The competitive effects of IPOs on industry rivals

I study the impact of initial public offerings (IPOs) on industry rival performance. Instrumenting for IPO completion with post-IPO filing NASDAQ returns, I find no impact of IPOs on average rival sales growth, return on sales (ROS), or Tobin’s q after 3 years. However, post-IPO rival performance varies with rival financial constraints. Relative to peers, rivals with low cash or high leverage exhibit lower sales growth, ROS, and q values, accompanied by lower capital expenditures and employment growth. I provide causal evidence of the competitive impact of IPOs and highlight the competitive cost of financial constraints following industry IPO activity.     

Pricing,issuance volume,and design of innovative securities: The role of investor information

This study investigates the role of asymmetric information for the pricing, issuance volume, and design of innovative securities. By analyzing the information that structured product issuers provide to the investors of those products, we can identify specific sources of asymmetric information between the issuers and investors in this market. We show that issuers exploit this information friction to offer products to investors that appear more profitable for the issuer. In addition, we find that the friction induces issuers to design products with higher information asymmetry. Our results suggest that product issuers’ behavior increases information frictions in the financial system.     

Economic consequences of mandatory GAAP changes: The case of SFAS No. 158

This study examines management's reaction to the SFAS No. 158 requirement to recognize previously disclosed post-retirement benefit obligations on the balance sheet. The results indicate that managers attempted to mitigate the impact of the standard by increasing the assumed pension discount rate in subsequent periods. Further, the discount rate choice was related to the magnitude of the SFAS No. 158 balance sheet adjustment. Specifically, firms with larger required liability adjustments and more volatile pension assets and obligations were more likely to increase their discount rates. The findings have important implications for research regarding the economic consequences of accounting regulations and in particular the debate surrounding recognition versus disclosure since they indicate that managers react to the relocation of information from the financial statement footnotes to the balance sheet.     

Internal capital market efficiency and the diversification discount: The role of financial statement comparability

This paper investigates how financial statement comparability affects the efficiency of internal capital markets and diversification discounts in multi‐segment firms through monitoring mechanisms. Previous studies suggest that financial statement comparability improves transparency and reduces the cost of information processing, mitigating information asymmetry between managers and shareholders. Using measures of comparability and internal capital efficiency, we find that financial statement comparability has a strong positive influence on internal capital market efficiency. Further, we find that by improving the efficiency of internal capital markets, financial statement comparability indeed mitigates diversification discounts. Especially, the effect of financial statement comparability is more pronounced for firms with high information asymmetry or operating environment volatility. The results support our arguments that financial statement comparability enhances the efficiency of internal capital markets and increases firm value in diversified firms by mitigating agency problems via monitoring and corporate control mechanisms.     

Financial statement effects of adopting international accounting standards: the case of Germany

Using a sample of German firms, we investigate the financial statement effects of adopting International Accounting Standards (IAS) during 1998 through 2002. We find that total assets and book value of equity, as well as variability of book value and income, are significantly higher under IAS than under German GAAP (HGB). In addition, book value and income are no more value relevant under IAS than under HGB, and HGB (IAS) income is highly persistent (transitory). Finally, we find weak evidence that IAS income exhibits greater conditional conservatism than HGB income. Our results are consistent with the fair-value (income smoothing) orientation of IAS (HGB).

The dark side of financial innovation: A case study of the pricing of a retail financial product

The offering prices of 64 issues of a popular retail structured equity product were, on average, almost 8% greater than estimates of the products' fair market values obtained using option pricing methods. Under reasonable assumptions about the underlying stocks' expected returns, the mean expected return estimate on the structured products is slightly below zero. The products do not provide tax, liquidity, or other benefits, and it is difficult to rationalize their purchase by informed rational investors. Our findings are, however, consistent with the recent hypothesis that issuing firms might shroud some aspects of innovative securities or introduce complexity to exploit uninformed investors.     

The effects of government capital and liquidity support programs on bank lending: Evidence from the syndicated corporate credit market

This study jointly evaluates the effects of the U.S. Treasury's Troubled Asset Relief Program (TARP), the Federal Reserve's Discount Window (DW), and Term Auction Facility (TAF) on bank syndicated lending during the 2007–2009 financial crisis, using a unique data set that tracks the exposure of each lender in each syndicated credit facility in each year. By comparing lending changes within a group of banks that lend to the same facility of the same firm in the same year, it eliminates the impacts of demand-side factors that often bias the results of empirical studies on bank credit supply. Overall, I find that TARP, DW, and TAF played only a marginal role in increasing bank syndicated lending. By examining lending changes at the facility-lender and firm-lender levels, this study is less prone to the reverse causality problem that is inherent in studies using bank-level data. Therefore, this study complements studies using bank-level data and provides policymakers with a balanced view on the effects of these programs.     

