarnphanich, Eakapat Manitkajornkit
Research Collection Lee Kong Chian School Of Business
This study examines the derivative warrant's profit of issuers compensated with the risk from issuing call and put derivative warrants because they have commitments in risk management and managing risk by hedging the underlying exposure. The average profit of issuers is a cumulative profit from the first trading day until the last trading day. Consistent with the imperfect competition for issuing put derivative warrants on single stock from different securities borrowing and lending advantages, the profit margin of a put warrant is higher than the call warrant. However, the profit margin from a put warrant is not necessarily higher than …
Board Composition, Board Diversity And Stock Performance, Chiyachantana N. Chiraphol, Siripen Pattanawihok, Pattarawan Prrasarnphanich
Board Composition, Board Diversity And Stock Performance, Chiyachantana N. Chiraphol, Siripen Pattanawihok, Pattarawan Prrasarnphanich
Research Collection Lee Kong Chian School Of Business
The study investigates the relationship between six board compositions and stock returns. The results indicate a significant association between various board compositions and stock returns. Specifically, board size and executive directors have a negative impact, whereas independent directors enhance stock returns. Busy directors positively impact the abnormal stock returns for the companies in the non-financial industry, which implies that busy directors who serve on more boards tend to be well connected. More importantly, the results indicate a significant positive relationship between board tenure and stock returns. Board service time is perceived as the board quality of knowledge and experience from …
Inside Brokers, Frank Weikai Li, Abhiroop Mukherjee, Rik Sen
Inside Brokers, Frank Weikai Li, Abhiroop Mukherjee, Rik Sen
Research Collection Lee Kong Chian School Of Business
We identify the broker each corporate insider trades through, and find that analysts and mutual fund managers affiliated with such “inside brokers” have a substantial information advantage on the insider’s firm. Affiliated analysts issue more accurate earnings forecasts, and affiliated mutual funds trade the insider’s stock more profitably than their peers, following insider trades through their brokerage. Notably, this advantage persists well after these insider trades are publicly disclosed. Our results challenge the prevalent perception that information asymmetry arising from insider trading is acute only before trade disclosure, and suggest that brokers facilitating these trades are in a position to …
The Old Boys Club In New Zealand Listed Companies, Chen Chen, David K. Ding, William R. Wilson
The Old Boys Club In New Zealand Listed Companies, Chen Chen, David K. Ding, William R. Wilson
Research Collection Lee Kong Chian School Of Business
The board of directors plays an important role in implementing corporate governance in the firm, as directors have a fiduciary duty to the firm’s shareholders. The effectiveness of directors is a key determinant of corporate value and they need to bring a range of skills and experience to the boardroom. This skill and experience cannot be developed solely within the firm, and most boards incorporate non-executive directors who are or have been directors of other firms. Current research on the benefits of interlocking directorships is mixed between the claim that they bring outside feedback to the table and open decision …
Speed Acquisition, Shiyang Huang, Bart Zhou Yueshen
Speed Acquisition, Shiyang Huang, Bart Zhou Yueshen
Research Collection Lee Kong Chian School Of Business
Speed is a salient feature of modern financial markets. This paper studies investors' speed acquisition together with their information acquisition. Speed heterogeneity arises in equilibrium, fragmenting the information aggregation process with a nonmonotone impact on price informativeness. Various competition effects drive speed and information to be either substitutes or complements. The model cautions the possible dysfunction of price discovery: An improving information technology might complement speed acquisition, which shifts the concentration of price discovery over time, possibly hurting price informativeness. Novel predictions are discussed regarding investor composition and their investment performance.
