Non-Segmented Equilibria Under Differential Taxation: Evidence from the Canadian Government Bond Market

This paper investigates tax effects in the Canadian government bond market during the period 1964–1986. Unlike previous studies, we apply both statistical and nonstatistical tests to analyze clientele effects and market equilibria. The results divide the sample into two distinct periods of time, with the end of 1976 marking the division. We find that taxeffects are almost non-existent in the Canadian government bond market before the end of 1976, but are predominant in the post-1976 period. Non-segmented market equilibria cannot be rejected before 1977, but are strongly rejected after 1976. In fact, segmented equilibria with clientele effects in both quantities and prices characterize the entire five year period from 1982 to 1986. These findings are consistent with tax reforms, government deficit financing and interest rate fluctuations in Canada during our sample period.     

Government Bond Market Seasonality, Diversification, and Cointegration: International Evidence

Using government bond market data for the United States, Canada, the United Kingdom, Germany, France, and Japan, I investigate several hypotheses. Market efficiency is investigated by testing for seasonality and cointegration. The seasonality results are mixed. In regression tests, a January effect is detected in several markets (United States, Germany, France, United Kingdom, and Canada) using local currencies. However, in a nonparametric test, the January effect is supported only for France. When U.S. dollar returns are used, regression results also reveal a January effect for several markets (United States, Germany, France, and United Kingdom). These results are not confirmed by a nonparametric test. Correlation analysis shows considerable diversification opportunities for short‐term investors. Cointegration tests indicate that several of the markets share cointegrating vectors, increasing the possibilities of using other endogenous bond markets to better predict movements in a particular market.     

Bond Market Access,Credit Quality,and Capital Structure: Canadian Evidence

We examine the impact of bond market access (measured by having a credit rating) on leverage for Canadian high credit quality (HQ) and low credit quality (LQ) firms, and find that the leverage impact is more pronounced for LQ firms. The results are similar for U.S. firms. Our results are confirmed when we control for the firm's credit quality, examine the change in leverage around rating initiation, and account for the issue size effect. A similar leverage impact for Canadian and U.S. LQ firms suggests that the Canada‐U.S. bond market integration has mitigated the financial constraints for Canadian LQ firms.     

多重信用评级与债券融资成本——来自中国债券市场的经验证据

本文揭示了多重信用评级的信息生产机制和信用认证机制,排除了“信用评级购买”假说对于多重评级动机的解释,研究发现:多重信用评级有利于降低债券融资成本;相对于不一致的多重信用评级,一致的多重信用评级更有利于降低债券融资成本。在多重信用评级中,相对于评级机构均为“发行人付费”模式,兼有“投资者付费”模式的信用评级更有利于降低债券融资成本。此外,当多重信用评级的评级意见不一致时,平均评级的信息含量最高,即综合不同信用评级所包含的多种信息比任何单一信用评级更加具有信息含量。本研究为我国债券市场双评级制度提供了理论和经验证据的支持,有助于完善多元化信用评级制度和债券市场监管制度,并提示发债企业可以通过多重信用评级向市场传递更多和更具效度的评级信息,以弥补单一信用评级的信息不足和评级结果失准,减少投资者决策的不确定性,从而降低债券融资成本。     

Capital Gains Taxation and Stock Market Activity: Evidence from IPOs

Prior to the Tax Reform Act of 1986 (TRA '86), long-term capital gains were taxed at a lower rate than short-term gains, presenting investors with an opportunity to increase their after-tax return by delaying the sale of appreciated assets until after they qualified for long-term status and selling depreciated assets prior to long-term qualification. Using a sample of Initial Public Offerings, I find that stocks that appreciated prior to long-term qualification exhibit increased volume and decreased returns just after their qualification date, while stocks that depreciated prior to long-term qualification exhibit these effects just prior to their qualification date.     

Capital Market Equilibrium with Differential Taxation

This paper studies the effect of investor-specific differentialdividend taxation on the dynamics of equilibrium security pricesand allocations. In order to deal with the inherent Paretoinefficiency of such an equilibrium as well as the preclusion oftax arbitrage, we construct a continuous-time equilibrium via arepresentative investor with state-dependent utility. Investorsdiffer in their pricing of risk, inducing investor-specificconsumption-based CAPMs, with differential taxation appearing asan additional factor. The interest rate, stock price, andconsumption dynamics are also impacted. Under logarithmicpreferences, risk is transferred from the higher-taxed to thelower-taxed investor, and the interest rate decreases tocounteract extra precautionary savings against this suboptimallyshared risk. Numerical analysis reveals further tax rate,time-to-horizon, and dividend risk effects on equilibriumquantities. For most wealth allocations, the stock returnvolatility is increased above the no-tax benchmark.     

