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Controlling Shareholders' Value and Corporate Tax Avoidance* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2024-02-01 Hyungjin Cho, Jeong-Hoon Hyun, Taejin Jung, Yewon Kim
This paper investigates whether and how controlling shareholders' value (i.e., the concentration of controlling shareholders' wealth within a business group) affects corporate tax planning using Korean chaebols. We find that firms with high controlling shareholders' value engage in a lower level of tax avoidance than other affiliates in the business group. We also find that controlling shareholders'
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Does Green Bond Issuance Enhance Market Return of Equity Shares in the Indian Stock Market?* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2024-01-30 Snehith Jacob Kodiyatt, Biju A V Nair, Manna Sarah Jacob, Krishna Reddy
This study examines the announcement effect of a green bond on the issuer's stock returns in the Indian Stock Market. The event study methodology for data analysis and abnormal returns were calculated using the market model for the 16-day event window that includes the 5 days prior and 10 days after the issuance of the green bonds. The findings of this study show that green bond announcements do not
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Business Strategy and CEO Compensation: Evidence from the Hospitality and Tourism Industry* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2024-01-29 Hye Seok Kim, Akinloye Akindayomi, Chune Young Chung, Adeduro Adesola Ogunmakin
This study examines the relationship between a hospitality and tourism (HT) firm's business strategy and the level and structure of compensation for its chief executive officer (CEO). Using the ordinary least square (OLS) estimation method, we find that firms in the HT industry that adopt an innovation-oriented business strategy increase their CEOs' total compensation. The increased compensation is
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Control Beyond Ownership: Open-Book Accounting in Unbalanced Supply Chain Networks* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-12-08 Yunxiao Liu, Woojin Kim, Jongsub Lee
Open-book accounting is a practice to disclose the full cost structure of suppliers to customers to achieve cost efficiency in supply chains. However, the dominant market power of customers could interfere with this goal in practice. Using unique data on the suppliers of large Korean business groups, we find that open-book accounting is associated with profit rate regulation by customers. Suppliers'
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Improving Retirement Coverage Durability with Target Volatility Strategy for Changing Interest Rate Environment Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-12-07 Zefeng Bai, Victoria Steblovskaya, Kai Wallbaum
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
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Unintended Consequences of End-of-Year Rush Toward Innovation: Evidence from Patent Application Filings* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-11-28 Jiyoung Park, Hyun-Han Shin
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
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Procyclical Credit Rating Policy* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-10-30 Jun Kyung Auh
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
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Does Geographical Proximity Matter in Small Business Lending? Evidence from Changes in Main Bank Relationships* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-10-17 Arito Ono, Yukiko U. Saito, Koji Sakai, Iichiro Uesugi
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
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Stock Pledge by Controlling Shareholder and Corporate Social Responsibility* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-09-29 Wen Wen, Lijing Tong, Lu Xie, Siting Zhang
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
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Unintended Consequences of Leverage Regulation: Evidence from Korea* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-08-06 Taejin Jung, Natalie Kyung Won Kim, Woo-Jong Lee, Daniel Yang
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
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Local Newspaper Layoffs and Workplace Safety* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-08-03 Min Kim, Kwangjin Lee, Jason Shin
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
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The Roles of Finance in ESG Management Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-06-15 Young Seog Park, Hyo Seob Lee
As shareholder capitalism has revealed its limitations since the outbreak of Covid-19, there has been a growing demand for a shift toward stakeholder capitalism. Environmental, social, and governance (ESG) management seeks an optimal way to allocate resources to both financial and social values in order to enhance stakeholder utility. Given the various legal, theoretical, and empirical limitations
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Family Feud: Succession Tournaments and Risk-Taking in Family Firms* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-06-13 Jongsub Lee, Hojong Shin, Hayong Yun
We identify succession as a novel determinant of risk-taking in family firms. We find significantly higher risk-taking (mergers and acquisitions and cash flow volatility) and lower operating efficiency in firms controlled by families with multiple sons during the pre- rather than the postsuccession period compared to family firms with one or no sons. Presuccession risk-taking by sons decreases the
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Less Volatile Value-at-Risk Estimation Under a Semi-parametric Approach* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-06-13 Shih-Feng Huang, David K. Wang