Internal Capital Markets And Return Predictability In Complex Ownership Firms, Angelica Gonzalez, Sergei Sarkissian, Jun Tu, Ran Zhang
Internal Capital Markets And Return Predictability In Complex Ownership Firms, Angelica Gonzalez, Sergei Sarkissian, Jun Tu, Ran Zhang
Research Collection Lee Kong Chian School Of Business
Using global cross-ownership data, we find return predictability for four possible cases in ownership-linked firms (OLFs): subsidiary−parent, parent−subsidiary, subsidiary−subsidiary, and parent−parent. A long/short portfolio strategy sorted by the lagged monthly returns of OLFs yields the monthly Fama-French six-factor alpha of 79−113 bps. These results, which are observed only after the establishment of ownership links, are not subsumed by industry or cross-country momentums or by alternative inter-firm relations, including customer−supplier links, strategic alliances, common boards, and shared analyst coverage. The OLF return predictability is best explained by active internal capital markets—a mechanism unique to firms with a complex ownership network.
Seasoned Equity Offerings And Corporate Financial Management, Michael J. Barclay, Fangjian Fu, Clifford W. Smith
Seasoned Equity Offerings And Corporate Financial Management, Michael J. Barclay, Fangjian Fu, Clifford W. Smith
Research Collection Lee Kong Chian School Of Business
We assume executives managing corporate financial policy consider the firm's current and target leverage, investment plans, anticipated cash flows, and consequences of alternative sequences of financing transactions, operating within efficient markets. Our analysis yields time-series and cross-sectional predictions for management of investment spending and leverage; use of maturity, priority, and convertibility covenants; and management of dividends, share repurchases, cash balances, and credit lines. Our evidence from 8608 SEOs covering 1970–2015 is consistent with implications of our theory, helps to resolve an array of issues in corporate finance, and offers a step toward a more unified analysis of rational corporate financial …
Capm-Based Company (Mis)Valuations, Olivier Dessaint, Jacques Olivier, Clemens A. Otto, David Thesmar
Capm-Based Company (Mis)Valuations, Olivier Dessaint, Jacques Olivier, Clemens A. Otto, David Thesmar
Research Collection Lee Kong Chian School Of Business
There is a discrepancy between CAPM-implied and realized returns. Using the CAPM in capital budgeting -- as recommended in textbooks -- should thus have real effects. For instance, low beta projects should be valued more by CAPM-users than by the market. We test this hypothesis using M&A data and show that bids for low-beta private targets entail lower bidder returns. We provide further support by testing several ancillary predictions. Our analyses suggest that using the CAPM when valuing targets leads to valuation errors (relative to the market's view) corresponding on average to 12% to 33% of the deal values.
Executive Compensation And Firm Performance In New Zealand: The Role Of Employee Stock Option Plans, David K. Ding, Ya Eem Chea
Executive Compensation And Firm Performance In New Zealand: The Role Of Employee Stock Option Plans, David K. Ding, Ya Eem Chea
Research Collection Lee Kong Chian School Of Business
We examine the role of employee stock option plans (ESOPs) in mitigating agency problems in New Zealand firms. We find that ESOPs have a significant and positive effect on firm performance relative to their non-ESOP counterparts. This relation appears within a year from the first ESOP announcement, and for two to four years after the announcement. Our results show that ESOPs improve corporate performance by 10 times the cost of the ESOPs’ adoption in the first year of issue. The improvement persists for four years after the first issuance. These findings confirm the effectiveness of employee stock option plans for …
Value Creating Drivers For Effective Human Capital Management, Ser Keng Ang
Value Creating Drivers For Effective Human Capital Management, Ser Keng Ang
Research Collection Lee Kong Chian School Of Business
It is common for modern-day corporate leaders and academic writers to make claim that human resources is one of the most important assets in their organization (Guest, 2001). If that were the case, effective management of human capital would be a critical factor in the success of any organization. As an important organizational resource, human capital is expected to generate significant economic benefits from its deployment, development and retention (Flamholtz, 1999). There is widespread evidence that the effective use of human capital can also create durable competitive advantage for an organization (Barney, 1991; Becker & Gerhart, 1996; Lado & Wilson, …
Algorithmic Trading And Market Quality: International Evidence, Ekkehart Boehmer, Kingsley Fong, Juan Julie Wu
Algorithmic Trading And Market Quality: International Evidence, Ekkehart Boehmer, Kingsley Fong, Juan Julie Wu
Research Collection Lee Kong Chian School Of Business
We study the effect of algorithmic trading (AT) on market quality between 2001 and 2011 in 42 equity markets around the world. We use an exchange colocation service that increases AT as an exogenous instrument to draw causal inferences about AT on market quality. On average, AT improves liquidity and informational efficiency but increases short-term volatility. Importantly, AT also lowers execution shortfalls for buy-side institutional investors. Our results are surprisingly consistent across markets and thus across a wide range of AT environments. We further document that the beneficial effect of AT is stronger in large stocks than in small stocks.
