Collateral requirements of SMEs: The evidence from less-developed countries

This paper aims to investigate the determinants of collateral requirements for loans that are extended to small and medium-sized enterprises in less-developed countries. Our primary data source consists of the results from firms in Eastern Europe and Central Asia from the Business Environment and Enterprise Performance Survey, which is compiled by the World Bank and the European Bank for Reconstruction and Development. The results show that borrower-specific variables are more important than country-specific variables in determining collateral requirements on loan contracts. The strongest evidence in our paper emphasises the importance of borrower risk and loan cost in collateral determinants.     

Asset use and the relevance of fair value measurement: evidence from IAS 41

This study investigates whether asset use influences the relevance of fair value measurement. Specifically, I examine whether fair value is more relevant when it is applied to in-exchange assets than when it is applied to in-use assets. I test the framework on a sample of international firms that adopt International Accounting Standard 41. Using a difference-in-differences approach, I find that earnings information is significantly more relevant when firms measure in-exchange biological assets at fair value, but book value and earnings information is significantly less relevant when firms measure in-use biological assets at fair value. Consistent with these results, in cross-sectional analyses I find that investors discount the fair value of in-use biological assets and their associated unrealized gains and losses relative to the fair value of in-exchange biological assets. At present, the Conceptual Framework provides little guidance on asset measurement, resulting in inconsistencies across measurement standards. Thus, my findings may provide insight to standard setters and those interested in conceptually based asset measurement.     

Intangible assets and value relevance: Evidence from the Portuguese stock exchange

We assess the value relevance of the amounts for identifiable intangible assets and goodwill reported in the financial statements of all non-finance companies listed on the main market of the Portuguese Stock Exchange from 1998 to 2008. Additionally, we use panel data to explore the impact on value relevance of Portugal’s formal adoption of International Accounting Standards [IAS] and International Financial Reporting Standards [IFRS] in 2005. A distinctive feature of the accounting by our sample companies is that when they adopted IAS 38 and IFRS 3 in 2005, they were no longer required to recognise some intangible assets (such as start-up costs and research expenditures) and were no longer required to amortise goodwill.We find that net earnings, reported goodwill and other intangible assets are highly significantly associated with stock price. However, whereas earnings are related positively to stock prices when Portuguese Generally Accepted Accounting Principles (GAAP) were applied prior to 2005, the value relevance of earnings appears to have declined after the adoption of IAS/IFRS in 2005. Although the change to IAS/IFRS had no impact on the value relevance of identifiable intangibles as a whole, the evidence suggests that there was a positive effect on the value relevance of goodwill. When the subclasses of identifiable intangible assets are considered, we found evidence of an increase in value relevance of goodwill, other intangible assets, and research and development expenditures.     

Individual investors repurchasing behaviour: evidence from the Portuguese stock market

We study the repurchasing behaviour of individual investors and identify-related stock- and investor-specific attributes that affect the preference to repurchase stocks previously owned. Using a unique database of Portuguese individual investors, we find that investors prefer to repurchase stocks that were associated with a gain during their previous roundtrip (i.e. prior winners) and have suffered price declines subsequent to their last sale. Consistent with the extant literature based on the US market, our results suggest that different market characteristics do not seem to affect investors’ preference regarding stock repurchases. Moreover, we find that this preference increases with the magnitude of the prior gain or the decline in price following the last sale. We also demonstrate that larger and more visible domestic stocks are more likely to be repurchased and that less active, under-diversified and home-biased investors are more likely to engage in such behaviour. Finally, we find that repurchased stocks yield poor post-performance – approximately 267 basis points less than newly purchased stocks. Our main conclusion is that repurchases are essentially emotionally driven and penalize investor’s performance.     

The certification value of private debt renegotiation and the design of financial contracts: Empirical evidence from Europe

By using a sample of bank loan renegotiations by European firms, I show that the renegotiation of financial contracts bears a certification value, while deeply changing the contractual features of the loan over time, to the benefit of shareholders. I find that amendments to financial covenants and to loan amounts increase the cumulative abnormal returns of a borrowing firm by 10–15%. Early and less frequent renegotiations of bilateral loans with short maturities also imply a positive stock market reaction. Amendments signaling the early accrual of new and positive information allow increasing firm value.     

