Degree of Multinationality and Financial Performance: A Study of U.S.-Based Multinational Corporations

This paper examines the marginal benefits that accrue to U.S.-based multinational corporations through increased international investment. Specifically, the study seeks to determine if increased degrees of multinationality produce additional benefits for multinational firms in terms of excess returns and/or reduced risk. The results indicate that during the period studied, the degree of multinationality did not have a significant influence on the risk and return performance of the sample firms. Thus, the study supports the findings of Qian (1996) and Siegel et al. (1995, 1995A) who report that the advantages enjoyed by multinational corporations may be going away.     

A Test of the Eclectic Paradigm: Evidence From the U.S. Reinsurance Market

This study provides a test of the eclectic paradigm with data from U.S. reinsurers. The U.S. reinsurance industry provides a unique setting to test the eclectic paradigm due to the extensive data available on U.S. reinsurers and the well‐developed literature related to reinsurance. The ability to test the hypotheses related to the eclectic paradigm in a service industry and incorporate industry‐specific factors adds to the eclectic paradigm literature which has traditionally focused primarily on manufacturing firms. In addition, the application of the eclectic paradigm to the reinsurance industry provides an empirical framework that combines several prior streams of literature which examine the reinsurer's decision to internationalize. The current study includes firm‐specific factors, country‐specific factors of the international markets, and factors related to the U.S. reinsurance industry. This article finds support for traditional factors impacting globalization such as host market size, loss experience, and competitiveness as well as reinsurer's ability to expand based on available capacity. Understanding the importance of firm‐, country‐, and industry‐specific factors is key for managers, as analyzing these issues in isolation may lead to an incomplete picture of the factors impacting the internationalization decision, hindering managers' ability to make decisions that are in the best interest of the firm. With the continued interdependence of the world reinsurance marketplace, as well as the recent expansion of the European Union, internationalization issues are of critical importance not only to U.S. insurers, reinsurers, and regulators, but also to their global counterparts.     

Nonlinear relationship between monetary policy and stock returns: Evidence from the U.S.

This paper studies the relationship between monetary policy and stock market return in the U.S. using nonlinear econometric models. It first employs a univariate Markov-switching model on each of the three stock indices and three monetary policy variables, displaying significant regime-switching patterns and common movements. This paper then uses a Markov-switching dynamic bi-factor model to simultaneously extract two latent common factors from stock indices and monetary policy variables to represent monetary policy changes and stock market movements separately. The smoothed probabilities of regimes demonstrate that expansionary monetary policy regimes follow economic recessions, but bear stock markets usually occur before economic recessions. The maximum likelihood estimation results show that expansionary monetary policy such as a decrease in the federal funds rate raises stock returns, but stock returns don't directly influence monetary policy decision.     

Risk spillovers between FinTech and traditional financial institutions: Evidence from the U.S.

In this paper, we propose a novel approach to examine the risk spillovers between FinTech firms and traditional financial institutions, during a time of fast technological advances. Based on the stock returns of U.S. financial and FinTech institutions, we estimate pairwise risk spillovers by using the Granger causality test across quantiles. We consider the whole distribution: the left tail (bearish case), the right tail (bullish case) and the center of the distribution and construct three types of spillover networks (downside-to-downside, upside-to-upside, and center-to-center) and obtain network-based spillover indicators. We find that linkages in the network are stronger in the bearish case when the risk of spillover is higher. FinTech institutions' risk spillover to financial institutions positively correlates with financial institutions' increase in systemic risk. These results have important policy implications, as they underscore the importance of enhancing the supervision and regulation of FinTech companies, to maintain financial stability.     

Finance and employment: Evidence from U.S. banking reforms

Economic theory offers competing hypotheses about how the cost and availability of finance influence labor market outcomes. Making use of the U.S. banking reforms between the 1970s and the 1990s as a quasi-natural experiment, this paper studies the impact of credit market development on employment. This paper documents the significant effects of these reforms on employment growth. Potential channels between finance and employment are also investigated. Changes in the growth of the number of self-employed individuals, the entry and exit of firms, and investment growth do not explain most of the employment growth following the reforms. The reforms had a substantially higher impact in industries with higher labor intensity, which is consistent with the idea that labor has fixed costs that need to be financed.     

日美中小银行:路径不同结果迥异

在讨论城市商业银行可借鉴的国际经验时,首先需要澄清的是,在国外不存在城市商业银行这个概念,只有根据规模大小划分的大银行和中小银行的概念。关于中小银行问题所进行的分析研究隐藏于西方学者对金融制度、市场竞争、社会效率与规     

Investor Tax Credits and Entrepreneurship: Evidence from U.S. States

Angel investor tax credits are used globally to spur high-growth entrepreneurship. Exploiting their staggered implementation in 31 U.S. states, we find that they increase angel investment yet have no significant impact on entrepreneurial activity. Two mechanisms explain these results: crowding out of alternative financing and low sensitivity of professional investors to tax credits. With a large-scale survey and a stylized model, we show that low responsiveness among professional angels may reflect the fat-tailed return distributions that characterize high-growth startups. The results contrast with evidence that direct subsidies to firms have positive effects, raising concerns about promoting entrepreneurship with investor subsidies.     