The Effect Of Green Announcements On Stock Returns Of New Zealand Listed Companies, David K. Ding
The Effect Of Green Announcements On Stock Returns Of New Zealand Listed Companies, David K. Ding
Research Collection Lee Kong Chian School Of Business
The purpose of this paper is to investigate the effect of corporate green announcements on the stock performance of listed companies in New Zealand. We find that the market has a positive, though not significant, reaction to the announcements. New Zealand companies are largely viewed to be already quite green at the onset and the market is not very much surprised by such announcements but expect them to continue being green. Our results are consistent with the view that to be green is costly, especially so in a developed economy where the cost of doing business is high. Our findings …
The Innovation Effect Of Dual-Class Shares: New Evidence From Us Firms, Xiaping Cao, Tiecheng Leng, Jeremy C. Goh, Paul Malatesta
The Innovation Effect Of Dual-Class Shares: New Evidence From Us Firms, Xiaping Cao, Tiecheng Leng, Jeremy C. Goh, Paul Malatesta
Research Collection Lee Kong Chian School Of Business
The proliferation of dual-class structures in the US stock market presents a controversial trend since such shares are traditionally deemed to damage governance quality. We study the relationship between 362 firms with dual-class shares and their innovativeness using patent citations from Google Patents over the 1976 through 2006 period. We find dual-class shares have significant innovation effect in high-tech sectors, hard-to-innovate industries, firms with higher external takeover threat and firms heavily dependent on external equity financing. We also document a positive causality relationship between dual-class structures and the quality of innovation. The channel for this causal relationship is the protection …
Cross-Border Acquisitions And Employment Policies, Hao Liang, Luc Renneboog, Cara Vansteenkiste
Cross-Border Acquisitions And Employment Policies, Hao Liang, Luc Renneboog, Cara Vansteenkiste
Research Collection Lee Kong Chian School Of Business
Using novel firm-level data on employment quality in an international sample of M&A deals, this paper investigates the cost-benefit trade-off faced by acquirers when providing generous employment policies. We find that shareholders react more positively to deal announcements by acquirers providing generous employee incentives when the deal is domestic, but negatively when the deal is cross-border. These effects are primarily driven by the provision of monetary incentives and are strongest for firms in skilled industries. We argue that generous employment policies increase synergy gains and reduce labor adjustment costs in a domestic takeover. In cross-border deals, however, costs associated with …
Are Corporate Spin-Offs Prone To Insider Trading?, Patrick Augustin, Menachem Brenner, Jianfeng Hu, Marti Subrahmanyam
Are Corporate Spin-Offs Prone To Insider Trading?, Patrick Augustin, Menachem Brenner, Jianfeng Hu, Marti Subrahmanyam
Research Collection Lee Kong Chian School Of Business
Despite abundant empirical evidence of informed trading ahead of major corporate events, no such evidence has been reported in the case of corporate spinoff (SP) announcements. This is surprising, as SP announcements are unexpected, and are also associated with a positive price jump in the parent company’s stock. Using a sample of 280 US announcement events from 1996 to 2013, we document significant pre-announcement informed trading activity in options for about 9 to 16% of events in our sample. In contrast, we find statistically insignificant evidence of informed trading in stocks, suggesting that informed traders employ leverage through options. In …
Does Intergeneration Succession Influence Stock Prices Of Family Businesses?, Kunlun Zou, Rong Wu, Pu Chen
Does Intergeneration Succession Influence Stock Prices Of Family Businesses?, Kunlun Zou, Rong Wu, Pu Chen
Research Collection Lee Kong Chian School Of Business
