Bank shareholding and corporate cash management: Evidence from China

We study the effect of bank shareholding on corporate cash management in China. We document that for state-owned enterprises (SOEs) with some of their shares owned by banks, the market value of cash holdings is less, and the overinvestment of free cash flow is more than those SOEs without bank shareholding. For non-SOEs, we do not find such an adverse impact. We also find that the adverse impact of bank shareholding is confined to state-owned banks owning SOE shares and stronger for pyramidal structure than those of non-pyramidal structure SOEs. The Chinese environment offers lessons that can help other emerging markets to review their bank shareholding regulations.     

Unbundling Ownership and Control

We study control contests under asymmetric information. Using a mechanism design approach, we fully characterize the optimal control contest mechanism. The optimal mechanism requires increasing the number of shares owned by the incumbent insider if he remains in control, while giving him a golden parachute that includes both shares and cash if he is deposed. The model underscores a novel explanation for the prevalence and persistence of the separation of ownership from control: efficiency in control contests is more easily achieved when ownership of cash flow rights is not concentrated in the hands of insiders.     

Managing Underpricing? The Case of Pre‐IPO Discretionary Accruals in China

Previous studies have found that companies use income‐increasing positive discretionary accruals (DAC) prior to initial public offerings (IPOs) to inflate earnings as a signal to anticipate future income and future dividends. This study, directly explores the role of DAC in prospectus information of 691 A‐shares IPOs in China during the period 1995–2002 and its relationship with market‐adjusted returns. The results suggest that in China, pre‐IPO non‐discretionary accruals (NDAC) as well as DAC have informative value in explaining first‐day returns as well as first‐year adjusted returns. However, in yearly cross‐sectional models, I find that firms use income‐decreasing accruals (conservative accounting) in prospectus financial statements. This downward manipulation or income “understatement” creates a regulatory setting that could explain initial underpricing and abnormally high IPO returns for A‐shares. In addition, the results show that as state ownership (SO) increases, cash flow also increases, exacerbating agency costs and adverse selection problems. These findings may suggest that managers might be using more conservative accounting in Prospectus financial data to offset the agency costs related to high cash flow, and high SO, by “banking income” and possibly therefore “smoothing” the effects of possible future suboptimal earnings.     

The discourse of inflation accounting

The value of a share is given by the dividend discount model as a simple function of future dividends; but the actual determination of the share price is rarely based upon the direct estimation of these future dividends. A ranking of the valuation models used by analysts and fund managers shows a preference for ‘unsophisticated’ valuation using, for example, the dividend yield rather than the dividend discount model. This finding is shown to depend upon the practical difficulty of using currently-available information to forecast future cash flows. This difficulty limits the quantitative basis of valuations to short forecast horizons, while the subjective, qualitative estimation of terminal value assumes great importance. Crucially, both analysts and fund managers use their own assessment of management quality to underpin the estimation of terminal value, on the basis that superior quality causes outperformance and that, whereas management quality can be assessed now, future performance itself is unobservable. Linked with this and with information asymmetry, valuation is a dynamic, company-specific process, focused on personal communication with management and embodying ongoing signalling and implicit contracting, using both dividends and other variables. This method of valuation causes formal valuation models such as the dividend yield to play only a limited role. They offer a benchmark of relative price differences, which serves as a basis from which to conduct subjective, company-specific analysis and to make investment decisions; but valuation models are not used exclusively, in themselves, to value shares.     

Do Analysts Strategically Employ Cash Flow Forecast Revisions to Offset Negative Earnings Forecast Revisions?

