Commission Splits in Real Estate Transactions

We examine commission splits between listing and selling agents in real estate transactions. We construct a theoretical model to show that agency problems arise when a listing agent attempts to maximize his or her payoff while setting the commission split. Mitigation to these agency problems can be achieved through the imposition of a limited duration on listing contracts. Our model produces several testable hypotheses, which are supported by empirical evidence. We find property listings with higher list prices and quick sales are associated with lower commission splits. Commission split is more likely to be higher when the listed property has a high degree of atypicality and/or is overpriced. Additionally, agent-owned properties pay higher commission splits.     

The Dark Side of International Cross‐Listing: Effects on Rival Firms at Home

We analyse the stock price impact of firms' US cross‐listing on home‐market rival firms. Using an empirical event study approach we find negative cumulative average abnormal returns for the rival firms around both the listing and announcement of listing dates. The evidence suggests both positive and negative spillover effects on rival firms, where the dominant effect is that investors see rivals at a relative disadvantage to the cross‐listing firm. As firms cross‐list in the US and commit to the increased disclosure and investor protection associated with the US listing, they are better able to take advantage of growth opportunities relative to their non cross‐listing counterparts, and this results in negative spillover effects on rival firms. Our results are consistent with the idea that firms cross‐list as a means to reduce agency costs of controlling shareholders and thus are able to exploit growth opportunities as they have better access to external finance.     

Days on market and home sales

In 2006, Massachusetts adopted a new policy that prohibits home sellers from resetting their properties’ days on market through relisting. Massachusetts homes exposed to the policy change experienced a $16,000 reduction in sale price relative to Rhode Island homes. Slow‐moving homes suffered a greater reduction, but newer listings only had a small increase in sale price. One reason is that some buyers were unaware of sellers’ manipulation of days on market and thus unable to recognize authentically new listings. Sellers reacted to the new policy by cutting listing prices, although in towns where listing price history was transparent, sellers raised listing prices to dampen the stigma of slow sales.     

Competition and Cooperation among Exchanges: Effects on Corporate Cross‐Listing Decisions and Listing Standards

In recent years, many European companies have listed on the New York Stock Exchange (NYSE), and companies from emerging market countries such as Israel, China, and India have listed not only on the NYSE, but on various other American and European exchanges such as the Nasdaq and the London Stock Exchange (LSE). At the same time, growing competition among exchanges has led to consolidation of the industry through mergers and alliances. In this article, the authors explore the main factors in corporate listing decisions as well as the expected effects on listing standards of both the growing competition and the recent wave of alliances and mergers among exchanges. When choosing an exchange, corporate issuers are likely to consider the listing requirements and reputations of the exchanges, as well as the sophistication of investors who trade on those exchanges and the extent of their knowledge of the firm's industry and business. As a general rule, value‐maximizing companies can be expected to list on the most reputable exchange they can, but may also choose listings (in some cases, dual or multiple listings) on less reputable (typically local) exchanges with more investors who are familiar with the issuer's industry or products. When setting their listing standards, publicly traded exchanges devote considerable attention to finding the optimal listing and disclosure standards, and may consider adjusting them to changes in circumstances. The setting and enforcement of the appropriate listing standards are the main determinant of an exchange's reputation, which in turn determines the kinds of companies that will choose to list on it. Exchanges with the highest listing standards and reputations are likely to work hard to maintain them, while exchanges with lesser reputations will seek to carve out niches by making opportunistic use of lower (though not too low) listing standards while possibly seeking alliances or mergers. But if less reputable exchanges use their lower listing standards (and fees) as a means of competing for listings with other exchanges, this will not necessarily lead to a “race to the bottom” in listing standards. Moreover, a merger between two exchanges is likely to result in a higher listing standard for the combined exchange than for (at least one of) the pre‐merger exchanges.     

注册制下完善A股分拆上市对策研究

分拆上市作为证券市场优化资源配置和促进市场化并购重组的重要手段,在境外市场被广泛运用,但A股市场的分拆案例相对较少。2019年12月,证监会发布了《上市公司分拆所属子公司境内上市试点若干规定》(以下简称《若干规定》),为引导和规范上市公司分拆所属子公司在境内上市奠定了政策基础。由于我国分拆上市制度还刚刚起步,仍需在加强监管、完善配套制度、确立有关业务规则等方面开展持续研究。为厘清成熟市场分拆上市的实践,本文重点研究美国和中国香港市场,对其分拆上市的相关规则、有益经验以及最新案例进行梳理和归纳,在此基础上提出相应的政策建议,以期为后续细则制定提供参考。     

Influence of geographic distribution on real activities manipulation within consolidated companies: Evidence from Japan

With the globalization of companies, distances between parent companies and their subsidiaries have increased and the locations of subsidiaries have become more diversified. These changes have had various effects on corporate real activities, depending on information asymmetry, transport costs, and the economic environment. We investigate the impact of the geographic distribution of companies on real activities manipulation (RM) within Japanese companies. The results show that (1) as the distance between a parent company and its subsidiaries increases, the subsidiaries’ RM decreases; (2) as the proportion of subsidiaries in Organisation for Economic Cooperation and Development countries increases, the subsidiaries’ RM decreases; and (3) part of the subsidiaries’ RM reduced by geographic distribution is replaced by the parent company’s RM. Additional tests comparing RM with accrual-based manipulation (AM) show that subsidiaries’ AM increases with the distance from the parent company. This result suggests that the parent–subsidiary distance and locations of subsidiaries influence accounting information.     

