The externalities of credit default swaps on stock return synchronicity

We examine the externality effect of customer firms’ credit default swap (CDS) trading on the stock price informativeness of supplier firms. Our empirical results show that firms with a high proportion of sales to CDS referenced customers tend to have more firm-specific embedded information in their stock prices and thus higher stock price informativeness, which is associated with a lower level of stock return synchronicity. We provide new evidence of CDS trading externality on equity market information environments along the supply chain.     

The capital market spillover effect of product market advertising: Evidence from stock price synchronicity

We analyze whether product market advertising has a spillover effect on stock price synchronicity by transmitting firm-specific information to the capital market and attracting more investor attention. Using a sample of Chinese listed firms from 2009 to 2017, we find that firms with greater advertising expenditures have lower stock price synchronicity. The results are robust after we address endogeneity concerns. In accord with our hypothesis that product market advertising increases the amount of firm-level information capitalized into stock prices through the information channel, we find that the impact of advertising on synchronicity is more pronounced for firms with a higher degree of information asymmetry and firms in the consumer-product industry. Further tests show that product market advertising enhances the ability of current period returns to reflect future earnings, and thus rules out that the negative relationship between advertising and synchronicity is driven by noise trading. Our results imply that product market advertising plays an informative role and improves information efficiency in a capital market.     

Foreign institutional investors and stock return comovement

We investigate whether foreign institutional investors facilitate firm-specific information flow in the global market. Specifically, using annual institutional ownership data from firms across 40 countries, we find that foreign institutional ownership is negatively associated with excess stock return comovement. Our results are more pronounced when foreign institutional investors originate from common-law countries and hold a large equity stake in invested firms; and when the invested firms are located in civil-law countries. Overall, the evidence suggests that foreign institutional investors from countries with strong investor protection play an important informational role in mitigating excess stock return comovement around the world.     

Foreign institutional investors and stock return comovement

We investigate whether foreign institutional investors facilitate firm-specific information flow in the global market. Specifically, using annual institutional ownership data from firms across 40 countries, we find that foreign institutional ownership is negatively associated with excess stock return comovement. Our results are more pronounced when foreign institutional investors originate from common-law countries and hold a large equity stake in invested firms; and when the invested firms are located in civil-law countries. Overall, the evidence suggests that foreign institutional investors from countries with strong investor protection play an important informational role in mitigating excess stock return comovement around the world.     

Company visits and stock price crash risk: Evidence from China

Using a sample of Chinese listed firms, we observe that firms more visited by analysts or institutional investors exhibit lower future stock price crash risk. This effect is more pronounced for firms facing more incentives for or fewer constraints on hiding bad news. Greater mitigation of crash risk occurs if more firm-specific information is discovered during such visits and if visits are conducted by analysts instead of institutional investors. The impact of company visits is observed mostly in the first half of the subsequent year. These findings suggest that company visits mitigate crash risk by discovering and disseminating firm-specific information.     

Is Firm‐specific Return Variation a Measure of Information Efficiency?

The issue of whether firm‐specific return variation measures the private information reflected in stock returns or trading noise is controversial. Using a firm's geographic proximity to its investors as a proxy for a firm's private information, we investigate the relation between firm‐specific return variation and price informativeness. We find that firms located in metropolitan areas experience higher firm‐specific return variation and that holdings and trading by local institutional investors positively affect firm‐specific return variation. These findings suggest that higher firm‐specific return variation is indicative of more informative stock prices.     

Media Coverage and the Cross‐Section of Stock Returns: The Chinese Evidence

Using hand‐collected news headlines for a large sample of listed firms in China over a period of 2000–2015, we investigate the cross‐sectional relation between media coverage and stock returns. Our results document that no‐media coverage stocks earn 55 basis points a month higher than stocks that are featured in the media. This result is robust after controlling for common risk factors and is not driven by short‐run return reversals. Further analysis provides evidence to support the investor recognition hypothesis, suggesting that mass media may play an incremental role in providing a supplement to traditional channels of information dissemination. Therefore, results in this paper are of interests to both investors and regulators on drivers of stock returns.     

