Competition among exchanges through simplified disclosure requirements: evidence from the American and Global Depositary Receipts

In this study, we address the ongoing debate as to whether the competition among the world's major exchanges through simplified disclosure requirements is justified. Companies from across the globe have a choice of cross-listing shares as either American or Global Depositary Receipts (ADRs and GDRs, respectively). The former are primarily listed on the US exchanges – NYSE, NASDAQ and AMEX – whereas the latter are issued into non-US markets such as the London Stock Exchange (LSE). The GDRs listed on the LSE are subject to simplified disclosure requirements compared to their exchange-listed ADR peers that have to meet more stringent compliance standards. Proponents of the ‘light touch’ approach argue that firms cross-listing as GDRs are not subject to the higher reporting costs faced by ADRs yet still face similar valuation benefits. Those who challenge this approach argue that simplified disclosure requirements set by the LSE will ultimately be recognised by the market as ineffective, diverting traders from investing in GDRs. This study provides evidence that supports the LSE's ‘light touch’ approach and shows that the benefits of information risk reduction for ADRs and GDRs are comparable. The explanation for this finding is that the two avenues through which information asymmetry is expected to be resolved after cross-listing – disclosure and analysts – are substitutive and make equally important contribution to information risk reduction, eventually leading to similar cost of capital decline for ADRs and GDRs.     

Effect of Shariah Compliance on Operating Performance: Evidence from GCC Countries

We examine the operating performance of Shariah-compliant (SC) vs. non-Shariah-compliant (NSC) firms in six Gulf Cooperation Council (GCC) countries during 2000–2014 using a unique dataset from S&P’s Compustat Global database and show robust evidence that SC firms are operationally much more profitable than NSC firms. We show that higher operating profit margin (due to lower cost structure) and higher total asset turnover (i.e., asset efficiency) of SC firms compared to NSC firms are the primary drivers of the profitability difference. We also find that this association is more pronounced for firms that are always SC or always NSC during sample period.     

Depositary Receipts, Country Funds, and the Peso Crash: The Intraday Evidence

We study the intraday impact of exchange rate news on emerging market American Depositary Receipts (ADRs) and closed-end country funds during the 1994 Mexican peso crisis. Peso exchange-rate changes affect prices and trading volumes of Latin American equities, and some closed-end fund behavior is consistent with "noise trader" theories of small investors. However, there is no evidence that peso depreciation triggers a significant sell-off of non-Mexican securities or that other non-Mexican trading patterns change at times of high peso news flow. Thus, the "Tequila Effect" is largely confined to price changes.     

PCAOB international inspection access and debt contracting: Evidence from American Depositary Receipt firms

We examine whether the Public Company Accounting Oversight Board’s (PCAOB’s) international inspection access affects the usage of accounting-based debt covenants in bank loan contracts of American Depositary Receipt (ADR) borrowers. We show that there is an increase in the use of financial covenants in debt contracts after the auditor of an ADR borrower becomes subject to PCAOB inspections. We also document that lenders increase the usage of financial covenants only in loans to ADR borrowers domiciled in countries with weak home country intuitions, and the increase is more pronounced for ADR borrowers from countries without a local auditor regulatory oversight body. These findings suggest that PCAOB regulatory oversight enhances the perceived credibility of accounting numbers for debt contracting and serves as a substitute for the weak monitoring of auditors for ADR borrowers domiciled in countries with weak country institutions.     

An Investigation on Information Transmission Between Stocks of Far Eastern Countries and Their American Depositary Receipts

Domestic stocks and their American depositary receipts (ADRs) are essentially twin securities listed in the home country and United States, respectively. Accounting for exchange rates and market friction, their prices should move in tandem if international markets are efficient. In reality, however, their returns are close but sometimes differ dramatically. This study hypothesizes that changes in trading volume and macro events can lead investors between two equity markets to generate heterogeneous expectations or interpretations, causing returns on one security to deviate from those on the other. The results show that changes in past domestic volume do affect current ADR returns, implying that volume contains additional information not in prices. It is also found that important macro events, especially bad news, trigger significant differences in returns between domestic shares and their ADRs. These results support our argument that heterogeneous expectations prolong price information transmission between two equity markets.     