Seasonality in Stock Price Mean Reversion: Evidence from the U.S. and the U.K.

The evidence of slowly mean-reverting components in stock prices has been controversial. The hypothesis of stock price mean-reversion is tested using a regression model that yields the highest asymptotic power among a class of regression tests. Although the evidence that the equally weighted index of stocks exhibits mean-reversion is significant in the period 1926–1988, this phenomenon is entirely concentrated in January. In the post-war period both the equally weighted and the value-weighted indices exhibit seasonal mean-reversion in January. A similar phenomenon is also observed for the equally weighted index of stocks traded on the London Stock Exchange.     

Destination taxation and evasion: Evidence from U.S. inter-state commodity flows

Tax evasion has been an important issue in the accounting literature for several decades, but the focus has been on corporate income taxes. We develop a new way to examine tax evasion that focuses on corporate transactions, rather than corporate profits. Specifically, we examine how commodity flows respond to destination sales taxes, allowing for tax evasion as a function of distance between trade partners. After accounting for transportation costs, we find that the effect of taxes decreases as distance increases. This is consistent with the notion that longer distances between trade partners hinder government oversight and increase the likelihood of successful tax evasion. Our results are robust with respect to outliers, strategic neighbor effects, information sharing agreements and other re-specifications. These results are important to policymakers because they evidence the difficulty of enforcing destination taxation in open economies such as U.S. states and the European Union.     

Dividends and financial health: Evidence from U.S. bank holding companies

Using a large sample of U.S. bank holding companies from 1986 to 2020, we show that there is a positive relationship between banks' dividends lagged by one quarter and their financial health in the current quarter. We also find that this positive relationship is more pronounced for banks with lower capital adequacy and during the 2007–2009 financial crisis, indicating that it is more necessary for banks with these characteristics to use dividends to convey information regarding their financial health. Our additional analyses suggest that total payout is also positively associated with bank financial health, and that the positive relationship between dividends and financial health applies to private banks as well, but that the magnitude is weaker for them than for public banks. Our overall findings primarily complement a risk reduction hypothesis in corporate finance and bank payout policies.     

Approximate Factor Structures: Interpretations and Implications for Empirical Tests

This paper provides some new insights about approximate factor structures, as defined by Chamberlain and Rothschild [2], and their implications for empirical tests. First, we show that any economy that satisfies an approximate factor structure can be transformed, in a manner that does not alter the characteristics of investor portfolios, into an economy that satisfies an exact factor structure, as defined by Ross [9]. Second, we show that principal components analysis represents just one of many methods of forming groups of well-diversified portfolios with no idiosyncratic risk in large samples. Correct factor loadings will be obtained by regressing security returns on any group of these portfolios. Our interpretations of the Chamberlain and Rothschild results also provide additional insights into the testability of the Arbitrage Pricing Theory. We show that securities cannot be repackaged to hide factors in the manner suggested by Shanken [10] without the variance of some of the repackaged securities approaching infinity in large economies.     

Foreign exchange exposure: Evidence from the U.S. insurance industry

We study the foreign exchange exposure of U.S. insurers. The evidence shows that no systematic difference exists in the currency risk profiles of life and non-life segments within the insurance industry. This suggests that life and non-life insurers have similar risk exposure management strategies arising from similar risk pooling and financial intermediary functions. The empirical results reveal that a sizable proportion of U.S. insurers are exposed to foreign exchange movements against the seven largest U.S. trade partners in insurance services (U.K., Japan, Switzerland, Netherlands, France, Germany and Canada). Significant operational and size effects are also documented and we find that the frequency of foreign exchange exposure increases with time horizon.     

The Response of Dynamic Herd Behavior to Domestic and U.S. Market Factors: Evidence from the Greater China Stock Markets

ABSTRACT

We investigate the dynamic reaction of stock market herding in China, Hong Kong, and Taiwan to unexpected shocks from domestic and U.S. market factors. In China and Taiwan, herding is more pronounced, and the investors tend to herd with the rising stock market returns. Overconfident investors will herd on the subsequent trading days under market stress. Compared with the response to the domestic market factors, the responses of herding in the Greater China stock market to the U.S. market factors are weaker. After the 2007–8 financial crisis, the U.S. market factors highly explain the forecast error variance of herding in the Shanghai A-share and Taiwan markets.     

