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Articles 811 - 840 of 1293

Full-Text Articles in Finance and Financial Management

Limited Attention, Marital Events, And Hedge Funds, Yan Lu, Sugata Ray, Melvyn Teo Jan 2015

Limited Attention, Marital Events, And Hedge Funds, Yan Lu, Sugata Ray, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

We explore the impact of limited attention on investment performance by analyzing the returns of hedge fund managers who are distracted by personal events such as marriage and divorce. We find that marriages and divorces are associated with significantly lower fund alpha, during the six-month period surrounding the event and for up to two years after the event. Relative to the pre-event window, fund alpha falls by an annualized 8.50 percent during a marriage and 7.39 percent during a divorce. Busy fund managers who manage larger funds and engage in high tempo investment strategies are more affected by marriage. Fund …

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The Interaction Effects Of Ceo Power, Social Connections And Incentive Compensation On Firm Value, Gary Caton, Choo Yong, Jeremy Goh, Jinghao Ke, Scott C. Linn Jan 2015

The Interaction Effects Of Ceo Power, Social Connections And Incentive Compensation On Firm Value, Gary Caton, Choo Yong, Jeremy Goh, Jinghao Ke, Scott C. Linn

Research Collection Lee Kong Chian School Of Business

We study the relation between company value and the interplay between CEO power, CEO equity incentives and the friendliness of the board of directors. Following Bebchuk, Cremers and Peyer (2011), we measure CEO power as the proportion paid to the CEO of the total compensation paid to the top five executives of the firm. We find that strong CEO equity incentives and the presence of a friendly board of directors both individually moderate the negative effect of CEO power on Tobin’s q. Moreover, these variables also work together. We find that firm value tends to increase when equity incentives are …

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Analyst Price Target Expected Returns And Option Implied Risk, Turan G. Bali, Jianfeng Hu, Scott Murray Dec 2014

Analyst Price Target Expected Returns And Option Implied Risk, Turan G. Bali, Jianfeng Hu, Scott Murray

Research Collection Lee Kong Chian School Of Business

Motivated by the nature of asset pricing models, we investigate the cross-sectional relation between the market's ex-ante view of a stock's risk and the stock's ex-ante expected return. We demonstrate that an ex-ante measure of expected returns based on analyst price targets is highly related to the market's required rate of return. Using this measure, we show that ex-ante measures of volatility, skewness, and kurtosis derived from option prices are positively related to ex-ante expected returns. We then decompose the risk measures into systematic and unsystematic components and find that while expected returns are related to both systematic and unsystematic …

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Risk Sharing In An Asymmetric Environment, Eric Fesselmeyer, Leonard J. Mirman, Marc Santugini Nov 2014

Risk Sharing In An Asymmetric Environment, Eric Fesselmeyer, Leonard J. Mirman, Marc Santugini

Research Collection College of Integrative Studies

We study the effect of an asymmetric environment on risk sharing. In our model, entrepreneurs consider undertaking risky projects in the real sector as well as selling part of their projects to investors. To capture the idea of an asymmetric environment, the returns on the alternative risk-free investment are allowed to differ between the entrepreneurs and the investors, i.e., agents have different opportunity costs of participating in the risky projects. We first show that the presence of asymmetric options establishes links between the risk-free and risky sectors as well as between the real and financial sectors. In particular, an asymmetric …

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Mind The Liquidity Gap: Building A Better Capital Market For You, Kaushik Rudra Nov 2014

Mind The Liquidity Gap: Building A Better Capital Market For You, Kaushik Rudra

Asian Management Insights

Asian banks in most jurisdictions are currently more than adequately capitalised with respect to Basel III. However, as they are called upon to support the region’s economic growth over the next decade, they are likely to run up against capital constraints.

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Singapore Exchange: Managing Investment Risk In Times Of Volatility, Geoff Howie Nov 2014

Singapore Exchange: Managing Investment Risk In Times Of Volatility, Geoff Howie

Asian Management Insights

Growing Asian stock exchanges, such as the Singapore Exchange, create economic value for businesses and investors, while helping to reduce volatility by offering a diversified basket of investment choices and equity derivative products.

