Social and Behavioral Sciences Commons^™

Did The Adoption Of Ifrs Affect Corporate Tax Avoidance?, Oliver Nnamdi Okafor, Akinloye Akindayomi, Hussein Warsame

Economics and Finance Faculty Publications and Presentations

This article investigates whether the adoption of international financial reporting standards (IFRS) affected corporate tax avoidance in Canada. Based on a 3,200 firm-year data set of 400 publicly listed Canadian firms that adopted IFRS and 400 listed US firms, matched one-to-one using propensity score matching, the authors’ regression results show that IFRS adoption was followed by a decrease in corporate tax avoidance in Canada, at least in the short run. The study finds a significant increase in cash tax paid in the post-adoption period by Canadian firms that adopted IFRS compared to US firms that used US generally accepted accounting …

Understanding Us Firm Efficiency And Its Asset Pricing Implications, Giovanni Calice, Levent Kutlu, Ming Zeng

Economics and Finance Faculty Publications and Presentations

We investigate the links between firm-level total factor productivity (TFP) growth and technical efficiency change, and their implications on firm-level stock returns. We estimate TFP growth of US firms between 1966 and 2015 and decompose TFP growth into returns to scale, technical progress, and technical efficiency change components. We show that most of the variation in TFP growth is explained by variation in technical efficiency change. Moreover, we examine the effects of important macro- and micro-level factors on inefficiency as well as its asset pricing implications. We find that low-efficiency firms are more vulnerable to a wide class of aggregate …

A Dynamic Stochastic Frontier Model With Threshold Effects: U.S. Bank Size And Efficiency, Pavlos Almanidis, Mustafa U. Karakaplan, Levent Kutlu

Economics and Finance Faculty Publications and Presentations

Common/Single frontier methodologies that are used to analyze bank efficiency and performance can be misleading because of the homogeneous technology assumption. Using the U.S. banking data over 1984-2010, our dynamic methodology identifies a few data-driven thresholds and distinct size groups. Under common frontier assumption, the largest banks appear to be 22% less efficient on average than how they are in our model. Also, in the common frontier model, smaller banks seem to be relatively more efficient compared to their larger counterparts. Hence, common policies or regulations may not be well-balanced about controlling the banks of different sizes on the spectrum.

On The Dynamic Analysis Of Cournot-Bertrand Equilibria, Aggey Semenov, Jean-Baptiste Tondji

Economics and Finance Faculty Publications and Presentations

Highlights

• Firms invest in R&D. One firm sets a quantity, and another sets a price.

• The quantity-setting firm invests more in R&D than the price-setting firm.

• The quantity-setting firm has higher profits than in Bertrand and Cournot.

• Consumer surplus and social welfare are higher than in the Cournot model.

• The quantity-setting firm may produce more than social optimum.

Abstract

We consider a setting where firms in the first stage invest in cost-reducing R&D. In the market stage, one firm sets a quantity, and another sets a price. We prove that the quantity-setting firm invests more in R&D, has a …

The Impact Of Financial Regulation Policy Uncertainty On Bank Profits And Risk, Robert N. Killins, David W. Johnk, Peter V. Egly

Economics and Finance Faculty Publications and Presentations

Purpose

The purpose of this paper is to explore the impact of financial regulation policy uncertainty (FRPU) on bank profit and risk.

Design/methodology/approach

This study applies dynamic panel techniques and uses the Baker et al. (2016) FRPU index and macroeconomic variables to assess FRPU’s impact on bank profit and risk using Federal Deposit Insurance Corporation call reports from Q1 2000 to Q4 2016 for over 4,760 commercial banks.

Findings

The effect of FRPU on profitability (Return on Assets [ROA] and Return on Equity [ROE]) and risk (standard deviation of ROA and ROE) produces complex results. FRPU negatively (positively) impacts profits …

Locating An Optimal Site For A Controversial Facility, Jean-Baptiste Tondji

Economics and Finance Faculty Publications and Presentations

We consider a situation in which policymakers in a local community have to choose an optimal site for a controversial and essential project in a democratic setting. Policymakers have either single-dipped or multi-dipped preferences over a Euclidean space of possible locations. We provide two existence results for this issue. There exists at most two optimal sites if the size of policymakers is odd, and they have single-dipped preferences over a one-dimensional site space.

A Time-Varying True Individual Effects Model With Endogenous Regressors, Levent Kutlu, Kien C. Tran, Mike G. Tsionas

Economics and Finance Faculty Publications and Presentations

We propose a fairly general individual effects stochastic frontier model, which allows both heterogeneity and inefficiency to change over time. Moreover, our model handles the endogeneity problems if either at least one of the regressors or one-sided error term is correlated with the two-sided error term. Our Monte Carlo experiments show that our estimator performs well. We employed our methodology to the US banking data and found a negative relationship between return on revenue and cost efficiency. Estimators ignoring time-varying heterogeneity or endogeneity did not perform well and gave very different estimates compared to our estimator.

