<Emphasis Type="Italic">Guanxi</Emphasis> and Business Ethics in Confucian Society Today: An Empirical Case Study in Taiwan

Guanxi, or social networks common in Confucian cultures, has long been recognized as one of the major factors for success when doing business in China. However, insider networks in business are certainly not confined to Asian cultures, nor is the attendant possibility for corruption. This study obtained original data to investigate current Taiwanese perceptions of (1) how guanxi is established and cultivated; (2) how guanxi actually is practiced now and people’s acceptance of it; and (3) the effects of guanxi on business operations, employment/promotion, and social justice and fairness. The researchers also hope to (4) verify some arguments made by pioneering researchers. The authors speculate on how these attitudes may affect behavior in business transactions in hopes of making readers more aware of differing cultural values that may create unexpected ethical dilemmas. They suggest that professional ethical codes should provide guidance on the practice of guanxi in a Confucian society and that special emphasis or training in interpreting those codes may be required.     

Corporate diversification and CEO turnover in family businesses: self-entrenchment or risk reduction?

Our study investigates differences in CEO turnover between focused and diversified firms to determine whether diversification strategies are necessarily associated with governance efficiency in family businesses. We find that large family CEO firms are more likely to engage in corporate diversification than are small non-family CEO firms and their CEOs are seldom replaced. Large family CEO diversified firms also have lower turnover sensitivity relative to focused firms. The results imply that the CEOs of diversified firms have entrenched themselves, thereby increasing agency costs within family businesses. However, we fail to find diversification discounts in family businesses. It is interesting that CEOs tend to diversify their businesses in order to decrease firm risk. Founding families favor risk-reducing decisions in order to maintain family wealth and prestige; suggesting that family businesses are more interested in survival than growth. Although family businesses may benefit from risk reduction, a negative relationship between diversification level and CEO turnover is still evidence of poor corporate governance. Agency theory may not completely account for the adoption of diversification strategies in family businesses and corporate diversification may weaken the effectiveness of internal monitoring mechanisms.

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.     

Social Status,Labour Market Frictions and Endogenous Growth

This paper develops an endogenous growth model that incorporates wealth‐enhanced preferences for social status and labour market frictions to investigate the role of social status in determining unemployment and long‐run growth. We show that the increase in the desire for social status reduces the unemployment rate, but its effect on long‐run growth is unclear. We then calibrate our model to the US economy and find that an increase in the desire for social status lowers the unemployment rate and enhances the economic growth rate in the long run.     

Financial literacy and high‐cost borrowing: Exploring the mechanism

Recent studies have suggested that financial literacy is an important determinant of informed borrowing decisions. Despite the evidence that financially literate consumers are less likely to use alternative financial services, the mechanism through which financial literacy discourages demand for alternative financial services has yet to be fully understood. The previous studies proposed several explanations, such as the ability to undertake complex financial calculations and understand contract terms, to link financial literacy to savvy credit choices. This study evaluates the validity of this argument by examining whether or not financial knowledge plays a greater role in borrowing decisions where consumers are forced to rely on financial knowledge. It is assumed that consumers in an information‐sparse environment have a greater incentive to utilize financial knowledge to infer the hidden cost of borrowing contracts. To test this argument, this study examines the extent to which information availability moderates the negative impact of financial knowledge on rent‐to‐own transactions. Information content is captured by state‐level disclosure mandates for rental contracts, given that consumer in a loosely regulated state are exposed to less pricing information. The results illustrate that limited information strengthens the negative association between financial knowledge and rent‐to‐own transactions. This confirms the previous arguments that consumers are active thinkers who refer to financial knowledge to estimate the overall cost of borrowing.     

P2P Loans and bank loans,the chicken and the egg,what causes what?: further evidence from a bootstrap panel granger causality test

This study attempts to re-investigate the causal link between bank loans and Peer-to-Peer (P2P) loans from China using data sets from eight areas (i.e., Beijing, Shanghai, Jiangsu, Zhejiang, Shandong, Hubei, Guangdong and Sichuan) over 2014M1-2016M4. We apply a bootstrap panel causality analysis that considers both cross-dependency and heterogeneity across cities. The empirical results indicate a unidirectional Granger causality running from P2P loans to bank loans for Beijing, Shanghai, Zhejiang and Shandong; feedback between P2P loans and bank loads for Jiangsu only and independence for the other three areas (i.e. Hubei, Guangdong and Sichuan).     

Comparison of Bank Profitability in China and the USA

This paper examines and compares the profitability of banks in the USA and China. The USA has the largest market‐based banking system and the financial system of China is still bank‐based. Our analysis indicates that in terms of profitability, banks in China outperformed those in the USA during our study period (2008–2014). Real estate loans had an adverse effect on US bank profitability during the financial crisis and no effect after the crisis but consistently improved the profitability of Chinese banks. Interest margins have no effect on US bank profitability but a consistently positive effect on Chinese banks, confirming that China is a traditional bank‐based economy. Interbank loans have a positive and significant effect on Chinese bank profitability, while interbank domestic loans have a negative effect on US bank profitability. Finally, size had a positive effect on US banks after the financial crisis period, confirming the scale economies of large US banks, but a negative effect on Chinese banks, indicating diseconomies of scale.     

The impact of banking sector reform in a transition economy: Evidence from Kyrgyzstan

We examine the impact of financial sector reform on interest rate levels and spreads using Kyrgyz bank-level data from 1998 to 2005. We find that, in addition to macroeconomic stabilization, structural reforms to the banking sector significantly contributed to lower interest rates. In particular, our results suggest that foreign bank entry and regulatory efforts to increase average bank size were important in reducing deposit rates. In contrast, we find little evidence that banking sector reform or macroeconomic stabilization has impacted interest rate spreads.     

Investor sentiment as conditioning information in asset pricing

This paper assesses whether incorporating investor sentiment as conditioning information in asset-pricing models helps capture the impacts of the size, value, liquidity and momentum effects on risk-adjusted returns of individual stocks. We use survey sentiment measures and a composite index as proxies for investor sentiment. In our conditional framework, the size effect becomes less important in the conditional CAPM and is no longer significant in all the other models examined. Furthermore, the conditional models often capture the value, liquidity and momentum effects.     

Effect of Cross-Border E-Business Policy on the Export Trade of an Emerging Market: A Dynamic Study of Institutional Support to Cross-Border E-Business at Chinese Pilot Cities

Policies to offer institutional support to cross-border E-business are processed in the development of export at emerging markets. This research estimates the effect of institutional support to cross-border E-business on export trade in an emerging market by a difference-in-difference model. It is found that the institutional support to cross-border E-business at the pilot cities had a positive effect on export trade. Further, a decision tree of predictions to export is developed, based on the cross-border E-business policy and regional economic factors shown to have effect on export, and the complex network of interconnections across the cities in different conditions is revealed. The estimation of probability for export increase based on the effect of cross-border E-business policy is further performed by Bayesian model. This research can be helpful to policy makers and business administrators in understanding the effect of cross-border E-business policies on export at emerging markets.