中国视角:收入来源国与跨国公司的税收博弈

跨国公司经济实力强大、现代企业制度完备、经营结构合理、享有垄断与内部化优势.跨国公司全球范围内追求集团利益最大化,内部管理的高效率、信息沟通的高科技,以及对税收筹划的高度重视,都对收入来源国提出了严峻挑战.跨国公司在中国发展迅速,也存在大量的避税问题.中国已经开展了20年的反避税工作,但在制度建设以及针对跨国公司避税特点采取强力度措施方面进展不够.新的两税合一的<企业所得税法>及其<实施条例>,以及预约定价制度是重大进步,但要很好地贯彻执行还需做出多方面的努力.     

Firm Value and Hedging: Evidence from U.S. Oil and Gas Producers

This paper studies the hedging activities of 119 U.S. oil and gas producers from 1998 to 2001 and evaluates their effect on firm value. Theories of hedging based on market imperfections imply that hedging should increase the firm's market value (MV). To test this hypothesis, we collect detailed information on the extent of hedging and on the valuation of oil and gas reserves. We verify that hedging reduces the firm's stock price sensitivity to oil and gas prices. Contrary to previous studies, however, we find that hedging does not seem to affect MVs for this industry.     

Cross-Border Listings and Price Discovery: Evidence from U.S.-Listed Canadian Stocks

We examine the contribution of cross-listings to price discovery for a sample of Canadian stocks listed on both the Toronto Stock Exchange (TSE) and a U.S. exchange. We find that prices on the TSE and U.S. exchange are cointegrated and mutually adjusting. The U.S. share of price discovery ranges from 0.2 percent to 98.2 percent, with an average of 38.1 percent. The U.S. share is directly related to the U.S. share of trading and to the ratio of proportions of informative trades on the U.S. exchange and the TSE, and inversely related to the ratio of bid-ask spreads.     

First- and Second-Moment Exchange Rate Exposure: Evidence from U.S. Stock Returns

This study investigates the impact of first‐ and second‐moment exchange rate exposure on the daily returns of nine U.S. sectors from 1992 to 1998. In 17.8% of the cases we detect significant first‐moment exposure when contemporaneous exchange rates are used. Moreover, 25.0% of the significant exposures are asymmetric. When the model utilizes one‐day lags, 42.2% of the cases are significant and 79.0% are asymmetric. Regarding second‐moment exposure, the financial sector displays pervasive sensitivity to exchange rate volatility when using contemporaneous and lagged models. This result is reasonable, assuming that revenues from the sale of derivative products increase with currency volatility.     

Common ownership and bank stability: Evidence from the U.S. banking industry

We empirically test competing theoretical arguments about the impact of common ownership on bank stability: the common ownership hypothesis, where banks decrease risk-taking by internalizing risk externalities on commonly held banks, and the diversification hypothesis, where banks increase risk-taking influenced by common owners who hold diversified portfolios and are less risk averse. Using data from the U.S. banking industry from 1991 to 2016, we find that banks with more common ownership linkages undertake lower risk, as predicted by the common ownership hypothesis. This relation is statistically significant and economically sizable, which is consistent across alternative measures of common ownership and bank risk and robust to potential endogeneity. Our study adds the financial stability perspective to the ongoing discussions on common ownership and antitrust regulations.     

Fundamentals and bubbles in asset prices: Evidence from U.S. and Japanese asset prices

This paper investigates the existence and extent of non-fundamental bubbles in both U.S. and Japanese asset prices by employing a flexible empirical method which allows us to decompose asset prices into fundamental and non-fundamental bubble components. This study finds that a substantial fraction of U.S. and Japanese asset prices is accounted for by non-fundamental bubble components and that these asset prices overreact to non-fundamental bubble shocks. In addition, allowing for time-varying interest rates as another fundamental factor does not change any qualitative results about the role of non-fundamental bubble components. This suggests that the present value model fails to explain volatile asset price behavior even with time-varying interest rates. This paper was initially written when I was visiting Keio University in Japan. I benefited from several discussions with Mike Dothan, Pat Hess, and Steve LeRoy in my department, Takashi Kaneko, Yukitami Tsuji and Naoyuki Yoshino at Keio University, and Yong-Seok Park at the International University of Japan. Special thanks are due to the anonymous referee and the editor of this journal, who provided many useful and insightful comments that helped to improve the paper. This research was in part supported by a grant from the International Program Development.     

Sigma Convergence versus Beta Convergence: Evidence from U.S. County-Level Data

In this paper, we outline (i) why σ-convergence may not accompany β-convergence, (ii) discuss evidence of β-convergence in the United States, and (iii) use U.S. county-level data containing over 3,000 cross-sectional observations to demonstrate that σ-convergence cannot be detected at the county level across the United States, or within the large majority of the individual U.S. states considered separately. Indeed, in many cases statistically significant σ- divergence is found.