The association between cost of debt and Hong Kong politically connected firms

This paper investigates the association between Hong Kong politically connected (PCON) firms and their cost of debt and find these firms are associated with significantly lower interest rates being charged by lenders compared to other (non-PCON) firms. We compare our results with earlier investigations of Malaysian and U.S. PCON firms and find that our results are consistent with the results of the U.S. but inconsistent with that of Malaysia. Our results suggest that the economic wealth, the extent of political power, and the pervasiveness of firms having political connections could account for the cross-country differences between the cost of debt and PCON firms.     

Measuring Uncertainty for New Zealand Using Data‐Rich Approach

This paper develops two state‐of‐the‐art uncertainty indices for New Zealand by exploiting two separate data‐rich environments. The first index follows the methodology outlined in Jurado, Ludvigson and Ng (2015) to construct an estimate of uncertainty based on a large New Zealand macro dataset. The second index is constructed based on freely accessible and real time Google Trends data to provide a real‐time and freely‐accessible measure of uncertainty as in Castelnuovo and Tran (2017) and Shields and Tran (2018). Both indices do a reasonable job measuring uncertainty in New Zealand. VAR evidence documents significant impacts of uncertainty shocks on GDP in New Zealand.     

The impact of mandatory IFRS reporting on institutional trading costs: Evidence from Australia

This study examines the impact of mandatory International Financial Reporting Standards (IFRS) on the market quality of the Australian Securities Exchange (ASX) 200 constituent stocks. Using traditional metrics that are consistent with prior literature (i.e., bid‐ask spreads), the first stage analysis confirms that stock liquidity has improved. However, when the analysis is extended to consider the trading costs incurred by market participants (i.e., execution shortfall), results suggest liquidity has not changed significantly. The paper utilizes rich unique datasets that contain detailed trade information, and findings are robust after controlling for trade difficulty and market conditions. In the era of High Frequency Trading (HFT) and occurrences of ‘fleeting’ liquidity, this paper provides some evidence that while IFRS may have enhanced ‘visible’ bid‐ask spreads, tangible liquidity for market participants, particularly global institutional investors, has not improved significantly.     

Sources of inequality in the Philippines: Insights from stochastic dominance tests for richness and poorness

New stochastic dominance (SD) tests of richness and poorness are applied to income and expenditure distributions in the Philippines to measure relative welfare levels and investigate sources of inequality from 2000 to 2012. We successfully demonstrate that welfare analyses based on ascending and descending SD principles offer a stronger characterisation of changing levels of welfare in a population than what could be obtained using standard SD approach alone. Empirically, our results show that large improvements in relative welfare over time in the Philippines favoured older and female-headed households, mainly in the urban areas. Further, female headship and more years in education promoted higher welfare within and among the population groups. On the other hand, the growth of remittance incomes may have caused the greater imbalance in the distributions found in more recent years. Analysis by age groups meanwhile showed that over time, there are increasing concentrations of poorer households among the youngest cohort (30 and under), at the same time that there are also increasing concentrations of richer households among the over 60s. The combined impact of these factors provides a viable explanation as to why the gap between the rich and the poor has remained high in the Philippines for a very long time now.     

Robust state-dependent mean–variance portfolio selection: a closed-loop approach

Finance and Stochastics - This paper studies a class of robust mean–variance portfolio selection problems with state-dependent risk aversion. Model uncertainty, in the sense of considering...     

Positive spillover effect and audit quality: a study of cancelling China’s dual audit system

The mandatory dual‐audit and dual‐reporting system (DADRS) for mainland Chinese firms cross‐listed in Hong Kong (AH firms) was abolished in 2010. This study quantifies a positive spillover effect from Hong Kong‐based auditors in the DADRS and examines whether and to what extent this affects the audit quality of AH firms. We find that AH firms exposed to a stronger positive spillover effect have higher audit quality, and the loss of this effect drives the declining audit quality of AH firms after they cancelled the DADRS. This study is among the first empirical works on this research topic.     

Estimating and accounting for the output gap with large Bayesian vector autoregressions

We consider how to estimate the trend and cycle of a time series, such as real gross domestic product, given a large information set. Our approach makes use of the Beveridge–Nelson decomposition based on a vector autoregression, but with two practical considerations. First, we show how to determine which conditioning variables span the relevant information by directly accounting for the Beveridge–Nelson trend and cycle in terms of contributions from different forecast errors. Second, we employ Bayesian shrinkage to avoid overfitting in finite samples when estimating models that are large enough to include many possible sources of information. An empirical application with up to 138 variables covering various aspects of the US economy reveals that the unemployment rate, inflation, and, to a lesser extent, housing starts, aggregate consumption, stock prices, real money balances, and the federal funds rate contain relevant information beyond that in output growth for estimating the output gap, with estimates largely robust to substituting some of these variables or incorporating additional variables.     

The West German gastarbeiter system of immigration

The paper analyzes the West German immigration system as operated until early 1970s. Defining the essential features of this system, the authors explain the cross-sectional industrywise utilization of foreign guestworkers during 1964/65 to 1971/72. They also extend the analysis to explaining the sourcewise (by country) composition of foreign workers during this period     

Differentiating Good Soldiers from Good Actors*

abstract In a qualitative interview study, 20 Hong Kong Chinese informants were asked to report stories about colleagues who were either ‘good soldiers’ or ‘good actors’. In stories about good soldiers, informants attributed their colleagues' organizational citizenship behaviour (OCB) primarily to prosocial or pro‐organizational motives. Informants' stories about good actors broke down into three major subcategories of citizenship‐related impression management: OCB attributed primarily to impression management motives; alleged pseudo‐OCB concomitant with minimal compliance; and alleged pseudo‐OCB concomitant with counterproductive behaviour. When distinguishing good soldiers from good actors, informants adopted two criteria for attribution: wilful behavioural inconsistency, i.e. low generality of behaviour across contexts; and alleged false pretence, i.e. discrepancy between claims or allusions and actual deeds. Our findings partially supported a prior hypothesis from attribution theory, that consistency was a criterion for attribution, but indicated that consensus, i.e. correspondence between the focal colleague's behaviour and other employees' behaviour, failed to differentiate good soldiers from good actors. Informants generally regarded OCB as socially desirable only when it was attributed primarily to prosocial/pro‐organizational motives.