Boardroom Diversity and Operating Performance: The Moderating Effect of Strategic Change

ABSTRACT

This study aims to investigate the effect of boardroom diversity on Chinese listed firms’ operating performance. Incorporating gender, age, tenure, and professional background of board member’s attributes into a composite diversity index, the results show that boardroom diversity positively affects operating performance. However, when taking strategic change into consideration, the results indicate that the firms with larger strategic change tend to have a negative correlation between boardroom diversity and operating performance, whereas the correlation is positive if firms with smaller strategic. This study expects to fill the literature gap by extending the understanding of boardroom-diversity-performance relationship in the emerging context.     

The Impact of Dividend Covenants on Investment and Operating Performance

This paper examines the influence of dividend covenants in corporate bonds on investment and operating performance. Prior literature analytically demonstrates that by limiting dividend distribution to shareholders, dividend restrictions effectively place a minimum on investment expenditures. This suggests a positive relation between dividend covenants and investment. The literature also conjectures that the influence of dividend covenants on investment (1) mitigates the under‐investment problem associated with debt financing; or (2) exacerbates over‐investment. We empirically document that the presence of dividend covenants is associated with a higher level of investment and poorer future performance. Further analyses confirm that the higher level of investment is consistent with dividend covenants exacerbating over‐investment, not mitigating under‐investment. Our results shed light on the cost aspect of dividend covenants proposed in prior literature.     

Long-Run Operating Performance of Initial Public Offerings in Japanese Over-the-Counter Market (1991–2001): Evidence and Implications

This paper implements a comprehensive study on the long run post-issue operating performance of more than 700 initially public offerings (IPOs) in the Japanese over-the-counter market (JASDAQ) from 1991 to 2001. Empirical results document dramatic and continuing operating underperformance that are robust to industry or mean reversion adjustment. The diagnostic tests for behavioral explanations further uncover the salient decline of market expectations by various measures over the post issuing years, as well as the upsurge in company expansion around the offering years followed by the striking dwindle soon afterwards. These findings jointly shed light on the systematic over-optimism of market investors and managers at the time of IPO events. The multiple regression analysis also demonstrates robust evidence that is favorable for the hypotheses of “Windows of Opportunity” and market timing. In contrast, we do not find that there are significant associations between changes in alternative insider ownership and the evolution of operating performance. We suggest the explanations based on the agency problem theory are not effective in explaining the long run operating underperformance of JASDAQ IPOs.JEL Classification Code: G30, G31, D80, D84     

商业银行信贷运行机制变迁及其绩效分析

随着内外部制度的变迁,中国商业银行在信贷运行机制方面进行了大量改革,这些改革对信贷资金的供给行为产生了非常深刻的影响。本文对信贷运行机制变迁各阶段的主要特征进行了归纳和描述,将制度变迁因素引入信贷行为的研究中,并就信贷运行机制变迁对银行宏观绩效、产业绩效和微观绩效所产生的影响进行了实证分析。最后本文总结了现行信贷运行机制的缺陷,并提出了进一步改革的政策建议。     

The Effects of Downsizing on Operating Performance

We examine the performance of 118 firms that downsized between 1989–1993. We find that downsizing firms experience declines in operating performance prior to the downsizing announcement. Operating performance improves significantly following the downsizing. These firms are able to reduce the cost of sales, labor cost, capital expenditures and R&D expenditures. We also find that firms that perform poorly in their industries prior to the downsizing and have increases in assets following the downsizing have larger improvements in performance. There is some evidence that the improvements are greater for firms that increase their focus.     

The Impact of Acquisitions on Operating Performance: Some Australian Evidence

This study investigates the impact of acquisitions on the operating performance of Australian firms. For a sample of 36 Australian acquisitions occurring between 1986 to 1991 inclusive, and using matched firms to control for industry and economy-wide factors, the results based on four accrual and four cash flow performance measures show that corporate acquisitions do not lead to significant improvements in post-acquisition operating performance. The consistency of the results with the agency, the hubris and the financial motivation hypotheses suggests that corporate acquisitions in Australia may be undertaken for other than synergistic reasons. The results assist in explaining inconsistent findings reported in the literature.     

Accounting Accruals,Future Operating Performance,and Public-Listing Age

This paper investigates the impact of public-listing age on the future operating performance of Chinese firms making initial public offerings (IPOs) during the period 1998-2010 and examines whether accounting accruals contribute to this impact. We found that, on average, public-listing age has a negative incremental effect on future operating performance in China and that accounting accruals do play a role in postissue underperformance. However, our industrial analysis reveals that the listing-age effect does not persist in industry-specific models; this implies that listing age has heterogeneous effects on post-IPO operating performance and that these effects deserve further attention.     

