High-speed rail construction and labor investment efficiency: Evidence from an emerging market

This study investigates the association between high-speed rail (HSR) construction and labor investment efficiency. Using unique hand-collected data on HSR construction over the period 2008–2019, we find that HSR construction can significantly decrease inefficient labor investment in China. In addition, we find that this negative relationship is (a) strong in state-owned companies and in firms located in big cities and (b) weak in financially constrained firms and in firms located in areas with a strong religious atmosphere. Consistent with the theoretical prediction, we find that the HSR construction mitigates inefficient labor investment by reducing information asymmetry between managers and investors and enhancing labor mobility. Overall, our findings are robust to alternative measurements, additional controls, fixed effects, and endogeneity concerns. Our findings have implications for firms’ top management to make strategic decisions and for government’s bodies/policymakers in relevance to HSR investment decisions.     

The transmission of market shocks and bilateral linkages: Evidence from emerging economies

The linkage between emerging and developed economies spans beyond the usual trade in goods and services. Underlying trade is the flow of capital for foreign direct investment and for speculation in markets, which renders emerging economies vulnerable to shocks from the developed world. As such, equity return volatility in emerging markets is partly attributable to this dependence. To gauge the importance of bilateral economic and cultural factors in driving economic integration, we adopt a two-step process. First, we use Diebold and Yilmaz's spillover index methodology to extract spillover indices representative of the return volatility spillover effects of the United States, the developed portion of the Euro area, and Japan on financial markets in Asia, the Gulf Cooperation Council countries, Eastern and Central Europe, Africa, and Latin America. Second, we test whether these indices are governed by economic and cultural factors. Our results show that the spillover effects vary across markets and that a strong correlation exists with the volume of trade, security investment, common language, distance, and market capitalization.     

Diversification strategy,efficiency, and firm performance: Insight from emerging market

We investigate further the inconsistencies of the diversification-performance link by introducing efficiency as moderating factor. A data of 319 firms was used to conduct a panel data analysis excluding the financial sector industries and the results show three important findings. First, industrial diversification shows a significant contribution in performance improvement while international diversification shows no effect on performance. Yet, international-conglomerate shows a significant negative relationship with performance. Meanwhile, the efficiency results are contrary to our conjecture. We find that efficiency is a factor to enhance performance, but it is not the moderating variable on the diversification-performance link. This implies that the efficiency of the firm has no connection with the link between diversification and performance.     

Board secretary and market information efficiency: Evidence from corporate site visits

Using the setting of corporate site visits, this study examines the information interpretation role of board secretaries on market information efficiency. We find that the presence of the board secretary during corporate site visits can significantly improve the information content of such visits. From the perspective of information interpretation ability, when the board secretary has a dual role, receives high relative compensation, and has a high level of education, his or her participation in site visits has a greater effect on improving the informativeness of such visits. From the perspective of information asymmetry, the information interpretation role of the board secretary is more pronounced when the level of information asymmetry between the firm and its investors is high. Further analysis shows that when the board secretary attends more site visits, the level of analyst forecast error is lower. In summary, we confirm the information interpretation role of board secretaries, which is useful for opening the “black box” of their participation in the information assimilation process and for better understanding of how to improve market information efficiency.     

Bank efficiency,market structure and strategic interaction: Evidence from Vietnam

This study investigates the impacts of Vietnamese banks’ efficiency on the strategic interactions with their rivals. The study argues that efficient banks will compete the market to grow, and then become more responsive to the strategies from their rivals. The study extends the Efficiency Structure theory to capture the behaviours of banks after the evolvement of market structure as the result of efficiency improvement. The study further argues that the speed of growth plays a key role in moderating the relationship between efficiency and strategic interaction. The study finds evidence that the impact of efficiency on strategic interaction is stronger at the lower level of growth.     

Cross-market information transfers of ADR firms: An investigation of emerging market economies

Level II and III ADRs permit issuers to be listed on the major U.S. exchanges with the stipulation that they comply with extensive SEC disclosure requirements. Foreign private issuers are compelled to file a set of audited financial statements prepared in accordance with U.S. GAAP, or alternatively, IFRS or Home Country Accounting Principles with attendant reconciliation to U.S. GAAP prior to 2008. Although the Form 20-F reconciliation is discontinued in 2008 for IFRS filers, non-U.S. issuers are required to satisfy other Form 20-F stipulations such as expanded Item 17 and Item 18 disclosures. We conjecture that non-U.S. firms choosing to be listed on the major U.S. exchanges will incur the added costs associated with the supplemental disclosure requirements in order to attract sufficient investor attention as to have the disclosures impounded in the home country equity share price in the manner described by Fishman et al. (1989). Because a prominent attribute of ADR firms is that they benefit from multiple-market trading, we investigate whether the Form 20-F disclosure cross-market information transfers are associated with emerging market economy status. We employ models of the cross-market ADR and equity security share returns and trading volume controlling for the emerging economy status and incremental firm-specific SEC Form 20-F accounting principles disclosures. Preliminary results indicate that (1) U.S. listed ADR firms from emerging economies experience greater cross-market information transfers associated with the SEC Form 20-F filing, and (2) that the increased cross-market information transfers associated with the SEC Form 20-F filing are proportional to the difference in quality of accounting principles employed for home country reporting purposes vis-à-vis the accounting principles employed for SEC Form 20-F reporting purposes. Results are consistent with a feedback process through which the new information disclosed by the SEC Form 20-F reporting requirements in the ADR market attenuates the price discovery process in the home country equity market when the difference in information environment quality is large.     