The response of competitors to announcements of bankruptcy: An empirical examination of contagion and competitive effects

We find, like [Lang, L.H.P., Stulz, R.M., 1992. Contagion and competitive intra-industry effects of bankruptcy announcements: An empirical analysis, Journal of Financial Economics, 32(1), 45–60], that large firm bankruptcies generate a dominant contagion effect. A value-weighted portfolio of competitors' stocks experiences a significant loss of 0.56% in the three days centered around the Chapter 11 announcement. This represents an average loss of $3.32 for all the competitors combined for every dollar lost by the bankrupt firm. In addition, we find that small firm bankruptcies also generate a dominant contagion effect among smaller sized competitors; an equally-weighted portfolio of all competitors has a significant 0.12% drop. In a new approach to separate the contagion and competitive effects, we compare the stock price reactions of competitors who themselves subsequently file for bankruptcy in the next three years (candidates for contagion effect) with those who do not do so (candidates for competitive effect). As expected, candidates for contagion effect experience a significant, negative three-day stock price reaction of −4.68%. However, contrary to expectations, candidates for competitive effect also have a significant, negative return (−0.49%), suggesting that the competitive effect is weak at best since it is dominated by the contagion effect even in this sample. Other procedures to identify candidates for competitive effect generally yield similar findings. Finally, we analyze competitors' stock price reactions based on selected characteristics (e.g., industry concentration, and leverage), with similar results as before. One explanation for the failure to detect a competitive effect is that the impact may already have been incorporated in stock prices prior to the filing for Chapter 11. Consistent with this explanation, we find significant positive stock price reactions by competitor stocks for the hundred days prior to the bankruptcy announcement.     

The real effects of a new accounting standard: the case of IFRS 15 Revenue from Contracts with Customers

International Financial Reporting Standard 15 (IFRS 15) Revenue from Contracts with Customers has significantly changed the philosophy of revenue recognition, not only to provide a fairer representation of corporate revenues, but also to inhibit the use of revenues for ‘earnings management’ purposes. We provide a framework to analyse the various effects of new and amended accounting standards. Changes in how companies recognise, measure, present and disclose their revenues (accounting effects) can affect how companies and their transactions are understood, both internally and externally (information effects), can change security prices (capital market effects) and can change how companies operate, and their costs and cash flows (real effects). We provide empirical evidence, based on a review of corporate annual reports, comment letters and interviews, on the effects of IFRS 15. We find evidence of accounting, information and, to a lesser extent, real effects, although, outside a few industries, IFRS 15 has had relatively little impact on the recognition and measurement of revenue.     

Acceptance of digital investment solutions: The case of robo advisory in Germany

The financial services sector is undergoing substantial change due to technological innovation and digitalization. Traditional banks face intensifying competition through the market entry of digital investment platforms that make use of automated investment advisory, so-called robo advisors. Based on replica of two German robo advisors, a sample of 96 participants assessed their intention to use such digital investment services. The results obtained using partial least squares (PLS) path modelling indicate that perceived usefulness and privacy are the most decisive factors with a one percent higher perceived usefulness (higher privacy) increasing usage intentions by 0.57 % (0.25 %). The results are robust to various socio-demographic and FinTech-related controls as well as alternative estimation procedures such as generalized structured component analysis (GSCA).     

产业链金融视角下财务公司融资产品定价研究——基于模糊B S欧式看跌期权模型

财务公司为产业链上的中小企业提供产业链金融产品,需要获得一个合理的融资利率。由于产业链金融产品主要以应收账款、存货等动产抵押物作为还款来源,因此,财务公司在定价的时候要突出考虑抵押物的价值波动,而抵押物价值又存在模糊特性,常见的贷款定价方法无法正确识别出来。为此,在传统的定价方法基础上,将期权定价模型引入财务公司产业链融资产品的定价中,重点考虑动产抵押物的价值波动以及无风险利率的波动性,得出基于抵押物价值的基础利率,同时财务公司可以根据产业链条的主体特点对贷款利率进行优化调整。     

Foreign direct investment and trade: The case of Vietnam

By making use of a gravity model, this paper examines the impact of FDI on exports, imports and net export of Vietnam. The empirical analysis presented in this paper is based on a recently released panel dataset involving Vietnam's 19 major trading partners for the period 1990-2007. The paper also considers the impact of FDI on trade during three sub-periods: the pre-Asian financial crisis, the post-Asian financial crisis and during the Asian financial crisis period. The empirical analysis reveals that a complementary relationship exists between FDI and exports and FDI and imports. While the impact of FDI on net-exports is insignificant during the full sample period, a significant positive relationship exists between net-exports and FDI in the post-Asian financial crisis period.     