In this study, we propose a two-step, less-volatile value-at-risk (LVaR) estimation using a generalized nearly isotonic regression (GNIR) model. In the proposed approach, a VaR sequence is first produced under the generalized autoregressive conditional heteroskedasticity (GARCH) framework. Then, the VaR sequence is adjusted by GNIR, and the generated estimate is denoted as LVaR. The results of an empirical
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Forecasting Korean Stock Returns with Machine Learning Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-04-12 Hohsuk Noh, Hyuna Jang, Cheol-Won Yang
This paper aims to evaluate the predictive power of financial variables by using various machine learning methods. An analysis is conducted on data for the Korean stock market, which is representative of emerging markets, over 32 years from 1987 to 2018. The study shows that median regression is a more efficient tool than mean regression in the presence of potential heterogeneity of stocks, significantly
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Pricing Liquidity Risk in the Korean Corporate Bond Market* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-04-06 Eunji Kim, Ga-Young Jang, Soo-Hyun Kim
This study investigates the pricing of liquidity risk in the Korean corporate bond market. We use three different liquidity factors — namely, aggregate market liquidity, liquidity innovation, and predicted liquidity. The empirical results show that, while a liquidity premium exists in the Korean corporate bond market when measured by the market liquidity factor, a liquidity discount occurs when measured
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Does Information Disclosed in “Use of Proceeds” from Prospectuses Affect IPO Initial Underpricing? Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2023-01-04 Wenxiu Tang, Zhong-Guo Zhou
We study the impact of intended use of proceeds disclosed in the section of “Use of Proceeds” in prospectuses on ChiNext IPOs' initial underpricing. After splitting the entire period into two non-overlapping sub-periods to control for regulatory changes and after controlling for the firm-level characteristics and market conditions, we find that the overall information disclosed from “Use of Proceeds”
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The Effect of the Financial Structure Decision and Governance Mechanism on Shareholders' Wealth: Nonlinearity Evidence from a Petroleum-based Economy Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-12-01 Ali Shaddady
This study was designed to determine the nature of the association between the financial structure decision and shareholders' wealth—dividend payments—of firms listed on one of the largest stock markets in oil-based economies, the Saudi stock market. The study used panel data for all nonfinancial firms listed in Saudi Arabia's primary stock market (TASI) during the period from 2000 to 2018. The pooled
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Surplus Optimization in Defined Benefit Pensions Using the Regime-Switching Model: Occupational Pension Plans in South Korea* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-10-21 Hyeonjong Jung, Dong-Hwa Lee, Do Young Cheong
We assume a hypothetical defined benefit (DB) pension plan that reflects the characteristics of the occupational pension in South Korea and propose a surplus optimization strategy using a regime-switching model. Using conditional surplus at risk, we construct an optimized portfolio that limits extreme tail risks. Furthermore, we identify the surplus risk and return conditional on global macroeconomic
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The Signaling Role of IPO Lockups: Evidence from SMEs in Korea Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-10-11 Youngjoo Lee
This study examines the signaling role of lockup extensions for initial public offering (IPO) firms subject to mandatory lockup provisions. The sample contains IPO firms that went public in the Korean stock market, which reduced the mandatory lockup period over the sample period. This study finds that (1) IPO underpricing is negatively related to the lockup extension length after the reform, and (2)
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Does Co-CEO Adoption Lead to Better Stock Performance? An Empirical Analysis Focusing on High-growth Firms Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-09-30 Jae Eun Shin, Gun Lee
While there is an increasing debate about whether having multiple CEOs is beneficial to firms, few empirical studies have examined stock returns' consequences after adopting the co-CEO structure. Set in the Korean context, where the co-CEO structure is a common corporate practice, we find that co-CEO adoption has subsequently led to better stock performance than adherence to a sole-CEO structure. Moreover
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Effect of Institutional Depositors on Banks' Dividend Policy: Evidence from Korea during the Global Financial Crisis* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-09-29 Hyun-Jae Jung, Jinho Lee, Young S. Park
This study investigates the motive for dividends by examining the relationship between dividends and banks' institutional depositors during the global financial crisis. The results indicate that during the financial crisis, the higher the deposit ratio of institutional depositors to the total insured deposits was, the lower the dividend payments were. This may be attributable to the fact that during
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Market Responses to Private and Public Targets: The Role of Goodwill Valuation* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-09-21 Shin Hyoung Kwon, Irene Guannan Wang
Investors overprice goodwill value acquired from a private target during a merger and acquisition (M&A) announcement. However, the overpricing of goodwill is corrected in the years following the deal's completion. Our results show that investors predict the decreasing value of goodwill and promptly adjust their pricing regardless of goodwill impairment. The differential market reactions to goodwill
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The Unintended Effects of Stock Pledging: A Perspective on the Shareholder–Creditor Conflict* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-08-24 Yuanyuan Liu, Lili Jiu