Testing the transparency benefits of inflation targeting: Evidence from private sector forecasts

Using inflation forecast data for 11 IT adoption countries, IT adoption is found to promote convergence in forecast errors, suggesting that it enhances transparency. This result, which is subjected to several robustness checks and found to be robust, supports Morris and Shin's (2002) contention that better public information is most beneficial for forecasters with bad private information. However, it does not support their hypothesis that better public information could make private forecasts less accurate.     

Forecast rationality and monetary policy frameworks: Evidence from UK interest rate forecasts

We find evidence of heterogeneity and irrationality among professional forecasts for three-month inter-bank rates and ten-year gilt yields at both short and long forecast horizons over the period 1989-2006. The majority of biased forecasts overestimate the future spot rate, consistent with slow adjustment to the declining trend in inflation and interest rates. Furthermore, we produce evidence indicating that both monetary policy actions and elements of communication policy have information content regarding the rationality of forecasts. Changes in official bank rates and disagreement among the Monetary Policy Committee influence the rationality of forecasts. The publication of inflation reports has no effect.     

International linkage of interest rates: Evidence from the emerging economies of Asia

This article employs monthly short-term interest rate data over the 1980–1999 period to investigate the intermarket interest rate linkages across seven newly industrialized markets in Asia, and the influence that Japan and the US exert on interest rates in the region. In an attempt to isolate the impact of the liberalization process from the Asian financial crisis on interest rate transmission mechanisms, the sample period is broken down into two equally divided subperiods (1980 through 1989 and 1990 through 1999). The results from the study indicate that (a) the national short-term interest rate nexus is inherently a steady-state, long-run phenomenon, in that they are found to be cointegrated; (b) there is a pronounced increase in the cross-country interest rate linkages during the 1990s; (c) Hong Kong and Singapore play an important, but not dominant, role in the Asian region, and serve to integrate the regional economies and mediate the short-run linkages between the regional and the world financial markets; and (d) while Japan played an influential role during the 1980s, the US supplants Japan's role during the 1990s. Several policy implications are derived.     

Auditing standards,increased accounting disclosure,and information asymmetry: Evidence from an emerging market

The interest in accounting disclosure and audit quality by academics, practitioners, and regulators heightened following the various financial reporting scandals, and subsequent legislative and professional response to these scandals. An important question is whether the implementation of stricter auditing standards such as those mandated by the US Sarbanes-Oxley Act would improve the information environment of firms whose shares are publicly traded. In this paper, I investigate the link between information asymmetry, measured by bid-ask spread, and increased accounting disclosures following the adoption of new auditing standards in China—an environment in which disclosure hitherto was relatively low. I report the following primary results of the statistical analyses. First, information asymmetry cost is substantial in the Chinese order-driven emerging markets. Second, the firms in the sample experienced significant reductions in their bid-ask spreads subsequent to the adoption of the new auditing standards. Third, the reductions in the bid-ask spreads were abrupt and permanent. However, no significant result is found for firms in the control group with foreign ownership, whose financial statements were prepared in accordance with international accounting standards and were audited with international auditing standards. The results have implications for policy makers and regulators in general, and those in emerging markets in particular.     

Health care regulation and the operating efficiency of hospitals: Evidence from Taiwan

Using data from the Annual Survey of Hospitals compiled by the Department of Health in Taiwan for years 1994 through 1997, we employed Data Envelopment Analysis (DEA) to evaluate the impact of a National Health Insurance (NHI) Program on the operating efficiency of district hospitals in Taiwan. We find that, on average, efficiency of district hospitals in Taiwan decreased following the implementation of the NHI Program. Our results are robust to the inclusion of control variables that have been shown to affect hospital operating performance in prior research, and alternative efficiency measurements.     

Currency crisis and the forward discount bias: Evidence from emerging economies under breaks

This paper investigates the effects of two financial crises (the 1997 Asian currency crisis and the 2000 Turkish financial crisis) on the forward discount bias in 14 emerging-market economies using a robust two-stage procedure. This unique sample of less researched currencies displays: (i) high persistence in forward discount equations; and (ii) varying variance ratios between changes in exchange rates and the forward premium. The findings provide new insights into the forward discount puzzle: financial crises exert considerable power on the forward discount bias and uphold the forward rate unbiasedness hypothesis (FRUH) by reverting the negative sign into positive.     