Capital structure and financing of SMEs: Australian evidence

This paper investigates the determinants of capital structure and use of financing for small and medium sized enterprises. Hypotheses utilising static trade-off and pecking order arguments are empirically examined using a series of firm characteristics including: size, asset structure, profitability, growth and risk. The hypotheses developed are tested using a large Australian nationwide panel survey. The results suggest that asset structure, profitability and growth are important determinants of capital structure and financing. For asset structure the direction of the influence is reliant upon the capital structure or financing measure employed. The results generally support static trade-off and pecking order arguments proposed by theoretical models.     

Propping and tunneling: Empirical evidence from Japanese keiretsu

We examine the response of horizontal and vertical keiretsu to the changing economic and regulatory climate in Japan from 1987 to 2001. We find evidence of profit tunneling of more weakly affiliated keiretsu firms during strong economic times. We observe propping of weakly aligned firms during recession. Many horizontal keiretsu firms strengthened their degree of adhesion to the horizontal keiretsu in response to increasingly tightened credit conditions post-1991. The motivation behind strengthened affiliation appears primarily linked to the goal of overcoming financial constraints by accessing the internal capital market of the business group.     

Bank privatization and performance: Empirical evidence from Nigeria

We assess the effect of privatization on performance in a panel of Nigerian banks for the period 1990–2001. We find evidence of performance improvement in nine banks that were privatized, which is remarkable given the inhospitable environment for true financial intermediation. Our results also suggest negative effects of the continuing minority government ownership on the performance of many Nigerian banks. Finally, our results complement aggregate indications of decreasing financial intermediation over the 1990s; banks that focused on investment in government bonds and non-lending activities enjoyed a relatively better performance.     

Corporate governance and tunneling: Empirical evidence from China

We analyze asset appropriation by principal shareholders in China and uncover the following relationships: (1) outsiders in the board of directors, audit without non-clean opinion, and dispersed ownership prevent operational tunneling; (2) belonging to a business group and issuing B or H share exacerbate asset appropriation. Institutional ownership does not prevent the embezzlement of assets and is endogenous, as investors select companies with good governance. Besides governance mechanisms, stock characteristics matter in that larger firms exhibit less tunneling, whereas highly leveraged firms experience the opposite. We find a decline of tunneling in 2001, which might be due to economic reforms.     

Empirical evidence of the value of monitoring in joint ownership

Joint ownership of assets by two partners can have an adverse effect on the incentives to invest and can result in unstable and inefficient organizational structures. Control sharing, however, plays an important role in economic, political, and social institutions. There is scarce empirical evidence on the benefits of joint ownership in corporate finance. We analyze acquisitions of corporate assets by joint ventures to empirically ascertain the value of joint ownership in economic activities. The results indicate that firms experience significantly larger returns in joint acquisitions than in full-control acquisitions and that this difference is restricted to the sample of firms in which both partners share equal ownership in the target. These findings suggest that monitoring in joint ownership structures ameliorates the possibility of value-destroying corporate decisions.     

Asset prices and exchange risk: Empirical evidence from Canada

Asset prices have been found to respond to unpredicted changes in macroeconomic variables in a number of studies. This paper focuses on the relationship between economic factors and the stock market for a small open economy, namely Canada. Exchange risk is observed to have a significant impact on firm value in that country between 1971 and 2004. Inflation risk also played a non negligible role during the seventies and eighties. The role played by market risk is harder to ascertain.     

Executive incentives and payout policy: Empirical evidence from Europe

We investigate how corporate payout policy is influenced by executive incentives, i.e. stock and option holdings, stock option deltas and stock-based pay-performance sensitivity for 1,650 publicly listed firms from the UK, Germany, France, Italy, the Netherlands and Spain, over the period from 2002 to 2009. Our results show that executive stock option holdings and stock option deltas are associated with lower dividend payments in our sample of European countries, where we do not observe any presence of dividend protection for executive stock options. We find that this relationship is mainly driven by exercisable stock options and by options that are in the money. Additionally, we observe that executive stock option holdings and stock option deltas have a negative impact on total payout, suggesting that executives do not substitute share repurchases for dividends. Furthermore, the fraction of share repurchases in total payout increases as executive stock option holdings and stock option deltas increase. Finally, our results show that executive share ownership and stock-based pay-performance sensitivity may mitigate agency conflicts by significantly increasing the level of total payout.     

International income-shifting regulations: Empirical evidence from Australia and Canada

This study examines market reactions to two different approaches to reduce income shifting in an international setting. The two methods are described and event studies are performed using stock market data from Canada and Australia. Samples of companies from both countries are partitioned into firms predicted to be affected versus unaffected by each country's event. Australia's regulation taxes profits arising in low-tax subsidiaries at Australian rates. Canada's method defines acceptable transfer prices (arm's-length transactions) and describes enforcement and audit policies. We find evidence of stock market reactions on some of the event dates for Australian and Canadian firms affected by these two approaches.     

