Effective allocation of financial services intensity and its impact on channel competition

We study the role of adjusting the sales intensity of financial advisers in determining investors' choice of purchasing channels and explore how banks take advantage of the “aspirations” deviation of investors to formulate the optimal strategy for making recommendations. Our research shows that the flexible allocation of financial services increases the profits of banks, but investors' surplus is often completely deprived. Interestingly, in online and offline channel competition, improving platform competitiveness may lead to increased, rather than decreased, profitability for banks. Moreover, with completely heterogeneous investors, strategic outcomes can be significantly different under the perception coefficient of different dispersion degree.     

Environmental transparency and investors' risk perception: Cross-country evidence on multinational corporations' sustainability practices and cost of equity

We explore whether a greater amount of environmental disclosure can reduce a firm's ex ante cost of equity. This could occur because the quantity of environmental information changes investors' risk perception of the company, thereby influencing its ex ante cost of equity. Our study is a cross-country analysis of 1481 multinational corporations (MNCs) across 43 countries and territories from 2013 to 2019. Firstly, we measure investors' risk perception as a firm's ex ante cost of equity by employing five different valuation models, all based on equity analysts' forecasted data. We then investigate whether large quantities of environmental information disclosed by an MNC affect its ex ante cost of equity. We find evidence that investors price the amount of environmental disclosure. More environmental disclosure decreases a firm's ex ante cost of equity because it lessens investors' information asymmetry. However, this relationship is non-linear. Once the amount of environmental disclosure data exceeds a certain threshold level, a firm's ex ante cost of equity will rise again. Our empirical results also suggest that non-financial factors at the country level play a role in shaping how investors perceive a firm's riskiness. Locating the firm in a country with better environmental performance and a higher score of the human development index can reduce investors' risk perception and result in a lower ex ante cost of equity. A policy implication of our findings is that a global standardised and effective corporate sustainability reporting is needed to provide investors a more holistic view for evaluating the riskiness of their investments.     

Institutional investors' corporate site visits and aggressive financial reporting

This paper investigates the impact of institutional investors' corporate site visits on financial reporting aggressiveness. While prior research has shed light on the monitoring impact of institutional shareholding on firms' financial reporting practices, institutional investors' preference regarding financial reporting remains unclear. Using a sample of Chinese firms listed on the Shenzhen Stock Exchange from 2012 to 2019, we find that institutional investors' on-site visits significantly increase financial reporting aggressiveness of hosting firms. The on-site visit effect is more salient in firms that are more sensitive to the influence of institutional investors, for example, firms with a less powerful chief executive officer, financially constrained firms, and firms operating in competitive industries. Our study highlights that under a setting of weak minority shareholder protection such as in China, managers are likely to recognize revenue aggressively to please powerful shareholders who paid intensive attention to them.     

How does investors' heterogeneous trust affect the complexity of financial products? A look into the development of online finance

We introduce “trusting effects” to market complexity strategy and, through modeling, measure the decision‐making behavior of financial institutions' complexity choices as online and offline finance develops into different stages. We find that the complexity of financial products is not only determined by the intrinsic value and structure of products but also largely influenced by the behavior of investors. In addition, the characteristics of financial institutions, as well as different investor structures, also affect the complexity of the products and the equilibrium. Therefore, financial institutions attempt to exploit investors' biases and cognitive limitations through complexity strategies and ultimately obtain excess returns.     

Media Content,Accounting Quality,and Liquidity Volatility

We examine how the linguistic content of news items affects the volatility of a firm's liquidity, and we consider whether accounting quality moderates the media content-liquidity volatility relation. Regarding the unconditional relation between media content and liquidity volatility, one view is media content could reduce liquidity volatility by providing additional information about fundamental values; another view is it could increase liquidity volatility by increasing investor uncertainty, particularly for negative news. Using data from Thomson Reuters News Analytics, we find evidence supporting the view that media content, positive and negative, has incremental information. Regarding the moderating role of accounting quality, pre-existing accounting information of higher quality could enhance investors' reactions to media content by providing a more precise baseline, or it could reduce investors' reactions to the news if investors anchor on higher quality financial statements. Our findings are consistent with more credible accounting information serving an anchor role, and suggest that investors condition their reaction to media content based on the quality of a firm's pre-existing accounting information.     