This paper examines whether and how stock pledging by a firm's largest shareholder affects the conflict of interest between shareholders and creditors. We find such stock pledging is negatively associated with corporate risk-taking. This association is more pronounced for companies with high debt costs before such pledging, with dominant controlling shareholders, and those whose largest shareholders
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Sustainable Finance: ESG/CSR, Firm Value, and Investment Returns* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-07-23 Xin Chang, Kangkang Fu, Yaling Jin, Pei Fun Liem
We review the burgeoning sustainable finance literature, emphasizing the value implications of ESG (environmental, social, and governance) and CSR (corporate social responsibility) practices. We use a discounted cash flow valuation framework to identify value drivers through which such practices can enhance firm value. Collectively, empirical evidence supports that they increase firm value by motivating
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Financial Education, and Gender Equity Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-07-09 Kyounghun Bae, Ga-Young Jang, Hyoung-Goo Kang, Pearleen Tan
This study investigates how to promote gender equity in finance through early financial education using the survey responses gathered in Singapore. The empirical tests for the effect of financial education on financial literacy suggest that women who receive early financial education better understand the compounding effect of interest rates on loans, portfolio diversification, and mortgage payments
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Early Financial Education, Financial Literacy, and Gender Equity in Finance* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-06-27 Kyounghun Bae, Ga-Young Jang, Hyoung-Goo Kang, Pearleen Tan
This study investigates how to promote gender equity in finance through early financial education using survey responses gathered in Singapore. The empirical tests for the effect of financial education on financial literacy suggest that women who receive early financial education better understand the compounding effect of interest rates on loans, portfolio diversification, and mortgage payments. The
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Firm Misvaluation and Corporate Social Responsibility* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-05-31 Yaling Jin
This paper shows that overvalued firms have better performance in corporate social responsibility. Using hypothetical mutual fund outflow pressure, I establish causality from misvaluation to corporate social responsibility performance. Further analysis reveals that the effect of firm misvaluation on corporate social responsibility performance is stronger for firms with greater financial strengths,
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Corporate Social Irresponsibility and Firm Value: International Evidence from Media Coverage Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-05-31 Tracie Frost, Lei Li, Albert Tsang, Miao Yu
Media attention to corporate social irresponsibility (CSiR) is increasing around the world. Using a sample of firms from 43 countries, we find that media coverage of CSiR is negatively associated with firm value. We further find that the negative relation between media coverage of CSiR and firm value is more pronounced for firms with long-term orientations and for firms domiciled in countries where
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How Does Corporate Social Responsibility Affect Credit Default Swap Spreads? Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-05-30 Jongho Kang, Jihun Kim
We examine the relationship between corporate social responsibility (CSR) and credit risk. We test how CSR strengths and concerns impact credit default swap (CDS) spreads during the global financial crisis period (2008–2009) and non-crisis periods (2003–2007 and 2010–2013). CSR concerns increase and CSR strengths reduce CDS spreads during the non-crisis period, whereas their effects change during the
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The Mediating Effect of Internal Control for the Impact of Institutional Shareholding on Corporate Financial Performance* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-03-31 Xiao Li
This study analyzes the mediating effect of internal control (IC) on corporate financial performance from an information economics perspective. The results show that effective IC has a significant mediating effect for institutional shareholding to improve financial performance. The mediating mechanism of IC is not reflected for institutional holdings other than Pressure-resistant institutions. In addition
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A Survey of Asian Family Business Research* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-02-14 Morten Bennedsen, Yi-Chun Lu, Vikas Mehrotra
We survey the literature on family firms with a focus on Asian countries. We begin with identifying three key motivational drivers of international research on family business—their dominance, relative performance, and extent of family embeddedness in the business. Second, we provide a brief survey of family firms in eight Asian economies with a focus on the history and current challenges faced by
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Impact of Investor Sentiment on Stock Returns* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-02-13 Youngkwang Kim, Kaun Y. Lee
This study examines the relationship between investor sentiment and stock returns in two active but different Korean stock markets. Using daily KOSPI and KOSDAQ data, we construct an investor sentiment index that includes adjusted turnover rate, buy–sell imbalance, and relative strength index. We find that investor sentiment significantly affects stock returns, more so in the KOSDAQ with high individual
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What Drives Stock Market Underreaction to Liquidity Shocks? Evidence from Korea* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2022-02-01 Jeewon Jang