Investors’ Uncertainty And Stock Market Risk, Diego Escobari, Mohammad Jafarinejad

Economics and Finance Faculty Publications and Presentations

We propose a novel approach to model investors' uncertainty using the conditional volatility of investors' sentiment. Working with weekly data on investor sentiment, six major U.S. stock indices, and alternative measures of uncertainty, we run various tests to validate our proposed measure. The estimates show that investors' uncertainty is greater during economic downturns, and it is linked with lower investors' sentiment. In addition, the results support the existence of a positive conditional correlation between sentiment and returns. This positive spillover between sentiment and returns is interpreted as a positive link between investors' uncertainty and market risk. We also find that …

Exchange Rates, Oil Prices And World Stock Returns, Andre V. Mollick, Hamid Sakaki

Economics and Finance Faculty Publications and Presentations

This paper examines responses of 14 major currency/USD pairs to two global factors (oil and world equity returns) from January 1999 to July 2017, a period comprising the global financial crisis and oil price boom and collapse. With global equity markets advancing, risk tolerance increases and oil and stock markets impact currencies under two methodologies: transmission of shocks and mean-variance approaches. Vector autoregressions (VARs) suggest large and statistically significant responses: commodity currencies strongly appreciate following positive oil price shocks and depreciate with positive global equity shocks. GARCH models provide similar qualitative results with coefficients typically larger for global equity returns …

Return Predictability: The Dual Signaling Hypothesis Of Stock Splits, Ahmed Elnahas, Lei Gao, Ghada Ismail

Economics and Finance Faculty Publications and Presentations

This paper aims to differentiate between optimistic splits and overoptimistic/opportunistic splits. Although markets do not distinguish between these two groups at the split announcement time, optimistic (over-optimistic/opportunistic) splits precede positive (negative) long-term buy-and-hold abnormal returns. Using the calendar month portfolio approach, we show that the zero-investment, ex-ante identifiable, and fully implementable trading strategy proposed in this paper can generate economically and statistically significant positive abnormal returns. Our findings indicate that pre-split earnings management and how it relates to managers’ incentives, is an omitted variable in the studies of post-split long-term abnormal returns.

An Index Of Unfairness, Victor H. Aguiar, Roland Pongou, Roberto Serrano, Jean-Baptiste Tondji

Economics and Finance Faculty Publications and Presentations

The Shapley distance is introduced as a measure of the extent to which output sharing among the stakeholders of an organization can be considered unfair. In fact, it measures the distance between an arbitrary pay profile and the Shapley pay profile under a given technology, the latter profile defining the fair distribution. Therefore, this chapter contributes to the literature that studies economic inequality using game theory. In particular, we provide an axiomatic characterization to a notion of unfairness, namely the Shapley distance, and show that it can be used to determine the outcome of an underlying bargaining process. We also …

Institutional Investors And Corporate Environmental, Social, And Governance Policies: Evidence From Toxics Release Data, Incheol Kim, Hong Wan, Bin Wang, Tina Yang

Economics and Finance Faculty Publications and Presentations

This paper studies the role of institutional investors in influencing corporate environmental, social, and governance (ESG) policies by analyzing the relation between institutional ownership and toxic release from facilities to which institutions are geographically proximate. We develop a local preference hypothesis based on the delegated philanthropy and transaction-costs theories. Consistent with the hypothesis, local institutional ownership is negatively related to facility toxic release. The negative relation is stronger for local socially responsible investing (SRI) funds, local public pension funds, and local dedicated institutions. We also find that the relation is more negative in communities that prefer more stringent environmental policies …

Do Women Managers Keep Firms Out Of Trouble? Evidence From Corporate Litigation And Policies, Binay K. Adhikari, Anup Agrawal, James Malm

Economics and Finance Faculty Publications and Presentations

We find that firms where women have more power in the top management team, measured by female executives’ plurality and pay slice, face fewer operations-related lawsuits. This effect is robust to several treatments of endogeneity and does not appear to be driven by female executives' greater willingness to settle the cases. Evidence from a simultaneous equations approach suggests that firms where women executives have more power avoid lawsuits partly by avoiding some risky but value-increasing firm policies, such as more aggressive R&D, intensive advertising, and policies inimical to other parties.

Policy Uncertainty And Firm Cash Holdings, Hieu V. Phan, Nam H. Nguyen, Hien T. Nguyen, Shantaram Hegde

Economics and Finance Faculty Publications and Presentations

This research examines the relation between government economic policy uncertainty and firm cash holdings. We find evidence that policy uncertainty is positively related to firm cash holdings due to firms’ precautionary motives and, to a lesser extent, investment delays. The relation between policy uncertainty and cash holdings is more pronounced for firms dependent on government spending and extends beyond business cyclicality. Further analysis indicates that the effects of policy uncertainty on corporate cash holdings are distinct from those of political, market, or other macroeconomic uncertainty.

Getting On And Moving Up The Property Ladder: Real Hedging In The Us Housing Market Before And After The Crisis, Damian S. Damianov, Diego Escobari

Economics and Finance Faculty Publications and Presentations

Real hedging is the practice of getting onto the property ladder in order to trade up to a larger home in the future. We define the value of the real hedge of home ownership as the difference between the risk premiums of renting and owning and explore how this value depends on local housing price dynamics and household characteristics. Controlling for the potential endogeneity of housing bubble bursts across different U.S metropolitan areas, we find a significantly higher correlation in the appreciation rates across the Standard & Poor's Case-Shiller tiered house price indices in the period after the housing crisis. …

Globalization Tropes In Films: A Focus On Crazy Rich Asians, Nikhilesh Dholakia, Deniz Atik

Marketing Faculty Publications and Presentations

Learning from and encouraged by the impacts of film film-based windows into globalization phenomena, in this issue of MGDR, we have focused on the film Crazy Rich Asians. In the popular press, the movie has been hailed as a major cultural point of departure for Hollywood as well as panned as just an Asian Asian-themed romantic comedy that celebrates the super-rich of Asia. The buzz around this movie does, however, indicate a slight bend in the curve of the geopolitics of the globalization discourse – and hence our decision to feature a number of academically insightful reviews of this movie …