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Portfolio Manager Ownership And Mutual Fund Risk Taking, Linlin Ma, Yuehua Tang Nov 2014

Portfolio Manager Ownership And Mutual Fund Risk Taking, Linlin Ma, Yuehua Tang

Research Collection Lee Kong Chian School Of Business

We study the effect of portfolio manager ownership, that is, “skin in the game”, on the risk taking of mutual funds. Using a holdings-based risk-shifting measure and a difference-indifferences approach, we find that managers with greater ownership engage in less risk-shifting behavior. We also find that managers with higher ownership exhibit superior reward-to-risk (i.e., Sharpe and appraisal) ratios. Funds with greater managerial ownership attract more capital flows. Taken together, our findings indicate that managerial ownership reduces managers’ incentive to engage in risk-shifting behavior and increases shareholder wealth.

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Ceo Optimism And Incentive Compensation, Clemens A. Otto Nov 2014

Ceo Optimism And Incentive Compensation, Clemens A. Otto

Research Collection Lee Kong Chian School Of Business

I study the effect of chief executive officer (CEO) optimism on CEO compensation. Usingdata on compensation in US firms, I provide evidence that CEOs whose option exercisebehavior and earnings forecasts are indicative of optimistic beliefs receive smaller stockoption grants, fewer bonus payments, and less total compensation than their peers. Thesefindings add to our understanding of the interplay between managerial biases andremuneration and show how sophisticated principals can take advantage of optimisticagents by appropriately adjusting their compensation contracts.

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Governance Matter: Morningstar Stewardship Grades And Mutual Fund Performance, Jerry X. Cao, Aurobindo Ghosh, Jeremy Goh, Wee Seng Ng Nov 2014

Governance Matter: Morningstar Stewardship Grades And Mutual Fund Performance, Jerry X. Cao, Aurobindo Ghosh, Jeremy Goh, Wee Seng Ng

Research Collection School Of Economics

Mutual fund investors have the arduous task of disentangling luck from ability of mutual fund managers’ performance. In this paper we investigate the role of mutual fund corporate governance (measured by Morningstar Stewardship grade) in mutual fund performance. We propose an objective data-driven corporate governance score based on principal components of Morningstar Stewardship Grades. Furthermore, we establish corporate governance scores have Granger Causality on long-term risk-adjusted returns. The findings suggest that corporate governance grades of mutual funds carry information content beyond the usual star rating measures for predicting long-term mutual fund performance and provide an effective tool for selecting funds.

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Risk Sharing In An Asymmetric Environment, Eric Fesselmeyer, Leonard J. Mirman, Marc Santugini Nov 2014

Risk Sharing In An Asymmetric Environment, Eric Fesselmeyer, Leonard J. Mirman, Marc Santugini

Research Collection College of Integrative Studies

We study the effect of an asymmetric environment on risk sharing. In our model, entrepreneurs consider undertaking risky projects in the real sector as well as selling part of their projects to investors. To capture the idea of an asymmetric environment, the returns on the alternative risk-free investment are allowed to differ between the entrepreneurs and the investors, i.e., agents have different opportunity costs of participating in the risky projects. We first show that the presence of asymmetric options establishes links between the risk-free and risky sectors as well as between the real and financial sectors. In particular, an asymmetric …

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Mutual Funds And Information Diffusion: The Role Of Country-Level Governance, Chunmei Lin, Massimo Massa, Hong Zhang Nov 2014

Mutual Funds And Information Diffusion: The Role Of Country-Level Governance, Chunmei Lin, Massimo Massa, Hong Zhang

Research Collection Lee Kong Chian School Of Business

We hypothesize that poor country-level governance, which makes public information less reliable, induces fund managers to increase their use of semipublic information. Utilizing data from international mutual funds and stocks over the 2000-2009 period, we find that semipublic information-related stock rebalancing can be five times higher in countries with the worst quality of governance than in countries with the best. The use of semipublic information increases price informativeness but also increases information asymmetry and reduces stock liquidity. It also intensified the price impact and liquidity crunch during the recent global financial crisis.

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All That Glitters Is Gold, Singapore Management University Oct 2014

All That Glitters Is Gold, Singapore Management University

Perspectives@SMU

Limited supply of the precious metal and an age gap in leadership translate into career opportunities in the gold industry

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Finance And Social Responsibility In The Informal Economy: Institutional Voids, Globalization And Microfinance Institutions, Hao Liang, Chris Marquis, Sunny Li Sun Oct 2014

Finance And Social Responsibility In The Informal Economy: Institutional Voids, Globalization And Microfinance Institutions, Hao Liang, Chris Marquis, Sunny Li Sun

Research Collection Lee Kong Chian School Of Business

We examine how different types of country-level globalization and the industry structure of microfinance institutions (MFIs) affect organization-level microcredit interest rates which crucially affect the poor's entrepreneurial opportunities. We develop an opportunity structure perspective that argues that MFI interest rates can be reduced by egalitarian-based social globalization but increased by neoliberal-based economic globalization. Moreover, stronger presence of nonprofit organizations in the microfinance industry lowers interest rates. Furthermore, these three forces can moderate the relationship between MFIs' outreach to the poor and average interest rate. Analyses of 2,559 MFI observations across 74 countries from 2002 - 2012 largely support our hypotheses.