Stock-level liquidity shocks have a positive cross-sectional relation to not only contemporaneous returns but also one-month-ahead returns in the Korean stock market, which implies that the stock market underreacts to liquidity shocks. However, the return continuation after the arrival of liquidity shocks is short-lived and disappears in two months in Korea, unlike in the United States. The positive
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Intangible Capital and Market Reactions to Earnings News* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-12-20 Woosung Jung, Bong-Chan Kho
We investigate how market reactions to earnings news differ between U.S. firms with high and low intangible capital. We expect investors to have difficulty processing information on earnings news for firms with high intangible capital, leading to a larger reaction to earnings news. Measuring intangible capital as the accumulated sum of externally purchased and internally created intangible assets,
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Distress Resolution through New Block Formation: Implications for Ownership Concentration* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-12-13 Yoonyoung Choy
This study examines distress resolution under concentrated equity ownership and concentrated bank debt. Using a large sample of Korean financially distressed firms, I find that distress resolution is more likely when private placements of new equities are accompanied by a change in control. Control transfers in which new blocks are created through equity capital injection contribute to operational
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Managerial Over-Optimism and Research and Development Investment: Evidence from Korean Initial Public Offering Firms* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-12-01 Kyung Soon Kim, Chune Young Chung, Jin Hwon Lee, Jongchan Park
Examining 1114 Korean firms between 2001 and 2015, we find that positive discretionary research and development expenditures in initial public offering years positively relate to future investment but do not significantly affect future performance. Thus, managerial optimism rather than signaling likely drives over-investment. High-tech firms generally over-invest more, and those that over-invest are
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An Extension of the Five-factor Affine Term Structure Model: Predicting Future Bond Returns* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-11-30 Ga-Young Jang, Hyoung-Goo Kang, Dong-Joon Lee
We investigate time-varying risk premia in Korean government bonds using a five-factor affine model. The model generates nearly perfectly fitted yields and estimates the bonds’ expected returns with more precision than the four-factor model. We also find the statistically significant predictive power of the model for future bond returns using forward rates from cross-sectional and time-series regressions
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Value-destroying Mergers: Evidence from Korean Business Groups* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-11-30 Kee-Hong Bae, Kyunghyun Kim
In this study, we find evidence of tunneling in mergers among affiliated firms that belong to Korean business groups. Using a recent sample of Korean mergers during the 2000–2020 period, we find that control-motivated mergers to enhance the controlling family’s control over the business group significantly decrease the target’s value and that of the value-weighted combined portfolio of the acquirer
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The Role of Second-Tier Exchange in Corporate Valuation: Evidence from Korea* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-11-29 Heejung Choi, Dong Wook Lee
Using data from Korea, we show that the second-tier exchange—also known as the entrepreneurial market—assigns higher valuations to growth-oriented (i.e. small yet intangibles-rich) companies despite their low profitability. Such “growth” valuation is most pronounced among companies in an earlier stage of their life cycle as proxied by dividend payments (i.e. dividend non-payers). Further analysis confirms
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Media Coverage and Cash Holding Adjustment* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-11-26 Hyungjin Cho, Meeok Cho, Sehee Kim
This paper investigates how companies adjust their cash holdings in response to media coverage. We find that firms with more media coverage and more negative tone of media coverage move the level of cash holdings faster toward the target level. More importantly, the association between media attention and cash holding adjustment speed is weaker for firms affiliated with business groups, indicating
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Voluntary Earnings Notifications and Post-earnings-announcement Drift* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-09-22 Giman Nam, Sunhwa Choi
We examine whether voluntary disclosure of earnings notifications mitigates the post-earnings-announcement drift (PEAD). An earnings notification, which is a firm’s voluntary announcement of the date of its earnings announcement (EA), increases investor attention to firms’ upcoming EAs and thus facilitates the incorporation of earnings news into stock prices. We find that firms with earnings notifications
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ESG and Stock Price Crash Risk: Role of Financial Constraints* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-09-27 JinCheol Bae, Xiaotong Yang, Myung-In Kim
This paper investigates whether corporate performance measured from three aspects—environmental, social responsibility and governance (“ESG”)—are associated with stock price crash risk, and also examines how the relation between ESG ratings and stock price crash risk is affected by the degree of financial constraint. Our empirical results show that ESG ratings reduce the stock price crash risk, and
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Analyst Coverage and the Market Valuation of Capitalized versus Expensed R&D* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-08-02 Yewon Kim, Hyungjin Cho, Seunghee Yang