Do institutional investors monitor management? Evidence from the relationship between institutional ownership and capital structure

We examine the dynamic relations between institutional ownership and a firm's capital structure. We find that a firm's leverage decreases when institutional ownership increases. This result implies that a firm reduces its debt level as institutional investors substitute for the monitoring role of debt. More importantly, we find that a firm's suboptimal leverage decreases when the institutional ownership increases, and institutional ownership decreases when a firm's suboptimal leverage increases. This finding shows that institutions not only effectively monitor a firm's capital structure but they also passively sell their shares when dissatisfied with it. In addition, we find that the monitoring evidence on a firm's leverage and suboptimal leverage are more pronounced when the institutional investors are less likely to have business relationships with a firm or the information asymmetry is high in the market.     

Institutional investors’ ownership stability and their investee firms’ equity mispricing

This study examines the impact of institutional investors' equity ownership stability and their investment horizon to determine the impact on their investee firms' equity mispricing. Mispricing represents the difference between a firm’s market and fundamental values. We treat institutional investors as a heterogenous group, i.e., dedicated, transient, or quasi-indexer as defined by Bushee, 1998, Bushee, 2001 since their categorization determines their trading strategy. Higher institutional ownership, higher stability in institutional investors' equity ownership, and institutional investors classified as long-term are all associated with lower equity mispricing at investee firms.     

Firm Characteristics and the Pricing of Foreign Earnings of US Multinational Firms

Prior research finds a positive relation between current changes in foreign earnings of USmultinational firms and future stock returns. The cause of this relation is either (1) investors' mispricing of securities by underestimating the persistence of foreign earnings or (2) research design misspecifications (e.g., the researcher failing to control for cross‐sectional differences in risk). The purpose of this study is to determine which of these two competing explanations is more likely. If the anomalous results are due to market mispricing, then the anomalous results should be more pronounced for firms that are followed by fewer well‐informed, sophisticated investors and for firms that have foreign earnings that are more persistent than domestic earnings. If the anomaly is related to research design misspecification, then the existence of the anomaly is not expected to vary across these firm characteristics. The results are more consistent with the market mispricing hypothesis. Predicting the existence of the foreign earnings anomaly based on these firm‐specific characteristics increases our understanding of the true nature of the anomaly. In addition, relating the foreign earnings anomaly to firm‐specific characteristics provides relevant information to investors for firm valuation and helps to promote future academic research in the market's valuation of multinational firms' operations.     

The impact of investor structure on stock price crash sensitivity: Evidence from China's stock market

Stock price crash sensitivity refers to the conditional probability of a stock crash when the market collapses. It focuses on individual stocks' sensitivity to the market crash and can affect stock pricing significantly. Although the crash sensitivity of China's stock market is very high as a whole (Weigert, 2016), different individual stocks show varying degrees of crash sensitivity. This paper, adopting the perspective of institutional investors, explores the reasons for the difference in crash sensitivity in China's stock market, and finds that: First, institutional investors' shareholdings is positively related to firms' stock price crash sensitivity. However, after dividing institutional investors into professional (represented by financial institutions) and non-professional institutional investors (represented by general legal persons), we find that only professional institutional investors' shareholdings is negatively related to firms' stock price crash sensitivity. Second, the impact of professional institutional investors on the crash sensitivity is influenced by stock liquidity and media sentiment: when the stock liquidity of listed companies is good or the media sentiment is strong, the negative impact of professional institutional investors on the crash sensitivity is accordingly high. This paper, by highlighting the investor structure, attempts a pioneering exploration of the influencing factors of the difference in stock price crash sensitivity in China. Our empirical results enrich research on stock price crash sensitivity and the heterogeneity of institutional investors. They can also serve to guide regulatory authorities' development of institutional investors and efforts to maintain market stability.     