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Outward Foreign Direct Investment By Emerging Market Firms: A Resource Dependence Logic, Jun Xia, Xufei Ma, Jane W. Lu, Daphne W. Yiu Sep 2014

Outward Foreign Direct Investment By Emerging Market Firms: A Resource Dependence Logic, Jun Xia, Xufei Ma, Jane W. Lu, Daphne W. Yiu

Research Collection Lee Kong Chian School Of Business

This study examines and extends the resource dependence logic of diversification for a better understanding of outward foreign direct investment (OFDI) activities by emerging market firms. We contend that the diversification logic is bounded by state ownership, an important but less considered component of interdependence. Our empirical results, based on panel data analysis of Chinese listed firms, suggest that the level of interdependence between Chinese and foreign firms in China in multiple forms, including symbiotic, competitive, and partner interdependencies, is positively associated with the level of the Chinese firms' OFDI activities. However, Chinese firms with higher levels of state ownership …

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Do Loan Loss Reserves Behave Like Capital? Evidence From Recent Bank Failures, Jeffrey Ng, Sugata Roychowdhury Sep 2014

Do Loan Loss Reserves Behave Like Capital? Evidence From Recent Bank Failures, Jeffrey Ng, Sugata Roychowdhury

Research Collection School Of Accountancy

Regulatory capital guidelines allow for loan loss reserves to be added back as capital. The evidence in this paper suggests that the influence of loan loss reserves added back as regulatory capital (hereafter referred to as “add-backs”) on bank risk cannot be explained by either economic principles underlying the notion of capital, or accounting principles underlying the recording of reserves. Specifically, we observe that in sharp contrast to the economic notion of capital as a buffer against bank failure risk, add-backs are positively associated with the risk of bank failure during the recent economic crisis. Further the positive association of …

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Do Venture Capitalists Play A Monitoring Role In An Emerging Market: Evidence From The Pay-Performance Relationship Of Chinese Entrepreneurial Firms?, Jerry X. Cao, Qigui Liu, Gary G. Tian Sep 2014

Do Venture Capitalists Play A Monitoring Role In An Emerging Market: Evidence From The Pay-Performance Relationship Of Chinese Entrepreneurial Firms?, Jerry X. Cao, Qigui Liu, Gary G. Tian

Research Collection Lee Kong Chian School Of Business

This paper investigates venture capitalists’ monitoring of managerial behaviour by examining their impact on CEO pay-performance sensitivity across various controlling structures in Chinese firms. We find that the effectiveness of venture capitalists' monitoring depends on different types of agency conflict. In particular, we find that venture capital (VC) monitoring is hampered in firms that experience severe controlling-minority agency problems caused by disproportionate ownership structures. We provide further evidence that VC is more likely to exert close monitoring in firms that have greater managerial agency conflict, and thus require more direct monitoring. However, controlling-minority agency problems have a greater impact on …

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Housing Policies In Singapore: Evaluation Of Recent Proposals And Recommendations For Reform, Sock Yong Phang, David K. C. Lee, Alan Cheong, Kok Fai Phoon, Karol Wee Sep 2014

Housing Policies In Singapore: Evaluation Of Recent Proposals And Recommendations For Reform, Sock Yong Phang, David K. C. Lee, Alan Cheong, Kok Fai Phoon, Karol Wee

Research Collection Lee Kong Chian School Of Business

The Singapore housing market is unusual in its high homeownership rate, the dominance of HDB housing, and the extensive intervention of the government in regulating housing supply and demand in both the HDB and private housing sectors. Recent rapid population increases in a low interest rate and high global liquidity environment has resulted in accelerated house prices increases in Singapore. Earlier this year, the government launched “Our Singapore Conversation” of which discussion on housing policies constitutes one major component. This “conversation” comes in the wake of several consecutive rounds of measures to stabilize housing prices using various instruments. This paper …