Competition among stock exchanges for equity

We consider cross-border competition by stock exchanges for listings from firms that have controlling shareholders who have private benefits. We examine exchanges’ choices of their listing standards and firms’ choices of the exchanges where they cross-list their shares. We show that the share price compensates controlling shareholders for giving up some private benefits and enables firms with growth opportunities to obtain listings on exchanges with different listing standards. In particular, firms with high-growth opportunities tend to obtain listings on stock exchanges with high listing standards. We empirically examine these predictions and find that they are consistent with evidence.     

Parent-subsidiary investment layers and the value of corporate cash holdings

Our study investigates whether agency costs arising from organizational structure in terms of the number of investment layers which connect the parent firm and its lowest-tiered subsidiaries within the corporate pyramid are associated with the value of cash holdings. Using a sample of Taiwanese publicly traded firms, we find that a change of a dollar in cash holdings is associated with less than a dollar change in market value. In line with our expectation, we find that the marginal value of cash decreases with the number of investment layers, supporting the agency theory of excess cash holdings. We also find that the negative association between the number of layers and the value of cash holdings is stronger for firms with high deviation between cash flow and voting rights and for family-controlled firms.     

Do Transparent Firms Pay out More Cash to Shareholders? Evidence from International Cross‐Listings

This paper examines the relation between agency costs and payout policy using a sample of 755 firms that cross‐list shares abroad. Firms increase cash payouts to shareholders by about 9% of earnings after cross‐listing on exchanges with high standards of transparency and shareholder protection. The shift in payout policy is more pronounced in firms controlled by management. No shift is observed if shareholder protection in the country of incorporation is already strong, or if the host exchange does not mandate additional disclosure. The findings support the theory that high corporate payouts are the outcome of transparency and shareholder protection.     

Public Attention and Auditor Behavior: The Case of Hurun Rich List in China

Adverse client publicity can entail regulatory scrutiny over audited financial statements and impose political costs on auditors. We use the changes in client publicity caused by their controlling owners’ presence on the Hurun Rich List (the rich listing) in China to test the hypothesis that auditor conservatism increases with client publicity. Our evidence indicates auditors issue more adverse audit opinions to clients and charge higher fees following the rich listing events. Moreover, we observe that auditors strategically respond to clients with different attributes—for clients whose owners accumulated wealth in a more questionable manner, auditors choose more stringent audit reporting to better defend themselves from regulatory scrutiny; for clients without such attributes, auditors primarily rely on increasing audit fees to cope with any post-listing increase in audit risks. Our analyses also suggest the impacts of rich listings tend to be concentrated among large audit firms with stronger reputation concerns or among engagement auditors with more conservative reporting styles. By showing how auditors manage political risks associated with heightened public scrutiny, we contribute to both the auditing and political cost literature.     

THE EFFECT OF TRADED OPTION INTRODUCTION ON SHAREHOLDER WEALTH

Several authors suggest that the opening of a market in traded options constitutes a “feasibility-expanding” change. In this paper evidence on changes in the price of underlying stocks at the time of option listing is examined to determine whether option listing constitutes such a change. Evidence supports the hypothesis that call option listing is feasibility expanding, that put option listing is not feasibility expanding, and that call listings closer to the initiation of organized option trading have a larger impact relative to later listings.     

Insider Ownership,Subsidiary Cash Holdings,and Economic Consequences: Evidence from Listed Chinese Companies

ABSTRACT

Using a large sample of listed Chinese companies, we investigate how the equity ownership of business group insiders affects subsidiary cash holdings. We find that ownership by the largest shareholders and senior managers in the listed parent firm is negatively related to its subsidiaries’ cash holdings, whereas there is a positive relationship with minority equity in subsidiaries. We also find that the market places a more significant value discount on listed firms whose cash holdings are more located in the affiliated subsidiaries. Our evidence demonstrates how cash policy inside business groups is influenced by insider ownership, and it reveals to what extent cash allocated in subsidiaries may suffer from losses in efficiency.     

Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm?

We use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the Great Recession with lending by a benchmark of 202 domestic banks. Contrary to earlier and more contained crises, parent banks were not a significant source of strength to their subsidiaries during 2008–09. When controlling for other bank characteristics, multinational bank subsidiaries had to slow down credit growth almost three times as fast as domestic banks. This was in particular the case for subsidiaries of banking groups that relied more on wholesale funding.     

