Using a customer–supplier matched sample of US-listed firms from 1980 to 2016, we study the corporate cash-holding relationship between suppliers and their major customers. The key findings suggest that the cash-holding levels of suppliers are positively affected by those of their major customers, consistent with the liquidity argument. The effects are more pronounced when the major customers are in

This paper presents a data-driven complex network approach, to show similarities and differences—in terms of financial risks—between the companies involved in organized crime businesses and those who are not. At this aim, we construct and explore two networks under the assumption that highly connected companies hold similar financial risk profiles of large entity. Companies risk profiles are captured

Under Accounting Standards Update 2011-05, firms can present comprehensive income (CI), defined as the sum of net income (NI) and other comprehensive income (OCI), in a single continuous statement or two separate, consecutive statements. We identify whether firms use the one- or two-statement approach for the years 2012–2015 and assess the value relevance of CI, NI, and OCI under the alternative approaches

We examine the effect of the U.S. Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 on the credit card lending rate pass-through. Our findings show that the Act had no impact on the long-term relationship between the lending rate and funding costs. However, in the short-term, banks were quicker to raise rates in response to an increase in funding costs after the implementation

This study investigates the changes in the marginal cost, revenue, and profit efficiencies after a series of deals by US acquiring banks for the period from 1992 to 2007 using the nonparametric data envelopment analysis (DEA) method and the market reaction model. All the efficiency measures show increases in the first two deals but show significant decreases in the next two to three deals and substantial

This paper examines how a concentrated tenant base affects the operating performance and market valuations of US REITs. We observe that REITs adopting a concentrated tenant base present higher corporate cash flows and lower expenses. However, we identify a concentration discount effect that REITs with a more concentrated tenant base experience lower market valuations. We argue that this concentration

This study investigates the effect of news sentiment on stock market volatility using the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model and measures the asymmetric effect with the GJR-GARCH model. We adopt patented linguistic analysis that considers the semantic orientation process to quantify financial news that may attract investor attention. This study distinguishes between

The Campbell and Vuolteenaho (Am Econ Rev 94(5):1249–1275, 2004) two–beta model decomposes the systematic risk in the sensitivity of cash flow and discount rate change. We employed this model, which we call the Two Beta Decomposition Model (TBDM) and found that this model is useful to compute the cost of capital for unlisted companies (UCs) via a proxy from listed companies. This model includes not

In this research we make the first attempt to construct automated Bitcoin trading systems that are based on classical candlesticks patterns. We than tried to alter the classical formations for better trading results. Our data consists Bitcoins prices from the beginning of 2012 till the end of July 2020. WE found that that out of the tree classical candlesticks pattern only Engulfing has been fertile

Target costing is a well-established strategic cost management tool in theory and practice. The original target costing model implies independence of customer preferences resulting in additive utility functions for the customer-oriented optimization of cost structures. We argue that this independence of preferences is not given until a minimum variant of a product is reached that provides its inherent

We examine the relation between accounting reporting complexity and analysts’ performance and whether analysts’ qualifications, experience, and expertise in specific financial domains help them more effectively process complex information. We document an inverse relation between complexity and analysts’ performance. Further, we show that analysts’ firm-specific experience, industry focus, and CFA certification

In this paper, we explore the relations between liquidity, stock returns, and investor risk aversion as captured by the variance risk premium (VRP). This is motivated by theoretical and empirical evidence in the literature which suggests that investor risk aversion negatively correlates with asset liquidity, and ample empirical evidence documenting liquidity risk premium. We use monthly US data from

This study examines whether investors’ familiarity bias affects their earnings-based equity valuation. Building on theoretical and empirical findings from prior studies, we hypothesize that familiarity bias may reduce the earnings-based equity valuation of foreign firms. We also hypothesize that the perceived link between current earnings surprises and future operating cash flows is one channel through

Specialized funds such as charitable trusts do not attach much value to consumption, instead, they pursue to maintain a satisfactory level of spending and avoid ruin to achieve their managerial goals. We employ an objective function tailored for studying ruin probability of a specialized fund, which implies simple analytical conditions to judge if the fund can be operable permanently. We analytically

Probability of informed trading (PIN) models characterize trading with certain types of information through a tree structure. Different tree structures with different numbers of groups for market participants have been proposed, with no clear, consistent tree used in the literature. One of the main causes of this inconsistency is that these trees are artificially proposed through a bottom-up approach

We examine the impact of religious beliefs on loan repayments in 770 microfinance institutions (MFIs) across 65 countries over the period 2006–2018. We find robust evidence of a negative relationship between religiosity and loan losses in MFIs. We also find that the relationship between religiosity and loan losses is stronger for MFIs in Protestant-dominated countries than in Catholic-dominated countries

We perform a microstructure analysis of trading activities pre- and post-class period end-dates of securities class action lawsuits. We posit that these events are likely to significantly impact the spreads of affected firms, in addition to the well documented market capitalization loss that spurs the legal action. We detect neither meaningful widening of spreads nor change in put-call ratios ahead

The authors regret the following errors occurred in the original publication of the article. The corrected text has been presented with this erratum.