Executive compensation and earnings management: Empirical evidence from Japan

This study investigates the relation between discretionary accounting choices and executive compensation in Japanese firms. The results show that the use of discretionary accruals increases executive compensation. The analyses also show that firm managers receiving no bonus adopt income-decreasing accruals and extraordinary items. In particular, evidence shows that negative extraordinary items are strongly associated with no bonus payment. Finally, the research indicates that the association between discretionary accruals and executive bonus varies depending upon the circumstances of the firm. This study contributes to the literature on earnings management from an international comparative perspective since most previous studies on earnings management and executive compensation have focused on U.S. firms.     

Determinants of corporate social disclosure: Empirical evidence from Bangladesh

We explore the potential firm and industry characteristics that determine the corporate social responsibility (CSR) disclosure practises by Bangladeshi listed firms. We use a CSR disclosure checklist to measure the extent of CSR disclosure in the annual reports and a multiple regression analysis to examine the determinants of CSR disclosure. Our study finds that CSR disclosure has positive and significant relationships with export-oriented sector, firm size and types of industries. We also find a negative relationship between CSR disclosure and family ownership. The overall findings of our study provide empirical evidence which suggests that a number of firm and industry characteristics are important determinants of the extent of CSR disclosures in a developing country like Bangladesh. Our findings can help the policy makers to adopt necessary regulatory reform to improve the CSR practises and enhance organisational legitimacy.     

Financial imbalances and household welfare: Empirical evidence from the EU

This paper uses Eurobarometer survey data from 26 EU countries to evaluate whether the general public cares about financial stability and imbalances over and above their effects on macroeconomic variables such as unemployment and inflation. I confirm previous results in the literature that life satisfaction – a widely used measure of household welfare – negatively depends on the unemployment rate. In addition to previous results in the literature, I establish a strong empirical link between life satisfaction and consumer confidence as measured by the European Commission consumer survey. The main result of the paper is that life satisfaction generally does not systematically depend on a number of measures of financial imbalance based on credit and asset prices once the other macroeconomic controls are included.     

Heterogeneity in asset allocation decisions: Empirical evidence from Switzerland

We analyze the heterogeneity in asset allocation decisions of different investor groups in response to changes in the macroeconomic environment. Using a new data set that includes the monthly portfolio holdings of private, commercial, and institutional investors deposited with Swiss banks, we estimate the relationship between equity and bond holdings and common business cycle indicators. Regression analysis indicates that private investors do not systematically move from stocks into bonds by selling stocks to institutional investors and purchasing bonds from them in adverse macroeconomic states. A VAR-error correction framework including cointegration and error correction restrictions suggests that the investment behavior of commercial investors leads and private investors follow in their investment decisions only slowly over time. The asset allocation decisions of institutional investors are not affected by the actions of private and commercial investors. Our results refute a principle of “institutional irrelevance”.     

基于平衡计分卡的ERP用户效益研究——来自中国ERP用户的经验证据

自从ERP诞生以来,西方学界就着力探究ERP能否及带给用户多少效益,设计了一系列计量指标和计量模型。能否在此基础上构建中国意义上的计量指标及计量模型,本文力图在此方面做出尝试。以四家引入ERP的中国用户为样本,比较了他们之间的效益。构建一个以平衡计分卡的流程、客户、财务、学习与革新四维因素为一轴,信息技术的自动化、信息化与转移三维因素为一轴,组合成计量ERP用户效益的十二单元的模型,用以解释、了解和确认引入ERP带来的直接与间接效益。在十二单元计量模型的基础上,提出了各单元的指标体系,指标体系的标准化为软件厂商的设计与用户的ERP决策提供了依据。     

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.     

Financial markets and economic performances: Empirical evidence from five industrialized economies

This paper investigates the nature of the links between the development of financial markets and economic performances in five advanced economies. The vector error correction model (VECM) establishes the quantitative importance of long-run relationships among three financial variables and the real output. Granger's causality test then suggests short-run causality between financial markets and the real sector as well as the substitution effect of the individual sectors in the financial market of each country. The results support the supply-leading hypothesis that the development of financial markets spurs growth for all countries except for Canada. The demand-driven hypothesis is confirmed for Canada only in the short run.