We investigate the information benefits from R&D capitalization by focusing on the role of financial analysts in mitigating information asymmetry. Using a large sample of Korean firms, we find a positive association between analyst coverage and the market valuation of expensed R&D indicating that an analyst's activities can help investors to understand the implications of R&D investments. In contrast
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How Do Foreign Traders Affect Stock-Pricing Efficiency? Microstructure-based Evidence from Korea* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-07-31 Kyounghun Bae, Chanyoung Eom, Younghee Kim
We analyze how foreign ownership relates to the short-term pricing efficiency of common stocks listed on the Korea Stock Exchange. We find that stocks with greater foreign holdings are priced less efficiently. This result is robust to different efficiency measures, estimation methods, and reverse causality concerns. Our evidence suggests that foreign trading deters price corrections, at least in the
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Stock Return Autocorrelations: Evidence from the Asia-Pacific Stock Markets Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-08-04 Luke Lin, Wen-Yuan Lin
This study uses quantile regression to examine the stock autocorrelations of eight Asian markets for the period 1990–2014. First, we find that the impacts of their previous returns are basically positive under most of the quantiles. Second, if we distinguish previous returns as positive or negative, the basic positive autocorrelations are strengthened. Third, when the previous return soars or plummets
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Voluntary Disclosure and Rating Disagreement among Credit Rating Agencies: Evidence from Korea Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-06-27 Yujin Kim, Jungin An
We examine the effect of voluntary disclosure on rating disagreement among credit rating agencies (CRAs). Previous empirical findings suggest that precise financial reporting decreases information risk and affects split ratings. However, no prior research has investigated the relationship between voluntary disclosure and split ratings, even though such disclosure can reduce information asymmetry. We
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Is Managerial Ability Associated with Capital Structure Adjustment Speed?* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-06-15 Hyungjin Cho, Ga-Young Choi, Sera Choi
We find that firms with more capable managers exhibit a slower adjustment speed of capital structure toward the target level. This result is stronger for younger and smaller firms. These can be explained by capable managers’ avoidance of transaction costs and their decision to focus on core activities rather than on capital structure adjustment. Lastly, the negative relation between firm value and
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Momentum and Earnings Information in the Korean Stock Market Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-07-08 Yu Sung Ha, Jangkoo Kang, Sun Yung Kim
This study examines whether price momentum profit is related to earnings information in the Korean stock market. Through time-series and cross-sectional asset pricing tests, we find that price momentum profits are captured by return on equity; an earnings surprise or revenue surprise partially explains price momentum. The risk-based factor models cannot explain the existence of earnings-based momentum
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Social Capital and Firm Innovation: Evidence from Cooperative Banking in Korea* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-04-19 Frederick Dongchuhl Oh, Heejin Yoon
This study investigates the link between social capital and firm innovation by examining the cooperative banking channel in Korea. Social capital has a positive impact on the activities of cooperative banks, thus fostering innovation in regional firms. We first confirm a positive association between social capital and firm innovation in Korea and find that firms located in provinces with higher social
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The ex-ante Effect of Law and Judicial Efficiency on Borrower Discouragement: An International Evidence Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-05-26 Safi Ullah Khan, Naimat Ullah Khan, Asad Ullah
We investigate whether cross-country differences in the legal system influence demand-side credit constraints. We explore the notion of discouraged borrowers — firms that choose not to apply for bank credit because they anticipate rejection. Employing survey data from 46 economies, we find that rapid and less costly court proceedings, lower procedural complexity in court processes, and higher recovery
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Pension Fund Monitoring and Corporate Debt Policy: Evidence from the Korean Market* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-04-26 Wonseok Choi, Chune Young Chung, Jongchan Park
We investigate whether the Korean National Pension Service, a corporate watchdog and major long-term investor in South Korea, positively affects corporate financial policy. The Korean National Pension Service is less likely to influence corporate financial policy even among firms with high uncertainty and information opacity, which increases the importance of large shareholders’ monitoring role. Additionally
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Non-traditional Banking Activities and Bank Financial Reporting Quality Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-04-22 Mengyang Guo, Justin Jin, Yi Liu, S. M. Khalid Nainar
We examine whether and how non-traditional banking activities affect the quality of banks’ financial reporting. We find that a bank’s ratio of non-interest income (derived from non-traditional activities) to total operating income is positively and significantly associated with the magnitude of discretionary loan loss provisions, our proxy for financial reporting quality.
