Asia-Pacific Journal of Financial Studies最新文献

Motivated by the recent market turbulence triggered by the COVID-19 pandemic and the changing interest rate environment, we propose an improved investment strategy for extending retirement coverage in the pension decumulation stage. The newly proposed strategy with interest rate dependent volatility targets can significantly improve the durability of conventional retirement portfolios with constant risky and risk-free asset allocations. This conclusion follows from our analysis in the simulated financial market with stochastic interest rate and stochastic volatility, based on the Hybrid Heston-Vasicek model. Consequently, the proposed target volatility strategy could be a suitable option for more reliable retirement coverage after retirement.

This study employs novel data on patents filed in Korea to investigate whether there is an end-of-year rush phenomenon for innovation. Our findings indicate that patent applications tend to be concentrated in the second half of the year more than in the first half of the year, and the number of application filings gradually increases toward the end of the year. We also examine the quality of patents and find that applications filed near the end of the year are more likely to be low-quality innovations. Firms in our sample that filed more patent applications in the second half of the year engaged in incremental innovation, which entails the exploitation of existing knowledge or research areas rather than the exploration of new knowledge in new areas. Furthermore, our study reveals that this end-of-year rush on innovation is more prevalent among firms with high free cash flow and among firms belonging to business groups. Our findings demonstrate that the end-of-year rush has unintended consequences for innovation.

This paper examines whether credit rating agencies applied consistent rating standards to US corporate bonds in the periods surrounding the 2008 financial crisis. Based on estimates of issuing firms' credit quality from a structural model, I find that rating standards are in fact procyclical: ratings are stricter during an economic downturn than during an economic expansion. As a result, firms receive overly pessimistic ratings in a recession, relative to during an expansion. I further show that a procyclical rating policy amplifies the variation in corporate credit spreads, accounting for, on average, 11% of the increase in spreads during a recession. In the cross-section, firms with a higher rollover rate of debt, fewer alternative channels to convey their credit quality to the market, and firms with businesses that are more sensitive to economic cycles are more affected by the procyclical rating policy.

We examine the causal link between the geographical distance between firms and their main bank and the termination of main bank relationships, using the exogenous change in firm–main bank distances brought about by bank branch consolidations in Japan. Our findings are threefold. First, an increase in lending distance increases the likelihood that firms switch their main bank. Second, the average lending distance for firms that switched to a new main bank decreased after the switch. Third, the lending distance of new firm–main bank relationships after the switch had a positive impact on the probability of default of small firms.

We examine how analysts respond to non-financial information about environmental, social responsibility, and corporate governance (ESG) performance and find good ESG performance lessens analysts' optimistic bias. We verify the mediating role of financial transparency that superior ESG performance decreases the level of information asymmetry between firms and analysts and improves financial transparency, thus weakening optimistic bias. Analysts' optimistic bias rises with increased institutional holdings and diminishes with heightened economic policy uncertainty. Social responsibility makes a larger reducing effect on analyst optimistic bias than corporate governance and environmental protection. Our findings have important implications for encouraging firms to emphasize ESG performance and improving stock market efficiency.

We examine the influence of stock pledge by controlling shareholders on corporate social responsibility (CSR). Results show that firms exhibit poorer CSR performance when the controlling shareholders have more shares under pledge to financial institutions. Further analyses suggest that the negative relation between stock pledge and CSR only exists in financially constrained firms and non-state-owned firms, in which the pledging controlling shareholders have greater incentive to increase stock price and maintain their control rights. Our findings support a margin call hypothesis that firms tend to cut off CSR spending to improve short-term financial performance and reduce the risk of losing control rights.

This study examines whether differentiated disclosure of key audit matter (KAM) in China indicates a higher financial misstatement risk. Our empirical study demonstrates that financial statements with less boilerplate KAM are more likely to be subsequently restated than those with more boilerplate KAM. This association is only pronounced for smaller auditing firms in stronger legal environments. Additionally, auditors who report differentiated KAM are likely to disclose more risk-related information. Moreover, clients are more likely to restate financial reports when the KAM relates to managers' subjective estimations.

This study investigates the impact of firms' cost behavior on their seasoned equity offering (SEO) performance. The empirical findings show that cost-stickier SEO firms experience more negative SEO cumulative abnormal returns (CARs). The economic mechanism of this association is that cost-stickier SEO firms deal with higher information asymmetry and issue fewer debts, which reduce their SEO CARs. SEO firm cost behavior also affects corporate SEO decisions and announcement returns in different life cycles. Among the three economic mechanisms, the information asymmetry channel has been found as the dominant one. This study also indicates that cost-stickier firms are less likely to conduct SEOs than their counterparts. In contrast, the motivation for Chinese SEO issuance for cost-stickier firms is market timing rather than adjusting the capital structure or financing for investment and growth. Additionally, the negative impact of cost stickiness on corporate SEO returns is less pronounced for firms associated with industry-specialized auditors and greater corporate governance capacity but more substantial for SEO firms with higher free cash flow. All main findings are consistent in a number of endogenous tests, including the two-stage least squares test, the generalized method of moments estimation, and the control of alternative fixed effects. These conclusions also passed several robustness tests such as an alternative factor model and event windows and an alternative proxy of cost stickiness.

During the 1997 Asian financial crisis, Korean regulators imposed a 200% leverage cap to curb excessive debt and restore economic stability. We examine the real effects and externalities of mandated capital structure changes resulting from this leverage ratio regulation. Our findings indicate that firms that met the leverage requirement experienced a significant decrease in firm risk. However, the effect varied depending on how firms adjusted their capital structure. Firms that chose to issue equity to lower their leverage ratio, as opposed to firms repaying debt, exhibited higher firm risk, lower investment-q sensitivity, and lower profitability in the post-regulation period.

Using a large sample of publicly listed firms in China, we examine the relation between local financial agglomeration and corporate green innovation. We document that local financial agglomeration positively affects corporate green innovation output. This positive effect is more pronounced when firms have better environmental performance, when the market-level sentiment for corporate environmental responsibility is higher, or prior to the implementation of a green credit policy in China. Further analysis reveals that local financial agglomeration enhances corporate green investments and the quality of green innovation. Collectively, our findings reveal the real and environmental effects of local financial agglomeration.