The Effect of Corporate Social Responsibility on Cost of Corporate Bond: Evidence from China

This article examines the link between corporate social responsibility(CSR) and cost of bond(COB) in China. We find that there exists a negative relationship between CSR and COB. In particular, when the bond issuer is a state-owned enterprise, or when the credit rating of bond is high, the negative association between CSR and COB is strengthened. The findings indicate that CSR plays a significant role in reducing the risk premium of corporate bonds through an insurance-like effect. Moreover, the effect of CSR on COB also depends on contextual factors such as firm ownership and bond credit rating.     

公司战略、大股东持股与财务欺诈

以2001-2015年我国A股上市公司为样本,考察企业公司战略定位对财务欺诈行为的影响,研究发现:公司战略对财务欺诈行为有显著影响,公司战略定位越激进,越可能导致财务欺诈行为的发生;经过稳健性测试后,结果依然成立.进一步研究发现:提高大股东持股比例,可以增强大股东对管理者的"监督效用",从而提升企业内部监督效率,进而抑制公司战略对财务欺诈行为的影响.     

The Effects of Corporate Social Performance on the Cost of Corporate Debt and Credit Ratings

This study investigates the differential impact that various dimensions of corporate social performance have on the pricing of corporate debt as well as the assessment of the credit quality of specific bond issues. The empirical analysis, based on an extensive longitudinal data set, suggests that overall, good performance is rewarded and corporate social transgressions are penalized through lower and higher corporate bond yield spreads, respectively. Similar conclusions can be drawn when focusing on either the bond rating assigned to a specific debt issue or the probability of it being considered to be an asset of speculative grade.     

CEO风险偏好、财务困境与企业违规

CEO作为企业战略决策的首席执行官,其自身的认知基础、风险偏好等个人特质会通过影响组织决策与战略布局进而影响企业行为.为此,基于高层梯队理论和舞弊三角理论,以2010-2018年沪深A股上市企业为研究样本,实证检验C EO风险偏好、财务困境与企业违规倾向的关系.结果表明:由风险偏好型C EO任职的企业违规倾向更高,企业财务困境对主效应具有调节作用.     

Management's Materiality Criteria of Internal Control Weaknesses and Corporate Fraud: Evidence from China

This paper investigates the determinants and consequence of Chinese listed companies' first-time decisions on materiality criteria for internal control weaknesses, which have been observable beginning from the 2011 annual report. Although pretax income is most commonly used as the benchmark for materiality, revenue is also used as a popular alternative. Revenue is more susceptible to manipulation, as it has a much larger financial amount than pretax income. We argue that unethical managers prefer not to disclose material weaknesses by manipulating the materiality criteria to justify non-disclosure of a potentially material weakness. Consistent with this opportunistic incentive, we find that when companies committed fraud in the previous year that remains undetected, their management is more likely to use revenue (rather than pretax income) as the first-time benchmark and to set a higher revenue-based materiality threshold as well. Moreover, once the materiality metrics are set, the first-time revenue-based materiality threshold is significantly and positively associated with subsequent incidence of corporate fraud, which suggests that setting deviant and loose materiality metrics leaves room for the management to engage in future misconduct.     

Testing for Opaqueness in the European Banking Industry: Evidence from Bond Credit Ratings

The question of whether banks are relatively more opaque than non-banking firms is empirically investigated by analyzing the disagreement between rating agencies (split ratings) on 2,473 bonds issued by European firms during the 1993–2003 period. Four main results emerge from the empirical analysis. First, fewer bank issues have split ratings overall, but the predicted probability of a split rating is higher for banks after controlling for risk and other issue characteristics. Second, subordinated bonds are subject to more disagreement between rating agencies. Third, bank opaqueness increases with financial assets and decreases with bank fixed assets. Fourth, bank opaqueness increases with bank size and capital ratio. The implications of these findings for regulatory policy are also discussed. All errors remain those of the author. This paper was prepared while the author was visiting the Department of Finance, Insurance and Real Estate at the Graduate School of Business Administration, University of Florida.     

Investments,Credit, and Corporate Financial Distress: Evidence from Central and Eastern Europe

Although they are instrumental for economic development, productivity-enhancing corporate investments may increase the financial vulnerability of companies, especially in an economic and financial crisis. We employ an instrumental probit model with the aim of finding evidence for the investment and credit patterns that led companies into financial distress during the global financial crisis 2009–2010. The company-level micro-data for our study on three Central and East European countries—Hungary, Bulgaria, Romania and two Baltic countries, Latvia and Lithuania—originates from two independent surveys, the Business Environment and Enterprise Performance Survey conducted in 2008 and the Financial Crisis Survey conducted in 2009/2010. Both were carried out jointly by the EBRD and the World Bank. Our results emphasize a substantial adverse impact from investment intensity and debt financing on company financial soundness during a crisis. On top of that, we discover a strong non-linear pattern in the sensitivity of company distress to its investment-financing nexus.     