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Designing Efficient Infrastructural Investment And Asset Transfer Mechanisms In Humanitarian Supply Chains, Shantanu Bhattacharya, Sameer Hasija, Luk N. Van Wassenhove Sep 2014

Designing Efficient Infrastructural Investment And Asset Transfer Mechanisms In Humanitarian Supply Chains, Shantanu Bhattacharya, Sameer Hasija, Luk N. Van Wassenhove

Research Collection Lee Kong Chian School Of Business

We analyze the efficacy of different asset transfer mechanisms and provide policy recommendations for the design of humanitarian supply chains. As a part of their preparedness effort, humanitarian organizations often make decisions on resource investments ex ante because doing so allows for rapid response if an adverse event occurs. However, programs typically operate under funding constraints and donor earmarks with autonomous decision-making authority resting with the local entities, which makes the design of efficient humanitarian supply chains a challenging problem. We formulate this problem in an agency setting with two independent aid programs, where different asset transfer mechanisms are considered …

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How Can Banks Use Big Data?, Singapore Management University Aug 2014

How Can Banks Use Big Data?, Singapore Management University

Perspectives@SMU

Banks can recommend better use of money for customers, but data security is crucial

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Have Capital Market Anomalies Attenuated In The Recent Era Of High Liquidity And Trading Activity?, Tarun Chordia, Avanidhar Subrahmanyam, Qing Tong Aug 2014

Have Capital Market Anomalies Attenuated In The Recent Era Of High Liquidity And Trading Activity?, Tarun Chordia, Avanidhar Subrahmanyam, Qing Tong

Research Collection Lee Kong Chian School Of Business

We examine whether the recent regime of increased liquidity and trading activity is associated with attenuation of prominent equity return anomalies due to increased arbitrage. We find that the majority of the anomalies have attenuated and the average returns from a portfolio strategy based on prominent anomalies have approximately halved after decimalization. We provide evidence that hedge fund assets under management, short interest and aggregate share turnover have led to the decline in anomaly-based trading strategy profits in recent years. Overall, our work indicates that policies to stimulate liquidity and ameliorate trading costs improve capital market efficiency.

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Managerial Expertise, Corporate Decisions, And Firm Value: Evidence From Corporate Refocusing, Sheng Huang Jul 2014

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 …

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Singapore's Financial Market: Challenges And Future Prospects, David K. C. Lee, Kok Fai Phoon Jul 2014

Singapore's Financial Market: Challenges And Future Prospects, David K. C. Lee, Kok Fai Phoon

Research Collection Lee Kong Chian School Of Business

Singapore has successfully developed into one of the leading international financial centers in a short span of less than half a century. The factors of success can be attributed to time, space, and people. Given the complexity and connectivity of today’s markets, there are many challenges in a fast changing environment marked by huge global capital flows and punctuated by crisis after crisis. This chapter will explain the success of Singapore’s financial market and provide the author’s outlook for the island state’s future prospects in the aftermath of the US debt crisis, the Euro crisis, and likely slowdown in emerging …

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Dissecting The Asset Growth Anomaly, Fangjian Fu Jul 2014

Dissecting The Asset Growth Anomaly, Fangjian Fu

Research Collection Lee Kong Chian School Of Business

Studies have shown that firm asset growth predicts cross-sectional stock returns. Firms that shrink their assets earn superior returns while firms that substantially expand their assets incur poor returns in the following years. I show that the negative asset growth often implies poor operating performance and a high probability subsequently to be delisted from the exchanges and that the high asset growth is primarily fuelled by large external financing. The seemingly superior returns of the negative asset growth portfolios are due to the omission of delisting returns. The poor returns of the high asset growth portfolios coincide with the widely-documented …

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Board Interlock Networks And The Use Of Relative Performance Evaluation, Qian Hao, Nan Hu, Ling Liu, Lee J. Yao Jul 2014

Board Interlock Networks And The Use Of Relative Performance Evaluation, Qian Hao, Nan Hu, Ling Liu, Lee J. Yao

Research Collection School Of Computing and Information Systems

Purpose - The purpose of this paper is to explore how networks of boards of directors affect relative performance evaluation (RPE) in chief executive officer (CEO) compensation. Design/methodology/approach - In this study, the authors propose that an interlocking network is an important inter-corporate setting, which has a bearing on whether boards decide to use RPE in CEO compensation. They adopt four typical graph measures to depict the centrality/position of each board in the interlock network: degree, betweenness, eigenvector and closeness, and study their impacts on RPE use. Findings - The authors find that firms that have more connected board members …

