Bidder's Gain: Evidence from Termination Returns

In most cases, bidder's stock returns around merger announcement convey more information than the synergy created from the acquisition. To overcome the interpretation problem, I study the bidder's return from the perspective of deal termination. Using a hand‐collected dataset on terminated merger proposals, I investigate termination returns in deals canceled for reasons unrelated to the bidder's stand‐alone valuation. I find that bidder's gain varies significantly with the type of target acquired. Further evidence suggests that the liquidity need of private target significantly contributes to the positive gain to the bidder.     

Ethical Commitment,Financial Performance,and Valuation: An Empirical Investigation of Korean Companies

A variety of stakeholders including investors, corporate managers, customers, suppliers, employees, researchers, and government policy makers have long been interested in the relationship between the financial performance of a corporation and its commitment to business ethics. As a subject of research, the relations between business ethics and corporate valuation has yet to be thoroughly quantified and investigated. This article is an effort to amend this inadequacy by demonstrating a statistically significant association between ethical commitment and corporate valuation measures. Consistent with anecdotal evidence, we have found a significant association between the ethical commitment of Korean companies and their valuation on the Korean stock market. However, the result reveals that the association between ethical commitment and financial performance is not significantly supported. Tae Hee Choi received Ph.D. from the Ohio State University, Ohio, USA. Presently working as Assistant Professor in accounting at the KDI School of Public Policy and Management. Research interests are business ethics, capital market, financial accounting, managerial accounting, and valuation. Jinchul Jung received Ph.D. from Kent State University, Ohio, USA. Presently working as Assistant Professor of Business Administration Department in the College of Business at Chosun University. Research interests are business ethics, family-supportive program, and organizational commitment.     

Sovereign debt crises and credit to the private sector

We use micro-level data to analyze emerging markets' private sector access to international debt markets during sovereign debt crises. We find that these crises are systematically accompanied by a decline in foreign credit to domestic private firms, both during debt renegotiations and for over two years after restructuring agreements are reached. This decline is large, statistically significant, and robust. We find that this effect is concentrated in the non-financial sector and is different for firms in the exporting and in the non-exporting sectors. We also find that the magnitude of the effect depends on the type of debt restructuring agreement.     

Mission Power and Firm Financial Performance

We estimate the effect of the mission statement on firm financial performance. The mission power, a latent construct, is included in a structural equation model to compute its impact across two channels: the profit margin and the assets turnover. Our estimates, based on a sample of Colombian companies, show that the non-significant impact of mission statement documented in the literature may be caused by the opposite effect that the amount of sales induces on both channels. We disentangle both effects and show that the effect on assets turnover dominates when mission statement compels good assets management practices.     

The Financial Performance of Ethical Investment Trusts: An Australian Perspective

This study examines whether differences in financial performance exist for investment trusts which base their portfolio selection primarily on an ethical screen, compared to indexes which incorporate a broader spectrum of investments. Results indicate that on a risk-adjusted basis there is an insignificant difference in the financial performance of these trusts against three common market benchmarks. However as to the extent of the directional effect, there does exist slightly superior financial performance by ethical trusts against their respective industry average indexes, but an underperformance against a smaller company's index and the market as a whole. The lack of a distinct advantage in the short to medium term for applying an ethical screen, may in part be due to the recent development of ethical investments in Australia. Stronger performances by older ethical investment trusts may indicate superior returns are more likely to occur over a longer term.     

公司规模、分析师选择偏差和公司市场绩效——基于收购方公司视角的研究

在对中国2769个股权收购样本进行分析后发现,分析师跟踪和收购公告日效应(短期绩效)之间呈显著负向关系,但当控制公司规模时显著性消失;进一步研究发现,这种负向关系是由分析师偏好跟踪大规模公司造成的,从而证明了中国分析师存在选择偏差.分析师跟踪和收购方公司的长期市场绩效间存在显著的正向关系,从而为分析师的长期价值发现功能提供了证据.对于中国证券分析师的选择偏差问题,本文建议用残差分析师跟踪替代分析师跟踪的原始值来解决.随着证券市场制度创新和小型公司上市成为新常态,监管部门需要规范分析师跟踪公司的规模分布,并考虑进一步放宽机构投资者的投资标的选择范围.     

