Corporate Cash Holding in Asia

In this paper, we analyze the determinants of corporate saving in the form of changes in cash holdings for 11 Asian economies using firm‐level data from the Oriana Database for the 2002–2011 period. We find some evidence that cash flow has a positive impact on the change in cash holdings (i.e. that the cash flow sensitivity of cash is positive) and that the positive impact of cash flow on the change in cash holdings is larger and more significant in the case of smaller and presumably more constrained firms than in the case of larger and presumably less constrained firms in both developed and developing economies. Both of these findings corroborate the importance of financial constraints in Asian firms. In addition, we find that the cash flow sensitivity of cash declined after the global financial crisis and that Tobin's q has a positive impact on the change in cash holdings, especially in the case of larger and presumably unconstrained firms.     

Managerial Discretion and Task Interdependence in Teams

This study investigates whether task interdependence in teams alters the effectiveness of managerial discretion in motivating team performance. Teams are particularly useful when employees' tasks are interdependent—that is, when the degree to which the increase in team performance resulting from a team member's effort depends on the effort and skills of the other team members. The reason is that the more interdependent tasks are, the more employees need to coordinate their actions and help one another to achieve their objectives. Prior research analyzing settings where task interdependence is absent suggests that providing managers with discretion over team bonus allocation can improve team performance relative to equal team bonus allocations because it strengthens the link between contributions to team output and rewards. Economic theory suggests that managerial discretion will also improve team performance when task interdependence is present and information is efficiently used. However, we use behavioral theory to predict that managerial discretion is less effective in the presence of task interdependence, because managers do not fully incorporate all relevant information into bonus decisions and because managerial discretion hurts coordination and helping, which is particularly problematic under task interdependence. We find that while discretion over compensation has a positive effect on team performance relative to equal bonus allocation when task interdependence is absent, it has a negative effect when task interdependence is present. Additional analyses provide support for our underlying theory. Results of our study contribute to both theory and practice by suggesting that, ironically, managerial discretion may be most useful when the potential benefits of employing teams are lowest and least useful when the potential benefits are highest. Our results help explain why firms often grant managers only partial or no discretion over team members' compensation.     

Does the Creative Business Promotion Law enhance SMEs’ capital investments? Evidence from a panel dataset of unlisted SMEs in Japan

This paper examines whether the Creative Business Promotion Law (CBPL) enacted in 1995 has helped to enhance the capital investment of small and medium enterprises (SMEs) in Japan. Using a panel dataset of unlisted manufacturing SMEs in Japan, we examine their investment behavior under a marginal q model, incorporating leverage and annually constructed CBPL-approved dummies. The estimation results showed that CBPL approval substantially increased SMEs’ new investments. The positive effect of marginal q, and the negative effect of leverage were also shown, both of which were consistent with the hypothesis of the model.     

The stock market, fundamentals, cash flow, and private investment: evidence from Japan

Using Japanese postwar annual aggregate data, we examine the responsiveness of investment to three variables — asset Q (stock market), fundamentals Q (discounted future “profits”), and cash flow. We find considerable support for cash flow, but only moderate and very weak support for fundamentals Q and asset Q, respectively.Earlier work that has estimated investment equations on Japanese data spanning the entire period from the 1960s to the 1990s may therefore be plagued with specification error. When estimating the investment equations, we are careful to split the Japanese post-war period into two samples.     

Investment incentives and the relative demand for skilled labor: Evidence from accelerated depreciation policies in China

This study evaluates the effects of China's 2014 and 2015 accelerated depreciation policies on the relative demand of firms for skilled labor. We develop a simple model to explore how the policies affect the relative demand of firms for skilled labor and illustrate the roles of financing constraints and tax compliance in mediating the policy effects. We then employ a firm-level dataset from China's A-share listed companies and use a quasi-experimental design to examine the model predictions. We find that the policies significantly increase the relative demand of firms for skilled labor. The channels underlying the policy effects are that the policies generate additional cash flow for firms, stimulate investment and, thus, raise the demand of firms for skilled labor with the presence of capital–skill complementarity. We also find that the positive effects of the policies on the relative demand for skilled labor are primarily significant for firms with strong financing constraints and high tax compliance. Moreover, we document the positive effects of the policies on R&D investment, firm value added, productivity, workers' benefits, and corporate social responsibility performance, which further corroborate our main results.     

