Information Asymmetry and Corporate Cash Holdings

This study analyzes the effect of information asymmetry on corporate cash holdings. Using various measures of information asymmetry, this study shows that companies that operate in environments with higher information asymmetry have smaller cash holdings. This study continues to find a negative relationship between information asymmetry and corporate cash holdings from a battery of sensitivity analyses, including the tests using different regression methods and the difference‐in‐difference tests employing brokerage‐firm merger and closure events. On the whole, the results support the monitoring cost hypothesis of cash holdings over the investment opportunities hypothesis.     

Predictability of stock markets with disequilibrium trading

This paper analyses the predictability of a hypothetical market with freely negotiated prices on which exists a censoring of one-period returns which are in excess of an arbitrary level (‘floor’ and ‘ceiling’). It is shown that the expected value of returns (adjusted for drift) conditional on last period information regarding the censoring are equal to zero (and therefore the market is not predictable in mean) if there is no intertemporal spillover on the market. A simple simulation model is proposed and applied for the analysis of the effects of intertemporal and cross-spillovers resulting from quantity constraints. Statistical predictability tests are proposed, based on the corrected Student-t statistic of a regression of returns of some information concerning the previous censoring. An illustrative empirical analysis of six main time series of returns on the Warsaw Stock Exchange confirms their ex-ante, but not ex-post, predictability.     

Assessing the interaction effect of cost control systems and information technology integration on manufacturing plant financial performance

The interface between management control and information technology is an under-developed research area with a knowledge gap concerning its implications for financial performance. This study contributes to bridging this gap by investigating the interaction effect of cost control systems and information technology integration on manufacturing plant financial performance. We surveyed a sample of 518 managers of U.S. manufacturing plants, approximately evenly distributed between those using activity-based costing and volume-based costing. Using hierarchical regression analyses, results indicate that while information technology integration and cost control systems do not provide significant independent effects on plant financial performance, they do interact to positively impact manufacturing plant financial performance. Thus, our findings suggest that manufacturing plants will reap the greatest financial performance benefits from investments in activity-based cost control systems when combined with information technology integration.     

Transfer of information by an informed trader

This paper analyzes the effect of the transfer of information by an informed strategic trader (owner) to another strategic player (buyer). It shows that while the owner will never fully divulge his information, he may transfer a noisy signal of his information to the buyer. With such a transfer, the owner loses some of his informational superiority and yet increases his trading profit. I also show that if the transfer can be made to more than one buyer, then, the owner’s profit is increasing in the number of other buyers to whom the transfer is made.     

Due Process Failure in Sector-neutral Accounting Standard-setting

This study of due process in New Zealand draws upon information concerning events from 1993 to 1996 that resulted in the revision of a newly approved financial reporting standard and the withdrawal of requirements for the disclosure of director remuneration. Traditional consultation processes preceding approval of the standard failed to provide the FRSB with an adequate signal of the opposition to come, indicating a failure of due process. Analysis of this case study suggests adoption of a single and sector-neutral Board in New Zealand was undertaken with a poor appreciation of how to manage effective due process in a 'sector-neutral' world.     

A comparison of statistical tests for the adequacy of a neural network regression model

An integral part of econometric practice is to test the adequacy of model specifications. If a model is adequately specified, it should not leave interesting features of the data-generating process in the errors. Despite the common tradition, the importance of diagnostic checking as a safeguard against mis-specification has only recently been recognized by neural network (NN) practitioners, possibly because this type of semi-parametric methodology was not originally designed for economic and financial applications. The purpose of this paper is to compare a number of analytical statistical testing procedures suitable to diagnostic checking on a neural network regression model. We present the standard Lagrange multiplier (LM) testing framework designed under the assumption of identically distributed disturbances and also examine two modifications that are robust to heteroskedasticity in errors. One modification also gives the researcher an opportunity to incorporate information concerning the volatility structure of the data-generating process in the testing procedure. By means of a Monte Carlo simulation, we investigate the performance of these tests under GARCH-type heteroskedasticity in errors and various distributional assumptions. The results show that although the primary concern of the researcher may be to design a regression model that accurately captures relations in the mean of the conditional distribution, developing a good approximation of the underlying volatility structure generally increases the efficiency of tests in detecting non-adequacy of a NN model.     