Internal Capital Markets and Capital Structure: Bank Versus Internal Debt

We argue that domestic business groups are able to actively optimise the internal/external debt mix across their subsidiaries. Novel to the literature, we use bi‐level data (i.e. data from both individual subsidiary financial statements and consolidated group level financial statements) to model the bank and internal debt concentration of non‐financial Belgian private business group affiliates. As a benchmark, we construct a size and industry matched sample of non‐group affiliated (stand‐alone) companies. We find support for a pecking order of internal debt over bank debt at the subsidiary level which leads to a substantially lower bank debt concentration for group affiliates as compared to stand‐alone companies. The internal debt concentration of a subsidiary is mainly driven by the characteristics of the group's internal capital market. The larger its available resources, the more intra‐group debt is used while bank debt financing at the subsidiary level decreases. However, as the group's overall debt level mounts, groups increasingly locate bank borrowing in subsidiaries with low costs of external financing (i.e. large subsidiaries with important collateral assets) to limit moral hazard and dissipative costs. Overall, our results are consistent with the existence of a complex group wide optimisation process of financing costs.     

The World of Cross-Listings and Cross-Listings of the World: Challenging Conventional Wisdom*

There has long prevailed a conventional wisdom rationalizingwhy firms pursue overseas listings. It argues that firms seeksuch opportunities to benefit from a lower cost of capital thatarises because their shares become more accessible to globalinvestors. Much recent evidence challenges this conventionalwisdom. In fact, several new research initiatives have beenproposed that factor into the overseas listing decision manymore complex risks that globalization can create at the firmlevel, such as agency conflicts, transparency and disclosureconcerns, and other corporate governance problems. The goalof this article is to survey, synthesize and critically reviewthis new literature and to identify yet unresolved questionsto answer.     

企业集团现金分布、管理层激励与资本配置效率

本文以母公司为视角,基于科层代理理论和信息不对称理论,研究不同生命周期阶段母子公司现金分布变化对资本配置效率的影响及母公司管理层激励的治理效应。研究发现:在成长期,母公司 “自主型”财控模式下子公司高持现比率导致了过度投资,对母公司管理层薪酬激励和股权激励能够抑制过度投资,此时对母公司管理层激励表现为抑制子公司经理人圈地的监督机制;在成熟期,母公司 “平衡型”财控模式适度降低子公司持现比率,缓解了过度投资,对母公司管理层股权激励能够进一步抑制过度投资,但薪酬激励无效;在衰退期,母公司“家长型”财控模式下过度回笼资金带来投资不足,股权激励能够抑制投资不足,此时对母公司管理层股权激励表现为驱动子公司经理人投资的勉励机制。     

Competitive and Information Effects of Cross-Border Stock Listings

We examine the effect of 269 cross‐border listings on rivals in the listing and domestic markets and find that U.S. rivals experience significant gains whereas domestic rivals do not. Both competitive and information effects are important in explaining the reaction of U.S. rivals. Regarding the competitive effects, the reaction of rivals is less favorable when listings originate in developed countries and more favorable when listing firms do not have prior operating presence in the United States. Regarding the information effects, the reaction is less favorable when listings are combined with equity offerings and more favorable when the listing is the first to occur within an industry.     

The Limits of Limited Liability: Evidence from Industrial Pollution

We study how parent liability for subsidiaries' environmental cleanup costs affects industrial pollution and production. Our empirical setting exploits a Supreme Court decision that strengthened parent limited liability protection for some subsidiaries. Using a difference‐in‐differences framework, we find that stronger liability protection for parents leads to a 5% to 9% increase in toxic emissions by subsidiaries. Evidence suggests the increase in pollution is driven by lower investment in abatement technologies rather than increased production. Cross‐sectional tests suggest convexities associated with insolvency and executive compensation drive heterogeneous effects. Overall, our findings highlight the moral hazard problem associated with limited liability.     

Competition and cooperation among exchanges: A theory of cross-listing and endogenous listing standards

We analyze firms’ choice of exchange to list equity and exchanges’ choice of listing standards when insiders have private information about firm value, but outsiders can produce (noisy) information at a cost. Exchanges are populated by two kinds of investors, whose numbers vary across exchanges: sophisticated (low information production cost) investors and ordinary (high–cost) investors. While firms are short-lived, exchanges are long-lived, value-maximizing agents whose listing and disclosure standards evolve over time. The listing standards chosen by exchanges affect their “reputation,” since outsiders can partially infer the rigor of these standards from the post-listing performance of firms. We show that, while exchanges use their listing standards as a tool in competing for listings with other exchanges, this will not necessarily lead to a “race to the bottom” in listing standards. Further, a merger between two exchanges may result in a higher listing standard for the combined exchange relative to that of either of the merging exchanges. We develop several other implications for firms’ listing choices and resulting valuation effects, the impact of competition and co-operation among exchanges on listing standards, and the optimal regulation of exchanges.     

AGENCY COSTS AND CAPTIVE FINANCE SUBSIDIARIES IN CANADA

Agency theory is employed to formalize the intuitive rationale for the widespread practice of setting up captive finance subsidiaries: reduced agency costs of debt increase the firm's consolidated debt capacity. Of the two Canadian industries tested, firms forming captives had significantly higher use of debt in manufacturing but failed to show any significant difference for merchandising. In light of confounding influences from tax-clientele effects, size difference, and support in tests on U.S. firms, the mixed finding should encourage further testing. The outcome of these tests suggests that it is potentially useful to think of captive finance subsidiaries in light of agency theory.