Financing and monitoring in an emerging economy: Can investment efficiency be increased?

This study investigates the influence of the financial system on firms' investment efficiency in China. For this purpose, we employ country level data of capital markets and financial institutions along with financial data from 2797 Chinese firms in the period from 1998 to 2015. The firms are priori classified into four groups, by high and low values of financial constraints and agency problems. Results show that financial development influences firms' investments positively either directly or by reducing cash flow sensitivity. The impact remains the same for all types of firms. Moreover, the financial structure has an impact on investment efficiency of firms; this result also remains the same even after controlling levels of financial development. Study contributes that capital market based financial structure impacts investment decisions by reducing financing constraints and agency issue due to its strong monitoring ability.     

Financial reform and financing constraints: Some evidence from listed Chinese firms

This paper examines the impact of recent financial reforms in China on the financing constraints and investment of publicly-listed Chinese firms. Two continuous indices are constructed to measure the evolution and intensity of financial reforms: a financial liberalization index and a capital control index. Dynamic panel GMM method is used to estimate firms' financing constraints in an Euler-equation investment model. Based on panel data of listed firms for 1996–2007, we find that large firms face no credit constraints and smaller firms display significant constraints. However, the sensitivity of large firms' investment to their cash holdings is heightened as more financial reforms take place. It appears that reforms that gradually eliminate preferential treatments to large firms, primarily state-owned enterprises (SOEs) in China, have subjected these firms' investment decisions to stricter market-based discipline and therefore raised their financing constraints. No significant change in the financing constraint is detected for smaller firms in China. This is interpreted as financial reform in China has not been substantial enough for its benefits to reach smaller firms.     

Employee Stock Option Fair‐Value Estimates: Do Managerial Discretion and Incentives Explain Accuracy?*

We examine the determinants of managers' use of discretion over employee stock option (ESO) valuation‐model inputs that determine ESO fair values. We also explore the consequences of such discretion. Firms exercise considerable discretion over all model inputs, and this discretion results in material differences in ESO fair‐value estimates. Contrary to conventional wisdom, we find that a large proportion of firms exercise value‐increasing discretion. Importantly, we find that using discretion improves predictive accuracy for about half of our sample firms. Moreover, we find that both opportunistic and informational managerial incentives together explain the accuracy of firms' ESO fair‐value estimates. Partitioning on the direction of discretion improves our understanding of managerial incentives. Our analysis confirms that financial statement readers can use mandated contextual disclosures to construct powerful ex ante predictions of ex post accuracy.     

Changing factor market conditions in South Africa: The capital market – a sectoral description of the period 1970–97

This article explores changing conditions in South African real capital markets. Noteworthy is the evidence of strong restructuring in this market during the 1990s. Whereas the 1970s and 1980s showed the best investment performance among primary commodity sectors and sectors with strong parastatal involvement, the highest investment rates of the 1990s have been associated with the manufacturing industry. We show that the real user cost of capital and capital productitivity contribute plausible determinants of investment rates in South Africa. The extent to which market forces are allowed to bring in line marginal cost and marginal return on capital appears to influence the sustainability of investment.     

