Individuals’ Trading Prior to Earnings Announcements

This paper investigates the relationship between individuals’ net trading and stock price movements before and after annual earnings announcements for the Taiwan Stock Exchange. We conduct an event study on the effects of pre‐event individual trade imbalances on pre‐ and post‐announcement abnormal returns. With a unique and comprehensive dataset, we accurately classify executed orders by aggressiveness of order price. The evidence indicates that while individuals, as a group, are not informed about impending earnings announcements, individuals who place aggressive orders are informed as their net trading coincides with contemporaneous and future stock returns. Aggressive individuals lose their edge during the financial crisis. More importantly, the advantage (disadvantage) for individuals who adopt aggressive (passive) orders weakens when foreign institutions own concentrated equity in firms. We also find that net individual trading contains information about abnormal returns that either past returns or volume does not subsume. Controlling for past returns, trading volume and volatility, or using an alternative measure of net individual trading does not change our conclusions.     

The Impacts of Surrender Options on Reserve Durations

Estimating the interest rate risk of life insurance reserves is essential for insurers, and surrender options are critical to the estimation. This article advances our understanding of how surrender options affect the durations of reserves. We identify a pattern of the reserve duration with respect to the interest rate that is important in explaining how surrender rate levels and the interest-rate sensitivity of surrenders affect reserve durations. We further found that the surrender behavior that is more positively related to the interest rate produces larger/smaller effective dollar durations when the interest rate is low/high.     

Earnings,institutional investors,tax avoidance,and firm value: Evidence from Taiwan

This study examines the valuation of earnings from China and Taiwan by foreign and domestic institutional investors across a sample of Taiwanese electronics firms. We further compare the valuation of firm earnings reported in tax havens and non-tax havens, and whether these firms have changed tax avoidance activities since 2004 when the Taiwanese government enacted stricter auditing of transfer pricing regulation.Our findings show that both operating income from the home country and investment income are positively associated with firm value. Operating income from China, however, is not significantly related to firm value when institutional ownership of the firm exceeds fifty percent. This result indicates that operating income is valued differently, depending on the location from which the income was generated. Non-operating income enhances firm value regardless of the revenue source. We also report that foreign institutional investors favor operating income from domestic and investment sources over earnings generated from non-domestic sources and other non-operating income. Furthermore, our results suggest that firms rearrange reported profits from subsidiaries located in tax havens to affiliates in other countries following the transfer pricing audit guide Taiwan implemented in 2004. Results also indicate firms may have been shifting profits to other low-tax-rate countries, or to countries which do not require firms to pay taxes, even if they are not doing business in that country.     

Monetary policy and stock returns: Financing constraints and asymmetries in bull and bear markets

We examine asymmetries in the impact of monetary policy surprises on stock returns between bull and bear markets in the period 1994 to 2005. We ask how these impacts respond to the relative ability of firms to obtain external finance. We find that the impact of a surprise monetary policy in a bear market is large, negative, and statistically significant, and this holds across size decile portfolios. The impact of a surprise policy action in a bear market for most industries is significantly greater than the impact of surprise monetary policy in a bull market. Controlling for the capacity for external finance, stock returns of firms in bear states respond more than firms in bull states. Capacity for external finance is more important in a bear market, as it partially mitigates the larger impact of monetary policy in a bear market.     

The Information Transmission Effect and Asset Prices: Evidence from the China B-Share Discount

ABSTRACT

We construct a model based on market microstructure and examine the information transmission effect of equity prices in A-share and B-share markets in China. The data on foreign share discounts raise a question: How are asset prices determined if uninformed foreign traders obtain signals by observing public information? Our investigation on the measure of the information transmission effect presents a substantial segment of the cross-sectional variation in B-share discounts and finds that the information transmission effect plays a critical role in explaining how foreign share discounts become more contractive.     

Fiscal incentives and political budget cycles in China

Political budget cycles in democracies have been extensively analyzed, but few studies of non-democracies exist. This paper explores political budget cycles in China’s provinces. Using data from Chinese provinces from 1980 to 2006, the analysis finds that the effects of a provincial leader’s tenure on political budget cycles are minimal, implying a weak causal relationship between spending composition and a politician’s time in office at the provincial level. However, there exists a national coordinated cycle associated with the timing of the National Congress of the Communist Party (NCCP). Two years prior to the NCCP, politicians are likely to shift public spending toward capital expenditures, such as innovation funds and capital construction, and away from current expenditures, such as agricultural subsidies. The opposite pattern occurs during the year of the NCCP, when politicians increase current expenditures, such as social expenditures and government administration, and decrease capital expenditures. The increased capital expenditures 2 years prior to the NCCP are accompanied by an increase in taxation and total aggregate spending. The empirical results indicate that provincial budget cycles are mainly driven by national policies rather than by provincial leaders’ personal career incentives. Chinese leaders’ fiscal behaviors are constrained by the dynamics of the national leadership transition, resulting in similar distortions to those found in the democratic countries.     

Perceived ease of use in prior e‐commerce experiences: A hierarchical model for its motivational antecedents

This study develops and tests a theoretical model to evaluate the motivational factors behind perceived ease of use in prior e‐commerce experiences. This hierarchical model includes need for arousal as the independent variable; general self‐efficacy, technological innovativeness, and consumer self‐determination as the mediating variables; and perceived ease of use in prior e‐commerce experiences as the dependent variable. Tested by data generated from a survey of 290 consumers, the model yields satisfactory fit and contributes to the literature by adding more intrinsically motivational variables to predict perceived ease of use. Practical and academic implications are also discussed. © 2010 Wiley Periodicals, Inc.     

Selecting an Optimal Region by Fuzzy Group Decision Making: Empirical Evidence from Medical Investors

Since China opened its medical services market in 1989, its health care industry has become the focus of international investment. This study employs the fuzzy analytic hierarchy process to establish an evaluation model of optimal region selection for joint-venture hospitals or clinics in China. On the basis of the combined perspectives of thirty experts, this study adopts six criteria and nineteen sub-criteria for selection. It considers the Surrounding Bohai Bay (SBB), Yangtze River Delta (YRD), Pearl River Delta (PRD), and other economic zones as potential locations for the establishment of medical institutions. The findings reveal that government policies, demand conditions, and investment strategy are relatively highly weighted criteria. The order of priority for economic zone selection is as follows: YRD, PRD, SBB, and other economic zones. These results can help foreign investors in selecting appropriate investment regions.     

An Exploratory Study of the Otaku Adolescent Consumer

High accessibility to Internet technology and popularization of focus media has given rise to various emerging subcultures among the younger generation who constantly seek novelty. The otaku is such an adolescent subculture of avid collectors who have a special lifestyle and who are obsessed with anime products. This study explores this specific adolescent segment's traits and purchasing behavior patterns. A focus‐group interview was conducted with some adolescent otaku to allow them to express their opinions and purchasing behaviors. Then, a questionnaire was developed based on the interview's findings, and data from a survey of 105 respondents were collected. Exploratory factor analysis was applied to extract the otaku's trait factors, while confirmatory factor analysis and structural equation modeling were used for the verification of the scale and structural model, respectively. The results show that the adolescent otaku present an obsessive preference for visual perception. The main factor influencing the otaku's purchasing intentions in terms of animation, comics, and games (ACG) is their strong interest in and participation willingness toward ACG. Strategic marketing directions applied to this adolescent group should emphasize information visualization to entice their buying behavior.