Evidence of Avoiding Working Capital Deficits in Australia

This study examines the incidence of managerial interventions in Australian firms to avoid reporting working capital deficits. We document a significant discontinuity in the distribution of current ratios at 1.0. We also find that the propensity of Australian firms to avoid working capital deficits is largely determined by the costs and benefits of management interventions. Firms with short‐term or long‐term debt are less likely to engage in accounts manipulation, while firms paying dividends are more likely to do so. Further examination of the components of current assets and current liabilities reveals that, to avoid working capital deficits, Australian firms tend to undertake actions to overstate accounts receivable rather than overstate inventory or understate current liabilities. The results provide practical guidance and implications for shareholders, auditors and regulators in identifying accounting irregularities.     

中国外汇资本流动结构对实际有效汇率影响的实证研究

实际有效汇率(REER)是衡量一国国际竞争力的重要指标,不同的资本流动结构可能会对REER产生不同影响。本文分析了两大类外汇流动和资本流动对REER的作用机制,并对中国的情况进行实证检验。结果发现,加总资本流动对人民币REER升值产生微弱的负影响,外商直接投资导致REER较为显著的升值效应,投资收益和私人部门汇款对REER的升值效应较强。在此基础上,本文建议应该继续加大引进那些高科技的外商直接投资,并积极鼓励其进口,既有助于中国国际竞争力的提高,也有助于中国经常账户的平衡;同时应尽快建立一套完善的监测体系,加强对跨境资金流动的监督管理。     

Alternative Methods of Increasing the Precision of Weighted Repeat Sales House Prices Indices

Weighted repeat sales house price indices have become one of the primary indicators used to identify housing market conditions and to estimate the amount of equity homeowners have gained through house price appreciation. The primary reason for the acceptance of this methodology is that it derives a location specific (typically, census division, state or metropolitan area) average change in house prices from repeated observations of individual house prices. It is this repeat attribute that allows repeat sales price indices to claim that it is a preferable index which does a better job of holding quality constant. The amount of time between the two observed prices for a single property is determined by when the home transacts. Some homes transact twice in a period of months and others do not transact for decades. It is likely that individual house price appreciation rates vary from the mean appreciation rate, as estimated by the index, in a systematic fashion. In general, the longer the time between transactions the more variance there is in individual house price appreciation. This paper extends this concept to include new dimensions. For instance, houses that appreciate faster than the mean, as estimated by the index for that location, may experience a different variation structure than homes that appreciate slower. This process can be viewed as an asymmetric treatment of the variance of house price appreciation around the estimated index. In addition, the variance of expensive and affordable homes may also be different and time varying. This paper finds evidence that adding the dimensions of price tiers and asymmetry to the variance estimate has merit and does affect the estimated index as well as homeowner equity estimates. Homeowner equity estimates are especially sensitive to these added dimensions because they depend on both the revised index and the estimated variances, which are specific to each dimension considered—time between transaction, asymmetry, and price tier.     

人民币持续升值对我国外汇收支的影响分析

本文尝试运用计量经济分析的方法,结合问卷调查结果,分析人民币汇率变化对进出口、利用外资、结售汇、直接投资的影响,检验汇率改革的政策效果,并提出相关政策建议。     

我国货币政策传导机制有效性研究:条件与结论

对几种货币政策传导机制的利用是否有效,取决于市场失衡的程度与开放的程度以及经济发展不同时期的机遇。目前我国新兴市场资金流动与各市场间的联系主要受资产价格传导机制作用的引导,而不是利率传导。人民币升值带来的机遇并非仅发生在商品市场,更发生在资本市场,汇率传导机制的作用虽然影响了出口,但是目前却更有利于资本输出下的海外收购与兼并,从而降低了通货膨胀传递下商品市场的投资成本。     