A Quiet Revolution in Corporate Governance: An Examination of Voluntary Best Practice Governance Policies

This paper investigates the effects of several voluntary best practice corporate governance principles on firm performance and firm risk. Using a sample of Standard & Poor's/Toronto Stock Exchange Composite Index firms from 2003–2010, I show that firms with individual director election and detailed disclosure of voting results in director elections have a higher firm value or performance. Firms with independent chairman, majority voting, and detailed disclosure of voting results in director elections have lower idiosyncratic risk. In addition, the results from the panel regression show that detailed disclosure of voting results in director election leads to lower systematic and total risk.     

Board of Director Quality and Firm Performance

This paper aims to shed light on the relationship between the quality of the individuals on a firm's board of directors and performance. It reports the results of an empirical study of a sample of Fortune 1000 firms. The findings suggest that quality boards, as measured by the average number of board seats held by each director, are associated with quality firms, as measured by both accounting and market performance.     

Ethics and Disclosure: A Study of the Financial Performance of Firms in the Seasoned Equity Offerings Market

In this article, we examine the association between ethics and disclosure and the impact of this association on the long-term, post-issue performance of seasoned equity offerings (SEOs). We argue that firms with extensive disclosure are less likely to face information problems, and more likely to lead to an active shareholder monitoring, and therefore, engage in fewer unethical activities, such as aggressive earnings manipulation, and have better long-term, post-issue performance. Consistent with these predictions, this study presents evidence that disclosure is negatively related to unethical earnings manipulation and positively associated with long-term, post-issue performance. In particular, we find that long-term, post-issue SEO underperformance is significantly less for firms with extensive disclosure and conservative earnings management than firms with less disclosure and aggressive earnings management. We interpret this evidence to mean that over the long run, the capital market values ethical financial reporting and corporate efforts to incorporate social responsibility into their decision-making processes, for example, by enhancing information transparency through voluntary disclosure.      

Export and Firm Performance: Evidence on Productivity and Profitability of Italian Companies

Empirical research in international trade has shown that exporting firms display higher productivity than their non-exporting competitors. This paper focuses on the relation between export and profitability. Our evidence on Italian exporting firms shows that exporting activity is not systematically associated to higher firm’s profitability. This is shown both by means of non-parametric methods and, with an approach that is more standard within the empirical trade literature, by regression techniques that try to identify an “export premium”.     

Social Performance and Firm Risk: Impact of the Financial Crisis

This paper examines the impact of the recent financial crisis (2008–2009) on the relation between a firm’s risk and social performance (SP) using a sample of non-financial U.S. firms covering the period 1991–2012. We find that the relation between SP and risk is significantly different in the crisis period (post-crisis period) compared to the pre-crisis period. SP reduces volatility during the financial crisis. The risk reduction potential of SP is mainly due to the strengths component of SP. Since the relation of risk is stronger with SP strengths than SP concerns, this implies an asymmetric relation between these SP components and a firm’s risk. Specifically, strengths act as a risk reduction tool during an adverse economic environment.     

Gender Diversity in the Boardroom and Firm Financial Performance

The monitoring role performed by the board of directors is an important corporate governance control mechanism, especially in countries where external mechanisms are less well developed. The gender composition of the board can affect the quality of this monitoring role and thus the financial performance of the firm. This is part of the “business case” for female participation on boards, though arguments may also be framed in terms of ethical considerations. While the issue of board gender diversity has attracted growing research interest in recent years, most empirical results are based on U.S. data. This article adds to a growing number of non-U.S. studies by investigating the link between the gender diversity of the board and firm financial performance in Spain, a country which historically has had minimal female participation in the workforce, but which has now introduced legislation to improve equality of opportunities. We investigate the topic using panel data analysis and find that gender diversity – as measured by the percentage of women on the board and by the Blau and Shannon indices – has a positive effect on firm value and that the opposite causal relationship is not significant. Our study suggests that investors in Spain do not penalise firms which increase their female board membership and that greater gender diversity may generate economic gains.     

董事会特征与公司绩效研究 --基于民营上市公司的经验分析

董事会是公司治理结构的核心,人们普遍关心董事会特征是如何影响公司绩效的.本文利用民营上市公司2001-2003年的最新数据进行的经验分析表明,三年来董事会建设渐趋规范,而公司绩效却逐年下滑;董事长与总经理两职完全合一与公司绩效显著负相关,本文支持两职分离设置.本项研究没有发现董事会规模、董事长持股及独立董事比例对公司有正面的作用.本文认为,这个结果可能从一个侧面反映了民营公司的强控股股东弱董事会的特点.在加强董事会建设的同时,有必要进一步研究影响民营公司绩效的其他更为复杂的因素.     

