Convertible bond issuance volume,capital structure,and firm value

We investigate whether convertible bond (CB) issuance volume that causes capital structure change would affect firm value. We focus on either the hand-collected data due to multiple CB issues or diverse CB issuance volume (CB-IV) measures, including CB-IV over debt, equity, and assets. We reveal that the firms with higher CB-IV would enhance firm value, somewhat different from previous findings that CB might not be a cheap financing instrument for raising funds. We infer that because increased CB-IV might not be easily permitted by Taiwan authorities, enterprises might endeavor to exploit profits by using the funds raised by CBs. We argue that, to our understanding, our explored issues are essential for enterprises because they link CB-IV and firm value through the capital structure channel. Given that these issues have rarely been a comprehensive focus, this study may contribute to the existing literature.     

International spillovers in global asset markets

The paper empirically estimates the financial transmission within and across bond and equity markets in the four largest global financial markets – the United States, the Euro area, Japan, and the United Kingdom. We argue that international bond and equity markets are highly interconnected both within and across asset classes in a globalized world, where the complex transmission process across various financial assets is not restricted to just the domestic market. This paper employs identification through generalized forecast error variance decompositions to estimate spillovers across four systemic markets in a Vector Autoregression (VAR) framework. We find that asset prices react most strongly to international shocks within the same asset class, but that there are also substantial international spillovers across asset classes. Rolling estimations analysis provides evidence that global asset markets have become more integrated and that the bilateral relationships change over time. Our results are robust to specifications that take into account the monetary policy stance and include foreign exchange markets.     

Global Financial Transmission of Monetary Policy Shocks*

The paper analyses the transmission of US monetary policy shocks to global equity markets and the macroeconomic determinants of the underlying transmission process. We show that there is a substantial cross‐country heterogeneity in reactions across 50 equity markets worldwide, with returns falling on average around 2.7% in response to a 100 basis point tightening of US monetary policy, but ranging from a zero response in some to a reaction of 5% or more in other markets. As to the determinants of the strength of transmission to individual countries, we test the relevance of their macroeconomic policies and the role of real and financial integration. We find that in particular the degree of global integration of countries – and not a country's bilateral integration with the United States – is a key determinant for the transmission process.     

Financial Pressure and Balance Sheet Adjustment by Firms*

This paper examines the financial policies and balance sheet adjustment of companies. Using a large panel of UK‐listed firms we consider how companies resolve pressures on their balance sheet, estimating models for dividends, new equity issuance and investment. The results indicate that companies resolve balance sheet pressures by each of these means. Financial policies, through dividends and new equity issuance, and real investment decisions, respond to the underlying level of debt and the borrowing cost of servicing that debt. Dividends are estimated to be slow to adjust in the short run.     

Does bond market development enhance the banking sector’s efficiency in resource allocation? Industry-level evidence from Korea

Korea’s financial system used to be bank-based, with banks playing the leading role in financing corporations. As highlighted by Park et al. (2019), however, bond markets have developed rapidly in Korea and other Asian countries. The corporate bond market competes with banks as a source of finance for large borrowers. As such, bond markets may affect banking sector operation, a process known as disintermediation. In this paper, we examine whether bond market development improves the efficiency of resource allocation in Korean bank lending. We propose two channels through which bond market development affects the efficiency of bank lending. Since the two channels have opposing effects on the efficiency of banking, the issue must be settled by empirical analysis. We find that bank loans are much less efficient than bond financing in allocating resources across industries. Furthermore, banks are particularly inefficient in resource allocation in industries that rely more on bond financing. This suggests that competition from bond financing does not improve allocative efficiency of bank loans.     

Why do firms cross-list? International evidence from the US market

Using a modified international asset-pricing model we find strong evidence that publicly quoted firms cross-list when exhibiting strong performance in their domestic market and wish to take advantage of this situation. After cross-listing, this advantage disappears. Our sample consists of daily data for 1165 firms from 47 countries that have cross-listed on the US equity markets over the period 1976–2007. Within the context of this model we provide tests of the validity of the main hypotheses of capital market segmentation and investor protection, which provide explanations for equity cross-listing and investigate whether the nature of the market (regulated or unregulated) and the accompanying legal framework (common or civil law) can account for the impact of cross-listing on returns. Supporting the segmentation hypothesis, we report a decrease in local market risk after cross-listing. However, we find that the magnitude of such a decrease is diminishing over time as international markets become more integrated. On the other hand, we do not find any change in the global market risk after cross-listing, except for firms that cross-listed between 2001 and 2007, where their exposure to international market risk decreases. Furthermore, we find no evidence to support the investor protection hypothesis.     

