This paper examines whether firms' auditor choice reflects the strength of corporate ethics. Based on a sample of 132,853 firm year observations from forty-six countries around the globe during the period from 1998 to 2007 and controlling for a number of firm- and country-level factors, we find that firms in countries where “high corporate ethical values” prevail are more likely to hire a Big 4 auditor. We also find that the positive effect of home country corporate ethical values on the likelihood of hiring a high-quality auditor is reinforced by the extent of the firm's board size. These results establish an indirect link between corporate ethics and financial reporting quality through the firms' choice of auditor.
{"title":"Corporate Ethics and Auditor Choice – International Evidence","authors":"Noor Houqe, Tony van Zijl, K. Dunstan, A. Karim","doi":"10.2139/ssrn.1588295","DOIUrl":"https://doi.org/10.2139/ssrn.1588295","url":null,"abstract":"This paper examines whether firms' auditor choice reflects the strength of corporate ethics. Based on a sample of 132,853 firm year observations from forty-six countries around the globe during the period from 1998 to 2007 and controlling for a number of firm- and country-level factors, we find that firms in countries where “high corporate ethical values” prevail are more likely to hire a Big 4 auditor. We also find that the positive effect of home country corporate ethical values on the likelihood of hiring a high-quality auditor is reinforced by the extent of the firm's board size. These results establish an indirect link between corporate ethics and financial reporting quality through the firms' choice of auditor.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117060208","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}
The literature on foreign firms listing their equity in the US is extensive. This paper extends research in this area by looking at the experience of firms engaging in cross listing across the regional GCC equity markets. The primary objective for firms to pursue cross listing is to lower their cost of capital. Arguably the sources of cost of capital reduction are numerous and include, reducing the barriers of segmented markets, greater visibility across different markets, the need to adhere to extended legal and regulatory regimes that can improve corporate governance systems and provide enhanced protection to a larger set of stakeholders, and greater transparency can reduce monitoring costs. Parametric tests show that on average there is a run up in prices leading up to the listing date, this however is reversed quickly in the days following the cross listing. Non parametric results generally support this conclusion. There is also weak evidence that the variability in returns experience a decline across the event period.
{"title":"Effect on Security Prices and Volatility from Cross Listing within the GCC Markets","authors":"A. Abraham","doi":"10.2139/ssrn.1728387","DOIUrl":"https://doi.org/10.2139/ssrn.1728387","url":null,"abstract":"The literature on foreign firms listing their equity in the US is extensive. This paper extends research in this area by looking at the experience of firms engaging in cross listing across the regional GCC equity markets. The primary objective for firms to pursue cross listing is to lower their cost of capital. Arguably the sources of cost of capital reduction are numerous and include, reducing the barriers of segmented markets, greater visibility across different markets, the need to adhere to extended legal and regulatory regimes that can improve corporate governance systems and provide enhanced protection to a larger set of stakeholders, and greater transparency can reduce monitoring costs. Parametric tests show that on average there is a run up in prices leading up to the listing date, this however is reversed quickly in the days following the cross listing. Non parametric results generally support this conclusion. There is also weak evidence that the variability in returns experience a decline across the event period.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"196 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114089237","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 : 2010-11-16DOI: 10.1111/j.1468-2443.2010.01106.x
Yan-leung Cheung, Aris Stouraitis, Weiqiang Tan
Using Hong Kong firm data, we construct an index of corporate governance during 2002–2005, which scores the corporate governance practices of listed companies from the public shareholders' perspective based on the Organization for Economic Corporation and Development Principles of Corporate Governance. The findings show that family firms and firms with concentrated ownership structures are associated with bad corporate governance. The evidence also shows that these firms improve their corporate governance practices slower than their peers. Overall, the quality of corporate governance is very significant in explaining future company stock returns and risk. Good corporate governance is associated with both higher stock returns and with lower risk. Improvements in corporate governance are associated with significantly higher stock returns and lower company risk.
