Trading Behavior Prior to Public Release of Analyst Reports: Evidence from Korea

This paper investigates information leakage from analyst reports prior to their public release. Previous studies document abnormal trading by institutions or short selling before announcement of recommendation changes. Such prerelease abnormal trading is interpreted as evidence of information leakage from analyst reports. However, if sophisticated investors obtain information similar to what analysts have from other sources, abnormal prerelease trading patterns would be observed even if there were no information leakage from analyst reports. This paper, using a unique data set from Korea, aims to determine whether a direct causal link between recommendation changes and prerelease trading exists, by comparing trading behavior of client investors with non‐client investors. We find that abnormal prerelease trading by client investors, especially client institutions, is earlier in timing and greater in magnitude than that of other investor groups, supporting the information leakage hypothesis. We further find that net buying by client institutions and client large individuals is positively associated with firm, analyst, and earnings forecast change variables that influence formulation of recommendation changes and their impacts.     

Dynamic Relationships between Exchange Rates and Foreign Direct Investment: Empirical Evidence from Korea

This paper examines the short‐run and long‐run dynamic relationships between exchange rates and foreign direct investment (FDI) in Korea. Monthly data retrieved from the Bank of Korea from January 1999 to March 2012 are examined. A cointegration test, a vector error correction model, the Wald test and impulse responses techniques are applied to analyze the data. The present study finds that, first, long‐run causation between exchange rates and FDI flows exists, which implies that a change in exchange rates negatively affects FDI flows in the long run. Second, short‐run causation between exchange rates and FDI flows exists, which confirms that there is reciprocal feedback between the two variables. Finally, the study finds evidence of a structural break from the global financial crisis of 2007–2009 shock to FDI flows in Korea. An external shock affects changes in the endogenous variables and, thus, causes instability in the cointegrating vector in the system.     

The Settlement Norm in Audit Legal Disputes: Insights from Prominent Attorneys

Prior research indicates that most audit legal disputes settle. There is, however, little evidence of the factors that drive the settlement norm and its exceptions in audit legal disputes. To better understand these factors, we rely on theory related to how professionals manage risks and, as a result, how professions defend jurisdictional claims. We use this theoretical lens to help motivate four research questions that we probe by interviewing 27 prominent attorneys experienced in audit litigation. Consistent with our lens, our interview data indicate that attorneys manage their risks, including the risk of reputational loss, by settling based on their expectations of trial verdicts. Unlike trials, settlements simultaneously enable attorneys on both sides to limit costs and avoid catastrophic jury verdicts and, by doing so, claim “wins” for their clients. Attorneys also stress that they settle many audit disputes without any legal filings. Thus, a large subset of disputes is invisible to the public and researchers. Attorneys characterize trials as exceptions to the settlement norm that emerge due to abnormal conditions sometimes present in disputes. However, trial verdicts in these abnormal conditions help attorneys justify the use of settlements to clients, as attorneys stress that by settling they can avoid the dreaded possibility of extreme unfavorable verdicts. We conclude that as individual attorneys manage their risks, especially the risk of reputational loss, their profession maintains its public image and thereby defends its jurisdictional claims. Among the many questions we pose for future research is whether the settlement norm reduces society's ability to monitor the audit profession and, more generally, whether this norm's benefits outweigh its drawbacks.     

Asymmetric Inventory Management and the Direction of Sales Changes*

We study manufacturing firms' asymmetric inventory investment in response to sales changes. Focusing on the costs of resource adjustment and stockout that likely differ in sales‐increasing and sales‐decreasing periods, we predict and find that inventory investment declines less during periods with sales decreases than it rises during periods with sales increases. We validate this claim by showing that managers' expectations of future demand and desire to avoid inventory stockouts are important determinants of this asymmetry. In addition, we find that asymmetric inventory investment provides useful information for predicting future sales growth, and that both managers' and analysts' sales forecasts are positively associated with the asymmetry. Lastly, we document that forecasts of future sales growth that incorporate asymmetric inventory investment are associated with lower absolute forecast errors than benchmark forecasts. Overall, we highlight the importance of inventory information in understanding managers' resource adjustment and utilization decisions that have implications for forecasting future demand. Our findings on asymmetric inventory management provide new insights to fundamental analysis based on inventory signals.     

Attribute Range Effects in Binary Response Tasks

This paper investigates attribute range effects in binary response conjoint analysis tasks. We investigate a long-standing conjecture that the regression estimates of attributes in choice tasks are influenced by a researcher's selected range of attribute levels across choice sets. Specifically, we examine the effect(s) of varying attribute ranges systematically over two ranges of levels (1=wide range, 2=levels in the middle of the wide range) in a public bus choice context. A master 2³ design is used to vary the range (i.e., wide, middle) of three numerical attributes (fare, service and time). In each of the eight master range conditions a 2³ factorial creates bus profiles, and a ninth condition is added to test for response non-linearity. Our results suggest that attribute range impacts attribute main effects to a small degree, yet exhibit substantial and systematic effects on attribute interactions and model goodness-of-fit. Implications of these results for practical design of academic and commercial choice-based conjoint analysis tasks are discussed.     

The development strategy for china's travel service industry after china's WTO entry: Present status and future prospects

China's tourism market is growing in importance since China's accession to the World Trade Organization (WTO). It is likely that China's opening to the world market will lead to the further development of its travel service industry. Even though China will be confronted by some difficulties, its WTO commitment may have positive impacts on the travel service industry such as the development of technologies, introduction of advanced management strategies, improved industrial structure, and increased competition in the sector. This paper aims to explain the WTO‐related factors in China's travel service industry, analyzing and evaluating the sector's development strategy.     

Financial Development and Economic Growth: An Egg‐and‐Chicken Problem?

This study uses a Granger causality procedure to investigate the relationship between financial development and economic growth. The authors estimate a vector autoregression (VAR) model for nine OECD countries and China. They argue that a time-series approach is superior to a cross-sectional one and that the VAR framework avoids technical problems common in other time-series models. Evidence is presented of bidirectional causality between financial development and growth in half of the countries and reverse causality in three others. There is little support for the hypothesis that finance "leads" growth, and caution must be exercised in making general conclusions about this relationship.     

Generation Y consumers’ selection attributes and behavioral intentions concerning green restaurants

The objectives of this study are to examine the Generation Y consumer segments’ selection attributes and behavioral intentions toward green restaurants. A survey was administered to college students between the ages of 17 and 30 at a university in a Southeastern United States city. This study identified four different consumer segments of Generation Y college students according to their food-related lifestyles. Across the four segments, there were significant differences in selection attributes. In addition, significant differences were identified between the four segments regarding their behavioral intentions toward green restaurants. Finally, the marketing implications for the target groups are discussed.