The Role of Information in Building Reputation in an Investment/Trust Game

This article analyses the role of information in building reputation in an investment/trust game. The model allows for information asymmetry in a finitely repeated sender–receiver game and solves for sequential equilibrium to show that if there are some trustworthy managers who always disclose their private information and choose to return a fair proportion of the firm's income as dividend to the investor, then a rational manager will mimic such behaviour in an attempt to earn a reputation for being trustworthy. The rational manager will mimic with probability 1 in the early periods of the game. The investor, too, will invest with probability 1 in these periods. However, in the later periods, the rational manager will mimic with a certain probability strictly less than 1. The probability will be such that it will make the investor indifferent between investing and not investing, and he, in turn, will invest with a probability (strictly less than 1) that will make the rational manager indifferent between mimicking and not mimicking; that is, the game will begin with pure-strategy play but will switch to mixed-strategy play. There is one exception, though: when the investor's ex ante beliefs about the manager's trustworthiness are exceptionally high, the game will continue in a pure strategy, and the switch to mixed-strategy play will never occur. Identical results obtain if the manager's choice of whether to share his private information with the investor is replaced by exogenously imposed information sharing.     

Recessionary actions and absence: A workplace-level study

Actions such as work restructuring and wage and employment freezes taken by organizations in response to recessions are widely assumed to decrease employees' job security and detrimentally affect perceptions of management's trustworthiness. We assess whether these effects occur and if, in turn, they affect workplace absenteeism. Using data from Britain's Workplace Employee Relations Survey 2011, we show that the effects on stress-based absence are limited and not as predicted, but the effects on withdrawal-based absence are strong and as predicted. Reductions in well-being or job security's effect on well-being did not affect absence, and while the reduction of trust perceptions' effect was to increase anxiety, anxiety did not increase but reduced absenteeism. The effects on withdrawal absence differ: those of recessionary action through job security reduce absenteeism, while those through trust perceptions increase it, both as predicted. The two effects involving trust perceptions are less pronounced when recessionary actions are accompanied by voluntary layoffs, but not by compulsory layoffs. The implications for management are that they should be more conscious of the effects on absence when planning recessionary actions, and more generally their effects on presenteeism.     

机构投资者持股、产品市场竞争与上市公司违规治理

以2007—2020年的A股上市公司作为研究样本，实证检验机构投资者持股对上市公司违规的影响。研究发现：机构投资者持股比例越高，上市公司违规可能性越低，且违规频率越少；机构投资者持股与产品市场竞争存在互补效应，产品市场竞争强化了机构投资者持股对上市公司的违规倾向与违规频率的治理效应。研究结论为完善公司治理和解决上市公司违规问题提供了借鉴。     

Temporal Orientation and Corporate Social Responsibility: Global Evidence

There has been a growing emphasis on the importance of a long-term perspective in academia and practice. Yet understanding of the interdependency of those factors – the temporal preferences embedded in organizations and in societal values as well as the influence of temporal orientation of investors – remains limited. We theorize whether and how a firm's corporate social responsibility (CSR) is affected by the societal temporal orientation, its time horizon, and its investors' time horizon. Using a global sample, we confirm that CSR activity is higher when a country has a long-term orientation culture, when the firm has a long-time horizon, and when the controlling institutional investor has a long-term investment horizon. We also find that the national culture's long-term orientation heightens the effect of a firm's long-time horizon on its CSR. Further, our results show that the effects of temporal orientation are more pronounced in environmental than in social CSR.     

Editorial: Trust and HRM: Current insights and future directions

Over the last 20 years, HRM has been identified as one of the most influential organisational contexts in which to explore trust, and yet scholars have been slow to look systematically at both the systems and practices that underlie this assertion. Organisations make choices regarding both the design and implementation of HRM policies and practices, with research considering the impact on trust for both key single policy areas and bundles of policies. We outline the previous dominance on teleological approaches compared with a dearth of more deontological perspectives which would highlight moral and ethical considerations implicit in definitions of trustworthiness. We review the contribution of five new articles to further our understanding of trust and HRM and identify future research and practice agendas.     

