Are There Sectoral Anomalies Too? The Pitfalls of Unreported Multiple Hypothesis Testing and a Simple Solution

The recent emphasis on sector-specific investment strategies has led to the emergence of industry-specific calendar anomalies, notably the technology sector summer swoon. A standard t-test implies that these price movements provide arbitrage opportunities. However, this test fails to account for the many tests that may have preceded the swoons discovery. We propose the use of the Bonferroni correction to account for this unreported testing. Its application reverses the conclusions about the summer swoon and finds no evidence of calendar-based price patterns in any other sector. We also use the Bonferroni correction to revisit previously documented, market-wide, anomalies. Conclusions about the most widely cited anomalies (e.g., the January effect) are unchanged, but evidence for some other anomalies is substantially weakened. Our results emphasize that in evaluating a proposed anomaly, sectoral in nature or otherwise, it is crucial to account for the hypotheses that were likely to have been tested but not reported.     

Trading activity and bid–ask spreads of individual equity options

We empirically examine the impact of trading activities on the liquidity of individual equity options measured by the proportional bid–ask spread. There are three main findings. First, the option return volatility, defined as the option price elasticity times the stock return volatility, has a much higher power in explaining the spread variations than the commonly considered liquidity determinants such as the stock return volatility and option trading volume. Second, after controlling for all the liquidity determinants, we find a maturity-substitution effect due to expiration cycles. When medium-term options (60–90 days maturity) are not available, traders use short-term options as substitutes whose higher volume leads to a smaller bid–ask spread or better liquidity. Third, we also find a moneyness-substitution effect induced by the stock return volatility. When the stock return volatility goes up, trading shifts from in-the-money options to out-of-the-money options, causing the latter’s spread to narrow.     

Do IFRS Reconciliations Convey Information? The Effect of Debt Contracting

We examine whether earnings reconciliation from U.K. generally accepted accounting principles (GAAP) to International Financial Reporting Standards (IFRS) convey information. As a result of debt contracting, mandatory accounting changes are expected to affect the likelihood of violating existing covenants based on rolling GAAP, leading to a redistribution of wealth between shareholders and lenders. Consistent with this prediction, we find significant market reactions to IFRS reconciliation announcements. These market reactions are more pronounced among firms that face a greater likelihood and costs of covenant violation and early announcements. While the association between later announcements and weaker market reactions is consistent with contractual implications of technical changes to earnings, which investors quickly learn to predict, it is inconsistent with IFRS forcing all firms in the sample to reveal firm-specific information through accruals. Thus, by showing that mandatory IFRS also affects debt contracting, we expand on existing IFRS research that focuses on how accounting quality and cost of capital are impacted.     

Mad about Austerity? The Effect of Fiscal Consolidation on Public Opinion

We explore the impact of fiscal austerity on three different dimensions of public opinion in 26 European Union countries (consumer confidence, attitude toward national authorities, and European institutions) on annual data between 1997 and 2017. Our main finding is that the independent effect of a tighter fiscal stance on public opinion is not large and, when present, seems to closely follow the impact of fiscal austerity on economic activity. Our results therefore are inconsistent with the view that fiscal austerity necessarily implies a negative effect on public opinion and a decline in popularity of national and European institutions.     

The EONIA spread before and during the crisis of 2007–2009: The role of liquidity and credit risk

This paper provides an empirical assessment of the factors affecting the spread between the Euro Overnight Index Average (EONIA) and the main policy rate of the European Central Bank (ECB). Up until the period when Lehman Brothers collapsed in mid-September 2008, the spread was small and positive. After this point, the liquidity surplus that developed from the fixed rate full allotment tendering arrangement in refinancing operations drove the widening of EONIA spread (trading below the ECB policy rate), although other factors also played a significant role. This paper explains the drivers of spread across alternative non-crisis/crisis regimes. In addition, the paper examines how the EONIA spread reacts to shocks imposed on a range of liquidity and credit risk factors in alternative crisis/non-crisis regimes. The results have implications for factors that should be monitored closely across both regimes, and also the implications that this may have for steering an unsecured overnight rate in crisis times.     