基于不同融资体系的国别会计差异研究

笔者由于政治、经济、法律等因素的影响,各国的会计模式呈现出巨大差异。各国的融资体系差异对会计模式选择具有重要影响。以资本市场为导向的融资体系更倾向于会计信息的公允性,而以银行等机构为导向的融资体系则更关注会计利润的平滑性。通过比较两种融资体系的差异,说明这些差异对各国会计模式产生的影响,以探寻融资模式在国别会计及国际会计协调中的重要作用。     

Financial liberalization and firms’ capital structure adjustments evidence from Southeast Asia and South America

This paper investigates the impact of financial liberalization on the adjustment of debt ratios in 12 emerging markets using firm-level data from 1991 to 2004. The results support the central hypothesis of this paper that adjustment costs are important in explaining firms’ adjustment toward their debt ratio targets. Our results show that deviations from targets are halved within 1.09 years in South America and 1.19 years in Southeast Asia, suggesting speed of adjustment is relatively faster in South American countries than Southeast Asian countries. Furthermore, our results show that after full liberalization those countries where rule of law and creditors rights were properly enforced, firms had higher adjustment speed compared to those countries where such enforcement was not present.The estimated adjustment coefficients imply that on average firms’ adjustment speeds have increased in all South American countries over the period of financial liberalization. On the contrary, firms’ adjustment speeds did not increase in Southeast Asian countries, reflecting the uneven effect of liberalization on the firms’ financing behaviour in Asian countries. There was a significant reduction in time (in years) taken to half the gap between actual debt ratios and targets only in Pakistan and South Korea. This finding supports the idea of uncertain impact of financial liberalization programs on the domestic financial markets in those emerging markets which started opening up their market and integrating with the rest of the world latter than others. These findings have significant implications for the sequence of banking sector liberalization in the emerging markets.     

我国中小企业内源融资问题探讨

中央银行实行信贷紧缩政策以来,中小企业在银行贷款的难度越来越大。由于很多中小企业规模不符合上市和发行债券的要求,因此,中小企业融资难问题愈发严重。如何从另一个角度解决中小企业融资难已成为当务之急。基于中小企业自身的特点,在信贷紧缩的宏观环境下,重视内源融资不失为一种有效策略。     

Foreign direct investment and financial markets influences: Results from the United States

This paper investigates the linkages among Foreign Direct Investment (FDI-greenfield and mergers and acquisitions (M&A)) decisions and equity market returns and volatilities. The central premise is that FDI decisions by Multinational Enterprises (MNE) are influenced, among other factors, by risk and uncertainty indicated by equity market returns and volatilities in the destination (host) countries. This is because of the events on the stock markets in general, and their volatilities, in particular, signal the vitality of the investment climate of the target country. Including capital market variables among the determinants of FDI is important for assessing the cost of capital and for evaluating direct investment and asset allocation decisions.Secondary time-series data (quarterly) were used on incoming US FDI from 1994 to 2018 along with data on independent variables such as exchange rates, inflation, market size, equity market returns, and equity market volatilities. Thus, the paper endeavors to contribute to the International Business literature by highlighting the role played of equity returns and volatilities in FDI decisions and therewith attempts to integrate finance (capital markets) with International Business/Strategic Decision making. Several different regression specifications (OLS, Fixed, and random-effects and VAR) were utilized to analyze the data, and capital market variables (stock returns and volatilities) were found to influence the location of production facilities by a multinational enterprise (MNE). In other words, the share of production capacity optimally located abroad, as well as M&A decisions, are influenced by capital market returns and volatilities.     

The Impact of Debt-Equity Reporting Classifications on the Firm's Decision to Issue Hybrid Securities

Abstract

We test the influence of classification of securities into liabilities and equity on firms' financing choices, using as our setting the change in reporting classification of hybrid securities following SFAS 150. We find that this change affected the decision of firms to issue mandatorily redeemable preferred shares (MRPS). Following the requirement that firms classify the debt-like hybrid security MRPS as a liability, the share of MRPS issuances in firms' new financing declined. Characteristics of firms issuing MRPS also changed. While prior to SFAS 150 firms with higher levels of debt and lower coverage ratios chose to issue MRPS and not debt, after its adoption, the decision to issue MRPS is no longer related to firms' pre-existing debt and coverage levels. Furthermore, our results indicate that before SFAS 150 managers were willing to bear the higher issuance fees of MRPS and chose to issue these debt-like hybrid securities over cheaper debt. The requirement to classify debt-like hybrids as a liability took away the reporting incentives for issuance and made these securities a less popular financing vehicle.     