Credit Ratings and CEO Risk‐Taking Incentives

This study examines the sophistication of rating agencies in incorporating managerial risk‐taking incentives into their credit risk evaluation. We measure risk‐taking incentives using two proxies: the sensitivity of managerial wealth to stock return volatility (vega) and the sensitivity of managerial wealth to stock price (delta). We find that rating agencies impound managerial risk‐taking incentives in their credit risk assessments. Assuming other things equal, a one standard deviation increase in vega (delta) will lead to an approximately one‐notch (two‐notch) rating downgrade. In addition, we evaluate the significance of credit ratings in the design of CEO compensation. Our findings suggest that rating‐troubled firms will gear down managerial incentives of risk seeking. In particular, other things equal, a rating downgrade to the lower edge of the investment category (i.e., BBB?) in the immediate prior year will bring about an approximately 51 percent reduction of vega incentive from options newly granted to the CEO in the current year. However, we find no evidence that firms' rating concerns significantly affect delta. Given the significance of credit ratings in the marketplace and their close connection to accounting, the findings of the current study advance our understanding, not only of how sophisticated rating agencies are in incorporating forward‐looking information (i.e., vega and delta) into risk assessments, but of how influential the raters are in changing firms' compensation policies. The findings also have implications on the role of accounting in constraining excessive managerial risk taking with improved disclosures on managerial compensation.     

Do Campaign Contributions and Lobbying Expenditures by Firms Create “Political” Capital?

We examine the relation between a firm’s campaign contributions and lobbying expenditures and its Tobin’s q. We follow other studies that use q to measure the value of the firm’s intangible capital (e.g., the value of advertising, R&D, or environmental performance). Researchers have found a positive and significant relation between intangible assets and q. If political capital exists, it is an intangible asset. However, we find little relation between q and political contributions, suggesting that campaign contributions may not have long term effects on political markets. This is consistent with the view that contributions are done by firms as a response to a short term opportunity not as a way of building long-term political capital.

市场结构、投资替代与资本边际产出——转轨时期我国不同省份资本边际产出的变化特征及其成因分析

本文从市场结构特征与投资结构特征两个新的视角对转轨时期我国不同发展水平省份的资本边际产出的变化特征进行了分析。在分析的过程中,首先利用所构造的指标对各个省份的资本边际产出的纵向变化轨迹进行了考察并对不同省份资本边际产出的横向差异性进行了比较,在此基础上。我们构建了解释资本边际产出变化特征及资本长期积累特征的理论模型并利用样本数据对其进行了验证,所得的基本结论如下：第一。投资结构的变化解释了转轨时期不同发展水平省份资本边际产出的趋同性特征;第二,市场结构的变化解释了各省资本边际产出在转轨后期出现的迅速下降现象;第三,以非国有和集体投资比重或更新改造投资比重增加为标志的投资结构优化有助于总投资规模的更快速增长。     

基于时间价值的工程施工合同价格价值实现差异分析

文章运用资金时间价值原理,建立了基于时间价值的工程施工合同等值结算模型,并对工程施工合同价格的价值实现差异进行了敏感性分析。通过计算分析,证明资金的时间价值是客观存在的,工程施工合同的价值实现差异程度与投资收益率、结算的次数和结算金额的大小有关,这对承包商如何加速资金周转、早日回收资金、最大限度地获取其时间价值有着重要的意义。     

The effects of credit lines on cash holdings and capital investment: Evidence from Japan

This study examines how credit lines affect corporate cash holdings and capital investment using a hand-collected data on publicly traded Japanese firms from 2006 to 2017. The study compares firms with and without credit lines to investigate the effects of credit lines. The empirical results are as follows: (1) Firms with credit lines hold smaller cash reserves than those without; (2) Firms with credit lines undertake more capital investment than those without; (3) The effects of credit lines are more amplified for financially constrained firms than their counterpart; (4) A close bank–firm relationship plays a positive role in the effect of credit lines on corporate activities.These empirical findings indicate that credit lines can improve firms’ financial flexibility and allow them to use cash holdings held for precautionary reasons to invest. The results also show that credit lines and the attendant implicit bank–firm relationships are complementary to each other. Moreover, having both credit lines and a close bank–firm relationship is important to Japanese firms for their corporate activities. Furthermore, the results imply that the use of credit lines is still relatively undeveloped in Japan, which may be a reason for the country's large corporate savings and lackluster investment.     

