This paper examines the impact of cross-country variation in shareholders' and debt holders' rights on post-IPO performance and survival of newly listed stocks across the globe. Using a sample of 10,490 initial public offerings (IPOs) in 40 countries between 2000 and 2013, we find that post-IPO performance and survival is better in countries with stronger shareholder protection, but the impact of creditor protection is negative i.e. stronger creditor protection leads to poor post-IPO performance and survival. This effect is driven by rules requiring creditors’ consent for company reorganization and the mandatory replacement of incumbent managers. Reputable IPO advisors exacerbate the positive impact of shareholder rights and the negative impact of creditor rights.
{"title":"The Impact of Shareholders and Creditors Rights on IPO Performance: An International Study","authors":"Susanne Espenlaub, Abhinav Goyal, A. Mohamed","doi":"10.2139/ssrn.3222133","DOIUrl":"https://doi.org/10.2139/ssrn.3222133","url":null,"abstract":"This paper examines the impact of cross-country variation in shareholders' and debt holders' rights on post-IPO performance and survival of newly listed stocks across the globe. Using a sample of 10,490 initial public offerings (IPOs) in 40 countries between 2000 and 2013, we find that post-IPO performance and survival is better in countries with stronger shareholder protection, but the impact of creditor protection is negative i.e. stronger creditor protection leads to poor post-IPO performance and survival. This effect is driven by rules requiring creditors’ consent for company reorganization and the mandatory replacement of incumbent managers. Reputable IPO advisors exacerbate the positive impact of shareholder rights and the negative impact of creditor rights.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"114 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124043352","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines data from 35 countries and 24 industries to understand the relationship between gender diversity and firm performance. Previous studies report conflicting evidence: some find that gender-diverse firms experience more positive performance and others find the opposite. However, most research to date has focused on a single country or industry and has not accounted for possible variation across social contexts. This paper advances an institutional framework and predicts that gender diversity’s relationship with performance depends on both its normative and regulatory acceptance in the broader institutional environment. Using a unique longitudinal sample of 1,069 leading public firms around the world, I find that the relationship between gender diversity and firm performance varies significantly across countries and industries due to differences in institutional context. The more gender diversity has been normatively accepted in a country or industry, the more gender-diverse firms experience positive market valuation and increased revenue. These findings underscore the importance of the broader social context when considering the relationship between gender diversity and firm performance.
{"title":"An Institutional Approach to Gender Diversity and Firm Performance","authors":"Letian Zhang","doi":"10.2139/ssrn.3461294","DOIUrl":"https://doi.org/10.2139/ssrn.3461294","url":null,"abstract":"This study examines data from 35 countries and 24 industries to understand the relationship between gender diversity and firm performance. Previous studies report conflicting evidence: some find that gender-diverse firms experience more positive performance and others find the opposite. However, most research to date has focused on a single country or industry and has not accounted for possible variation across social contexts. This paper advances an institutional framework and predicts that gender diversity’s relationship with performance depends on both its normative and regulatory acceptance in the broader institutional environment. Using a unique longitudinal sample of 1,069 leading public firms around the world, I find that the relationship between gender diversity and firm performance varies significantly across countries and industries due to differences in institutional context. The more gender diversity has been normatively accepted in a country or industry, the more gender-diverse firms experience positive market valuation and increased revenue. These findings underscore the importance of the broader social context when considering the relationship between gender diversity and firm performance.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130575003","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper provides new evidence on how interest rates are linked to corporate cash policy in the presence of financial frictions. Using both time-series and firm-level data for US public and private manufacturing firms, we find a negative correlation between cash holdings and the interest rates for large/unconstrained firms. We find no evidence of such a relation for small/constrained firms. Our results can help reconcile the contradictory findings of previous studies and suggest that financial constraints play an important role in the adjustment of cash to changes in interest rates. We introduce a simple model in which firms differ in their cost function of external finance, where the constrained firms' highly curved cost function drives a steeper cash demand, leading to their lower cash-interest rate sensitivity.
