The Two Faces of Analyst Coverage

We find that positive excess (strong) analyst coverage is associated with overvaluation and low future returns. This finding is consistent with the view that excessive analyst coverage, driven by investment banking incentives and analyst self-interests, raises investor optimism causing share prices to trade above fundamental value. However, weak analyst coverage causes stocks to trade below fundamental values. This finding indicates that investors tend to believe that these firms are more likely to be plagued by information asymmetries and agency problems. The results remain robust after controlling for the possible endogenous nature of analyst coverage and analysts' self-selection bias.     

Securityholder Taxes, Corporate Capital Structures and the Priority Structure of Debt

This paper shows that the firm has an incentive to issue multiple classes of debt that are differentiated by seniority to enhance securityholder tax-timing option values. The analysis establishes that there is at least one mix of senior and junior debt that maximizes the tax option gain from having multiple priority classes of debt. An analytic example provides specifications for the optimal amount of leverage and the optimal mix of senior and junior debt. Relative to the case of only one class of debt, a multiple debt priority structure increases the optimal amount of corporate leverage.     

New development: Unified scores of governance capacity using a Bayesian latent variable analysis

A plethora of governance measures has been developed to assess governance capacity in different countries. Choosing one indicator over another involves discretionary decision issues. This article presents a new unified measure of governance capacity for the administrative and political dimensions. The unified measure provides a more accurate understanding of governance than single indices.     

An Analysis of Trade Patterns and the Effects of the Real Exchange Rate Movements in East Asia

This article investigates the patterns of vertical specialization in trade among China, Japan and Korea, and the effects of real exchange rate fluctuations under a multistage production process. By extending the models of Yi (2003, 2010), we derive two distinct features of vertical specialization and test them using Time-Varying Parameter (TVP) VAR. We find that a positive shock to China’s final good consumption increases the intermediate goods trade between Korea and China, with expanding magnitude over time. In addition, the positive effect of a real exchange rate depreciation on intermediate goods trade is strengthened through the competitiveness-enhancing channel, with this effect being more pronouncing in Korea-China trade than in Korea-Japan trade.     

Debt financing in private and public firms

Using administrative confidential data on the universe of Canadian corporate firms, we compare debt financing choices of private and public firms. Private firms have higher leverage ratios, which are entirely driven by private firms’ stronger reliance on short-term debt. Further, private firms rely more of leverage during economic expansions, while public firms rely on equity financing. Specifically, private firms manage to increase their long-term debt during expansions, while short-term debt is used during downturns. Our findings have implications for a better understanding of the role of asymmetric information in private firms’ capital structure decisions.     

3D simulation technology as an effective instructional tool for enhancing spatial visualization skills in apparel design

The purpose of this study is to explore the effectiveness of 3D simulation technology for enhancing spatial visualization skills in apparel design education and further to suggest an innovative teaching approach using the technology. Apparel design majors in an introductory patternmaking course, at a large Midwestern University in the United States, participated in this study. Three different teaching methods (lecture, 3D simulation instruments, and paper patternmaking) were employed in consecutive instructional phases, within a single day. A short questionnaire devised to assess students’ visualization abilities and overall evaluation on the three different teaching methods was administered to the students after each of the three phases. Overall, students’ abilities to visualize 2D patterns onto a human body were improved by all three teaching methods. The 3D simulation instruments anchored positive effects of training on spatial visualization abilities between lecture and paper patternmaking practices. The results affirm that 3D simulation technology has positive potential as an efficient instructional tool for improving students’ visualization skills in apparel design.     

The roles of R&D team leaders in Korea: a contingent approach

This study empirically examines the relationship between the role of R&D project leaders and their team performance using data from 87 project teams in 6 R&D organizations in Korea. The results reveal that:
(1) R&D project leaders played five different roles in performing their jobs – strategic planner, team builder, gatekeeper, technical expert, and champion;
(2) All but the champion role of a leader is positively related with project team performance;
(3) However, this relationship between the role of leader and project team performance varies according to the characteristics of R&D project teams and their tasks.
Specifically, it becomes important for a leader to focus less on the team building role as the team gets older. The team building role of a leader, however, is more important for higher performance of relatively certain R&D projects, while for uncertain R&D projects, the strategic planning role appears to be more crucial. Based on these results, this study discusses several managerial and theoretical issues related to the role of a leader in R&D project teams.     

Foreign versus domestic institutional investors in emerging markets: Who contributes more to firm-specific information flow?

Using a large sample of firms listed on the Korea Stock Exchange over 1998–2007, this study investigates whether and how trading by foreign and domestic institu...     

Financing Technological Innovation: Evidence from Patent-Intensive Firms

ABSTRACT

Equityholders of firms with high debt loads have an incentive to underinvest, a distortion that can be most costly for firms with attractive growth options. Using a novel patent-based measure of a firm's growth options, we find that firms issue more equity and shy away from debt financing when they have larger investment opportunities sets. The results are more pronounced among firms in patent-intensive industries. The findings suggest the existence of conflicts of interest between debtholders and equityholders. Our results are consistent with the use of conservative debt policies by technology-intensive firms to mitigate the debt overhang associated with their future growth options.     

Personalized goal-based investing via multi-stage stochastic goal programming

In this paper, we propose a goal-based investment model that is suitable for personalized wealth management. The model only requires a few intuitive inputs such as size of wealth, investment amount, and consumption goals from individual investors. In particular, a priority level can be assigned to each consumption goal and the model provides a holistic solution based on a sequential approach starting with the highest priority. This allows strict prioritization by maximizing the probability of achieving higher priority goals that are not affected by goals with lower priorities. Furthermore, the proposed model is formulated as a linear program that efficiently finds the optimal financial plan. With its simplicity, flexibility, and computational efficiency, the proposed goal-based investment model provides a new framework for automated investment management services.