We investigate whether analysts use cash flow forecasts to reduce the impact of earnings forecast revisions (EFRs) on market participants. In particular, we focus on conflict between an analyst's concurrent cash flow and earnings forecast revisions. We hypothesize and find that analysts are more likely to issue a positive cash flow forecast revision when they issue a negative earnings forecast revision concurrently, but not the opposite, particularly for Fortune 500 firms. Furthermore, our supplementary analyses suggest that (1) some analysts optimistically bias cash flow forecasts when they issue negative earnings forecast revisions; (2) the market pays less attention to the historical accuracy of analyst cash flow forecasts, so analysts have some latitude to present their cash flow forecasts in an optimistic way; and (3) the market reacts mainly to the direction, not the magnitude, of cash flow forecast revisions. Overall, these findings suggest that analysts may strategically use cash flow forecasts in conjunction with earnings forecasts to maintain good management relationships.     

上市公司现金股利分配情况分析

本文以2001年证监会发布的《上市公司新股发行管理办法》为起点,对我国A股上市公司2001￣2005年度现金股利分配情况从数量和质量两个方面进行了分析。结果表明,2002年以后由于政策性和公司自身原因,派现上市公司所占比率出现小幅回落;A股上市公司在收益质量不高的情况下,明显存在超能力派现的现象。而股票获利率高于无风险利率水平的公司比率上升,是理性表现。     

Value-Driving Activities in Euro-Zone Banks

We develop and test accounting-based valuation models for commercial banks. We extend Begley et al.'s framework (2006) and propose a valuation model where goodwill is generated by virtually all commercial and investment banking activities. Key features of our model are: the development of a relation between future cash flows from fee income and the bank value that depends on lending, borrowing and off-balance sheet business; and the inclusion of proprietary investment and trading as value-driving activities. Empirical tests on a sample of Euro-zone banks from 1998 to 2006 provide the following evidence. Unrealised expected cash flows from fee income are the most important source of unrecorded goodwill. This is consistent with the increasing importance of revenue from the sale of financial services to banks' income. The contribution of fee income to goodwill is higher for banks with large deposits and new loans. Equity securities are a source of unrecorded goodwill, but the introduction of fair value accounting, with the adoption of the International Financial Reporting Standards (IFRS), reduces their valuation role. Yet equity securities remain positively associated with unrecorded goodwill after IFRS adoption, suggesting that the fair value standards do not fully capture market expectations about future cash flows of investment assets.     

Hidden group patterns in democracy developments: Bayesian inference for grouped heterogeneity

We propose a nonparametric Bayesian approach to estimate time‐varying grouped patterns of heterogeneity in linear panel data models. Unlike the classical approach in Bonhomme and Manresa (Econometrica, 2015, 83, 1147–1184), our approach can accommodate selection of the optimal number of groups and model estimation jointly, and also be readily extended to quantify uncertainties in the estimated group structure. Our proposed approach performs well in Monte Carlo simulations. Using our approach, we successfully replicate the estimated relationship between income and democracy in Bonhomme and Manresa and the group characteristics when we use the same number of groups. Furthermore, we find that the optimal number of groups could depend on model specifications on heteroskedasticity and discuss ways to choose models in practice.     

制度环境、控制权私利与流通权价值——来自我国上市公司股权分置改革的证据

文章借助我国上市公司的股权分置改革事件,运用控制权私利理论,分析了经济制度对流通权价值的影响。控制性股份的价值由现金流量的要求权和控制权私利两部分构成。流通性的提高总是能够提高现金流量权的价值,但由于控制权的专有性,上市流通对控制权价值的影响条件依存于控制权私利的大小。控制权私利越大,上市流通对控制性股份的价值的影响越小,从而控股股东愿意支付的对价越低。将经济制度作为公司控制权私利的外生决定变量,实证检验的结果与上述预期相符。     

Acquirer Characteristics and Method of Payment: Evidence from Chinese Mergers and Acquisitions

This study examines the effects of acquirer characteristics on method of payment of Chinese acquirers on the basis of a sample of 1370 mergers and acquisitions that occurred between 1998 and 2008. Using both buy and hold abnormal returns and calendar time abnormal returns approaches, we find that Chinese acquirers experience pre‐acquisition abnormal returns ranging from 14.29% to 121% over the period of 12–36 months prior to the acquisition relative to three different portfolio benchmarks. In the pre‐bid period, acquisitions financed by shares outperform acquisitions financed by cash. However, in the post‐acquisition period, we document no significant difference between cash‐financed and equity‐financed acquisitions. The study also finds that acquirer market value, Tobin's Q, state ownership and leverage have significant effects on the method of payment. Copyright © 2013 John Wiley & Sons, Ltd.     