China’s A-shares family listed companies are facing a period of high intergenerational succession. This has attracted the attention and research of many scholars. The existing studies mainly focus on the motives, methods, and influencing factors of family business’ intergenerational succession, and there are few studies involving the reaction of the capital markets. This article takes 45 listed family businesses as samples and uses the synthetic control method to examine the impact and the degree of influence that intergenerational succession has on stock price movements. Thereafter, a difference-in-differences estimation is conducted to test for robustness. At the conclusion of our research, …
Do Firms Adapt To Climate Change? Evidence From Establishment-Level Data, Frank Weikai Li, Yupeng Lin, Zuben Jin, Zilong Zhang
Do Firms Adapt To Climate Change? Evidence From Establishment-Level Data, Frank Weikai Li, Yupeng Lin, Zuben Jin, Zilong Zhang
Research Collection Lee Kong Chian School Of Business
This paper examines firms’ adaptation to long-term changes in climatic conditions. Using detailed information of establishments owned by U.S. public firms from 1990 to 2012, we show that higher abnormal temperatures over the previous five years in a county lead to a significant reduction in local employment and the number of establishments. Further tests suggest that the decline in employment and establishments is largely due to a decline in local consumer demand rather than lower labor productivity. We also find that firms more likely take adaptive actions when their managers are more likely to believe in, or are concerned about, …
Geographical Influences On The Relationship Between Corporate Philanthropy And Corporate Financial Performance, Jane Lu, Xueji Liang, Heli Wang
Geographical Influences On The Relationship Between Corporate Philanthropy And Corporate Financial Performance, Jane Lu, Xueji Liang, Heli Wang
Research Collection Lee Kong Chian School Of Business
Building on stakeholder theory, the paper argues that geographical differences in stakeholders’ reactions to corporate philanthropy lead to differences in the relationship between corporate philanthropy and corporate financial performance across regions. When comparing the United States and China and different regions within China, it is found that the differences in stakeholder perceptions (as reflected by sinful industry) and information availability (as indicated by advertising intensity) across regions significantly moderate the corporate philanthropy–corporate financial performance relationship. The findings show that the value of corporate philanthropy varies by region and that stakeholder perception and information availability are two important mechanisms through which …
Are Interim Ceos Just Caretakers?, Xiaoxiao He, Rui Zhu
Are Interim Ceos Just Caretakers?, Xiaoxiao He, Rui Zhu
Research Collection Lee Kong Chian School Of Business
Interim CEOs are often viewed as caretakers during CEO transition periods. However, the caretaker function does not fully explain the increasing trend in the use of interim CEO appointments. Recent studies suggest that firms also use the interim position to test potential CEO candidates. This paper empirically examines this argument using a hand-collected dataset of 1936 CEO successions between 1994 and 2014. We find evidence that firms consider interim positions as a testing ground for CEO candidates. Specifically, we find that candidates with uncertain managerial abilities are more likely to be initially named as interim CEOs rather than permanent CEOs. …
The Impact Of Investor Protection Law On Global Takeovers: Lbo Vs. Non-Lbo Transactions, Xiaping Cao, Douglas Cummings, Jeremy C. Goh, Xiaoming Wang
The Impact Of Investor Protection Law On Global Takeovers: Lbo Vs. Non-Lbo Transactions, Xiaping Cao, Douglas Cummings, Jeremy C. Goh, Xiaoming Wang
Research Collection Lee Kong Chian School Of Business
This paper examines the impact of investor protection laws on value creation in LBOs versus non-LBO takeovers. We find that value creation measured by takeover premium is significantly higher in countries with better investor protection. The value effect of investor protection laws is more pronounced for LBOs than non-LBO takeover transactions. Among LBOs, investor protection’s value effect is lower for club deals than others. These results suggest that institutional context and legal environment determine the extent of value creation for takeovers around the world.