高管连锁、同业监督与公司违规

本文选取2011—2018年度A股上市公司为研究样本,以具有竞争关系的同业公司间的高管连锁作为同业监督的渠道,检验了同业监督对目标公司违规的影响。研究发现:(1)同业监督能有效抑制目标公司违规倾向,且这一影响当且仅当连锁公司是同业公司时存在;(2)同业竞争是同业监督的基础,在行业集中度低和行业增长率低的行业中,同业监督对目标公司违规的抑制作用更强;(3)目标公司的政治关联会瓦解同业监督对公司违规的抑制作用;(4)区分违规行为类型后发现,同业监督对经营违规的抑制作用最强,对信息披露违规次之,对领导人违规几乎没有效果。本研究丰富了公司违规监督机制的内容,也提供了辩证看待高管同业兼任的新视角。     

Measurement of the Severity of Opportunistic Fraud in Injury Insurance: Evidence from China

This article assesses the effects of claimant demographics and other claim characteristics on the measurement of the severity of opportunistic fraud using 96 excess claim lawsuits in personal injury insurance in China in 2000–2012. The empirical result indicates that severe opportunistic fraud that results in death is more numerous than it is for fraud that leads to disability and nondisability, which may be due to the fact that more severe injury may create greater openings for opportunistic fraud. Second, the severity of opportunistic fraud in provincial cities is lower than that in small or midsize cities because the former does not imply greater severity of opportunistic fraud. Third, the severity of opportunistic fraud in injuries from daily activity is greater than that for injuries from work and traffic accidents, implying that a higher excess claim probability and greater severity of opportunistic fraud in injuries from daily activity are consistent.     

The Responsiveness of Corporate Investments to Changes in Corporate Income Taxation During the Financial Crisis: Empirical Evidence from Slovenian Firms

I examine the responsiveness of corporate investments to changes in corporate income taxation during the financial crisis. When investigating tax effects in financially constrained firms, the model of investment demand needs to be extended to include an additional channel through which taxes could affect investments. I model the tax effects via two transmission channels, the traditional user cost of capital channel and the cash flow channel, which is crucial for financially constrained firms. The empirical results show that corporate investments in financially constrained firms do not respond to changes in corporate income taxation through the user cost of capital channel, but there is strong evidence of the effect that materializes through the cash flow channel.     

Credit ETFs in Mutual Funds and Corporate Bond Liquidity

We show that high yield (HY) mutual funds own and trade ETFs to manage liquidity needs driven by fund flows, whereas investment grade (IG) funds do not. The use of ETFs by HY mutual funds to manage liquidity shifts some trading away from bonds and into ETFs, which reduces the liquidity of the underlying bonds. This substitution effect outweighs the better-understood inclusion effect, whereby bond liquidity benefits from increased ETF ownership, such that the net effect of ETFs is to reduce HY liquidity. In IG, the substitution effect is not significant and ETFs result in increased bond liquidity.     

Corporate social responsibility and financial fraud: evidence from China

This paper investigates the impact of corporate social responsibility (CSR) on corporate financial fraud in China. We find that CSR scores are negatively associated with fraudulent financial activities, suggesting that CSR firms are less likely to engage in financial fraud. The results also indicate that the negative relation is more significant for CSR performance than CSR disclosure. Additionally, we demonstrate that the negative effect of CSR is more pronounced for firms with voluntary CSR practices, continuous CSR engagements, financial pressure and internal control weaknesses. Overall, we find that CSR is an ethical behaviour that reduces financial misconduct.     

Idiosyncratic Risk and Corporate Governance: Evidence from Jordan

ABSTRACT

This article offers evidence in support of the hypothesis that when investors have weak protection, small investors can suffer expropriation by large shareholders. In this kind of situation, a stock’s idiosyncratic risk is found to be negatively related to ownership concentration, which indicates that the cost of controlling ownership may outweigh its benefits. This is consistent with the view that minority investors have less incentive to invest in companies with weak protection for investors. When this is accompanied by low-quality information disclosed to the public, private information is not likely to be reflected in stock prices, resulting in lower idiosyncratic risk.     