Constraints to the economic development of the Republic of Transkei

A number of general constraints to the economic development of less developed countries are also to be found in Transkei. They include political fragility, conflict between traditionalism and modernization, shortage of skilled manpower, lack of clearly defined economic development strategies, inappropriate economic policies, and a shortage of capital.

In addition, there are constraints particular to Transkei's development, such as recent socio‐political developments in South Africa, the absence of an organizational structure to facilitate the formulation of relevant policies, a decline in the inflow of private sector investment, and a shortage of technical and managerial expertise. The author proposes a number of principles to maximize manpower productivity in Transkei.     

Industry‐specific Exchange Rate Fluctuations,Japanese Exports and Financial Constraints: Evidence from Panel Vector Autoregressive Analysis

Using a panel vector autoregression approach and industry breakdown data for financial constraints obtained from the Bank of Japan's Tankan (Short‐Term Economic Survey of Enterprises in Japan) database, this study empirically investigates whether and how Japanese firms' financial constraints (internal and external) influence the response of Japanese sectoral exports to an exchange rate shock. Furthermore, we use the industry‐specific real effective exchange rate data developed by to allow for different movements of real effective exchange rates across industries. It is found that financial constraints have a significant influence on Japanese exports in response to exchange rate shocks. Japanese exporters with either lower internal financial constraints or external financial constraints are less affected by the yen's appreciation. In addition, if firms face high external financial constraints, only reducing the internal financial constraints cannot help them mitigate the impact of the yen's appreciation on their exports. Thus, an accommodative financial environment also plays an important role in alleviating the impact that the yen's appreciation has on Japanese exports.     

基于RAROC的我国上市商业银行经济资本配置分析

在资本约束日益严格的情形下,研究我国商业银行经济资本配置问题具有重要意义。基于2014年我国13家上市银行的相关数据,以RAROC指标为核心分析了我国上市商业银行经济资本配置的效率高低问题。研究结果显示：我国各上市商业银行风险调整后收益率的标准差水平普遍都不够理想,各类业务之间的发展均衡性不高。此外,银行各类业务发展的均衡水平与风险调整后收益率的大小匹配度不高,最终提出相关建议。     

Accounting Discretion and Managerial Conservatism: An Intertemporal Analysis*

Accounting discretion and the principle of conservatism are two salient features embedded in financial reporting systems. Arguably, the practice of conservative accounting choices can never be well understood without incorporating their effect on future periods (the intertemporal effect). This paper provides one explanation for managerial conservatism in a two‐period agency model with hidden information (a binary project type) and hidden actions (the agent's efforts). A piece‐wise linear incentive scheme with accounting earnings as the performance measure is employed. The agent's discretion is the choice of a depreciation method. Discretion is valuable if and only if the agent's marginal productivity of a “bad” project is greater than that of a “good” project, but not to an extreme degree. A conservative depreciation method decreases current compensation in exchange for a “bet” on future compensation and, hence, serves as a commitment device for the agent to signal that the prospect is indeed good. The accounting mechanism replicates the performance of the optimal direct mechanism.     

Productivity,financial constraints and outward foreign direct investment: Firm-level evidence

This paper studies the relationship between the financial constraints and outward foreign direct investment (OFDI) of Chinese enterprises. First, we construct a theoretical model and develop a series of hypotheses to analyze how productivity and financial constraints influence firms' OFDI decisions. Then we construct a multivariate index to measure internal and external financial constraints. Using Chinese Industrial Enterprises Database as well as the Database of OFDI Firms in China, our empirical finds that both productivity and financial constraints have important impacts on firms' OFDI decisions. In addition, the marginal effect of the financial constraints increases as firms' productivity rises; an effect felt more to the private enterprises than state-owned enterprises. Empirical results also indicate that external financial constraints affect the firms' OFDI decisions more greatly than the internal financial constraints.