How Inheritance Law Affects Family Firm Performance: Evidence From A Natural Experiment, Yong Kyu Gam, Min Jung Kang, Junho Park, Hojong Shin
How Inheritance Law Affects Family Firm Performance: Evidence From A Natural Experiment, Yong Kyu Gam, Min Jung Kang, Junho Park, Hojong Shin
Research Collection Lee Kong Chian School Of Business
We argue that changes in the inheritance system affect incentives leading to sibling rivalry among descendants and therefore have a material impact on family firm performance. Using South Korea's 1991 inheritance law reform that stipulates the equal distribution of a deceased person's property to descendants, we find that the performance and operating growth rate in family firms show significant enhancement compared with those of nonfamily firms. Moreover, the positive effects are greater for family firms that undergo a business succession with multiple sons and married daughters. Overall, our results suggest that changing to equal bequests of inheritance has a positive …
Political Ideology Of The Board And Ceo Dismissal Following Financial Misconduct, Uisung Park, Warren Boeker, David Gomulya
Political Ideology Of The Board And Ceo Dismissal Following Financial Misconduct, Uisung Park, Warren Boeker, David Gomulya
Research Collection Lee Kong Chian School Of Business
Why do some boards refuse to take serious action against CEOs who have committed financial misconduct? Past work has directed attention to the antecedents of misconduct while largely overlooking this question. The relatively few studies to examine it have typically revolved around the capacity of boards to take action, or their relationships to their CEOs. This study instead examines how the beliefs and values held by board members can influence their actions following financial misconduct. Focusing on political ideology, we argue and find that politically conservative boards are more likely to respond by dismissing the CEO than are liberal boards. …
Corporate Governance And Institutional Investors: Proxy Voting Behavior After The Stewardship Code (コーポレートガバナンスと機関投資家―スチュワードシップコード改訂後の議決権行使の状況について), Mari Yamauchi, Toru Yoshikawa
Corporate Governance And Institutional Investors: Proxy Voting Behavior After The Stewardship Code (コーポレートガバナンスと機関投資家―スチュワードシップコード改訂後の議決権行使の状況について), Mari Yamauchi, Toru Yoshikawa
Research Collection Lee Kong Chian School Of Business
本稿では，日本版スチュワードシップコードの改訂により始まった機関投資家 による議決権行使の結果について，投資家のタイプごとに分析し，どのような投 資家がどのような会社提案議案についてより多くの反対票を投じているかについ て検討した。先行研究に従えば，資産運用会社のように投資先企業とアームズレ ングスの関係を持つ投資家は，保険会社のように投資先企業とビジネス上の関係 を持つ投資家と比較すると，会社側提案に対して異議を唱える可能性が高いとさ れる。また，株式持ち合いなど日本的背景を考慮すると，日本においては，外資 系投資家の方が国内の投資家に比べて，会社提案に対して反対票を投じる可能性 が高いことも予想される。2018年度の議決権行使の結果を分析したところ，ほぼ 先行研究と同じ結果が得られ，業種で分類した場合，資産運用会社の方が生損保 のような保険会社より反対票の比率が高いこと，資本国籍で分類すると，外資投 資家の方が買収防衛策の導入や退任役員への退職慰労金の支給など特定の項目に ついて，日系の投資家に比べて反対率が高いことが確認された。
Peer Effects Of Corporate Social Responsibility, Jie Cao, Hao Liang, Xintong Zhan
Peer Effects Of Corporate Social Responsibility, Jie Cao, Hao Liang, Xintong Zhan
Research Collection Lee Kong Chian School Of Business
We investigate how firms react to their product-market peers' commitment to and adoption of corporate social responsibility (CSR) using a regression discontinuity design approach. Relying on the passage or failure of CSR proposals by a narrow margin of votes during shareholder meetings, we find the passage of a close-call CSR proposal and its implementation are followed by the adoption of similar CSR practices by peer firms. In addition, peers that have greater difficulty in catching up with the voting firm in CSR experience significantly lower stock returns around the passage, consistent with the notion that the spillover effect of the …