Management Policy and Estimated Returns on School Trust Lands

Every state entering the Union since 1803 received land grants from the federal government for the support of their respective public school systems. Inherent in this federal grant is the fiduciary duty to prudently and effectively manage these assets for the beneficiary, their school systems. We develop a framework that measures the present value of the beneficiary’s economic benefits to assist managers of school trust lands in determining future management policy. Using this framework, we assess whether managers of state school trust lands are currently meeting their fiduciary responsibilities of “maximum economic benefit” for their beneficiaries or whether changes in management policy are needed. The present value of realized economic returns from grazing lease revenues and capital appreciation are compared with the present value of income streams that may be generated from alternative investments available to the land trustees if the land were sold and the proceeds reinvested in U.S. Treasury securities. Market values and capital appreciation for school trust lands in Wyoming are estimated using hedonic models formulated from ranch sales data. Because we are comparing a risky return on land investments with a riskless return on Treasury bonds, we observe, in most cases, that the sale of land andreinvestment of proceeds will increase economic benefits on school trust lands. Accepted for Publication in The Journal of Real Estate, Finance and Economics.     

Optimal capital allocation using RAROC™ and EVA®

Equity capital allocation plays a particularly important role for financial institutions such as banks, who issue equity infrequently but have continuous access to debt capital. In such a context this paper shows that EVA and RAROC based capital budgeting mechanisms have economic foundations. We derive optimal capital allocation under asymmetric information and in the presence of outside managerial opportunities for an institution with a risky and a riskless division. It is shown that the results extend in a consistent manner to the multidivisional case of decentralized investment decisions with a suitable redefinition of economic capital. The decentralization leads to a charge for economic capital based on the division's own realized risk. Outside managerial opportunities increase the usage of capital and lead to overinvestment in risky projects; at the same time more capital is raised but risk limits are binding in more states. An institution with a single risky division should base its hurdle rate for capital allocated on the cost of debt. In contrast, the hurdle rate tends to the cost of equity for a diversified multidivisional firm. The analysis shows that hurdle rates have a common component in contrast to the standard perfect markets result with division-specific hurdle rates.     

The split capital investment trust saga: Lessons for financial services marketing

The split capital investment trust boom at the end of the 1990s demonstrated that product innovation and financial engineering can lead to the creation of dangerous products whose risks are not understood by investors. It also emphasised the need for careful marketing of investment products. This involves identifying the needs of investors, creating products to meet those needs, promoting and selling those products, and managing client relationships after the sale. Particular issues that should be addressed include the need to educate clients and adequate stress testing of new products.     

Repeat Sales Regression on Heterogeneous Properties

This paper proposes a generalized repeat sales regression (GRSR) that uses repeat sales from the entire market, in which properties may have heterogeneous value appreciation processes, to estimate price indices for not only the entire market, but also submarkets or customized portfolios of properties that only have small numbers of value observations. Monte Carlo simulations provide strong evidence that the GRSR indices more accurately measure the index for the entire market as well as individual property value appreciation than conventional RSR indices. This paper also proposes a Chi-square test to detect the heterogeneity in property value appreciation across submarkets/portfolios, and use simulations to show that the test is powerful in small samples. This paper finally illustrates the application of the GRSR using a historical dataset of the Chicago housing market from 1970 to 1986.     

Intrametropolitan Decentralization: Is Government Structure Capitalized in Residential Property Values?

This paper examines the influence that the intrametropolitan growth in special districts has on residential property values. Our empirical approach tests whether the benefits of decentralizing local public good providers increases, decreases or leaves residential property appreciation rates unchanged. Past research in this area has been limited by the lack of variation in government structure within a region and by the self-selection of areas that decentralize governments. This research overcomes these limitations by 1) comparing appreciation rates for single-family homes that were located in areas that added local governments to appreciation rates for properties that were not; and 2) employing an estimation technique that border matches repeat sales to control for the self-selection of government structure. Overall, empirical results indicate that institutional decentralization has no influence on single-family property appreciation rates. It makes no difference whether the new government is the 3rd, 4th, 5th or 6th new jurisdiction–the new government does not influence appreciation rates. Residential property values for homes located in jurisdictions that added security special districts experienced rates of appreciation that were lower than otherwise comparable properties. Recreation, fire, water, sewer and other special districts had no measurable influence on appreciation rates. Empirical results also indicate that more overlap among local governments reduces appreciation rates. New governments created in areas whose residents have greater income heterogeneity increase appreciation rates. The distance separating the new government from existing governments, the land area of the new government and the creation of multiple new governments have no influence on appreciation rates. Finally, these results depend on the border matching repeat sales estimation technique employed here.     

