A comparison of value relevance of accounting information in different segments of the Chinese stock market

This paper investigates the difference in the value relevance between the accounting information prepared and audited under the Chinese GAAP for A-share investors and under the international accounting standards (IAS) for B-share investors in the Chinese stock market. The study reports three primary findings. First, accounting information influences the pricing process in both the A-share market and the B-share market. Second, the accounting information in the B-share market is more value relevant than that in the A-share market, as expected. Finally, the value relevance level of accounting information in the A-share market was low in earlier years, peaked in 1996, and then decreased due to changes in the disclosure environment. However, the value-relevance level of accounting information in the B-share market had no substantial changes. Using a constant sample, control variables on firm features, and measures of traders' behavior, we obtain robust results. These findings have implications for policymakers on recent moves toward replacing local GAAP with the IAS.     

The Economic Consequences of Increased Disclosure: Evidence from Cross-Listings of Chinese Firms

In this paper, we investigate the impact of cross‐listings on information asymmetry risk, the cost of capital and firm value of a group of cross‐listed Chinese companies. Our paper is the first to examine the effect of cross‐listing on information asymmetry risk. Because cross‐listed firms are subject to increased disclosure requirements, increased regulatory scrutiny and increased legal liability, we propose that Chinese cross‐listed firms have lower information asymmetry risk, lower cost of capital and higher firm value than their non‐cross‐listed counterparts. We find in both univariate and multivariate tests that cross‐listed firms enjoyed lower information asymmetry risk in the domestic market compared with the non‐cross‐listed firms. We also find that cross‐listed firms have lower cost of capital in the cross‐listing market than non‐cross‐listed firms in the domestic markets. Finally, we find that cross‐listed firms are associated with higher firm value as measured by Tobin's Q. These results have implications for international investors and companies seeking cross‐listing opportunities.     

THE ROLE OF THE EXCHANGE RATE IN A NEW KEYNESIAN DSGE MODEL FOR THE SOUTH AFRICAN ECONOMY

We build a small open economy New Keynesian dynamic stochastic general equilibrium model for South Africa similar to Steinbach et al. We abandon their assumption of complete risk sharing with the foreign economy, and introduce country risk shocks to allow deviations from uncovered interest rate parity. These changes allow us to include the exchange rate as an observable variable in the estimation of the model. Using forecast error variance decompositions and historical decompositions, we show that country risk shocks have sizable effects on the South African business cycle. We also explore the optimal monetary policy implications of our model within the context of Taylor rules.     

US presidential elections and implied volatility: The role of political uncertainty

This paper focuses on the effects of political uncertainty and the political process on implied stock market volatility during US presidential election cycles. Using monthly Iowa Electronic Markets data over five elections, we document that stock market uncertainty, as measured by the VIX volatility index, increases along with positive changes in the probability of success of the eventual winner. The association between implied volatility and the election probability of the eventual winner is positive even after controlling for changes in overall election uncertainty. These findings indicate that the presidential election process engenders market anxiety as investors form and revise their expectations regarding future macroeconomic policy.     

Islamic and conventional banks' soundness during the 2007–2008 financial crisis

The recent global financial crisis has induced a series of failure of many conventional banks and led to an increased interest in the Islamic banking business model. This paper attempts to answer empirically the following question: What was the effect of the 2007–2008 financial crisis on the soundness of Islamic banks and their conventional peers? Using the Z-score as an indicator of bank stability, our regression analysis (covering a matched sample of 34 Islamic Banks (IBs) and 34 conventional banks (CBs) from 16 countries) shows that there is no significant difference in terms of the effect of the financial crisis on the soundness of IBs and CBs. This finding reveals that IBs are diverging from their theoretical business model which would have allowed them to keep the same level of soundness even during the crisis.     

Time Series Dynamics of Sugar Export Earnings in Fiji with Multiple Endogenous Structural Breaks: Implications for EU Sugar and Industry Reforms

Journal of Quantitative Economics - The sugar industry has been the backbone of the Fijian economy since the late 1950s. Owing to its poor performance over the recent years, and especially the...     

Direct perturbations of aggregate excess demand

We complement the Sonnenschein–Mantel–Debreu results by establishing that an exchange economy, i.e., preferences and endowments, that generates a given aggregate excess demand (AED) function is close to the economy that generates a perturbation of this AED. As a consequence, genericity and determinacy results obtained by direct perturbation of an AED are as strong as results obtained by perturbing preferences and endowments.     

Linking knowledge, entry timing and internationalization strategy

This paper contributes to the current internationalization theory by linking the characteristics of the firm's resource-base, its market-entry timing orientation and international growth orientation so as to shed more light on internationalization strategies. By employing multi-industry data, we find that the nature of the firm's knowledge, its entry timing orientation and international growth orientation are related to its internationalization strategy. Among other results, we find that the firm's accumulated expertise is positively related for both the international growth orientation and entry timing orientation. The international growth orientation, in turn, is related both to the path type of internationalization the firm employs as well as the geographical diversification in market entry. In other words, the results suggest that the firm's resource-base influences on both its entry timing orientation and to the internationalization strategy. These and other findings are discussed with regard to their scholarly and managerial implications.     

Strategic orientations of born globals—Do they really matter?

This paper contributes to the literature on born globals by introducing the concept of strategic orientations into this domain. Only few empirical studies have investigated them in this context. The study extends the existing knowledge on born globals and responds to complaints about lacking empirical research in this as yet infant field. The literature on strategic orientations and born globals was used as a basis for drawing up the hypotheses, which were tested with data from 299 Finnish companies representing several different industrial sectors. The findings indicate that strategic orientations are related to a firm's international performance. This relationship is moderated by its international growth strategy.