Momentum And Reversal: The Role Of Short Selling, Zhaobo Zhu, Xinrui Duan, Licheng Sun, Jun Tu
Momentum And Reversal: The Role Of Short Selling, Zhaobo Zhu, Xinrui Duan, Licheng Sun, Jun Tu
Research Collection Lee Kong Chian School Of Business
This paper investigates the relation between short selling and momentum. We document that a consistent momentum strategy that buys lightly shorted winners and sells heavily shorted losers exhibits strong short-term momentum and no long-term reversal. In contrast, an inconsistent momentum strategy that buys heavily shorted winners and sells lightly shorted losers experiences weak short-term momentum and persistent long-term reversal. Our results are robust after controlling for firm characteristics, proxy for short-sale constraints, and investor sentiment, as well as an exogenous shock (the Taxpayer Relief Act of 1997). These findings present a new challenge to existing theories of momentum that rely …
Crossed Wires: Endorsement Signals And The Effects Of Ipo Firm Delistings On Venture Capitalists’ Reputations, David Gomulya, Kyuho Jin, Peggy M. Lee, Timothy G. Pollock
Crossed Wires: Endorsement Signals And The Effects Of Ipo Firm Delistings On Venture Capitalists’ Reputations, David Gomulya, Kyuho Jin, Peggy M. Lee, Timothy G. Pollock
Research Collection Lee Kong Chian School Of Business
Signaling theorists have paid a great deal of attention to the costs of acquiring characteristics that can serve as signals, such as endorsements from reputable third parties. However limited attention has been devoted to the penalty costs associated with providing inaccurate signals and the factors that can exacerbate or attenuate the penalties. In this study, we examine the effect of negative feedback loops on venture capital firms’ reputations that result from the failures (delistings) of the newly-public firms they once endorsed. Drawing on signaling and attribution theories, we argue that endorsements by reputable VC firms create high expectations that, when …
Informed Options Trading Prior To Bankruptcy Filings, Li Ge, Jianfeng Hu, Mark Humphery-Jenner, Tse-Chun Lin
Informed Options Trading Prior To Bankruptcy Filings, Li Ge, Jianfeng Hu, Mark Humphery-Jenner, Tse-Chun Lin
Research Collection Lee Kong Chian School Of Business
Prior evidence on pre-bankruptcy-filing informed trade is mixed. The inconclusive findings might result from the sole focus on stock trading. We reassess the presence of pre-filing informed and insider trades by examining the information content of options trading before bankruptcy announcements. We find that bankruptcy filing returns are not significantly related to pre-filing insider stock trading. However, filing returns are significantly negatively related to pre-filing insider and informed options trading. The informational content of options trading reduces with options illiquidity and the amount of information impounded into pre-filing stock prices.
Scaled Pca: A New Approach To Dimension Reduction, Dashan Huang, Fuwei Jiang, Guoshi Tong, Guofu Zhou
Scaled Pca: A New Approach To Dimension Reduction, Dashan Huang, Fuwei Jiang, Guoshi Tong, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
The notion that bond risk premium varies with business cycles is challenged once real time macro data are used. In this paper, we argue that the macro factors extracted by using the standard PCA are not the most relevant for forecasting bond risk premium, because the PCA factors are designed to explain the most variation of macro data instead of the variation of bond risk premium. With the latter objective in mind, we propose a scaled PCA (sPCA) approach, which incorporates the information in bond risk premium in the factor extraction procedure. The real time macro sPCA factors have much …