{"title":"Does the Quality of Corporate Governance Affect Firm Valuation and Risk? Evidence from a Corporate Governance Scorecard in Hong Kong","authors":"Yan-leung Cheung, Aris Stouraitis, Weiqiang Tan","doi":"10.1111/j.1468-2443.2010.01106.x","DOIUrl":"https://doi.org/10.1111/j.1468-2443.2010.01106.x","url":null,"abstract":"Using Hong Kong firm data, we construct an index of corporate governance during 2002–2005, which scores the corporate governance practices of listed companies from the public shareholders' perspective based on the Organization for Economic Corporation and Development Principles of Corporate Governance. The findings show that family firms and firms with concentrated ownership structures are associated with bad corporate governance. The evidence also shows that these firms improve their corporate governance practices slower than their peers. Overall, the quality of corporate governance is very significant in explaining future company stock returns and risk. Good corporate governance is associated with both higher stock returns and with lower risk. Improvements in corporate governance are associated with significantly higher stock returns and lower company risk.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126498507","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}
The managerial power view of executive compensation suggests that CEO membership of the compensation committee is an open invitation to rent extraction by self-serving executives. However, using data from New Zealand – where CEO compensation committee membership was relatively common until quite recently – we find that annual pay increments for CEOs with this apparent advantage averaged four percentage points less than those enjoyed by other CEOs during the 1998–2005 period. This puzzling result cannot be explained by omitted governance variables, risk-return tradeoff considerations, selection bias, or compensation mis-measurement. We find some weak evidence suggesting it may be consistent with a form of optimal contracting.
{"title":"CEO Presence on the Compensation Committee: A Puzzle","authors":"G. Boyle, Helen Roberts","doi":"10.2139/ssrn.1650826","DOIUrl":"https://doi.org/10.2139/ssrn.1650826","url":null,"abstract":"The managerial power view of executive compensation suggests that CEO membership of the compensation committee is an open invitation to rent extraction by self-serving executives. However, using data from New Zealand – where CEO compensation committee membership was relatively common until quite recently – we find that annual pay increments for CEOs with this apparent advantage averaged four percentage points less than those enjoyed by other CEOs during the 1998–2005 period. This puzzling result cannot be explained by omitted governance variables, risk-return tradeoff considerations, selection bias, or compensation mis-measurement. We find some weak evidence suggesting it may be consistent with a form of optimal contracting.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122324399","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 study a sample of Continental European firms for changes in the sensitivity of their CEO turnover to their foreign peers’ accounting performance around the mandatory adoption of International Financial Reporting Standards (IFRS). We find a post-adoption increase in the use of Relative Performance Evaluation (RPE) based on foreign peers’ accounting information, consistent with greater financial reporting comparability associated with mandatory IFRS adoption. These findings cannot be explained by changes in foreign ownership or changes in foreign operations around mandatory IFRS adoption. Furthermore, we find stronger results for firms in more competitive industries and when peers are from highly correlated economies, consistent with the economic theory of RPE.
{"title":"Accounting Integration and Comparability: Evidence from Relative Performance Evaluation Around IFRS Adoption","authors":"Joanna S. Wu, I. Zhang","doi":"10.2139/ssrn.1650782","DOIUrl":"https://doi.org/10.2139/ssrn.1650782","url":null,"abstract":"We study a sample of Continental European firms for changes in the sensitivity of their CEO turnover to their foreign peers’ accounting performance around the mandatory adoption of International Financial Reporting Standards (IFRS). We find a post-adoption increase in the use of Relative Performance Evaluation (RPE) based on foreign peers’ accounting information, consistent with greater financial reporting comparability associated with mandatory IFRS adoption. These findings cannot be explained by changes in foreign ownership or changes in foreign operations around mandatory IFRS adoption. Furthermore, we find stronger results for firms in more competitive industries and when peers are from highly correlated economies, consistent with the economic theory of RPE.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"78 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122485249","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}
By introducing the concept of conditional probability of joint failure (CPJF), and by proposing a new measure for the systemic impact of currency crises, we provide new insights into the different sources of currency crises. We conclude that financial openness helps to diminish the probability of a currency crisis even after controlling for the onset of a banking crisis, that systemic currency crises mainly exist regionally, and that monetary policy geared towards price stability reduces the probability of a currency crisis.
{"title":"Can Financial Openness Help Avoid Currency Crises?","authors":"Gus Garita, Chen Zhou","doi":"10.2139/ssrn.1331889","DOIUrl":"https://doi.org/10.2139/ssrn.1331889","url":null,"abstract":"By introducing the concept of conditional probability of joint failure (CPJF), and by proposing a new measure for the systemic impact of currency crises, we provide new insights into the different sources of currency crises. We conclude that financial openness helps to diminish the probability of a currency crisis even after controlling for the onset of a banking crisis, that systemic currency crises mainly exist regionally, and that monetary policy geared towards price stability reduces the probability of a currency crisis.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"86 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-06-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114489697","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}
The goal of this paper is to explain the de facto financial market integration to global markets with foreign equity ownership using a unique data set of foreign portfolio flows at the individual stock level. The main result is the positive link between global financial integration and past portfolio inflows by foreign investors on the cross-section of local stocks. The results have high economic significance. Across individual stocks a 2.4% increase in foreign portfolio inflows corresponds to up to 13.5% greater relative explanatory power of the global factor in explaining local stock returns in the following month. The lead-lag effect between foreign portfolio inflows and financial integration does not exist in the opposite direction. I show that stocks that experience an increase in foreign ownership are not more financially integrated in the past, i.e. the foreign portfolio flows are not a response to increased financial integration.