Extensions and intensions of management control—The inclusion of health

Interest in management control of intangibles has grown remarkably during the last decades and now includes managing employee health. Research in this field is so far in the early stages: few empirical studies have been undertaken and fewer studies take into consideration the implications of such systems. In this paper we wish to contribute to the field with a qualitative study of instances of management control of health in ten Swedish organizations.Many good intentions lie behind the idea of making health and ill-health a subject for management control and the expected results are very positive—lower sick-leave rates, reduction of costs and human suffering. Such intentions stand for an intension, i.e. the ideas, properties or state of affairs that are connoted by a word or symbol, in this case what can be connoted by the concept of management control of health, its conceptual position. An intension, however, is not given insofar as a word or concept may be associated to more than one. Thus we set out to interpret management control of health in terms of two conceptual positions, modernism and postmodernism, in order to bring forth two very different intensions of management control of health: one where the practice is seen as an investment with a purpose to visualize ill-health and increase efficiency by putting in place measures to increase employee health; the other where the practice is seen as a means to make the individual accountable in order to be able to intensify control and colonize leisure.     

The Impact of Enterprises’ Shadow Banking Activities on Business Performance: A Test Based on Mediator Effect of Investment Scale and Investment Efficiency

ABSTRACT

In recent years, China’s financial sector has gradually been alienated from the real sector, allowing financial innovation and regulatory arbitrage add their own value to finance. High interest rates in the financial industry have led to changes in the real sector, revealing a trend toward “financialization” and “quasi-financialization”; a typical example of this includes nonfinancial enterprises’ shadow banking activities. In this article, we use annual data from 2004 to 2015 of A share listed companies on the Shanghai and Shenzhen Stock Exchanges, to examine the influence of nonfinancial enterprises’ shadow banking activities on business performance. The results show that, overall, enterprises’ shadow banking activity improve operating performance. In addition, from the perspective of earning structure, nonfinancial enterprises’ shadow banking business increases financial benefits, but has a significantly negative effect on operating income. Further tests show that enterprises engaged in shadow banking activities will impact operating income through the two intermediary variables of investment scale and investment efficiency. However, the negative effect of investment in crowding out operating income is greater than that of the efficiency-improving effect on operating income. This article provides policy guidance in terms of recognizing diverse aspects of shadow banking system that divorce the real economy from the financial economy.     

The Olympic Games and the Development of Social undertakings

Sociologically, the Olympic Games belongs to the entire society where every citizen should be a beneficiary from the Olympic economy. The humanistic themes and     

Comments on “The Effect of a Common Currency on the Volatility of the Extensive Margin of Trade”

In this note, we correct two typos contained in the published version of Auray et al. (2012), which affect the quantitative results, without modifying the qualitative results and then the message of the paper. In addition, we present a modified pricing rule for exported goods, and allow export prices to be sticky as well. This extension slightly improves the quantitative predictions of the model. Finally, predictions are made closer to the data when considering an alternative inflation target.     

The meaning of risk-taking – key concepts and dimensions

Dealing with and taking risks are central issues of current societies which had been characterised by heightened debates and conflicts about risk (Beck, Giddens). Even though there is good knowledge available, policies and strategies to reduce people’s risk-taking are often less successful than expected. Experts are puzzled about common people not following good advice presuming people’s lack of understanding. While this might be true in many cases a growing body of research shows, rather than being merely ignorant or misinformed, people often have good knowledge when taking risks. A growing body of research provides knowledge about the complexities, dynamics and contradictions of people’s risk-taking. However, there have been little attempts to systematise this body of knowledge. This article contributes to such an enterprise. It suggests distinguishing between different motives for risk-taking, different levels of control and a number of ways how reflexivity about risk is rooted in the social realm. It also explores how risk-taking is part of developing and protecting a valued identity. The article concludes, across different domains there is good evidence for how structural and cultural forces combine and shape risk-taking while people take risks to develop a valued identity and to protect it. Advancing expert’s understanding of risk-taking and change people’s risk-taking require considering and approaching the larger social contexts and individual risk practices in everyday life.     

The ‘Typhoon Eye Effect’: determinants of distress during the SARS epidemic

This study examined the effect of the SARS crisis on the level of distress in people both in and around epidemic areas of China during the time of the crisis. We designed a questionnaire to measure personality factors, beliefs regarding SARS, behavioral responses to SARS, and distress levels. The level of exposure to SARS was not a primary determinant of experienced anxiety; indeed, nearness to the center of the epidemic was negatively related to anxiety levels. Instead, more subjective interpretations of the situation were the primary determinants of distress. We propose a ‘Typhoon Eye Effect’ metaphor to describe the spread of psychological distress.     