The asymmetric effect of warranty payments on firm value: The moderating role of advertising,R&D,and industry concentration

Changes in firms’ warranty payments are informative signals that enable investors to form timely expectations about potential changes in product quality. The authors’ survey shows that warranty payments affect potential investors’ product quality assessments and stock investment likelihood. Their quantitative analysis reveals an asymmetric stock market reaction: unanticipated increases in warranty payments (which signal quality “losses”) lower stock returns but unanticipated decreases do not affect stock returns. Two important factors moderate this relationship. First, boosting advertising spending attenuates the negative stock return effect of unanticipated increases in warranty payments. Second, unanticipated decreases in warranty payments, which signal quality “gains”, translate into higher stock returns when the industry has become less concentrated. Interestingly, changes in R&D spending do not moderate investors’ response to unanticipated increases or decreases in warranty payments. The authors advise firms to use advertising to lessen the harm from warranty payment increases and to strongly communicate warranty payment decreases in the face of intensified competition. The authors also caution that offering warranties in general does not ensure greater firm value as declining quality firms that myopically offer warranty programs experience lower firm value than those that do not provide warranties.     

The Relationship Between the Intensity of Competition in China’s Real Estate Industry and its Return on Equity

Does the rate of return from the Chinese real estate industry correlate with the intensity of competition among real estate firms? If China’s equity market performs efficiently, the rates of return of real estate firms should vary indirectly with their level of monopoly power. Greater monopoly power reduces earnings risk and leads to lower costs of capital. The authors analyze empirical evidence and indicate no relationship exists between returns and competition. Speculation may induce stock prices to deviate from normal values. Because normal values assume no speculation, Chinese markets are not likely to be economically efficient.     

Do XBRL filings enhance informational efficiency? Early evidence from post-earnings announcement drift

In 2009, the Securities Exchange Commission (SEC) mandated public firms to file their financial statements using eXtensible Business Reporting Language (XBRL). The SEC's main motive behind this mandate is that XBRL filings would enhance the informational efficiency in the stock markets by making financial data easier to use and analyze for a broad range of investors. Using a sample from the first wave of mandated XBRL filers, we find a decline in post earnings announcement drift for the good news portfolio in the post-XBRL adoption period. Instead of a drift associated with underreaction, we find that markets overreact to negative earnings surprises for the bad news portfolio during our observation period, which coincides with the financial crisis. We detect limited evidence that XBRL adoption mitigates overreaction, which is another form of market inefficiency. We also find limited evidence that XBRL particularly benefits small investors.     

证券市场选择是否影响公司业绩与价值?--来自中国房地产行业的经验证据

企业在不同资本市场之间的选择往往是上市过程中一个重要决策。上市地点是否会影响其后续业绩表现以及价值？文章基于中国内地房地产企业数据的研究发现,在中国香港上市的企业比在中国内地上市的企业经营业绩更优,而两者在股市价值上并无显著差别。另外,在(中国)香港上市的房地产企业中,国有企业股市价值低于非国有企业;而在中国内地上市的房地产企业中,国有企业股市价值高于非国有企业。研究结果说明,证券市场完善的监管有利于降低代理人问题,提高企业经营业绩。     

Asymmetrical reaction to US stock-return news: evidence from major stock markets based on a double-threshold model

This paper examines the hypothesis that both stock returns and volatility are asymmetrical functions of past information from the US market. By employing a double-threshold GARCH model to investigate six major index-return series, we find strong evidence supporting the asymmetrical hypothesis of stock returns. Specifically, negative news from the US market will cause a larger decline in a national stock return than an equal magnitude of good news. This holds true for the volatility series. The variance appears to be more volatile when bad news impacts the market than when good news does.     

Institutional investors,selling pressure and crash risk: Evidence from China

Inconsistent with prior literature on the US stock market, our evidence shows the negative role of institutional investors who exacerbate subsequent crash risk in China. This is because institutional ownership amplifies the selling pressure in response to firm’s bad news, which in turn leads to higher stock price crash risk. The positive relation between institutional ownership and crash risk is more (less) pronounced for transient (dedicated) institutional investors, suggesting the selling pressure of short-term investors is heavier. Additionally, competition of institutional investors strengthens institutional selling pressure and hence exacerbates the effect of institutional ownership on crash risk.     

Do Foreign Investors Promote Stock Price Efficiency in Emerging Markets?

This paper examines the role of foreign investors in promoting stock price efficiency in emerging stock markets relying on the fact that stock prices in these markets are influenced by both local and global factors. We employ a data sample of Vietnamese‐listed firms on the Ho Chi Minh City stock exchange over the period from 2006 to 2015. We utilize the panel data estimation analysis. The results show that foreign investors accelerate the incorporation of available information into local stock prices. The finding reinforces the important role of foreign investors in domestic stock markets of emerging economies.     