Bank Debt versus Bond Debt: Evidence from Secondary Market Prices

This paper uses a new data set of daily secondary market prices of loans to analyze the specialness of banks as monitors. Consistent with a monitoring advantage of loans over bonds, we find the secondary loan market to be informationally more efficient than the secondary bond market prior to a loan default. Specifically, we find that secondary market loan returns Granger cause secondary market bond returns prior to a loan default. In contrast, secondary market bond returns do not Granger cause secondary market loan returns prior to a loan default.     

The Pricing of Audit Services: Further Evidence from the Canadian Market

Since the seminal work of Simunic (1980), many studies have investigated audit pricing, competition in the audit industry, product differentiation and audit cost functions. This study expands on the work done to date by examining Canadian audit fees across time, audit firm and industry. The observations of audit fee data span the period of time during which the provincial codes of professional ethics with respect to fee tenders and advertising in general were relaxing in Canada. The results reported in this study support the existence of differentiated audit services in the Canadian audit market, and are consistent with DeAngelo's (1981) size interpretation of audit quality. Although no significant differences in the pricing of audit services across time are detected, the data provide evidence of significant pricing differences across (pre-merger) Big Eight audit firms in the small auditee market, suggesting that treating these audit firms as a homogeneous group in future research may not be appropriate. These inter-firm pricing differences do not appear to be due to the potential confounding effects of the auditee's industry. In contrast to previous studies, a significant positive association between internal and external audit costs is observed, suggesting a complementary, rather than a substitute, relationship.     

Cross‐Border Bank M&As and Risk: Evidence from the Bond Market

The impact of cross‐border bank M&As on bank risk remains an open question. Though geographically diversifying bank M&As have the potential to reduce the risk of bank insolvency, they also have the potential to increase that risk due to the increase in risk‐taking incentives by bank managers and stockholders following these transactions. This paper empirically investigates whether cross‐border bank M&As increase or decrease the risk of acquiring banks as captured by changes in acquirers' yield spreads. This paper also investigates how differences in the institutional environments between bidder and target countries affect changes in yield spreads following M&A announcements. The study finds that bondholders, in general, perceive cross‐border bank M&As as risk‐increasing activities, unlike domestic bank mergers. Specifically, on average, yield spreads increase by 4.13 basis points following the announcement of cross‐border M&As. This study also finds that these yield spreads are significantly affected by the differences in investor‐protection and deposit insurance environments between the transacting countries. However, the study does not find that the regulatory and supervisory environment in the home countries of the transacting parties significantly affects the changes in yield spreads. The overall evidence suggests that regulators should judge the relative environment in both the home and the host countries in evaluating the associated risks of an active multinational financial institution and in setting the sufficiency of the banks' reserve positions.     

The Shareholder Wealth Effects of Insurance Securitization: Preliminary Evidence from the Catastrophe Bond Market

Insurance securitization has long been hailed as an important tool to increase the underwriting capacity for companies exposed to catastrophe-related risks. However, global volumes of insurance securitization have remained surprisingly low to date which raises questions over its benefits. In this paper, we examine changes in the market value of insurance and reinsurance firms which announce their engagement in insurance securitization by issuing catastrophe (Cat) bonds. Consistent with the hitherto underwhelming contribution of Cat bonds to global catastrophe coverage, we do not find evidence that Cat bonds lead to strong wealth gains for shareholders in the issuing firm. More importantly, we report large variations in the distribution of wealth effects in response to the issue announcement. We show that the wealth effects for shareholders in firms which issue Cat bonds appear to be driven by explanations according to which Cat bonds offer cost savings relative to other forms of catastrophe risk management (and less by the potential of Cat bonds to hedge catastrophe risk). Thus, abnormal returns are particularly large for issues by firms which face low levels of loss uncertainty (which reduces the information acquisition costs in financial markets) as well as for issues during periods when prices for catastrophe coverage (including Cat bonds) are low.     

Joint Taxation and the Labour Supply of Married Women: Evidence from the Canadian Tax Reform of 1988*

The Canadian federal tax reform of 1988 replaced a spousal tax exemption with a non‐refundable tax credit. This reduced the‘jointness’of the tax system: after the reform, secondary earners’effective‘first dollar’marginal tax rates no longer depended on the marginal tax rates of their spouses. In practice, the effective‘first dollar’marginal tax rates faced by women with high‐income husbands were particularly reduced. Using difference‐indifference estimators, we find a significant increase in labour force participation among women married to higher‐income husbands.     

