Asia-Pacific Journal of Financial Studies最新文献

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.

We investigate the role of the local media in curtailing undesirable behaviors of local corporations. We examine the effects of local newspaper layoffs on the workplace safety levels of local firms, finding that firms' total case rates of workplace injuries increase following newspaper layoffs. We also show the mechanisms of reductions in safety-related expenditures and increased workloads. Cross-sectional tests find that the monitoring role of these newspapers is more important for firms with weaker labor unions or lower institutional ownership. Overall, our results suggest that local newspapers serve as key corporate monitors and essential information intermediaries, mitigating firms' undesirable behavior.

Recent studies find that investors prefer funds with lottery-like payoffs. Using a sample of Chinese open-end funds, we show that investors' preference for funds' extreme positive payoffs (MAXs) depend on the state of the market: it is significant for MAXs in an unfavorable market but weak or reversed for those in a favorable market. Such state-dependent preference is irrational because, inconsistent with the flow–MAX relationship, higher MAXs under market downturns are associated with worse performance. We further document support for the salience-theory-based explanation for investors' preference and provide counter-evidence for alternative mechanisms based on rational choice or changes in aggregate flows.