A Strategic Approach to Software Protection*

This paper demonstrates that there is a strategic reason why software firms have followed consumers' desire to drop software protection. We analyze software protection policies in a price-setting duopoly software industry selling differentiated software packages, where consumers' preference for particular software is affected by the number of other consumers who (legally or illegally) use the same software. Increasing network effects make software more attractive to consumers, thereby enabling firms to raise prices. However, it also generates a competitive effect resulting from feircer competition for market shares. We show that when network effects are strong, unprotecting is an equilibrium for a noncooperative industry.     

股权分置改革对公司股权融资偏好的影响——以青岛海尔为例

本文以青岛海尔为例,分析了上市公司在股权分置改革前后基于股权融资偏好假说融资方式的变化。股改前,由于股权分割导致流通股和非流通股的获利机制不同,通过股权融资获取超额收益和套取现金成了非流通大股东的重要获利方式,因此,上市公司的再融资决策基本是随股权融资政策的变化而变化,债务融资和内源融资成了股权融资的附属和补充;股改后,大股东和中小股东利益趋同,以前的股权融资超额收益也在逐步消失,大股东利益格局的变化以及证券市场的规范化正逐步促使上市企业的融资决策理性化和多样化。     

Cameral accounting and cash flow reporting: some implications for use of the direct or indirect method

The most thoroughly debated format issue in designing a cash flow statement for a business enterprise concerns use ofthe direct or indirectmethod when reporting cash from operating activities. The article argues that the reason why we cannot solve this dilemma of using the direct or indirect method is related to the fact that our discussion is limited to using the axiom of double-entry bookkeeping within commercial accounting. In this article, however, the discussion of whether to use the direct or indirect method is not limited to commercial double-entry bookkeeping; it is also based upon another accounting framework, specifically designed to deal with cash transactions of governmental organizations: single-entry cameral accounting. The article argues that commercial accounting could learn from cameral accounting, separating cash from non-cash balance sheet changes, and directly prepare a cash flow statement from the single-entries of the cash transactions on the cash account, before they are entered into the double-entry bookkeeping system, to provide a performance result (revenues minus expenses) and related balance sheet information (assets, liabilities and equity). By applying this procedure, the direct method of preparing a cash flow statement becomes the natural method to use.     

The Effect of Founding Family Influence on Firm Value and Corporate Governance

We examined a sample of 120 Norwegian, founding family controlled and non‐founding family controlled firms, to address two important research questions: (1) is founding family control associated with higher firm value; and (2) are there unique corporate governance conditions under which a founding family controlled firm can be more valuable? We find a positive association between founding family control and firm value for four alternative definitions of founding family control. We find that the association between founding family CEOs and firm value is stronger among younger firms, firms with smaller boards, and firms with a single class of shares. However, the impact of founding family directors on firm value is not affected by corporate governance conditions such as firm age, board independence, and number of share classes. We also find that the relation between founding family ownership and firm value is greater among older firms, firms with larger boards, and particularly when these firms have multiple classes of shares. Our results imply that founding family controlled firms are more valuable and governed differently than firms without such influence. Furthermore, our results also suggest that founding family CEOs can enhance firm performance when family influence does not create shareholder entrenchment or when their cash flow rights are more aligned with their control rights.     

