Towards Geopolitical Analysis of Geoeconomic Processes

In his article, Antto Vihma seeks to develop a geoeconomic approach that draws from Edward N. Luttwak’s conception of inter-state competition, and suggests that a more nuanced reading of Luttwak provides a way forward. In this essay, I first tease out and discuss Vihma’s arguments, before calling for the need to develop geopolitical analysis of contemporary geoeconomic processes. This kind of geopolitical analysis focuses on the political imaginaries that frame the world in terms of economic expansion, new kinds of inter-spatial competition, connectivity and pace or global integration and connectivity. These imaginaries have become increasingly salient in state-centric political debates on national interests, national security, and national identity.     

Earnings Announcements,Differences of Opinion and Management Guidance

Berkman, Dimitrov, Jain, Koch, and Tice (2009) document a negative relationship between differences of opinion and earnings announcement returns, and this relationship is more pronounced when short‐sale constraints are likely to be high. These findings are interpreted as support for the theory in Miller (1977) that binding short sale constraints cause pessimists to be underrepresented in price formation. We conjecture that accounting information (i.e., earnings news) is likely to play a role in this returns pattern. After controlling for the level of earnings news, we find that the relationship between differences of opinion and stock returns is either eliminated or opposite from what is predicted by Miller's theory. Further, we present evidence that suggests the confounding effect of earnings news can be explained by (pessimistic) management earnings guidance. Our findings offer an alternative explanation for why low differences of opinion stocks earn greater abnormal returns around earnings announcements.     

Turn-of-the-month and intramonth effects in government bond markets: Is there a role for macroeconomic news?

This paper focuses on the turn-of-the-month (TOM) and intramonth anomalies in government bond returns. In particular, we examine whether the TOM and intramonth effects exist in government bond markets, and moreover, whether these anomalies are related to the release of macroeconomic news as suggested in recent stock market studies. Using data on the 2-year and 10-year US Treasury Notes and German government bonds, we document a modest TOM effect in government bond returns. This effect does not disappear after controlling for the release of macroeconomic announcements, thereby suggesting that the origin of the TOM effect is not necessarily the same across asset classes.     

Male–Male Status Signaling through Favoring Organic Foods: Is the Signaler Perceived and Treated as a Friend or a Foe?

Even though consumers’ status signaling is a heavily researched topic, empirical contributions from two important research areas—the mundane food context and prosocial status signaling between male consumers—to signaling literature are still scarce. Thus, this study empirically investigates how a male signaling about his status through favoring organic foods is perceived and treated by other males in two different sociocultural settings (urban vs. rural). In an urban area—but not in a rural—the pro‐organic signaler was perceived as more respected, altruistic, and affluent than a male who did not signal about this (he also received statistically more money in a charity donation task). This may indicate that signaling about this tendency—because it can be viewed as use of one's own resources for the benefit of others—is not only a way to attain status, but can also make others behave more positively toward the signaler.     

The Collusion-deterring Effect of Pre-attributed Supplies and the Hog Auction in Quebec

The hog/pork industry in Quebec has been going through major institutional changes since 1989, the year an electronic auction was put in place to market all of the hogs in the province. Because the auction's ability to generate high prices did not meet the expectations of hog producers, the pure auction system was replaced by a hybrid one in 1994. In this system, most of the hog supply was pre-attributed to processors at a negotiated price based on the US. price while the remainder of the provincial supply of hogs was sold through the auction. In this paper, we investigate how a seemingly inefficient marketing mechanism like pre-attributions can increase the efficiency of a usually efficient mechanism like an auction. We present theoretical arguments regarding the sustainability of collusion under the pure auction and hybrid systems in addition to analyzing auction prices with modern time series tools.     

The role of cross-listing,foreign ownership and state ownership in dividend policy in an emerging market

In this paper, we investigate if dividend policy is influenced by ownership type. Within the dividend literature, dividends have a signaling role regarding agency costs, such that dividends may diminish insider conflicts (reduce free cash flow) or may be used to extract cash from firms (tunneling effect) – which could be predominant in emerging markets. We expect firms with foreign ownership and those that are listed in overseas markets to have different dividend policies and practices than those that are not, and firms with more state ownership and less individual ownership to be more likely to pay cash dividends and less likely to pay stock dividends. Using firms from an emerging economy (China), we examine whether these effects exist in corporate dividend policy and practice. We find that both foreign ownership and cross-listing have significant negative effects on cash dividends, consistent with the signaling effect and the notion of reduced tunneling activities for firms with the ability to raise capital from outside of China. Consistent with the tunneling effect, we find that firms with higher state ownership tend to pay higher cash dividends and lower stock dividends, while the opposite is true for public (individual) ownership. Further analysis shows that foreign ownership mediates the effect of state ownership on dividend policy. Our results have significant implications for researchers, investors, policy makers and regulators in emerging markets.     

