The price adjustment and lead-lag relations between stock returns: microstructure evidence from the Taiwan stock market

This paper investigates the price adjustment and lead-lag relations between returns on five size-based portfolios in the Taiwan stock market. It finds evidence that the price adjustment of small-stock portfolios is not slower than that of large-stock portfolios. Additionally, limited evidence supports a positive leading role of large-stock portfolio returns over small-stock portfolio returns. These two findings are substantially different from the results of previous research on developed markets.     

R&D, risks and overreaction in a market with the absence of the book-to-market effect

Prior studies document that the book-to-market (BM) effect is absent in the Taiwan stock market. Using Taiwanese data covering from 1991 to 2006, we show that, after controlling for the size effect and the Fama and French's (1993) risk factors, the BM effect only exists for those firms with low R&D intensity essentially because these stocks suffer less from investors’ underreaction to R&D investment. The BM effect arises primarily from fundamental reversals acting as a proxy for investors’ overreaction.     

How close a relationship does a capital market have with other such markets? The case of Taiwan from the Asian financial crisis

In assessing how far and how close the relationships are between the Taiwan capital market and other international capital markets in Asian financial case, we examine the co-movement patterns by developing the “unequal variance test”. We find that a closer relationship exists between Taiwan and Hong Kong throughout the sample period than between Taiwan and other Asian countries and the US. It thus appears that adjacent regions with similar backgrounds in terms of their capital markets will reflect price patterns that are more similar to those of Taiwan than those of countries with which Taiwan frequently trades or cooperates.     

Using uncensored communication channels to divert spam traffic

We analyze a simple, feasible improvement to the current email system using an uncensored (open) communication channel. Such a channel could be an email folder or account, to which properly tagged commercial solicitations are routed without filtering along the way. We characterize the circumstances under which senders would voluntarily move much of their spam into the open channel, leaving the traditional email channel dominated by person-to-person mail. We then show that under certain conditions all email recipients are better off when an open channel is introduced. Only recipients wanting spam will use the open channel enjoying the less disguised messages and cheaper sale prices, and for all recipients the dissatisfaction associated with both undesirable mail received and desirable mail filtered out decreases.     

Network effect and subsidiary autonomy in multinational corporations: An investigation of Taiwanese subsidiaries

Considering the lack of empirical evidence on the subsidiary autonomy of firms from Asian developing countries, which are usually smaller in size and have limited international experience, this study investigates the antecedents of subsidiary autonomy from a network perspective. We assess the range and the strength of both internal network (i.e., technological network) and external network (i.e., supplier's and distributor's networks) on subsidiary autonomy. Examining a sample of 1473 manufacturers extracted from a Taiwanese government-maintained database, we find that (1) a firm will grant less autonomy to a subsidiary with more internal network range and stronger internal network strength, and (2) a firm will grant more autonomy to a subsidiary with more external network range and stronger external network strength.     

Relative accuracy of analysts’ earnings forecasts over time: a Markov chain analysis

The main purpose of this paper is to analyze the time patterns of individual analysts’ relative accuracy ranking in earnings forecasts using a Markov chain model. Two levels of stochastic persistence are found in analysts’ relative accuracy over time. Factors underlying analysts’ performance persistence are identified and they include analyst’s length of experience, workload, and the size and growth rate of firms followed by the analyst. The strength and the composition of these factors are found to vary markedly in different industries. The findings support the general notion that analysts are heterogeneous in their accuracy in earnings forecasts and that their superior/inferior performance tends to persist over time. An analysis based on a refined measure of analysts’ forecast accuracy ranking that strips off firm-specific factors further enhances the empirical validity of the findings. These findings provide a concrete basis for researchers to further explore why and how analysts perform differently in the competitive market of investment information services.     

Can Management Turnover Restore the Financial Statement Credibility of Restating Firms? Further Evidence

This paper investigates the association between management turnover following financial restatements and the probability of subsequent restatements. We find that restating firms that replace management (CEO and/or CFO) are more likely to restate their financial statements again. We also find that subsequent restatements are mainly attributable to the new management. Overall, our results suggest that management turnover following restatements may not be an effective mechanism to remediate financial restatements, but the change to a new management results in a greater possibility of lower earnings quality (i.e., higher probability of subsequent financial restatements and accruals‐based earnings management). Our study supports prior literature's findings that the change in the top management leads to organizational instability and higher accounting information risk. Our findings have implications for internal decisionmaking with regard to top executive replacement.     

Food and the Perception of Eating: The Case of Young Taiwanese Consumers

This study explores the food perception of young Taiwanese consumers, a growing market segment in the restaurant industry. An innovative qualitative tool known as the Zaltman Metaphor Elicitation Technique (ZMET) was employed to elicit deeper thoughts and emotions of young consumers. Twelve Taiwanese from Generation Y were invited to participate in a ZMET interview where they expressed their perceptions concerning food and eating through self-collected images. The data were analyzed using constant comparative method and charted on a consensus map. Five themes have evolved from the consensus map: health, trying new food, sharing, enhancing knowledge, and happiness. Findings reveal that young Taiwanese consumers are health-conscious and have high acceptance of novel food. They perceive food as a means of enjoyment and fostering social relationships. This study has contributed additional perspectives to existing literature by revealing the function of food in enhancing knowledge, as well as unveiling the deep-seated meanings of food associated with consumer's personal relevance values. Marketing implications for the restaurant industry targeting young Taiwanese consumers are proposed.     

Price Clustering: Evidence Using Comprehensive Limit-Order Data

Employing comprehensive limit-order data which identify investor types, this paper examines the clustering pattern of limit-order prices. First, limit orders, particularly those submitted by individual investors (IIs), tend to cluster at integer and even prices. Second, nonmarketable limit-order prices cluster more than marketable limit-order prices, indicating that aggressive limit orders generally embed more information. Third, investors choosing even-priced limit orders are not penalized by lower execution ratios. Fourth, investors (particularly IIs) strategically exhibit front-running behavior. Fifth, price clustering indeed creates price barriers. Finally, the degree of price clustering using trade data is significantly underestimated, compared to that using limit-order data.