JUST-IN-TIME PRODUCTION,AUTOMATION, COST ALLOCATION PRACTICES AND IMPORTANCE OF COST INFORMATION: AN EMPIRICAL INVESTIGATION IN NEW ZEALAND-BASED MANUFACTURING ORGANIZATIONS

This paper is based on an empirical study of the relationship between Just-in-Time (JIT) production, automation, cost allocation practices and the relative use of cost information for making and evaluating managerial decisions. The study uses a survey questionnaire to collect data from a random sample of New Zealand-based manufacturing organizations. Hypotheses were tested using bivariate tests and multiple regression analysis. The results indicate that the choice of activity-based cost allocations is negatively associated with the extent to which firms use a JIT approach to manufacturing, but positively associated with increased automation in the factory, as hypothesized. Furthermore, the increased use of JIT production is found to be associated with the decreased use of detailed costing information. The study found some support for the hypothesis that increased automation is associated with the increased use of costing information for managerial decisions.     

Determinants of transfer pricing aggressiveness: Empirical evidence from Australian firms

This study examines the major determinants of transfer pricing aggressiveness. Based on a hand-collected sample of 183 publicly-listed Australian firms for the 2009 year, our regression results show that firm size, profitability, leverage, intangible assets, and multinationality are significantly positively associated with transfer pricing aggressiveness after controlling for industry-sector effects. Our additional regression results also indicate that firms augment their transfer pricing aggressiveness through the joint effects of intangible assets and multinationality.     

股权质押下的控股股东增持:“价值信号”还是“行为信号”？

在股权质押的背景下,理性的控股股东会利用投资者的有限理性,通过增持向市场发送行为信号来提振股价,以缓解控制权转移风险。研究发现:股权质押下控股股东更有可能增持;短期内增持公告产生了正向的市场反应,其程度在非质押组和质押组间无显著差异;而长期来看,增持后质押组的长期股价以及经营绩效表现弱于其对照组,而非质押组则好于其对照组,说明股权质押下的增持并不是价值信号,而是行为信号。进一步研究发现,质押对增持的正向效应在高平仓压力组、低公司质量组、监管环境较宽松的欠发达地区更显著。拓展性检验表明,在考虑减持影响后,股权质押下控股股东更倾向于通过二级市场买卖和竞价交易实施净增持,并且管理层与其他大股东也会在一定程度上迎合控股股东的增持行为。最后本文排除了传统增持动机假说对上述结论的替代性解释。     

AUTOMOTIVE RECALLS AND INFORMATIONAL EFFICIENCY

This study provides an empirical test of the informational efficiency of the stock market by exploring the stock price and volume patterns exhibited by Chrysler, Ford, and General Motors around the time of announcement of severe automotive recall campaigns. Because information concerning automotive recalls is released to the public via two distinct methods, which differ only with respect to the number of market participants notified of the recall campaigns, a differential performance analysis of stock returns and trading volume around both events provides evidence of the degree of informational aggregation in the stock market for three closely followed U.S. firms. The results of the study fail to support the definitional notion of informational efficiency with respect to the first public release date of severe recalls, as the vast majority of the stock market's response to recall announcements does not occur until the information is reported to all market participants. Further, tests of differential trading volume around the announcements suggest that some members of the financial community may be trading securities on the basis of the information contained in the first public announcement.     

The impact of replacement cost disclosure on security prices: New Evidence

A number of studies have tested for information content in the ASR 190 disclosure by comparing the conditional and unconditional distribution of abnormal security returns around the time of disclosure. Since no differences were observed, it was concluded that ASR 190 had no information content. The study reported below performs a similar test by estimating the regression function of the conditional distribution of abnormal returns. This test procedure controls for the information content in contemporaneous historical cost disclosure and uses a conditioning variable not considered in earlier tests. It finds statistically significant stock price effects. However, because most of the effects appear to precede the official announcement date by several months, it is unclear whether stock prices were responding to the leakage of the information content of ASR 190 prior to disclosure, to private production of information contained in ASR 190 or to a variable omitted from the study which happens to be correlated with replacement costs.     

A multivariate nonparametric test for return and volatility timing

This paper develops a novel approach to simultaneously test for market timing in stock index returns and volatility. The tests are based on the estimation of a system of regression equations with indicator variables and provide detailed information about the statistical significance of alternative market timing components.     

A test of the Ohlson (1995) model: Empirical evidence from Japan

This paper investigates the validity of the Ohlson [Contemp. Account. Res. 11 (1995) 661] information dynamics (Linear Information Model: LIM) and attempts to improve the LIM. The difficulty concerning the empirical tests of the LIM lies in identifying ν_t, which denotes information other than abnormal earnings. Recent papers, such as those of Myers [Account. Rev. 74 (1999) 1], Hand and Landsman [The pricing of dividends in equity valuation. Working paper, University of North Carolina, 1999], and Barth et al. [Accruals, cash flows, and equity values. Working paper (January) (July), Stanford University, 1999], all try to specify ν_t by using various accounting information. Instead of tackling this difficult task, this paper focuses on serial correlation in the error terms caused by omitting the necessary variable ν_t from the regression equation. The results indicate that adjustment for serial correlation leads to an improvement of the LIM.     