We investigate the existence of evidence of investor sentiment on share price deviations from their intrinsic values across two sentiment regimes of shares market: the low-to-normal and the excess one. We use the residual income valuation model to calculate the intrinsic values of shares based on accounting fundamentals and we suggest a panel data threshold model to capture the sentiment regimes of

This study examines whether and how policy changes that aim to improve market efficiency, specifically the mandatory adoption of International Financial Reporting Standards (IFRS), influence the relation between product market competition and stock price informativeness. Using a sample of European firms, we find a negative association between product market competition and stock price informativeness

We explore whether firm managers trade on future stock price crash risk. This depends on managers’ ability to assess future crash risk, and on whether the expected payoff is greater than the expected costs associated with potential reputation loss and litigation risk. We find that insider sales are positively associated with future crash risk, which is consistent with managers’ trading on crash risk

Using large reductions in import tariffs as an exogenous shock to the competitive environment, this paper examines how an increase in foreign competition affects the importance of corporate governance. Consistent with prior studies, weak governance is associated with lower firm value, lower operating performance, lower labor productivity, higher capital expenditures, higher non-production expenses

Recent studies argue that CEO option compensation affects executives’ behavior toward risk. Specifically, the literature provides seemingly conflicting evidence regarding the impact of equity compensation (particularly option holding) on financing activities. We propose and test a nonlinear (e.g., inverted U-shaped) relation between corporate borrowing and option compensation. Consistent with our hypothesis

In this paper we revisit the equity premium puzzle reported in 1985 by Mehra and Prescott. We show that the large equity premium that they report can be explained by choosing a more appropriate distribution for the return data. We demonstrate that the high-risk aversion value observed by Mehra and Prescott may be attributable to the problem of fitting a proper distribution to the historical returns

We find evidence that a firm’s record earnings influence market response to earnings news. Our results show that the proximity of the firm’s earnings to its record earnings leads to investors’ underreaction following earnings announcements, exacerbating post-earnings-announcement drift. Such biased behavior is more pronounced in low-growth firms and firms with low institutional ownership. Meanwhile

We propose a new method to jointly estimate volatility risk and two-tail risk price with state-dependent features. Rather than assuming a constant risk price, as in existing models, this new method estimates an extended pricing kernel with macro-state-dependent risk prices. In contrast to the widely accepted constant risk price assumption, we find that the prices for equity, volatility, positive jump

This study examines the possible opposing effects of the board function of busyness (i.e. the presence of busy independent non-executive directors serving on multiple boards) on bank dividend payout patterns between two alternative payouts models (i.e. conventional and Islamic). Using an international sample for listed banks during the periods of 2006–2018, we show that the busyness of boards of directors

In this paper, we examine the impact of distracting events to audit committee members on the firms’ earnings quality. Specifically, we focus on major events occurring simultaneously at other firms in which the audit committee members also serve as board members or CEOs. We find that during the years of major events, the number of board meetings at event firms significantly increases while there is

We show that retail investors’ cyclical demand for lottery stocks, which tends to peak at the turn-of-the-month (ToM), has implications for firms’ financial activities. Consistent with the notion that the peak in demand is driven by a propensity to gamble that is associated with inattention, we find underreaction to earnings news issued at the ToM by lottery-type firms located in areas with many gambling

This paper introduces the PSCORE, which aggregates nine personal characteristics of chief executive officers (CEOs), to signal the quality of earnings. The PSCORE is a composite score based on publicly available data on CEOs. The study reports strong positive relationships between the PSCORE and two different proxies for earnings quality, (1) discretionary accruals and (2) financial statement errors

In this paper, we investigate earnings management surrounding forced CEO turnover for U.S. property-casualty insurance companies with differing organizational forms. We analyze the three principal organizational form types in the industry—publicly-traded stocks, closely-held stocks, and mutuals. We utilize a unique measure of earnings management, the loss reserve error. Multivariate results show that

Audits provide monitoring for investors. The collapse of markets across the financial crisis made assets more difficult to value, which increased risk for auditors. The money markets were at the center of the financial crisis increasing audit engagement risk on money market funds, which at the time of the crisis were highly opaque. Measuring the response to increased engagement risk with audit fees