Family firms and debt: Risk aversion versus risk of losing control

This study examines the effect of family management, ownership, and control on capital structure for 523 Colombian firms between 1996 and 2006. The study finds that debt levels tend to be lower for younger firms when the founder or one of his heirs acts as manager, but trends higher as the firm ages. When family involvement derives from direct and indirect ownership, the family–debt relationship is positive, consistent with the idea that external supervision accompanies higher debt levels and reduces the risk of losing control. When families are present on the board of directors (but are not in management), debt levels tend to be lower, suggesting that family directors are more risk-averse. The results stress the tradeoff between two distinct motivations that determine the capital structure of family firms: risk aversion pushes firms toward lower debt levels, but the need to finance growth without losing control makes family firms to prefer higher debt levels.     

Financial Performance of Foreign and Domestic Owned Companies in India

Foreign direct investment (FDI) is attracted into transitional economies like India for reasons like capital, technology, international markets, and managerial skills. Extant literature has focused on studying the impact of FDI inflows on financial performance at an aggregate level ignoring the differences in state regulations in industries. Further, in the case of India, the literature is confined to analysis in specific years. In this study, we examined whether foreign ownership has any impact on financial performance of firms in India over a period of time. We have conducted a pooled cross section time series analysis of 102 Indian pharmaceutical firms for the period 1998–2005. For the analysis, we used a novel, robust method of handling missing data thus making available twenty % more information than is otherwise possible. Foreign ownership is found to have a positive and statistically significant impact on the financial performance of pharmaceutical companies in India.     

Cross-border venture capital investments in Asia: Selection and exit performance

We investigate the investment behavior and exit performance of VCs that have pursued expansion outside their home locations, specifically, in Asia. Our findings indicate that, in the Asian VC markets, foreign VCs have relative advantages over local VCs in terms of size and experience while they are at a disadvantage in information collection and monitoring due to both geographic and cultural distances. When investing alone, foreign VCs are more likely to invest in more information-transparent ventures. Partnership with local VCs helps alleviate information asymmetry and monitoring problem and has positive implication for the exit performance of local entrepreneurial firms. Specifically, we find that after controlling for the endogeneity of selection, firms with both foreign and local VC partnership are about 5% more likely to successfully exit.     

Founder management and the market for corporate control for IPO firms: The moderating effect of the power structure of the firm

This study draws on agency and stewardship theory to evaluate the relationship between alternative governance regimes (founder versus non-founder CEO) adopted at the time of going public on post-IPO economic outcomes in the market for corporate control. We find that the presence of founder CEOs reduces the likelihood of post-IPO change of control but enhances target IPO firm wealth by increasing acquisition premiums. Additionally, we examine whether measures of CEO power over the board moderate the relationship between founder management and target IPO firm wealth. Our results suggest that CEO duality is the most effective instrument of CEO power available to founder CEOs to positively influence target firm wealth. Further, we find that while founder CEOs utilize power derived from CEO duality to increase acquisition premiums, non-founder CEOs use board leadership power to expropriate shareholder wealth.     

Theory and practice of corporate finance: Evidence and distinctive features in Latin America

We survey 290 LATAM firms on capital budgeting, cost of capital and capital structure issues. We analyze the results and compare them to those of other studies. We interpret differences according to special features characterizing both emerging markets and SME. We observe that LATAM firms make use of standard capital budgeting techniques, but give special weight to liquidity and capital rationing considerations. They rely less on cost of capital formal estimations; rather, they use investors' requests as their primordial input. Finally, surveyed firms are less leveraged, and inclined toward stressing the role of internal financing and minimizing payment commitments.     

Board Characteristics,Compliance, and Firm Performance: Empirical Findings from Colombia

Using data from a single database of Colombian firms, we confirmed an endogenous relationship between specific board characteristics, compliance with corporate governance guidelines, and firm performance. A board comprising experts without conflicts of interest is more likely to control ethical behavior, implement audit committees, review compliance with accepted accounting standards, and approve and control the firm’s strategic planning, all of which will lead to an improvement in firm results, and engagement and retention of higher quality board members. Conclusions have strong implications for public policy and managerial practice.