农业税减免、农业发展与地方政府行为——县级证据

本文试图检验2003-2005年中央废除农业税改革对农业发展及地方政府行为所造成的一系列影响。将这次改革视作自然实验,利用双差分方法并结合1999-2009年的县级数据,本文发现农业税的废除提高了劳均粮食产量,可解释2003-2005年粮食增长的11%;农民收支由于这次改革均有所增加,进而降低了城乡收入差别。我们的结果还显示这次改革的作用超出了农业范围并显著地影响地方政府行为:虽然获得一定数量的转移支付,但地方政府的净收入在改革后有所减少。为了弥补损失,地方政府可通过卖地提高收入,这导致了可耕地面积的降低进而在一定程度上抵消了改革的正面作用。上述发现凸显出在一般均衡框架下进行政策评估的必要性。     

Stock Returns Under High Inflation and Interest Rates: Evidence from the Brazilian Market

We analyze the relationship of high inflation and interest rates with stock returns in Brazil from May 1986 to May 2011, during which Brazil experienced subperiods of both high inflation (May 1986-June 1994) and relative monetary stability (July 1994-May 2011). The result in the total period is dominated by high inflation volatility, and the findings suggest a bidirectional relationship between stock returns and inflation. During the high-inflation subperiod, interest rates are relevant to explain future changes in inflation and stock returns. Under low inflation, movements in interest rates are better anticipated by equity investors, suggesting higher market efficiency than in high-inflation circumstances.     

Additional Evidence on Integration in the Canadian Stock Market

This paper reexamines the integration of the Canadian and U.S. stock markets in the 1977–86 period that is relatively free from capital controls. The study employs both the CAPM and the APT frameworks. Under both models, the evidence is consistent with segmentation in the 1977–81 subperiod, but supports integration in the 1982–86 subperiod. Using the APT framework, we also find that the Canadian stocks interlisted on the U.S. exchanges and NASDAQ are priced in an integrated market and segmentation is predominant for the non-interlisted Canadian stocks.     

Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market

We examine the relation between auditor characteristics (quality and tenure) and the cost of debt financing. Consistent with the hypothesis that audit characteristics are important to the capital markets, we find that (1) auditor quality and tenure are negatively and significantly related to the cost of debt financing, (2) the relation between auditor characteristics and the cost of debt is most pronounced in firms with debt that is noninvestment grade, and (3) both the insurance and information role of audits are economically significant to the cost of debt. Overall, our results suggest that, through their dual roles of providing information and insurance, auditor quality and tenure matter to capital market participants.     

可分离债券——国债市场产品创新的重要一环

一、本息分离债券的基本概况: 本息分离债券,英文简称为STRIPS(Separate Trading Registered Interestand Principal Securities).本息分离债券经常被称为零息债券,但是,从严格意义上讲,它实际上是零息债券的衍生产品.在国际上,本息分离债券是近20年来债券市场很有意义的创新之一,它的设计简单,却是实现投资组合的收益目标、对冲所面临的市场风险以及构造各种复合金融产品的非常有用的工具.     

当前我国国债市场存在的主要问题及对策建议

内1981年重新恢复发行吲债至今,我国国债市场已历经了近30年的发展历程.目前,我国国债市场已初具规模,市场化程度不断提高,但与成熟市场同家相比还存在差距,在国债市场的法律基础和监管体系、一级市场、二级市场以及财政政策与货币政策在国债市场上的协调配合等方面都存在着亟待解决的问题.对此,笔者提出了加快出台<国债法>,明确国债市场的主管部门;扩大国债发行规模,提高发行频率,完善定价机制;建立统一互联的国债市场体系,提高二级市场流动性,推出相关金融衍生产品,促进国债收益率曲线的构建和完善;推进储蓄吲债的利率市场化,用国债取代央行票据作为中央银行公开市场操作的主要工具等政策建议.     

Taxation and executive compensation: Evidence from stock options

Understanding the effects of taxes on executive compensation provides insight into the process determining this compensation and is a key input to top income tax rate policy. A 2010 tax reform in Canada, which greatly increased the effective tax rate on stock option compensation for a subset of firms, provides a natural experiment with which to address this issue. Difference-in-differences estimates suggest that this tax increase resulted in an immediate reduction in both stock option grants and the fraction of total compensation made up of stock options with limited, if any, substitution towards other components of compensation.     

Convertible Bond Issues: Evidence from Security Markets

A convertible bond (CB) is a hybrid security containing elements of both common stock and straight debt. Still, empirical investigations on CB issue announcements have failed to discern any pattern in the stock market reaction that is consistent with announcements of either common equity or straight debt issues. This study shows that (a) motives for issuing the CB and (b) its rating (and to a less extent the riskiness of the issuing firm) help explain the stock market reaction to CB issue announcements. Specifically, announcement of a CB issue with an explicitly stated motive for the use of proceeds, when coupled with a high (low) bond rating, generates a stock market response similar to a straight debt (common stock) issue. On the other hand, the preference of CB holders is dictated by the motive for the use of proceeds and the conversion premium. These findings highlight the critical importance of the motive of issue in determining reactions in both the stock and bond markets.     

政府补助、研发支出与市场价值——来自创业板高新技术企业的经验证据

基于政治关联视角,本文以创业板高新技术企业为研究对象,讨论了政府补助、研发支出和市场价值三者的关系。研究发现,创业板的高新技术企业并没有有效地将政府给予的资源投入到技术研发上,政治关联尽管能给企业带来更多的政府补助,但却反而削弱了企业的研发创新能力,未能带来企业市场价值的提高,政府资源的配置存在严重的失效。