International Cross-Listing and Order Flow Migration: Evidence from an Emerging Market

Policymakers in emerging markets are increasingly concerned about the consequences for the domestic equity market when companies list stock abroad. We show that the effects of cross-listing depend on the quality of intermarket information linkages. We investigate these issues with unique data from the Mexican equity market. The impact of cross-listing is complex—balancing the costs of order flow migration against the benefits of increased intermarket competition. These effects are exacerbated by equity investment barriers that induce segmentation of the domestic equity market. Consequently, the benefits and costs of cross-listing are not evenly spread over all classes of shareholders.     

Performance of Cross Listed Dual-Class Firms: Evidence from Chinese Firms Cross Listed on US Exchanges

We compare operating and market performance of Chinese single- and dual-class firms cross listed on US exchanges. We find evidence in line with researchers who argue that a dual-class structure allows insiders to invest in long-term value-enhancing projects. We find that dual-class firms underperform prior to their initial public offering (IPO) and then improve and have better operating performance than single-class firms in the second year after IPO. We find that dual-class firms also have better market performance than single-class firms beginning in the initial year, which is contrary to the finding in most other studies. The reason for this might be that firms that list on US exchanges show a credible commitment to shareholder rights.     

城市商业银行经营管理层胜任力与经营绩效的关系

本文构建了中国城市商业银行经营战略、企业文化与经营管理层胜任力与经营绩效的结构模型,运用探索性因素分析法和验证性因素分析法进行实证研究.结果表明,城市商业银行经营管理层胜任力模型包括内在素质、管理技能、关系管理三维结构;在中国城市商业银行,经营管理层管理技能胜任力对经营战略与财务绩效间的关系起到完全中介作用,经营管理层...     

Issuer Operating Performance and IPO Price Formation

We study the relation between issuer operating performance and initial public offering (IPO) price formation from the initial price range to the offer price to the closing price on the first trading day. For a post‐bubble sample of 2001–2013 IPOs, we find that pre‐IPO net income and, in particular, operating cash flow are strongly, positively associated with the revision from the mid‐point of the initial price range to the offer price and that the “partial adjustment phenomenon” concentrates among issuers with the strongest operating performance. As for why publicly observable information helps predict changes in valuation from when the initial price range is set to when the offer price is set, our findings suggest that strong‐performing issuers, especially those offering small slices of ownership, have lower bargaining incentives and are susceptible to the underwriter(s) low‐balling the price range. Overall, our results suggest an important role for accounting information in understanding the pricing of book‐built IPOs and are consistent with the presence of agency problems between issuers and underwriters.        

Exchange Rate Changes and the Operating Performance of Multinationals

Using a sample of 261 US multinationals over the period 1984–2002, we examine the relation between exchange rate changes and the profitability of foreign operations. We find that the impact of exchange rate changes on foreign operations’ profitability is not statistically significant in the majority of industries. Furthermore, according to our variance components analysis, exchange rate changes explain less than 2% of the variation in foreign operations’ profitability for most industries. We also find that the impact of exchange rate changes on foreign operations’ profitability is generally weak for non‐US multinationals from Australia, Canada, Japan and the UK. Our evidence is consistent with the finding of prior studies that the impact of exchange rate changes on firm value is not significant for most multinationals.     

银行背景董事与可转债融资: 中国的证据

基于我国的金融环境,将银行背景董事的来源分为五大行和非五大行两种类型,以此考察不同来源的银行背景董事对可转债融资的影响是否存在差异。研究发现：来自五大行的银行背景董事对可转债融资申请是否被证监会审核通过不会产生显著影响,而来自非五大行的银行背景董事具有显著的正面影响,但是,在可转债融资后的经营业绩上,两者都不会产生显著的积极影响。这表明银行背景董事的作用,主要来自于非五大行的银行背景董事,并且,发挥的作用有限,仅体现了其咨询功能,而非监督功能。     

Operating Performance and Stock Returns of Firms Calling Convertible Preferred Stocks

Abstract:   Using methodologies developed by Barber and Lyon (1996 and 1997 ), we examine the long‐run operating performance and stock returns of firms around in‐the‐money calls of convertible preferred stock. Our study intends to be a direct test of the hypothesis that managers call in‐the‐money convertibles when they view a decline in the firms' performance. We find no evidence that calling firms underperform non‐calling benchmark firms. On the contrary, we find mild evidence that the post‐call operating performance of calling firms is better than a carefully selected group of benchmark firms and call firms' post‐call stock returns are no worse than benchmark firms.