Journal of Corporate Accounting and Finance最新文献

Although there is broad consensus on a robust momentum effect in Australia, the interaction between momentum and capital structure has been underexplored in the literature. This paper explicitly examines whether capital structure promotes momentum trading in the Australian stock market. The data sample includes over 1800 stocks listed on the Australian Stock Exchange from 2000 to 2023. We construct momentum portfolios using the monthly rolling and overlapping techniques. Two ratios are calculated to measure the firms’ capital structure: the book-value and market-value financial leverages. Irrespective of the capital structure measure, the superior returns of the Winner quintile are concentrated in highly leveraged stocks. In contrast, the high-leverage Loser performs worst among the Loser quintile. The return of momentum strategy enhanced with capital structure is more than 1.5 times the original momentum profit. The risk-adjusted analysis paints a similar return pattern. Additionally, we observe high volatility in earnings and cash flows for highly leveraged stocks, leading to significant mispricing. Thus, the interaction between momentum and capital structure may stem from increased misvaluation, consistent with a behavioral explanation.

We develop machine learning models that incorporate both external (deterministic) and internal (voluntaristic) factors affecting firm failure and survival. Using structured and unstructured data, we empirically investigate the external and internal factors that affect the US manufacturing firms’ business failure. We also examine how the interactions between external shocks and firm responses impact business failure. Our findings indicate that while external factors can significantly impact the likelihood that firms fail, specific management responses to these challenges can effectively mitigate the negative effects and contribute to firm survival.

This study empirically analyzes the effects of banking deregulation on corporate investment efficiency in China. By introducing the first deregulation on city commercial bank entry and exploiting a staggered difference-in-difference regression model, we find that the entry of city commercial banks significantly promoted the overall investment efficiency of firms located in cities that implemented this deregulation. It mainly alleviated the underinvestment problem and, however, had little impact on the overinvesting firms. The cross-sectional analysis indicates that the effects were more pronounced for financially constrained firms, including non-SOEs, SMEs, and firms with strong dependence on external finance. We explain these findings by investigating whether the entry of city commercial banks alleviated the financing constraints of firms and find that following the deregulation, the financially constrained firms experienced a substantial increase in their access to long-term bank loans, as well as a drop in the investment-cash flow sensitivity.

This study applies a partial-adjustment model to test how well trade-off theory explains net working capital management decisions and examines working capital management dynamics. The results indicate that firms have long-run NWC targets and tend to gradually converge to the target from the firm's initial net working capital level within each period. We estimate that typical firms close approximately 50% of the gap between their actual and target net working capital each year. Such high adjustment speed implies that a typical firm closes half of a deviation from the target in about 13 months. Our results show that the trade-off theory can explain the management decisions regarding working capital holdings.

This study examines the misrepresentation of solvency at Lehman Brothers, focusing on a pivotal moment in financial history. The analysis reveals that a closer evaluation of the components of the accounting equation indicates significant leverage, which is critical to understanding Lehman's overall solvency. In contrast, liquidity pertains only to short-term solvency. The findings are viewed through the lens of agency theory and insights from positive accounting theory, particularly about managers’ self-interest and the role of corporate governance in mitigating managerial opportunism that led to significant misstatements in financial reports. It was noted that Lehman's CEO withdrew considerable amounts through bonus compensations and equity sales. Testing the debt-equity hypothesis showed that Lehman manipulated solvency figures to obscure excessive leverage resulting from substantial debts. This investigation highlights how deceptive financial practices can have extensive repercussions, underscoring the need for transparency and accountability within the banking sector. Understanding these misstatements is essential to prevent future crises and foster a more ethically sound financial environment. Additionally, ineffective governance and inadequate audits manipulated accounting transactions that obscured Lehman's solvency risks.

This study examines the effects of international diversification on the operating and market performance of US multinationals, using foreign fixed assets as a proxy for the degree of international diversification. We measure performance on multiple dimensions: stock price, stock returns, operating income, and operating cash flows. We posit a nonlinear association between diversification and our financial performance measures and test this by conducting two complementary analyses: an initial test based on a linear model and a second test based on a quadratic specification. Our results suggest a negative association in the quadratic model, consistent with prior work that suggests overexpansion of foreign investment decreases operating performance and lowers firm value. Overall, the evidence suggests that the assumed linear dynamics used in prior research appear to be an incomplete tool to describe the relation between firms’ foreign expansion and firm performance.

This study examines the potential effect of using component auditors in multinational group audits (group audits) on the investment efficiency of multinational companies (MNCs). Group audits tend to negatively affect MNCs’ investment efficiency by creating an opaque information environment and impairing auditors’ monitoring efficacy. Using a sample of US MNCs, this study demonstrates a positive association between group audits and underinvestment (overinvestment) in settings prone to underinvestment (overinvestment). In other words, among MNCs that are likely to underinvest (overinvest), those with group audits underinvest (overinvest) more. Furthermore, to address the concern that using group audits may be driven by MNCs’ characteristics, propensity score matching (PSM) and entropy balancing procedures are employed to pre-treat the sample. The results hold with using the treated samples. This study extends the literature on the effect of group audits on audit outcomes and investor's response by providing evidence that group audits can also affect business outcomes.

Existing studies of capital structure show a positive association between tangible assets and leverage, but these studies have ignored the potential systematic variation in magnitude due to institutional heterogeneity across countries. Using a sample from 32 countries, we find that the association between tangible assets and leverage is weaker if firms are located in countries with stronger creditors’ rights, better financial development, good governance, and more transparency. Using the US subprime mortgage crisis as a quasi-natural experiment, we find that the role of tangibility as a determinant of leverage becomes stronger during the crisis period. However, stronger institutional environments (i.e., stronger creditors rights, better financial development, good governance, and high country-level transparency) play a pivotal moderating role and reduce this enhanced association during the crisis period.