The Impact of Mandatory IFRS Adoption on Equity Valuation of Accounting Numbers for Security Investors in the EU

Motivated by the European Union (EU) decision to mandate application of the International Financial Reporting Standards (IFRS) to the consolidated financial statements of all EU listed firms (Regulation (EC) 1606/2002), starting in December 2005, we compare the value relevance of accounting information in 14 European countries in the year prior to and the year of the mandatory adoption of the IFRS. We focus on three accounting information items for which measurements under IFRS are likely to differ considerably from measurements under domestic accounting practices across the EU countries prior to the introduction of the international standards: goodwill, research and development expenses (R&D), and asset revaluation. These three items, selected on an a priori basis, have been shown in previous research to differ in the effect of uncertainty on their future benefits. We use valuation models that include these three variables and in addition the book value of equity and earnings. Overall, our study suggests that the adoption of the IFRS has increased the value relevance of the three accounting numbers for investors in equity securities in the EU. Association tests support our two hypotheses: (1) in the year prior to the mandatory adoption of the IFRS, the incremental value relevance to investors of the three domestic GAAP-based accounting items was greater in countries where the respective domestic standards were more compatible with the IFRS; and (2) the higher the deviation of the three domestic GAAP-based accounting items from their corresponding IFRS values, the greater the incremental value relevance to investors from the switch to IFRS. These associations prevail when considering cross-country differences in the institutional environments, which tend to provide complementary effects.     

Management of Sino-Sino Joint Ventures

Abstract

Since China's implementation of its open-door policy in 1979, the most effective way to obtain a foothold has proved to be to create joint ventures (JV) with a Chinese business partner. The foreign partner provides the transfer of technology, management skills, financing and access to international markets, whilst the Chinese partner contributes a production base with cheap land and labor, contacts with central and local government officials and access to the domestic Chinese market. The Chinese economy has benefited to a large extent from the creation of joint ventures in the past two decades. Hong Kong firms have used China as a production base for many years, usually with great success and to the mutual benefit of both. However, although Hong Kong firms had considerable experiences in running business and manufacturing operations in China, several have suffered substantially from their investment in joint ventures with Chinese partners. This paper evaluates various issues relating to the performance of equity joint ventures in China. The evaluation is based on a case study of four Sino-Hong Kong joint venture manufacturing firms in the electronics industry, and the findings of this paper indicate that there are number of important factors affecting the stability of joint ventures in China. Foreign investors' experiences in other areas may not be applicable to their investment in China because the operation of a joint venture in China is inevitably faced with a variety of problems that the foreign firms may not have encountered before.     

Screening and valuing venture capital investments: evidence from Hungary,Poland and Slovakia

This paper examines the screening and valuation approaches used by venture capital firms in emerging markets using evidence from surveys of venture capital firms in Hungary, Poland and Slovakia. The results show notable differences in the state of development and operation of the venture capital markets both between the three countries and in comparison with the developed UK venture capital market, especially in relation to the degree of equity ownership sought by venture capitalists, the information used in deal screening and valuation methods.     

Risk and return in the Tehran stock exchange

This paper analyzes market index returns in the Tehran stock exchange (TSE) within the context of three variants of the Capital Asset Pricing Model: the static international; the constant-parameter intertemporal; and a Markov-switching intertemporal CAPM, which allows for time-varying degree of integration with regional and international equity markets. We find that TSE returns are CAPM-efficient at monthly frequency with respect to several international market indices. Moreover, we find evidence in support of international integration of the TSE with respect to international markets. In addition, we conduct an extensive investigation for the direction of causality between TSE returns, international market index returns, and those in neighboring countries.     