The translation of accrual accounting and budgeting and the reconfiguration of public sector accountants’ identities

Under the umbrella of New Public Management (NPM) and managerialism, the last three decades have seen a widespread transformation of public sector accounting and budgeting from a cash to an accrual basis. Much of the ensuing research, however, has focused more on technical evaluations of these programmes and less on informing our knowledge of the interaction between such programmes and accountants. As public sector accountants (PSAs) are central entities in such programmes, the purpose of this paper is to focus on the reconfiguration of their identities. Using the theoretical lens of Actor-Network-Theory (ANT) and its concept of translation, this study seeks to explain how PSAs’ identities were transformed through the introduction of Accrual Output-Based Budgeting (AOBB) in two German states. Our analysis shows that the change of accounting regime was not a straightforward one, but rather involved that accountants faced particular challenges responding to several interessement devices that were used to enrol them into the new practices. We link this behaviour to a Weberian facet of the PSAs’ identity, which prevented serious project stagnancy and ‘strategies of total resistance’, but also precluded many accountants from enrolling easily into AOBB, or even developing enthusiasm. The paper suggests that several groups of accountants, rather than one, experienced different challenges in aligning with AOBB and that each assumed their compromises and investments in developing with accrual accounting.     

The Scope of Allocation—Differences in Concepts and Results

Original Papers

The Scope of Allocation—Differences in Concepts and Results     

The Authority and Charismas of Jack Ma＇s Leadership

Jack Ma is the top manager ofAli Baba group, with a strong leadership. He mixes autocratic leadership and charismatic leadership together. The powers he used are from his position, the reward system of the company and the charismas to gain his leading power. In addition, he uses his charmnas and his achievements to win the mast of the employees, which develop his leadership.     

The determinants and effects of CEO–employee pay ratios

We study the determinants and effects of the relative compensation of top executives and lower-level employees. First, we show that CEO–employee pay ratios depend on the balance of power between the CEO (relative to the board) and ordinary employees (relative to management). Second, our results suggest that employees do not perceive higher pay ratios as an inequitable outcome to be redressed via costly behaviors that lower productivity. We do not find a negative relation between relative pay and employee productivity, either in our full sample or in subsamples where employees are well-informed about executive pay and are protected against career retributions. Rather, we find that productivity increases with relative pay when the firm has fewer employees who are well-informed, and when promotion decisions are predominantly merit-based. We also find that firm value and operating performance both increase with relative pay. We conclude that ordinary employees appear to perceive an opportunity in higher pay ratios but the extent to which such perception incentivizes them depends on the likelihood of success in a series of sequential promotion tournaments.     

Are Certain Dividend Increases Predictable? The Effect of Repeated Dividend Increases on Market Returns

The authors report the findings of their study of over 400 stocks of public companies that announced at least 20 consecutive increases in their dividends during the period 1999 and 2009. With the assumption that the stock market learns to anticipate future dividend increases from current patterns, the study was designed to answer the question: How many increases does it take for the market to anticipate, and “price in,” the pattern of dividend increases? The authors report finding that abnormal returns around the first and second announcements of dividend increases are significant and positive, but are much less significant for the third and further increases. They also find that the size of the dividend increases tends to fall with more increases, and that the largest percentage dividend changes occur early in the sequence.     

Discussion of “The Characteristics and Valuation of Loss Reserves of Property Casualty Insurers”

Review of Accounting Studies -     

The relationship between bid–ask spreads and holding periods: The case of Chinese A and B shares

The Chinese stock markets for A (domestic) shares and B (foreign) shares were completely separated. This study examines the relationship between spreads and holding periods across these segmented markets on the same set of firms. Our major findings are as follows. (1) There is a positive relationship between holding periods and bid–ask spreads in the Chinese stock market. (2) Investors' sensitivity toward liquidity is approximately the same in the A and B share markets, even though bid–ask spreads are substantially different across the two markets. These results provide strong support for the theoretical argument of Amihud and Mendelson [Amihud, Y., & Mendelson, H. (1986). Asset pricing and the bid–ask spread. Journal of Financial Economics, 17, 223–249.] that stocks with higher spreads tend to be held by long-term investors. Evidence also suggests that liquidity has a role in explaining the B share discount, although the results are less than conclusive.