The preconditions for manufacturing foreign direct investment in the united states: An empirical assessment

This study used a multivariate regression analysis of industry-and firm-specific factors to determine characteristics that lead to manufacturing firms’ foreign direct investment in the United States (FDIUS). Two hundred forty firms were examined (137 investors and 103 noninvestors) from 7 countries in 10 industries during the 1984–1988 period. Firm size and overall profits were positive and significant indicators of FDIUS, but firms’ return on assets was not significant. Three industry-specific variables (prior exports to the United States, industry concentration, and technological intensity) were examined; they were generally positive but insignificant indicators of FDIUS.     

Foreign institutional investors and dividend policy: Evidence from China

This study examines whether foreign institutional investment influences firms’ dividend policies. Using data from all domestically listed nonfinancial firms in China during the period of 2003–2013, we find that foreign shareholding influences dividend decisions and vice versa.Furthermore, changes in dividend payments over time positively affect subsequent changes in foreign shareholding, but the opposite is not true. Our study indicates that foreign institutional investors do not change firms’ future dividend payments once they have made their investment choices in China. Moreover, they self-select into Chinese firms that pay high dividends. Our evidence suggests that in an institutional setting where foreign investors have tightly restricted access to local securities markets and a relatively high risk of expropriation by controlling shareholders exists, firms can use dividends to signal good investment opportunities to foreign investors.     

Information asymmetry and investor trading behavior around bond rating change announcements

This study examines stock market reactions to public announcements (corporate bond rating changes), including changes in stock prices and investor behavior in terms of trading volumes and patterns. Abnormal returns, abnormal volumes, and net order imbalances are estimated using high-quality stock transaction data from Korean firms, whose bonds were rated by Korea's leading credit rating agencies between 2000 and 2015. We find positive (negative) abnormal stock returns around upgrades (downgrades), although the stock price reactions to downgrades are more statistically significant than those to upgrades. Significant abnormal volumes and order imbalances are found around rating changes, and the extent to which each investor group (domestic individuals, domestic institutions, or foreign investors) reacts to a rating change varies. Our analyses also support that foreign and domestic institutional investors are better informed than individual investors.     

Ownership Structure and Insider Trading: Evidence from China

In this paper, we examine the information content of insider transactions in China and analyze how ownership structures shape market reaction to these transactions. We find that the cumulative abnormal return (CAR) to insider purchases is a convex function of the percentage of shares owned by the largest shareholder. Further, the CAR to insider purchases is lower when the largest shareholder is government-related, or when the control rights of the largest shareholder exceed its cash flow rights. We also find that the market reaction to insider purchases is more positive for firms audited by Big4 auditors. However, we do not find a significant relationship between an ownership structure and the market reaction to insider sales. Our results are remarkably robust to alternative model specifications, corporate insider identities, and recent corporate news releases on price-sensitive events. Finally, we show that market reaction to insider purchases is larger for firms with less severe expropriations, as captured by the use of other receivables.     

股市归零

套用“占领华尔街”运动的口号,这是万分之一或十万分之一的极少数人对剩下的绝大多数人的无耻占有。时隔10年后,中国股市回到了原点。不仅完成了上证指数2245点的10年归零,还超额了。10年问,欧美等发达经济体麻烦不断,基本上是零增长。     

Institutional Investors,Political Connections,and the Incidence of Regulatory Enforcement Against Corporate Fraud

We investigate two under-explored factors in mitigating the risk of corporate fraud and regulatory enforcement against fraud, namely institutional investors and political connections. The role of institutional investors in the effective monitoring of a firm’s management is well established in the literature. We further observe that firms that have a large proportion of their shares held by institutional investors have a lower incidence of enforcement actions against corporate fraud. The importance of political connections for enterprises, whether in a developed market such as the United States or an emerging market such as China, has been established by previous studies. However, we find evidence of another positive effect of political connections: they may reduce the incidence of enforcement action against corporate fraud. We also find that political connections play a more significant role in reducing regulatory enforcement incidents against non-state-owned enterprises and firms in weaker legal environments, whereas institutional ownership plays a more important role in reducing regulatory enforcement incidents against state-owned enterprises.