{"title":"Interest Rates, Financial Constraints, and Dynamics of Corporate Cash Holdings","authors":"R. Eskandari, Morteza Zamanian","doi":"10.2139/ssrn.3466188","DOIUrl":"https://doi.org/10.2139/ssrn.3466188","url":null,"abstract":"This paper provides new evidence on how interest rates are linked to corporate cash policy in the presence of financial frictions. Using both time-series and firm-level data for US public and private manufacturing firms, we find a negative correlation between cash holdings and the interest rates for large/unconstrained firms. We find no evidence of such a relation for small/constrained firms. Our results can help reconcile the contradictory findings of previous studies and suggest that financial constraints play an important role in the adjustment of cash to changes in interest rates. We introduce a simple model in which firms differ in their cost function of external finance, where the constrained firms' highly curved cost function drives a steeper cash demand, leading to their lower cash-interest rate sensitivity.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"59 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122656377","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
An implied volatility index reflects the market expectations for the future volatility of the underlying equity index. This study tests and documents the information content, regarding both the realized volatility and the returns of the underlying equity index, of all publicly available implied volatility indices across the world. The empirical findings suggest that implied volatility indices include information about future volatility beyond that contained in past volatility. In addition, we show that there is a statistically significant negative and asymmetric contemporaneous relationship between implied volatility changes and the corresponding underlying equity index returns. Furthermore, this study contributes to the international equity market integration studies by investigating the linkages among major stock exchanges; the basis of the integration analysis is the implied volatility of each market, as proxied by the corresponding implied volatility index and the findings suggest that there is significant integration with respect to market participants’ expectations about future uncertainty.
{"title":"Implied Volatility Indices – A Review","authors":"C. Siriopoulos, Athanasios P. Fassas","doi":"10.2139/ssrn.1421202","DOIUrl":"https://doi.org/10.2139/ssrn.1421202","url":null,"abstract":"An implied volatility index reflects the market expectations for the future volatility of the underlying equity index. This study tests and documents the information content, regarding both the realized volatility and the returns of the underlying equity index, of all publicly available implied volatility indices across the world. The empirical findings suggest that implied volatility indices include information about future volatility beyond that contained in past volatility. In addition, we show that there is a statistically significant negative and asymmetric contemporaneous relationship between implied volatility changes and the corresponding underlying equity index returns. Furthermore, this study contributes to the international equity market integration studies by investigating the linkages among major stock exchanges; the basis of the integration analysis is the implied volatility of each market, as proxied by the corresponding implied volatility index and the findings suggest that there is significant integration with respect to market participants’ expectations about future uncertainty.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130864918","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Objective: To verify whether firms that operate in several different business sectors are more tax aggressive in comparison to firms that operate in a single or a few segments. Method: The study analyzes a sample of firms listed in the Brazilian stock exchange B3 in the period from 2010 to 2017. To verify the existence of a relationship between diversification and tax aggressiveness, a data panel regression model with fixed effect of company and year was used and additionally the logit model. To measure tax aggressiveness, it was used ETR (effective rate of taxation) and ETR long (long-run effective tax rates). Originality/relevance: This type of research is unprecedented in Brazil, being a point not yet explored in the literature, in view of its peculiarities of a developing country. Relevant to define the effect of diversification on tax aggressiveness. Results: It was observed that the more companies are diversified, the lower the probability of having low tax aggressiveness, or that more diversified companies are more likely to be more aggressive, compared to companies with only one segment. Therefore, the results indicate that among companies with segments, the more segments, the more aggressive the company. Theoretical/Methodological contributions: A better understanding of the phenomenon of tax aggressiveness, causes and determinants, having implications for financial statement users, in particular tax regulators.
{"title":"The Effect of Corporate Diversification on Tax Aggressiveness in Brazilian Companies","authors":"Antonio Lopo Martinez, A. Rodrigues","doi":"10.2139/ssrn.3386433","DOIUrl":"https://doi.org/10.2139/ssrn.3386433","url":null,"abstract":"Objective: To verify whether firms that operate in several different business sectors are more tax aggressive in comparison to firms that operate in a single or a few segments. Method: The study analyzes a sample of firms listed in the Brazilian stock exchange B3 in the period from 2010 to 2017. To verify the existence of a relationship between diversification and tax aggressiveness, a data panel regression model with fixed effect of company and year was used and additionally the logit model. To measure tax aggressiveness, it was used ETR (effective rate of taxation) and ETR long (long-run effective tax rates). Originality/relevance: This type of research is unprecedented in Brazil, being a point not yet explored in the literature, in view of its peculiarities of a developing country. Relevant to define the effect of diversification on tax aggressiveness. Results: It was observed that the more companies are diversified, the lower the probability of having low tax aggressiveness, or that more diversified companies are more likely to be more aggressive, compared to companies with only one segment. Therefore, the results indicate that among companies with segments, the more segments, the more aggressive the company. Theoretical/Methodological contributions: A better understanding of the phenomenon of tax aggressiveness, causes and determinants, having implications for financial statement users, in particular tax regulators.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"303 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-05-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132818389","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper appraises the relative impact of creditor information and creditor rights on corporate bond issues. I employ a large panel of 3,969 bond issuers from 54 countries, between 2013 and 2017. I constantly find that an increase in creditor information is associated with an increase in the amounts of bonds issued. On the opposite, I document a very limited impact of creditor protection. Considering both simultaneously, only the positive impact of information persists, supporting a primal role of information on bond markets. I show that the positive effect of information originates from both the supply- and demand-side of the bond market, with lower coupon rates, less restrictive covenants, longer maturities and more frequent issues. I further document how creditor information alleviates issues stemming from firm’s opacity and firm’s risk. Results are robust to different specifications and robustness tests.