Determinants of Foreign Versus Domestic Real Estate Investment: Property Level Evidence from Listed Real Estate Investment Firms

We examine the determinants of foreign real estate investment relative to the domestic case using the portfolios of a large sample of publicly traded real estate investment companies; where foreign investment is defined as the property owner headquarters being located in a different country than a given asset. The cross-sectional results provide strong evidence that real estate firms are more likely to take a smaller stake in larger assets when investing abroad. The penchant for large assets holds when controlling for economic activity, real estate investment opportunities, depth and sophistication of the capital markets, investor protection and the legal framework, administrative burdens and regulatory limitations, and the socio-cultural and political environment at both the property nation and headquarter nation levels. In general, foreign ownership is less likely with industrial, office, retail, and self-storage properties. Capital market development is consistently negatively related to foreign investment.     

投资者关注会影响个体投资者的汇率预期吗?--基于银行代客结售汇数据的实证分析

为考察个体投资者汇率预期的非理性及形成机制,本文基于外汇市场异质主体理论和行为金融学观点,构建了包含投资者关注的个体投资者汇率预期形成模型,并采用远期和即期银行代客结汇售汇比作为个体投资者汇率预期的替代指标,进行了实证分析。结果表明,远期结售比受到前一期汇率变动和境内外利差的影响,而即期结售比受前一期汇率变动影响。进一步引入投资者关注,采用MS-FTP和MS-TVTP模型的实证研究表明,投资者关注对远期和即期结售比的影响是时变的。在人民币贬值阶段,投资者关注对结售比存在显著的负向冲击,会导致更大的结售汇逆差;而在人民币升值阶段,投资者关注对结售比则无显著影响。本文的结论表明,个体投资者汇率预期具有显著的非理性特征,符合动量原则和套息规则,同时还受到投资者关注的影响。央行在人民币处于持续贬值区间时,应通过汇率沟通作用于投资者关注,稳定汇率预期。     

The networking function of investment banks: Evidence from private investments in public equity

We examine investment banks' networking function in capital markets, using a sample of Private Investments in Public Equity (PIPEs). We argue that investment banks develop relationships with investors through repeat dealings, and that investment banks' networks of relationship investors form the basis of their networking function. We find that investment banks, especially those with larger investor networks, help issuers attract investors. Correspondingly, an issuer that desires more investors is more likely to hire an investment bank than place the shares directly. We also find that issuers pay higher fees to hire investment banks with larger investor networks. Our empirical findings suggest that the networking function of investment banks is important in securities offerings.     

Depreciation-Related Capital Gains,Differential Tax Rates,and the Market Value of Real Estate Investment Trusts

We develop a model for valuing U.S. real estate investment trusts (REITs) that considers the tax liability impounded in REITs’ property portfolios. This liability is a function of the portfolio’s accumulated depreciation and is driven by different tax rates applied to individual components of the total gain from property sales. These two components are the capital gain resulting from the sale of property at a price higher than its cost and the gain due to the recapture of depreciation taken during the use of the property. Our measure of value is the REIT’s net asset liquidation value (NALV). The metric of REIT value currently used by analysts is a REIT’s net asset value (NAV), but a REIT’s NAV will always be greater than the NALV and therefore overestimate market value, all else equal. Finally, using observed market prices for REITs, we provide evidence that NALVs give superior estimates of REIT market prices than do NAVs.     