Single-stock futures: Evidence from the Indian securities market

Although single-stock futures (SSFs) are useful multi-purpose stock derivatives, they have not received much attention in developed markets. We analyze SSFs in the Indian market to understand their contribution in price leadership. The findings indicate that trades in the stock market contribute more to price discovery than trades in the SSF market (72% and 28%, respectively), while quotes in the SSF market are more price innovative than quotes in the stock market (39% and 61%, respectively). Our analysis suggests that while stock and SSF trade returns have predictive ability for each other, in the case of quotes, only SSF quotes have predictive ability for stock and SSF returns.     

Stock market liberalization and return volatility: Evidence from the emerging market of Sri Lanka

This study examines the impact of liberalization of the Sri Lankan stock market on return volatility. We specify GARCH and TGARCH models of volatility, and estimate them using 16 years of weekly returns for the period from 1985 to 2000. The results show that liberalization of the market to foreign investors significantly increased the return volatility in the Colombo Stock Exchange. Both conditional and unconditional volatility measures are the highest in the liberalization period. Negative return shocks lead to lower volatility suggesting that there is no leverage effect, and this appears to reflect the very low levels of leverage used by Sri Lankan companies.     

The effect of financial reporting quality on corporate investment efficiency: Evidence from the Tunisian stock market

Positive Accounting Theory (Watts and Zimmerman, 1978) stipulates that financial reporting has two dimensions: market signaling and monitoring managerial behaviors. Through these signaling and stewardship means, a better financial reporting quality would have significant economic consequences in terms of efficient resources allocation, which results in improving firms’ investment decision. In this paper, we examine the impact of financial reporting quality on corporate investment efficiency. Our sample is based on 25 Tunisian listed companies for the period 1997–2013. The findings confirm that some characteristics of the financial information, namely, reliability and smoothness, appear to increase the investment inefficiency, while others, i.e., conservatism and relevance, seem have no significant effect on investment decisions. We attribute such results mainly to the contextual specificities of the Tunisian environment, such as, the institutional bodies and settings, the cultural values and some characteristics of the corporate governance system.     

Firm survival and financial development: Evidence from a panel of emerging Asian economies

Using a panel of five Asian economies - Indonesia, Korea, Malaysia, Singapore and Thailand - over the period 1995-2007 we analyze the links between firm survival and financial development. We find that traditionally used measures of financial development play an important role in influencing firm survival. When stock markets become larger or more liquid firms’ survival chances improve. On the contrary, we show that higher levels of financial intermediation can increase firm failures. We also find that the beneficial effects of stock market development are more pronounced during the later years of our sample, while the adverse effects of bank intermediation have declined over time. Finally, large firms are more likely to benefit from developments in financial markets compared to small firms.     

Sticky prices or economically-linked economies: The case of forecasting the Chinese stock market

We explore whether economic links via trade affect aggregate Chinese stock market returns. We find that market return indices from countries that China net imports from can forecast the Chinese aggregate market return at the weekly time horizon. The stock returns of countries that China net exports to have no consistently significant OOS predictability.The economic intuition for our results follows from the fact that China has positioned itself as a low-cost provider competing on price. As a low-cost provider China has a more difficult time passing cost increases through to export customers because of sticky prices. However, import costs, e.g., raw materials, are subject to both consumption and speculative demand and thus vary. We can conclude that costs will drive short term economic gains for the overall Chinese economy. One interpretation of our results is that supply shocks are absorbed within 2 weeks.     

Bond market development and bank stability: Evidence from emerging markets

We investigate how bond market development shapes banks’ risk taking in terms of portfolio structure, liquidity risk, and overall bank risk. Exploiting a bank-level database of 26 emerging markets, we find that larger bond markets are associated with stronger bank liquidity positions, lower portfolio risk of banks, and higher overall stability of banks. The effect of bond market development on bank risk taking remains robust across different levels of bank size and capital sufficiency. Overall, we find new evidence of a complementary relationship between bond market development and bank soundness.     

Manipulation in the bond market and the role of investment funds: Evidence from an emerging market

The aim of our research is to test for manipulation in the bond market, and to establish whether the practice of benchmarking investment funds encourages such interference. We analyse end-of-day and intraday trading data from the Borsa Istanbul Bond Securities Market between 2014 and 2018 along with specific data from investment fund sector over the same period. Our results indicate that treasury bonds have most likely been manipulated at the months' end by trading activities of investment funds. Price and volume rose significantly in the run up to the end of the month before falling off in the days following.     

Information effects of dividends: Evidence from the Hong Kong market

The literature has suggested that earnings and earnings forecasts provide stronger signals than dividends about future performance of a firm. We test the information effects of simultaneous announcement of earnings and dividends in the Hong Kong market, distinguished by three interesting features (concentrated family-shareholdings, low corporate transparency, and no tax on dividends). Our results show significant share price reactions to unexpected earnings and dividend changes, but dividends appear to play a dominant role over earnings in pricing, a result contrary to findings in the literature. The signaling hypothesis works primarily for firms with earning increases, while the maturity hypothesis works mainly for firms with earnings declines.