Do dividends signal safety? Evidence from China

Our paper examines whether dividends convey information about future cash-flow volatility in the Chinese stock markets. We observe that dividend changes are followed by cash-flow-volatility changes in the opposite direction. Taking advantage of the unique context of China, we show, in both the two-way sorting analysis and the regression analysis, that the strong relation between changes in dividend and cash-flow volatility is robust after controlling for potential confounders, including firm-level financial market frictions, macroeconomic and market conditions, and government intervention in firms' decision-making, and holds after we control for endogeneity concerns. Furthermore, we perform the theoretic mechanism tests of the relation and present supporting evidence on the signaling theory under the setting of asymmetric information, instead of the free cash flow theory based on the assumption of agency conflict. This study enriches our understanding of the source and nature of cash-flow information contained in dividends.     

The Share Price Impact of UK CCA Disclosures

This study investigates the impact of the experimental standard, SSAP16 (Current Cost Accounting), on share returns on the London stock market. Approximately 200 companies were examined between 1980–84. The experimental design specifies current cost as a supplementary signal to historical cost and employs two main statistical tools: ordinary least squares regression and the abnormal performance metric. In addition, a number of different CCA measurements are specified in order to assess the sensitivity of the results and to ease comparison with other studies. The results suggest that CCA information has a small but significant impact on stock returns in the days up to announcement. However, CCA does not seem to be the main driving force behind long period returns. Returns in the long run are associated more closely with historical cost information than with that generated by SSAPI6.     

International Corporate Tax Avoidance Practices: Evidence from Australian Firms

This paper examines the international corporate tax avoidance practices of publicly listed Australian firms. Based on a hand-collected sample of 203 publicly listed Australian firms over the 2006–2009 period (812 firm-years), our regression results indicate that there are several practices Australian firms use to aggressively reduce their tax liabilities. Specifically, we find that thin capitalization, transfer pricing, income shifting, multinationality, and tax haven utilization are significantly associated with tax avoidance. In fact, based on the magnitude and significance levels of the regression coefficients in our study, thin capitalization and transfer pricing represent the primary drivers of tax avoidance, whereas income shifting and tax haven utilization are less important. Finally, our additional regression results show that tax havens are likely to be used together with thin capitalization and transfer pricing to maximize international tax avoidance opportunities via the increased complexity of transactions carried out through tax havens.     

EARNINGS SIGNALS AND INTER-FIRM INFORMATION TRANSFERS

Three potential determinants of inter-firm information transfer at earnings announcement dates are examined. They are: (1) the correlation of the announcing and nonannouncing firms' information signals, (2) the information contained in the announcing firm's signal, and (3) the pre-announcement level of uncertainty for the nonannouncing firm. These determinants expand the scope of information transfer studies by (1) moving beyond standard industry definitions and (2) including a measure of the uncertainty related to the market's expectation for the forthcoming signal of the nonannouncer. The results suggest that these three determinants are jointly associated with the return movement of the nonannouncing firms.     

Income shifting and U.S. international trade in goods statistics

Intrafirm trade represents greater than one-third of total U.S. international trade in goods. Since these are not arm’s-length transactions, trade policymakers have voiced concerns that income shifting may distort international trade in goods statistics through the manipulation of transfer prices. Using country-level data on intrafirm exports and imports, we estimate a path analysis that simultaneously tests how and to what extent tax-motivated transfer pricing and real investment decisions affect intrafirm trade in goods statistics. Contrary to speculation, we do not find an economically significant relation between transfer pricing and intrafirm trade in goods statistics. In contrast, we find that tax-motivated location decisions create a 21 (20) percent or $819.7 ($927.1) million difference in mean intrafirm exports (imports) between the U.S. and a low- and high-tax country. This study provides trade policymakers with relevant information about the extent to which real investment decisions and accounting manipulations affect intrafirm trade in goods statistics and contributes to the international trade and income shifting literatures.     

股价信息、价格运动特征与资源配置效率

行为金融学的研究表明,股价不仅受到公司基本价值有关信息的影响,而且还受到市场公共信息的影响。通过研究股票价格运动特征可以有效地判断股价所包含的信息特征,解释股票市场的资源配置效率状况以及市场发育程度。现阶段我国股价还不能传递足够多的企业特定信息,引导资源配置的信号功能较弱,这一结论和对资源配置效率的实证结果相吻合,即股市对金融资源的低效配置问题还相当突出。