Do Capital Flows Matter to Stock and House Prices? Evidence from China

This article analyzes the impacts of foreign direct investment (FDI) and short-term capital flows, otherwise known as hot money, on stock and house prices in China. Empirical results, estimated using the local projections approach, reveal that a positive hot money net inflow shock significantly increases stock and house prices and the impacts persist for up to 1–2 months, while a positive FDI net inflow shock contributes significantly to lagged house price appreciation but has no effect on stock prices. This study also identifies negative pass-through effects of FDI net inflows on hot money net inflows and positive pass-through effects of stock prices on house prices.     

The Impact of Business Groups on Investment Efficiency: Does Capital Allocation Matter?

Using data on internal capital markets in China, this paper examines the influence of internal capital markets on investment efficiency in business groups. The empirical results show that using internal capital markets can alleviate over invests within business groups. In addition, it can alleviate deficiencies in R&D investment in business groups effectively. The impact of internal capital markets on investment efficiency varies between state-owned enterprises and private enterprises. At private enterprises, internal capital market operations significantly alleviate overinvestment and promote R&D investment. However, at state-owned enterprises, internal capital market operations increase overinvestment and reduce investment in R&D.     

R&D sensitivity to asset sale proceeds: New evidence on financing constraints and intangible investment

We examine the intersection between corporate divestitures of tangible assets and investment in intangible capital (R&D) to provide new tests for the impact financing constraints have on real activity. A positive R&D sensitivity to asset sale proceeds indicates binding financing constraints since cash inflows from tangible asset sales are negatively correlated with productivity shocks and not otherwise connected to intangible investment via non-financial channels. Using a variety of estimation approaches, we document a strong, positive link between cash inflows from fixed asset sales and corporate R&D investment, but only among firms most likely facing binding financing constraints. These results offer robust evidence that financing frictions impact the increasingly important yet understudied intangible corporate investments that drive innovative activity, and they highlight a previously unexplored but potentially valuable use of proceeds from fixed asset divestitures.     

The Role of Payback in the Investment Process

This study examines the use of the payback (PB) method as a means of evaluating a proposed asset's risk and its joint application with profit-oriented capital budgeting models. Previous research studies indicating a linkage between the PB method and risk analysis are reviewed. A certainty-equivalent model is used to demonstrate this relationship and the properties of the relationship exploited by PB when used as a heuristic. Results of the analysis indicate that using a hurdle PB as a filter for identifying proposals with acceptable risk and return attributes is consistent with more quantitatively oriented investment techniques under certain conditions. The study then examines the conceptual relationship between PB and profit-oriented capital budgeting models. Results suggest that PB and profit-oriented capital budgeting techniques measure different attributes of an investment and complement one another in describing and analysing its cash flows.     

增值税转型对信息技术业机器设备投资的激励效应研究

信息技术代表先进生产力的发展方向。根据资本结构的不同将信息技术类企业细分为信息技术业制造类企业和服务类企业,利用转型前后相关数据,通过多元线性回归法分析表明：我国增值税转型有利于促进信息技术类企业增加机器设备类固定资产投资,且对资本构成相对高的信息技术业制造类企业的激励效应高于服务类企业。     

Bank Debt,Flexibility, and the Use of Proceeds from Asset Sales

In the theory of financial intermediation, bank debt is often characterized as being more readily renegotiable than public debt. Banks are also conjectured to gain valuable non-public information through closer monitoring. Given these features, bank debt can theoretically be more flexible than public debt and can lead to better investment/liquidation decisions. We investigate this possibility using a sample of firms facing the important decision of whether to reinvest the proceeds from asset sales or whether to distribute the proceeds to debtholders. While higher levels of leverage are associated with an increased probability of distributing proceeds to creditors, this relationship is significantly muted for bank debt as opposed to public debt. This finding is consistent with the conjecture that bank debt provides enhanced flexibility when compared to public debt. Further we find that asset sale announcement period abnormal stock returns are increasing in firms’ use of bank debt, but not public debt. This suggests that market participants believe that banking relationships are leading to better decision making for this particular type of investment/liquidation decision. We find no significantly different effects of bank vs. public debt on the initial decision to undertake an asset sale in the first place. Thus, in the context of asset sales, the main observable difference arises in the use of proceeds decision, rather than the initial asset sale decision.