On Foreign Shareholdings and Agency Costs: New Evidence from China

This article examines the impact of foreign shareholdings on agency costs of Chinese firms from 2006 to 2012. The empirical results indicate that: (1) direct foreign shareholdings, in contrast to indirect foreign shareholdings, improve asset utilization, suggesting low agency costs; (2) qualified foreign institutional investors play a significant role in firms because they are less subject to political pressure, which is consistent with lower agency costs, but this effect could be eroded by government control; and (3) foreign shareholdings reduce the cost of equity and improve firm performance. The results contribute to the privatization of state-owned enterprises and the domestic/foreign ownership structure of firms.     

Corporate Disclosure as a Tacit Coordination Mechanism: Evidence from Cartel Enforcement Regulations

We empirically study how collusion in product markets affects firms' financial disclosure strategies. We find that after a rise in cartel enforcement, U.S. firms start sharing more detailed information in their financial disclosure about their customers, contracts, and products. This new information potentially benefits peers by helping to tacitly coordinate actions in product markets. Indeed, changes in disclosure are associated with higher future profitability. Our results highlight the potential conflict between securities and antitrust regulations.     

The Effectiveness of White‐Collar Crime Enforcement: Evidence from the War on Terror

This paper analyzes the impact of changes in regulatory priorities and resource allocation on criminal enforcement of white‐collar criminal activities. Using the 9/11 terrorist attacks as a shock to the FBI's priorities and allocation of investigative resources, as well as variation in the Muslim population in the United States, I examine whether prioritization of counterterrorism investigations after 9/11 is associated with weaker enforcement of laws targeting white‐collar crime. I then use a difference‐in‐differences estimation to study the magnitude of any increase in white‐collar crime resulting from reduced oversight. I find a significantly greater reduction in white‐collar criminal cases referred by FBI field offices that shifted more of their investigative focus away from white‐collar crime to counterterrorism. Further, geographic areas in the jurisdictions of FBI field offices with greater shifts in attention from white‐collar crime to counterterrorism experienced greater increases in wire fraud, illegal insider‐trading activities, and fraud within financial institutions.     

Split Ratings and Differences in Corporate Credit Rating Policy between Moody's and Standard & Poor's

This paper investigates split credit ratings awarded by Moody's and Standard & Poor's (S&P) to U.S. corporations. Bivariate probit model estimates, analyzing 5,238 firm‐year observations from dual‐rated S&P 500/400/600 index‐constituent corporations, indicate firm‐specific financial and governance characteristics predict split ratings. Large, profitable companies with enhanced interest coverage, a greater percentage of independent directors, and more institutional investment are less likely to receive splits. Moody's appears more conservative in its evaluations, assigning lower ratings to smaller, less profitable companies with low interest coverage. Moody's also associates external, independent constraints on managerial autonomy with a higher corporate credit standing relative to S&P.     

Climate for Scandal: Corporate Environments that Contribute to Accounting Fraud

We examine the governance characteristics, earnings quality, growth rates, dividend policy, and compensation structure of 97 firms recently under investigation by the Securities and Exchange Commission (SEC) for accounting fraud. Our results show that the corporate environment most likely to lead to an accounting scandal manifests significant growth and accounting practices that are already pushing the envelope of earnings smoothing. Firms operating in this environment seem more likely to tip over the edge into fraud if there are fewer outsiders on the audit committee and outside directors appear overcommitted.     

Corporate Fraud and Business Conditions: Evidence from IPOs

We examine how a firm's incentive to commit fraud when going public varies with investor beliefs about industry business conditions. Fraud propensity increases with the level of investor beliefs about industry prospects but decreases when beliefs are extremely high. We find that two mechanisms are at work: monitoring by investors and short‐term executive compensation, both of which vary with investor beliefs about industry prospects. We also find that monitoring incentives of investors and underwriters differ. Our results are consistent with models of investor beliefs and corporate fraud, and suggest that regulators and auditors should be vigilant for fraud during booms.     

Market Implied Ratings and Financing Constraints: Evidence from US Firms

Financing constraints have been found to play an important role in several aspects of firm behavior, but no attention has been given to their effects on credit ratings. In this paper we analyze a unique and comprehensive data set for US firms rated by Fitch over the period 2001–07. We employ Fitch's market implied ratings derived from bond and equity prices. The analysis finds evidence that financial variables are more important in predicting credit ratings for firms likely to face financing constraints. We conclude that the financing constraint is an important dimension in the market implied ratings process. Our findings are of relevance to managers, investors and rating agencies seeking to understand the mechanism through which financing constraints affect credit ratings.