中国上市公司现金股利利益侵占效应分析

流通股与非流通股的股权结构安排使得中国上市公司的现金股利具有利益侵占效应,即非流通股股东因无法获得股价上涨的收益而追求高额现金股利。非流通股股东较低的初始投资成本进一步增强了其对高额现金股利的偏好。但相对来说,现金股利只是一种较弱的利益侵占方式,并且现金股利支付将增大上市公司的盈余管理难度,因此,证监会将现金股利支付作为再融资门槛的重要参数有其合理性。     

Parametric and semi-parametric modelling of vacation expenditures

We analyse several limited dependent variable models explaining the budget share that Dutch families spend on vacations. To take account of the substantial number of zero shares, two types of models are used. The first is the single-equation censored regression model. We estimate and test several parametric and semi-parametric extensions of the Tobit model. Second, we consider two-equation models, in which the participation decision and the decision on the amount to spend are treated separately. The first decision is modelled as a binary choice model; the second as a conditional regression. We estimate and test parametric and semi-parametric specifications.     

The Valuation-relevance of Earnings and Cash Flows: an International Perspective

We investigate which variable, earnings or cash flows, provides greater information for equity valuation within the United States, the United Kingdom, Canada, Germany, and Japan. We regress returns on earnings and cash flow metrics. We generally find earnings developed in three Anglo-Saxon countries—where capital is traditionally raised in public markets and reporting rules are unencumbered by taxation requirements—to have greater explanatory power for stock returns than cash flow metrics. Conversely, in two non-Anglo-Saxon countries—where capital is traditionally raised from private sources—earnings are generally not superior to cash flows for equity valuation, except in Japan, non-consolidated sample. While sensitivity analyses generally support the conclusions of our primary tests, in some of the additional analyses, earnings were superior to cash flows for samples from all countries. As expected, in all countries earnings have incremental information content over cash flows in explaining returns. Collectively, our findings provide two contributions. First, we generalize the findings of prior US research by showing that earnings are more important than cash flows for equity valuation in other Anglo-Saxon countries. Second and more importantly, our findings demonstrate that the superiority of earnings over cash flows is not universal. Rather, it depends on the national reporting regime and attendant institutional factors.     

Forecasting ATM cash demands using a local learning model of cerebellar associative memory network

Forecasting cash demands at automatic teller machines (ATMs) is challenging, due to the heteroskedastic nature of such time series. Conventional global learning computational intelligence (CI) models, with their generalized learning behaviors, may not capture the complex dynamics and time-varying characteristics of such real-life time series data efficiently. In this paper, we propose to use a novel local learning model of the pseudo self-evolving cerebellar model articulation controller (PSECMAC) associative memory network to produce accurate forecasts of ATM cash demands. As a computational model of the human cerebellum, our model can incorporate local learning to effectively model the complex dynamics of heteroskedastic time series. We evaluated the forecasting performance of our PSECMAC model against the performances of current established CI and regression models using the NN5 competition dataset of 111 empirical daily ATM cash withdrawal series. The evaluation results show that the forecasting capability of our PSECMAC model exceeds that of the benchmark local and global-learning based models.     

Wider economic impacts of heavy flooding in Germany: a non-linear programming approach

Wider economic impacts of heavy flooding in Germany: a non-linear programming approach. Spatial Economic Analysis. This paper further develops a new methodology to estimate the wider, indirect impacts of major disasters, and applies it to the 2013 heavy flooding of southern and eastern Germany. We model the attempts of economic actors to continue their usual activities, as closely as possible, by minimizing the information gain between the pre- and post-disaster pattern of economic transactions of the economy at hand. Findings show that government support of local final demand substantially reduces the indirect losses of the floods, while having a disaster at the top of the business cycle increases them. Moreover, we find that assuming fixed trade origin shares and fixed industry market shares, as in all multiregional input–output models, leads to implausibly large estimates of the indirect losses.     

股权二元结构下的股利政策--一种新的代理成本理论

本文基于股权二元结构建立了新的代理成本理论,发现并度量了分配现金股利的“再分配效应”——导致价值在流通股与非流通股之间转移,说明分配现金股利可能是大股东对流通股股东的掠夺行为。再分配效应揭示了股权二元结构的缺陷,有助于解释股利分配的一些实证现象,为现金股利的“利益输送”假说提供了理论基础。本文提出的配股一分红策略可以实现非流通股间接上市的目的。