{"title":"Legal Environment and Corporate Bonds: The Primal Role of Information","authors":"P. Klein","doi":"10.2139/ssrn.3305131","DOIUrl":"https://doi.org/10.2139/ssrn.3305131","url":null,"abstract":"This paper appraises the relative impact of creditor information and creditor rights on corporate bond issues. I employ a large panel of 3,969 bond issuers from 54 countries, between 2013 and 2017. I constantly find that an increase in creditor information is associated with an increase in the amounts of bonds issued. On the opposite, I document a very limited impact of creditor protection. Considering both simultaneously, only the positive impact of information persists, supporting a primal role of information on bond markets. I show that the positive effect of information originates from both the supply- and demand-side of the bond market, with lower coupon rates, less restrictive covenants, longer maturities and more frequent issues. I further document how creditor information alleviates issues stemming from firm’s opacity and firm’s risk. Results are robust to different specifications and robustness tests.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127895078","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-20DOI: 10.35611/jkt.2019.23.2.88
S. Kim, Seungrae Lee
Purpose - This paper examines the effects of host country’s non-economic factors on foreign affiliate’s financial and operational performance.
Design/Methodology - Using Korean-owned foreign affiliate-level data, we employ various measures that represent host country’s non-economic factors and examine their effects on foreign affiliate’s performance. We further investigate the effects of local top managers and local middle managers on the impact of country’s non-economic factors on foreign affiliate’s performance.
Findings - We find that local top managers are effective in increasing foreign affiliate’s financial performance by dealing with institutional and cultural factors, particularly in high-income countries, while local middle managers are effective in increasing affiliate’s operational performance by responding to the changes in doing business factors, particularly in low-income countries.
Originality/value - Considering that most of previous FDI studies focus on examining host country’s economic factors on firm’s FDI decision, our findings suggest that country’s non-economic factors are strongly associated with actual business performance of foreign affiliates.
{"title":"Host Country’s Non-Economic Factors, Local Managers, and Foreign Affiliate Performance","authors":"S. Kim, Seungrae Lee","doi":"10.35611/jkt.2019.23.2.88","DOIUrl":"https://doi.org/10.35611/jkt.2019.23.2.88","url":null,"abstract":"Purpose - This paper examines the effects of host country’s non-economic factors on foreign affiliate’s financial and operational performance. <br><br>Design/Methodology - Using Korean-owned foreign affiliate-level data, we employ various measures that represent host country’s non-economic factors and examine their effects on foreign affiliate’s performance. We further investigate the effects of local top managers and local middle managers on the impact of country’s non-economic factors on foreign affiliate’s performance. <br><br>Findings - We find that local top managers are effective in increasing foreign affiliate’s financial performance by dealing with institutional and cultural factors, particularly in high-income countries, while local middle managers are effective in increasing affiliate’s operational performance by responding to the changes in doing business factors, particularly in low-income countries. <br><br>Originality/value - Considering that most of previous FDI studies focus on examining host country’s economic factors on firm’s FDI decision, our findings suggest that country’s non-economic factors are strongly associated with actual business performance of foreign affiliates.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132432745","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Prior research in accounting and finance uses stock price synchronicity, based on R2s from market model regressions, to measure stock price informativeness. The premise underlying this literature is that low levels of R2 are indicative of share prices reflecting more firm-specific information. Yet, empirical studies often find low R2 to be associated with variables that reflect a relatively weak information environment. Our study posits and provides evidence that stock illiquidity biases downwards the measurement of R2. Exploiting an exogenous shock to illiquidity, we demonstrate how reductions in illiquidity reduce this bias and cause increases in R2 measures. Using an international sample, we document that illiquidity is the primary determinant of the variation in R2 across and within countries. We demonstrate how failing to control for illiquidity in synchronicity research using the R2 measure can lead to biased coefficients that either reduce the power of tests or induce potentially false rejections of a null hypothesis. Lastly, we introduce a new method that can be used in testing changes in synchronicity around an event. This method circumvents the estimation of a market model and thereby minimizes the bias in the R2 measure induced by illiquidity.