The division of expert labour in the European audit market: The case of Germany

The implementation of three EU company law directives in Germany in the 1980s triggered a bitter dispute over the audit jurisdiction. This was fought out between an established “elite” occupational group of state-recognised auditors and aspiring related, but less qualified competitors. It ended with a compromise imposed by politicians. Our paper aims to contribute to the understanding of accounting professionalisation in different local and historical contexts by examining how the dynamics between the competing interest groups shaped the outcome in this particular episode. We base our analysis on the framework proposed by Abbott [Abbott A. The system of professions. An essay on the division of expert labour. Chicago/London: University of Chicago Press; 1988], but find that it requires refinement to explain the interactions between all actors, including the state and third parties. These interactions were complicated by simultaneous inter-and intraprofessional conflict, as well as by the peculiar complexity of ambiguous professional and jurisdictional boundaries, both in terms of work performed and professional qualifications held. Our discussion supports prior suggestions that Anglo-American theories may not be sufficient to explain professionalisation projects elsewhere, and considers additional dimensions which may be useful in explaining such projects also in other national and historical settings.     

产品市场竞争对股权资本成本的影响研究——以异质性风险为中介变量

以我国2003～2006年A股上市公司为样本,以产品市场势力为产品市场竞争的代理变量,采用"产品市场竞争—异质性风险—经济后果"这一研究范式,实证分析产品市场竞争对股权资本成本的影响及其作用路径。结果发现,产品市场势力越大、则股权资本成本越小,异质性风险是产品市场势力与股权资本成本间的中介变量。     

The real effects of bank distress: Evidence from bank bailouts in Germany

How does bank distress impact their customers' probability of default and trade credit availability? We address this question by looking at a unique sample of German firms from 2000 to 2011. We follow their firm-bank relationships through times of distress and crisis, featuring the different transmission of bank distress shocks into already weakened firm balance sheets. We find that a distressed bank bailout, which is subject to restructuring and deleveraging conditions, leads to a bank-induced increase of firms' probabilities of default. Moreover, bailouts tend to reduce trade credit availability and ultimately firms' sales. We further find that the direction and magnitude of the effects depends on firm quality and the relationship orientation of banks.     

Explaining co-movements between stock markets: The case of US and Germany

We explain co-movements between stock markets by explicitly considering the distinction between interdependence and contagion. We propose and implement a full-information approach on data for US and Germany to provide answers to the following questions:

(i) Is there long-term interdependence between US and German stock markets?

(ii) Is there short-term interdependence and contagion between US and German stock markets, i.e. do short-term fluctuations of the US share prices spill over to German share prices and is such co-movement unstable over high-volatility episodes?

Our answers are, respectively, no to the first question and yes to the second one.     

The effect of recognition vs. disclosure on investor valuation: The case of pension accounting

Whether or not the format of financial reporting influences user assessment of the reported information is an important issue to the Securities and Exchange Commission (SEC), the Financial Accounting Standards Board (FASB), and managers. Do investors, in determining security prices, differentiate between information recognized in the balance sheet and that disclosed in the footnotes? The findings indicate that investors appear to consider pension information disclosed in the footnotes as value-relevant, given that an accrued (prepaid) pension liability (asset) is also recognized in the balance sheet. Second, investors attach equal importance to both sorts of pension information.     

The global institutionalization of financial reporting: The case of the United Arab Emirates

Almost 100 countries have agreed to adopt or work towards convergence with the International Accounting Standards Board's international financial reporting standards (IFRS). Applying an institutional theory framework at a nation state level, and using publicly available data about the emerging economy of the United Arab Emirates (UAE) as a case, this paper identifies some of the global coercive, normative and mimetic pressures which have contributed to this widespread adoption. The challenge for emerging economies such as that of the UAE is whether the reality of IFRS implementation can match the image of IFRS adoption.     

北京信贷市场的现状与商业银行的竞争策略研究

研究商业银行在北京的信贷业务竞争策略首先要分析信贷目标行业的价值创造能力,从而确定信贷目标行业的范围。传统经济学对行业的分析强调依赖GDP增长率、资产收益率等绩效指标,其实质都是会计利润,而不是经济利润。本文对商业银行信贷目标行业的分析引入了一种新型的公司业绩衡量指标——经济增加值,它克服了传统指标的缺陷,能更准确地衡量信贷目标行业的价值创造能力,对其分析可总结出商业银行可以进入的信贷行业群为房地产行业群、基础行业群、高技术行业群和文化行业群。最后,本文在理论和实证分析的基础上,提出了商业银行的整体竞争策略、品种竞争策略和行业竞争策略。