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Price Limit Expansion and Volatility: A Theoretical Perspective* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-04-18 Jeong Hwan Lee, Xin Su, Jin Yoo
We theoretically examine whether and how price limit expansion changes return volatility. This study incorporates competing hypotheses regarding investor reactions to limit-hit events into a model that considers trader irrationality; we then conduct several simulations. We find that, when price limits are widened, stock return volatility tends to increase but may also remain unchanged or decrease.
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Liquidity Management During the Covid‐19 Pandemic* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-02-02 Heitor Almeida
With the help of the United States Government and committed funding from bank credit lines, the United States corporate sector responded to the Covid‐19 cash flow shock by issuing long‐term debt to increase cash holdings. I use a case study, evidence from recent research, and a theoretical model to explain the logic behind the changes in corporate financial policy that happened during 2020, and to
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Do Analysts Account for Accruals? Evidence from the Insurance Industry* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-03-05 Bok Baik, Young Jun Kim, Yongoh Roh
Property‐casualty (PC) insurers are mandated by the Securities and Exchange Commission (SEC) to report managers’ revisions of loss reserve estimates (“development”) in 10‐K supplemental disclosures. Using manually collected PC insurers’ development, we examine whether analysts’ earnings forecasts incorporate information in development. We initially show that development has incremental power to predict
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Erratum Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-03-16
In Amir Akbari and Lilian Ng (2020), Figures 1, 2 and 3 were incorrect. On page 4, Figure 1 should be replaced with the figure below. On page 4, Figure 2 should be replaced with the figure below. On page 4, Figure 3 should be replaced with the figure below. The online version of this article has been corrected. We apologize for this error.
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Is Informed Trading Different Across Investor Types?* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2020-12-19 Hyejin Park, Kee H. Chung, In Joon Kim
This study compares the extent of informed trading across investor types in the Korean stock market using intraday quote and trade data. We estimate for each stock the probability of information‐based trading (PIN) using trades that are initiated by foreign investors, domestic institutional investors, and local individual investors separately. The results show that the PIN values of foreign and domestic
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Distinctive features of student borrowers and suboptimal investor decision‐making: Evidence from the P2P lending market Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2020-12-14 Dongwoo Kim, Jihun Kim
This study attempts to identify the characteristics and behavioral features of student borrowers, and to investigate how well individual investors incorporate the uniqueness of these borrowers in their funding decisions. We find that student borrowers are distinct from other types of borrowers, not only with respect to factors that existed prior to joining the market, but also in terms of information
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Controversial Industries, Regional Differences, and Risk: Role of CSR* Asia-Pacific Journal of Financial Studies (IF 1.463) Pub Date : 2021-01-02 Hoje Jo, Kwangwoo Park
Controversial industries such as the alcohol, gambling, tobacco, and firearms sectors have long suffered from organizational legitimacy problems. Using data covering 32 countries, we show that controversial industry firms’ engagement in CSR initiatives has a substantial risk‐decreasing effect, thereby increasing the probability of maintaining the social license to operate. The effect of CSR on firm