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The Risk-Relevance Of Securitizations During The Recent Financial Crisis, Yiwei Dou, Yanju Liu, Gordon Richardson, Dushyantkumar Vyas Jun 2014

The Risk-Relevance Of Securitizations During The Recent Financial Crisis, Yiwei Dou, Yanju Liu, Gordon Richardson, Dushyantkumar Vyas

Research Collection School Of Accountancy

We investigate changes in the risk-relevance of securitized subprime, other nonconforming, and commercial mortgages for sponsor-originators during the recent financial crisis. Using the volatility of realized stock returns, option-implied volatility, and credit spreads, we observe a pronounced increase in the risk-relevance of subprime securitizations as early as 2006. Furthermore, reflecting the evolution of the financial crisis in waves, we find that investors recognized the increased credit risk of other nonconforming and commercial mortgage securitizations as the financial crisis progressed. Additional analyses show that risk-relevance varies cross-sectionally with structural characteristics such as monoline credit-enhancement and the presence of special servicers for …

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Self-Exciting Jumps, Learning, And Asset Pricing Implications, Andras Fulop, Junye Li, Jun Yu Jun 2014

Self-Exciting Jumps, Learning, And Asset Pricing Implications, Andras Fulop, Junye Li, Jun Yu

Research Collection School Of Economics

The paper proposes a self-exciting asset pricing model that takes into account cojumps between prices and volatility and self-exciting jump clustering. We employ a dence of self-exciting jump clustering since the 1987 market crash, and its importance Bayesian learning approach to implement real time sequential analysis. We find evidence of self-exciting jump clustering since the 1987 market crash, and its importance becomes more obvious at the onset of the 2008 global financial crisis. It is found that learning affects the tail behaviors of the return distributions and has important implications for risk management, volatility forecasting and option pricing.

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Credit Watch Placement And Security Price Behavior Around Bond Rating Revisions, Chiraphol N. Chiyachantana, Eakapat Manitkajornkit, Nareerat Taechapiroontong Jun 2014

Credit Watch Placement And Security Price Behavior Around Bond Rating Revisions, Chiraphol N. Chiyachantana, Eakapat Manitkajornkit, Nareerat Taechapiroontong

Research Collection Lee Kong Chian School Of Business

This study examines the informational role of credit watch placement in the overall bond rating process from 1992 to 2006. The paper uses standard event study to examine the market reaction of the whole process of credit rating change which includes credit watch placement, transitional period, and actual rating change. The authors find that the act of a company’s bond being put on both positive and negative credit watch placements are associated with significant abnormal returns in the company’s stock while negative credit watch placement helps reduce the negative market reaction on the actual rating downgrade. The paper shows that …

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Industry-Based Style Investing, Russell Jame, Qing Tong Jun 2014

Industry-Based Style Investing, Russell Jame, Qing Tong

Research Collection Lee Kong Chian School Of Business

Motivated by the style investing model of Barberis and Shleifer (2003), we examine the industry-wide investment decisions of retail investors. We find that retail investor industry demand is highly correlated and strongly related to past industry returns. Moreover, industries heavily bought by retail investors over the past year significantly underperform industries heavily sold over the subsequent year. Similarly, stocks in industries heavily bought by retail investors underperform stocks in industries heavily sold, even after controlling for firm-level demand. Our results suggest that industry-wide categorization influences the investment decisions of retail investors and has a significant impact on asset prices.

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Buy? Sell? Or Hold?, Singapore Management University May 2014

Buy? Sell? Or Hold?, Singapore Management University

Perspectives@SMU

Equity research is more valuable when times are bad

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Influence Of National Culture On Accounting Conservatism And Risk-Taking In The Banking Industry, Kanagaretn Kiridaran, Chee Yeow Lim, Gerald J. Lobo May 2014

Influence Of National Culture On Accounting Conservatism And Risk-Taking In The Banking Industry, Kanagaretn Kiridaran, Chee Yeow Lim, Gerald J. Lobo

Research Collection School Of Accountancy

Using an international sample of banks and country-level indices for individualism and uncertainty avoidance as proxies for national culture, we study how differences in culture across countries affect accounting conservatism and bank risk-taking. Consistent with expectations, our cross-country analysis indicates that individualism is negatively (positively) related to conservatism (risk-taking) and uncertainty avoidance is positively (negatively) related to conservatism (risk-taking). We also find that cultures that encourage higher risk-taking experienced more bank failures and bank troubles during the recent financial crisis.

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