{"title":"Illiquidity and the Measurement of Stock Price Synchronicity","authors":"Joachim Gassen, H. A. Skaife, David Veenman","doi":"10.2139/ssrn.2405465","DOIUrl":"https://doi.org/10.2139/ssrn.2405465","url":null,"abstract":"Prior research in accounting and finance uses stock price synchronicity, based on R2s from market model regressions, to measure stock price informativeness. The premise underlying this literature is that low levels of R2 are indicative of share prices reflecting more firm-specific information. Yet, empirical studies often find low R2 to be associated with variables that reflect a relatively weak information environment. Our study posits and provides evidence that stock illiquidity biases downwards the measurement of R2. Exploiting an exogenous shock to illiquidity, we demonstrate how reductions in illiquidity reduce this bias and cause increases in R2 measures. Using an international sample, we document that illiquidity is the primary determinant of the variation in R2 across and within countries. We demonstrate how failing to control for illiquidity in synchronicity research using the R2 measure can lead to biased coefficients that either reduce the power of tests or induce potentially false rejections of a null hypothesis. Lastly, we introduce a new method that can be used in testing changes in synchronicity around an event. This method circumvents the estimation of a market model and thereby minimizes the bias in the R2 measure induced by illiquidity.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"67 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129532893","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop a quantitative-oriented model that integrates the production and financing decisions of multinational corporations (MNCs). Firms can deploy their technology for production overseas and become MNCs. Due to frictions in obtaining external finance, the scale of the affiliates partially depends on the MNC’s internal capital market, giving rise to foreign direct investment (FDI). The model generates empirically consistent relationships between FDI, multinational production (MP), and the financial market conditions of the host and home countries. Model-based decompositions show that the changes in financial market conditions account for a sizable fraction of the rapid growth in global FDI prior to 2008 and the slowdown afterward. Overlooking the technology content of MNCs understates the welfare gains from FDI; overlooking the capital content misses the dynamic welfare effects.
{"title":"Financing Multinationals","authors":"Jingting Fan, Wenlan Luo","doi":"10.2139/ssrn.3355695","DOIUrl":"https://doi.org/10.2139/ssrn.3355695","url":null,"abstract":"We develop a quantitative-oriented model that integrates the production and financing decisions of multinational corporations (MNCs). Firms can deploy their technology for production overseas and become MNCs. Due to frictions in obtaining external finance, the scale of the affiliates partially depends on the MNC’s internal capital market, giving rise to foreign direct investment (FDI). The model generates empirically consistent relationships between FDI, multinational production (MP), and the financial market conditions of the host and home countries. Model-based decompositions show that the changes in financial market conditions account for a sizable fraction of the rapid growth in global FDI prior to 2008 and the slowdown afterward. Overlooking the technology content of MNCs understates the welfare gains from FDI; overlooking the capital content misses the dynamic welfare effects.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116149627","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We make use of the major credit reform and the new bankruptcy law empreended by Brazil at the end of 2004 and early 2005 to investigate the effect of a rise in collateral value in cash holdings. We find that more tangible firms reduced its cash holding after the passage of the law compared to less tangible firms. Also, our results suggest that more tangible firms reduced its short-term debt, corroborating the financial flexibility hypothesis.
{"title":"Cash Holdings and Collateral Value. Evidence from a Quasi Natural Experiment","authors":"M. Ermel","doi":"10.2139/ssrn.3330731","DOIUrl":"https://doi.org/10.2139/ssrn.3330731","url":null,"abstract":"We make use of the major credit reform and the new bankruptcy law empreended by Brazil at the end of 2004 and early 2005 to investigate the effect of a rise in collateral value in cash holdings. We find that more tangible firms reduced its cash holding after the passage of the law compared to less tangible firms. Also, our results suggest that more tangible firms reduced its short-term debt, corroborating the financial flexibility hypothesis.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-02-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130801635","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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