Summary Analvsis of Circular No. 106

SAEF will promulgate Circular 106 to heighten the threshold for foreign private equity funds into domestic enterprises, to facilitate the development of local Funds and capital market besides continuing to absorb foreign capitals.[第一段]     

Greenspan:More Than 50 Percent Chance of U.S.Recession

There is more than a 50 percent chance the UnitedStates could go into recession,former Federal Reservechairman Alan Greenspan told El Pais newspaper in an     

The U.S. left behind? Financial globalization and the rise of IPOs outside the U.S.

From 1990 to 2011, the share of world IPO activity by non-U.S. firms increased because of financial globalization and because of a decrease in U.S. IPO activity. Financial globalization reduces the impact of national institutions on domestic IPO activity and enables more non-U.S. firms from countries with weak institutions to go public with a global IPO. U.S. IPO activity does not benefit from financial globalization. Compared to other countries, the rate of small-firm IPO activity in the U.S. is abnormally low in the 2000s. This abnormally low rate cannot be explained by the regulatory changes of the early 2000s.     

An examination of the impact of the Sarbanes–Oxley Act on the attractiveness of U.S. capital markets for foreign firms

We examine whether voluntary deregistrations after the passage of Sarbanes–Oxley Act of 2002 (SOX) were intended to benefit common shareholders by avoiding firms’ costs of complying with SOX or to protect the control rents of managers or controlling shareholders (MCOs). We find that, compared with foreign firms that maintained their SEC registrations, foreign firms that voluntarily deregistered on average had weaker corporate governance, had a significantly less negative stock market reaction when SOX was passed, and suffered a significant price decline when they announced their decision to deregister. We also find evidence indicating that the deregistrations were (to a lesser extent) motivated by firms’ compliance costs related to SOX. Taken together, our results suggest that both agency costs (that is, private benefit of control of the MCOs) and the compliance cost of SOX play a role in motivating foreign firms to withdraw from the U.S. market.     

Cao Guowei, New CEO of Sina.com

On May 10th, 2006, the first Chinese gateway, Sina.com, proclaimed formally to the public that its administrative team will be adjusted. Wang Yan will not hold the post of CEO any more and he was transferred to be the vice board chairman of Sina.com. The primary president and CFO, Cao Guowei, will be promoted to be president and CEO as well as the member of the board of Sina.com.     

Uninvited U.S. Investors? Economic Consequences of Involuntary Cross‐Listings

We study the economic consequences of a recent Securities and Exchange Commission securities regulation change that grants foreign firms trading on the U.S. over‐the‐counter (OTC) market an automatic exemption from the reporting requirements of the 1934 Securities Act. We document that the number of voluntary (sponsored) OTC cross‐listings did not increase following the regulation change, suggesting that it did not achieve its intended purpose of increasing voluntary OTC cross‐listings through a reduction in compliance costs. We do find that the design of the regulation allowed financial intermediaries to create an unprecedented number of involuntary (unsponsored) OTC ADRs: 1,700 unsponsored ADR programs for 920 firms were created for companies that had previously chosen not to cross‐list in the United States. Our difference‐in‐differences analysis based on a matched sample approach documents that foreign firms forced into the U.S. capital markets experience a significant decrease in firm value, and we further show that the decrease in firm value is related to an increase in U.S. litigation risk. We also find that depositary banks’ propensity to involuntarily cross‐list firms is positively related to banks’ expected fee revenue, and that banks chose firms that incur high costs when involuntarily cross‐listed. Our results provide evidence that securities regulation can be exploited for private gain and result in costly unintended consequences.     

Rate regulation of U.S. electric utilities: Does it deter earnings management?

This study is the first broadly-based examination of earnings management within the rate-regulated U.S. electric utility industry. In a three-phase analysis using extant discretionary accrual models in the earnings-management literature, we provide evidence that: (1) on average, rate regulation appears to deter earnings management; (2) relaxing rate regulation (i.e., deregulation) tends to increase the potential for earnings management; and (3) in those situations in which utilities are seeking increased rates from regulators, sufficient accounting latitude exists under GAAP to allow utility management to depress reported earnings. As this last finding may persuade regulators to approve a utility's rate request, triggering increased electricity rates, the potential exists for wealth transfers between “captured” rate-paying customers and shareholders. The study's results also provide for the first time empirical justification for accounting researchers to exclude rate-regulated firms from cross-sectional, inter-industry research designs examining discretionary accruals.     

A practitioner's perspective: Comments on “Analysis of U.S. savings bonds”

In this issue, Potts and Reichenstein describe features of U.S. savings bonds and discuss their evaluation. The article can serve as a reference for busy practitioners who may not follow changes in the savings bond market closely, especially those who tend to rely on product-related education for updates on financial instruments.Savings bonds remain an important investment for individuals; on March 31, 1994, individuals held $174.9 million in U.S. savings bonds, a 7% increase from one year prior (Williams, 1994). Further, as Table 1, “Demographic Characteristics of Individual Savings Bond Holders,” indicates, the holding of savings bonds is not exclusive to any particular age group or income level (Federal Reserve Bulletin, 1994).     

Job Market Signaling: What Drives the Productivity of Finance Ph.D.s?

We study the research productivity of new finance Ph.D.s as measured by the number of quality publications. A commonly accepted notion is that the highest ranked schools produce the candidates with the greatest potential for high‐quality publications. Our results, however, find publications or revisions in top‐tier journals during the doctoral program are a stronger measure of potential research productivity than the school attended. Our findings demonstrate how candidates outside of the top schools can signal their future research productivity. Even though we examine the specialized labor market, our results have broader implications for markets outside academics.     