{"title":"Foreign Ownership and World Market Integration","authors":"Emre Konukoglu","doi":"10.2139/ssrn.1571533","DOIUrl":"https://doi.org/10.2139/ssrn.1571533","url":null,"abstract":"The goal of this paper is to explain the de facto financial market integration to global markets with foreign equity ownership using a unique data set of foreign portfolio flows at the individual stock level. The main result is the positive link between global financial integration and past portfolio inflows by foreign investors on the cross-section of local stocks. The results have high economic significance. Across individual stocks a 2.4% increase in foreign portfolio inflows corresponds to up to 13.5% greater relative explanatory power of the global factor in explaining local stock returns in the following month. The lead-lag effect between foreign portfolio inflows and financial integration does not exist in the opposite direction. I show that stocks that experience an increase in foreign ownership are not more financially integrated in the past, i.e. the foreign portfolio flows are not a response to increased financial integration.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"74 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123214333","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 uses transaction and index data to empirically examine price formation in, and equilibrium characteristics of, the primary CDM market. Results point to the preemptive (and, possibly, speculative) behaviour among intermediaries (carbon firms), and inefficiencies in information transmission between secondary and primary markets. Since the primary carbon market is unstable and is prone to rational and irrational oscillations, the CDM, in its current form, is not a reliable policy tool for long-term renewable energy sector development plans, whenever fiscal regulatory instruments are available.
{"title":"Renewable Energy Investment and the Clean Development Mechanism","authors":"K. Zavodov","doi":"10.2139/ssrn.1581724","DOIUrl":"https://doi.org/10.2139/ssrn.1581724","url":null,"abstract":"This paper uses transaction and index data to empirically examine price formation in, and equilibrium characteristics of, the primary CDM market. Results point to the preemptive (and, possibly, speculative) behaviour among intermediaries (carbon firms), and inefficiencies in information transmission between secondary and primary markets. Since the primary carbon market is unstable and is prone to rational and irrational oscillations, the CDM, in its current form, is not a reliable policy tool for long-term renewable energy sector development plans, whenever fiscal regulatory instruments are available.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"70 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134138684","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 study the currency impact of an investment in a non domestic equity market.
我们研究了投资于非国内股票市场的货币影响。
{"title":"International Investment in Equities and Currency Exposure (French Version)","authors":"M. Leblanc","doi":"10.2139/SSRN.1559387","DOIUrl":"https://doi.org/10.2139/SSRN.1559387","url":null,"abstract":"We study the currency impact of an investment in a non domestic equity market.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"393 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-02-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115904744","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 study the effect of financial markets on "optimal" diversification defined in the spirit of mean-variance efficiency as a pattern of output reallocation across industrial sectors which simultaneously accounts for the sectors' growth, volatility, and correlations. Our findings imply that financial markets increase substantially the speed with which the observed sectoral allocation of output converges towards the benchmark optimally diversified one. This convergence is relatively faster for sectors that have a higher "natural" long-term risk-adjusted growth and are more dependent on external finance. Our results are robust to different benchmarks, to the endogeneity of finance, and to accounting for investor protection, contract enforcement, and barriers to entry. Crucially, the observed patterns disappear when we employ classical measures of diversification based on the mechanical spreading of output across sectors.
{"title":"Financial Markets, Diversification, and Allocative Efficiency: International Evidence","authors":"S. Manganelli, A. Popov","doi":"10.2139/ssrn.1571636","DOIUrl":"https://doi.org/10.2139/ssrn.1571636","url":null,"abstract":"We study the effect of financial markets on \"optimal\" diversification defined in the spirit of mean-variance efficiency as a pattern of output reallocation across industrial sectors which simultaneously accounts for the sectors' growth, volatility, and correlations. Our findings imply that financial markets increase substantially the speed with which the observed sectoral allocation of output converges towards the benchmark optimally diversified one. This convergence is relatively faster for sectors that have a higher \"natural\" long-term risk-adjusted growth and are more dependent on external finance. Our results are robust to different benchmarks, to the endogeneity of finance, and to accounting for investor protection, contract enforcement, and barriers to entry. Crucially, the observed patterns disappear when we employ classical measures of diversification based on the mechanical spreading of output across sectors.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-02-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130002592","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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