Contagion in global equity markets in 1998: The effects of the Russian and LTCM crises

The Russian and LTCM financial crises in 1998 originated in bond markets, but rapidly transmitted through international equity markets. A multi-factor model of financial markets with multiple regimes is used to estimate the transmission effects in equity markets due to global, regional and contagious transmission mechanisms during the crises. Using a panel of 10 emerging and industrial financial markets, the empirical results show that contagion is significant and widespread in international equity markets during the LTCM crisis, but is more selective during the Russian crisis. Contagion effects in equities differ to those previously noted in bond markets for this period.     

International Convergence of Accounting Practices: Choosing between IAS and US GAAP

This study examines reporting practices of a sample of foreign listed and domestic‐only listed companies from the United Kingdom, France, Germany, Japan and Australia to determine the extent to which companies voluntarily use “international” standards. Two types of use of non‐national standards in the consolidated accounts presented to the public are considered: adoption of “international” standards instead of national standards, and supplementary use where “international” standards are used in conjunction with national standards. “International” standards are defined as US GAAP or IAS (now IFRS). The study tests for a preference for either set of standards and considers the relationship of choice of regime with firm attributes. The results show significant voluntary use of “international” standards in all five countries and among foreign listed and domestic‐only listed companies. Companies using “international” standards are likely to be larger, have more foreign revenue and to be listed on one or more foreign stock exchanges. US GAAP is the predominant choice, but IAS are used by many firms in Germany and some in Japan. Firms listed in the United States' regulated markets (NYSE and NASDAQ) are more likely to choose US GAAP, but companies traded in the OTC market often select IAS. The study demonstrates for managers and regulators that there is considerable support for “international” standards, and that choice of IAS or US GAAP relates to specific firm characteristics which differ according to a firm's country of origin. Most use of “international” standards reflects individual countries' institutional frameworks, confirming the key role of national regulators and standard setters in assisting companies to achieve more comparable international reporting.     

公开发行债券能提高企业创新产出吗？

以2006—2021年我国A股上市公司为样本，探讨了企业首次发行债券如何影响企业的创新水平。研究发现，企业首次公开发行债券能够显著提升企业的创新水平。机制分析结果表明,企业发行债券通过建立替代性融资渠道缓解融资约束，延长整体债务期限，提高信息披露水平这三个路径来提升企业创新水平。进一步研究发现,在控制了企业后续发债行为后，公开发行债券与企业创新的关系仍然存在；相比于公司债，企业首次发行债券种类为中期票据和企业债时，企业创新水平提升更显著；企业首次发行债券时，债券信用评级越高、发行利率越低，对于企业创新水平的提升越显著。研究结论丰富了债券市场经济后果的研究，也为企业创新发展和实现经济高质量发展提供了来自债券市场的建议。     

The Market Perception of Convertible Debt Versus Straight Debt: some Empirical Evidence from U.S. Firms and Non-U.S. Firms Listed in the U.S.

Accounting for convertible debt has long been a source of controversy in the accounting profession in the U.S. Current U.S. accounting rules require classifying convertible debt at date of issuance as "entirely debt" until conversion, despite numerous studies that assert that convertible debt is not "entirely debt", but is a blend of debt and equity. Convertible debt has taken on international interest because of the issuance of International Accounting Standard (IAS) 32, Financial Instruments; Disclosure and Presentation, which prescribes reporting separate debt and equity components for convertible debt. This study examines convertible debt issued by U.S. firms and non-U.S. firms listed in the U.S. using a levels approach. Specifically, convertible debt is compared to straight debt and contrary to ex ante expectation, convertible debt was not found to be perceived as being significantly different than straight debt for U.S. firms for any years and is statistically different in only two of the six years tested for non-U.S. firms. The validity of this study's findings is underscored by its research design, which compares convertible debt and straight debt issued by the same firms. The findings suggest that investors regard reported amounts of convertible debt similar to straight debt in their assessment of firm value.     

Stock price effect of high-yield debt issues

This paper investigates the common stock price reaction at the announcement of the issuance of high-yield straight debt. The two-day announcement period abnormal returns are not different from zero for the 164 bond issues in the sample. No difference is found between announcement period abnormal returns of firms with bonds that default and firms with bonds that do not default. Results from statistical tests indicate that the announcement period abnormal returns are not explained by issuance year, bond-rate class, underwriter, issuance size, takeover activity or prior high-yield debt issuance experience. The findings are not consistent with the models by Miller and Rock (1985), Jensen (1986), Myers and Majluf (1984) and Krasker (1986). However, results indicate that existing stockholders are not harmed or helped by the issuance of the high-yield straight debt.