Does pedigree matter? Earnings quality of U.S. listed domestic firms via reverse mergers

This paper examines earnings quality of U.S. domestic firms that access capital markets via a reverse merger transaction (RM firms) compared to those via the more traditional initial public offering (IPO firms) during the period from 1997 to 2011. In order to mitigate confounding effects of legal regime, law enforcement, and culture, we require both the acquiring and target firms to be incorporated and headquartered in the U.S. to be included in our sample. We also use the Heckman (1976) procedure to control for self-selection bias. To capture earnings quality, we use a battery of measures established in prior literature, including discretionary accruals, discretionary revenues, real activities earnings management, and accrual estimation errors. Our measures have both convergent and discriminant validity and therefore appear to capture earnings quality fairly well. We find consistent evidence that U.S. domestic RM firms have lower earnings quality compared with U.S. IPO firms. Our evidence suggests that investors and other stakeholders should take into account the fact and consequences of the method that firms use to access capital markets in their investment decision making process.     

Do cross-listers bond to U.S. markets? An examination of earnings quality around SOX

Sarbanes–Oxley [SOX, hereafter] was expected to improve the overall quality of financial reporting. A large amount of research has documented the influence of SOX on companies' reporting behaviors and how those behaviors have impacted the capital market as a whole (Cohen et al., 2008; Engel et al., 2007; Lobo & Zhou, 2006). While the assumption is that the far-reaching regulation impacts all U.S.-listed companies, this paper considers whether SOX has had a differential impact on the earnings quality of foreign filers that cross-list on U.S. exchanges. Despite some minor exceptions, these foreign companies are expected to meet the same reporting standards as domestic U.S. companies. Using a sample of cross-listers around the enactment of SOX, the results suggest that cross-listed companies do not strictly comply with SOX. At the same time, a size-matched sample of domestic U.S. companies shows significant improvement across the same set of earnings quality measures. This differential impact raises concerns about the ability of domestic regulations to impose compliance on foreign filers. While some may believe that cross-listed companies are bonding themselves to U.S. regulations and reporting quality, the evidence in this paper suggests that foreign companies are more interested in the reputational gains associated with a listing in the U.S.     

The Structural Dynamics of U.S. Output and Inflation: What Explains the Changes?

We examine the dynamics of U.S. output and inflation using a structural time-varying coefficients vector autoregression. There are changes in the volatility of both variables and in the persistence of inflation, but variations are statistically insignificant. Technology shocks explain changes in output volatility; real demand disturbances variations in the persistence and volatility of inflation. We detect important time variations in the transmission of technology shocks to output and demand shocks to inflation and significant changes in the variance of technology and of monetary policy shocks.     

Do Managers of U.S. Defined Benefit Pension Plan Sponsors Use Regulatory Freedom Strategically?

We use historical particularities of pension funding law to investigate whether managers of U.S. corporate defined benefit pension plan sponsors strategically use regulatory freedom to lower the reported value of pension liabilities, and hence required cash contributions. For some years, pension plans were required to estimate two liabilities—one with mandated discount rates and mortality assumptions, and another where these could be chosen freely. Using a sample of 11,963 plans, we find that the regulated liability exceeds the unregulated measure by 10% and the difference further increases for underfunded pension plans. Underfunded plans tend to assume substantially higher discount rates and lower life expectancy. The effect persists both in the cross‐section of plans and over time and it serves to reduce cash contributions. We further show that plan sponsor managers use the freed‐up cash for corporate investment and that credit risk is unlikely to explain the finding.     

What Is the Importance of Monetary and Fiscal Shocks in Explaining U.S. Macroeconomic Fluctuations?

This paper analyzes the importance of monetary and fiscal policy shocks in explaining U.S. macroeconomic fluctuations, and establishes new stylized facts. The novelty of our empirical analysis is that we jointly consider both monetary and fiscal policy, whereas the existing literature only focuses on either one or the other. Our main findings are twofold: fiscal shocks are relatively more important in explaining medium cycle fluctuations whereas monetary policy shocks are relatively more important in explaining business cycle fluctuations, and failing to recognize that both monetary and fiscal policy simultaneously affect macroeconomic variables might incorrectly attribute the fluctuations to the wrong source.     

The use of multi‐level modelling in risk research. A secondary analysis of a study of public perceptions of genetically modified food

Many studies have examined the relationship between various individual variables and people's perceptions of genetically modified (GM) food. A problem with this type of research is that contextual factors are completely ignored. This article explores the use of multi‐level modelling in the field of risk research, by re‐analysing a recent British study of public perceptions of GM food. As the study employed a multi‐stage sampling strategy, it could be used to examine simultaneously the individual and spatial variation in trust and the acceptability of GM food. While the geographical variation in acceptability was largely due to compositional differences between the sampling points, a geographical variation in trust remained after controlling for individual differences. The analysis demonstrated that city‐dwellers commonly have more trust in the regulation of GM food than other respondents. Next to being associated with a number of socio‐demographic variables, both acceptability and trust were related strongly to voting intention. Moreover, the results suggest that there is a link between vulnerable groups, feelings of exclusion, and (dis)trust. The article is concluded by arguing that multi‐level modelling provides new opportunities for simultaneously examining the individual and contextual basis of public perceptions of controversial risk issues.