Multinationals and human resource practices in Ireland: a rejection of the 'new conformance thesis': a reply

This paper reports on a study of 398 people employed in two UK service organizations: a hospital and two divisions of a high street bank. The main purpose of the study was to determine the degree to which dispositional factors (predisposition to trust and trait anxiety) and situational factors (seven aspects of the job environment) predicted a person's reported trust in their managers. Two types of managers were investigated: a person's immediate line manager and ‘senior managers in their industry’. It was hypothesized that the dispositional factors would have a greater influence on trust in managers in the industry and that situational factors would have a greater influence on trust in one's immediate line manager. The first hypothesis was supported, but the second was not. It was found that trust in both types of managers was best predicted by a combination of general disposition to trust (not trait anxiety) and situational factors: five of the seven situational factors had a role in predicting intention to trust. This reflects the complexity involved in predicting trust at work and the managerial challenge of creating a trusting culture.     

Informal investors - A categorization,with policy implications

A number of studies concerning informal investors have been carried out over the last two decades. One main conclusion from previous research has been that the informal venture capital market is very heterogeneous, and that classifications for informal investors are needed in order to more accurately depict the informal venture capital market. In this paper we propose that the market could be divided in accordance with the informal investors' investment activity and competence. The study is based on a sample of 425 active informal investors, divided into four different categories: (1) Lotto investors; (2) Traders; (3) Analytical investors; and (4) Business angels. The empirical findings show that there are considerable differences between the four categories of informal investors; differences regarding the information sources used, the level of firm involvement, co-investing, investment horizons, and geographic preferences, to name some examples. As a consequence, each of the various informal investor types responds differently to private and public prospects or motivators. It is suggested, therefore, that the informal venture capital market could be more effectively analysed and depicted by using the proposed classifications and applying differing measures to each informal investor category.     

To whom are IAS earnings informative? Domestic versus foreign shareholders' perspectives

Using a sample from the Helsinki Stock Exchange, this paper analyses the information content of dual disclosures of IAS (International Accounting Standards) and LAS (Local Accounting Standards) earnings. Their information content to foreign and domestic shareholders can be distinguished from each other as the unrestricted shares (available to foreign and domestic investors) and the restricted shares (available to domestic investors only) of the same set of companies were listed separately during 198492. The information content is tested with regressions using market-adjusted stock returns measured from the fifty-week period ending in the week of financial statements release. The overall findings suggest that restating local GAAP earnings according to the IAS helps to meet foreign investors' information needs, but is of limited use to domestic investors.     

互联网基金对股票市场的影响——基于大数据情绪指数的实证研究

投资者在进行投资决策时易受到自身情绪的影响，并且投资者行为是影响金融市场间波动溢出的直接原因。运用文本挖掘技术对新浪微博2014年4月至2016年7月的博文进行文本分析和随机森林主成分分析并构建微博大数据投资者情绪指数，根据投资者情绪指数研究互联网基金市场对股票市场的影响，结果表明互联网基金市场对股票市场具有波动溢出效应。     

When do retail investors pay attention to their trading platforms?

Buying and selling securities through online trading platforms has become increasingly popular among U.S. households in recent years. This study tracks U.S. households' attention to their online trading platforms using daily data for 2004 to August 2017. The analysis covers the 10 most popular online trading platforms among U.S. investors. The findings indicate that market shocks, captured by several proxies, as well as macroeconomic announcements attract investors' attention to trading platforms. We also document that the ostrich effect weakens when considering greater changes in the VIX. Our findings do not support the avoidance of information theory, but do support the theoretical argument that risk-averse agents engage in more information gathering when uncertainty prevails in hopes of reducing their risks.     

An optimal-incentive contract for managers with exponential utility

This paper examines the manager–investor relationship in the case of exponential utility when the manager of investments in real or financial assets has an endowment which can be invested in the risky assets for which he has private information. We obtain a relationship showing trade-offs or hedging behavior among the investments the manager can choose for himself and the principal. Even with the hedging ability of the manager, the well-known first-best solution with ‘no moral hazard’ risk-sharing is obtained among these possible solutions to the manager's problem by specifying a ‘no conflict of interest’, zero investment by the manager of his own endowment in those risky assets for which he has private information. Thus, the agent imputes no disutility to the assignment of the principal's investments and the investor is assured of an investment strategy that he would make if he had access to the manager's private information.