Investment opportunity set,political connection and business policies of private enterprises in China

The main purpose of this paper is to examine the factors that determine the business policies of private enterprises in the People’s Republic of China. Little is known about these private enterprises although these are surpassing the state-owned enterprises to become the most important corporate sector in China. The phenomenal growths of these enterprises provide an interesting setting to study the effect of the investment opportunity set (IOS) on business policies. We also examine how a firm’s political connection, generally believed to be instrumental to a firm’s success in transition economies, affects its business policies. We provide evidence on the importance of these factors in shaping the private firms’ business policies in China. More specifically, our results show that growth firms pay lower dividends, have lower overdue receivables relative to sales, have higher percentage of bonus shares, and are more likely to engage in joint ventures. In addition, firms with better political connection are able to borrow more, are more likely to establish a board of directors, and are more likely to acquire SOEs. These results have policy implications with regard to private enterprises in transitional economies in general and those in China in particular.     

Corporate governance and operating performance of Chinese listed firms

In this paper, we investigate the impact of corporate governance on firm performance and valuation in China. Our study introduces a composite measure of corporate governance to measure the association between corporate governance and Chinese firms’ performance and valuation. Because agency theory suggests that companies with better corporate governance standards perform better, we propose that better governed Chinese firms would have greater performance and higher valuation. We find that our composite measure of corporate governance is positively and significantly associated with firm performance and valuation. These findings have implications for policy makers, researchers, managers, and investors in general and those in emerging markets in particular.     

Innovation and internationalization as growth strategies: The role of technological capabilities and appropriability

Firms grow either by launching new products (innovation) or by attracting new customers (internationalization) or by using a mixed strategy. An interesting question is whether innovation and internationalization activities are complementary or substitutive. The paper discusses the connections between technological capabilities, their appropriability, innovation activities, and internationalization, and derives hypotheses from the knowledge-based view of the firm. The hypotheses are empirically analyzed using survey data from 300 Finnish firms clustered as follows: (i) domestic replicators, (ii) domestic innovators, (iii) international replicators, and (iv) international innovators. The performance of the clusters is empirically analyzed, the success criteria being actual growth rate and profitability. We conclude that a profitable firm needs to have unused technological capabilities in order to exploit economies of scope through innovation. A strong appropriability regime strengthens growth. Internationalization and innovation combined is the most advisable option when domestic markets are limited.     

Portfolio performance and accounting measures of earnings: an alternative look at usefulness

Measures of economic performance, such as accounting earnings, working capital and cash flows, have been evaluated in tests of relative explanatory power of regressions of market returns on earnings, working capital and cash flows. We employ a different test. Using Basu’s (J Finance 663–682, 1977) investment trading strategy, we measure portfolio returns based on these three accounting measures of earnings. The objective is to ascertain whether investment performance also supports the findings of the explanatory power studies that accounting earnings is the premier measure of performance. The evidence does not support this conclusion. Our findings are at variance with prior conclusions that accounting earnings is more useful than cash flow. The Basu trading strategy is effective for all three measures. Excess market returns are observed for all three measures, even when controlled for risk and for low priced stocks. But accounting earnings portfolios do not dominate working capital or cash flow portfolios. In fact, the raw returns to cash flow portfolios are marginally (statistically) larger than accounting earnings portfolios. Economically, a dollar invested in a portfolio using accounting earnings to select the stock would have an accumulated value of 22.73 while the same dollar investment using cash flow instead of accounting earnings would accumulate a value of22.73 while the same dollar investment using cash flow instead of accounting earnings would accumulate a value of 33.94 over the same 16 years starting with the second quarter of 1988 and concluding at the end of the first quarter of 2004. Thus, our results have implications for the studies of explanatory power of different measures of earnings and their comparison in the US and other markets.