Did corporate governance safeguard investor interest in the global financial crisis? Evidence from Hong Kong SAR

The global financial crisis of 2008 aroused renewed interest in the effectiveness of corporate governance mechanisms to safeguard investor interests. In this paper, we measure the effects of the crisis from 2008 to 2009 on the share performance of 976 companies listed on the Hong Kong Stock Exchange in the Hong Kong SAR and examine the link between share performance and corporate governance mechanisms. Our results present evidence that firms with a higher proportion of independent directors and a greater concentration of ownership had lower share performance, but lower price volatility, during the global financial crisis. These results suggest that no single corporate governance mechanism is fit for all economic environments and time frames. To strengthen investors' confidence, companies should enhance the efficiency and adaptability of their governance mechanisms in turbulent times.     

The Impact of Ethical Ideologies,Moral Intensity,and Social Context on Sales-Based Ethical Reasoning

Previous research indicates that ethical ideologies, issue-contingencies, and social context can impact ethical reasoning in different business situations. However, the manner in which these constructs work together to shape different steps of the ethical decision-making process is not always clear. The purpose of this study was to address these issues by exploring the influence of idealism and relativism, perceived moral intensity in a decision-making situation, and social context on the recognition of an ethical issue and ethical intention. Utilizing a sales-based scenario and multiple ethics measures included on a self-report questionnaire, data were collected from a regional sample of business students, most of whom had modest work experience. The results indicated that perceived moral intensity was associated with increased ethical issue recognition and ethical intention. Idealism was also associated with increased ethical issue recognition, and relativism was associated with decreased ethical intention. Social consensus was positively related to ethical issue recognition and intention, while competitive context was inversely related to ethical intention. Finally, ethical issue recognition was associated with increased ethical intention. Idealism, moral intensity, social consensus, and work experience worked together as predictors of ethical issue recognition, whereas recognition of an ethical issue, relativism, moral intensity, social consensus, and competitive context worked together to predict ethical intention.     

Regulation Fair Disclosure and Earnings Information: Market, Analyst, and Corporate Responses

With the adoption of Regulation Fair Disclosure (Reg FD), market behavior around earnings releases displays no significant change in return volatility (after controlling for decimalization of stock trading) but significant increases in trading volume due to difference in opinion. Analyst forecast dispersion increases, and increases in other measures of disagreement and difference of opinion suggest greater difficulty in forming forecasts beyond the current quarter. Corporations increase the quantity of voluntary disclosures, but only for current quarter earnings. Thus, Reg FD seems to increase the quantity of information available to the public while imposing greater demands on investment professionals.     

Does Advertising Overcome Brand Loyalty? Evidence from the Breakfast‐Cereals Market

In differentiated product markets where consumer preferences are characterized by brand loyalty, an important role for advertising may be to overcome brand loyalty by encouraging consumers to switch to less familiar brands. Using a scanner panel dataset of breakfast-cereal purchases, I find evidence consistent with the hypothesis that advertising counteracts the tendencies of brand loyalty toward repeat purchasing. Equivalently, advertising reduces switching costs in this market. Furthermore, counterfactual experiments demonstrate that in markets with brand loyalty, advertising is an attractive and effective option—relative to alternative promotional activities, such as price discounts—of stimulating demand for a brand .     

Investment and Productivity in Canadian and U.S. Food Manufacturing

A restricted cost function model of Canadian and US. food manufacturing shows that productivity growth rates in Canada have remained well below those in the United States for the past decade and a half_: At mean factor prices, output, and capital quantities, processing costs would be 22% lower in the U.S. than in Canada. Technical change in both countries has been labor-saving and material-using, although slightly more so in the US. than in Canada. The labor-saving bias of technical improvements puts Canada at a disadvantage to its southern neighbor, since food manufacturing wages in Canada tend to be lower and material prices higher than in the United States. Enhancing its competitiveness will require that Canada reduce raw food and packaging costs or invest more in research and development .
L'estimation d'une function constraint de coût démontre que le taux de productivité du secteur de la transformation des aliments et boissons au Canada est demeuré inférieur à celui des Etats-Unis depuis une quinzaine d'années. En effet, à la moyenne du prix des intrants, du stock de capital et de la quantité produite, le coût de production américain est de 22 % inférieur à celui du Canada. Dans les deux pays, le changement technologique a permis de substituer le matériel à la main-d'oeuvre, et ceci de façon plus prononcée aux Etats-Unis. En bout de ligne, ceci désavantage le secteur canadien des aliments et boissons puisque les salaires sont généralement inférieurs au Canada alors que le matériet est plus coûteux. Le Canada pourrait améliorer sa compétitivité face aux Etats-Unis en réduisant le prix des denrées et des entrées intermédiaires ou en augmentant l'investissement dans la recherche et le développement .     

Investigating the Effects of Gender on Consumers’ Moral Philosophies and Ethical Intentions

Using information collected from a convenience sample of graduate and undergraduate students affiliated with a Midwestern university in the United States, this study determined the extent to which gender (defined as sex differences) is related to consumers’ moral philosophies and ethical intentions. Multivariate and univariate results indicated that women were more inclined than men to utilize both consequence-based and rule-based moral philosophies in questionable consumption situations. In addition, women placed more importance on an overall moral philosophy than did men, and women had higher intentions to behave ethically. The marketing and practical implications of these findings are discussed, and the limitations of the research are presented along with several suggestions for future inquiry, which could advance current understanding of consumer ethics.     

Why firms issue callable bonds: Hedging investment uncertainty

This paper analyzes a firm's dynamic decisions: i) whether to issue a callable or non-callable bond; ii) when to call the callable bond; and iii) whether to refund it when it is called. We argue that a firm uses a callable bond to reduce the risk-shifting problem in case its investment opportunities become poor. Our empirical findings support this argument. We find that a firm facing poorer future investment opportunities is more likely to issue a callable bond than a firm facing better investment opportunities. In addition, a firm with a higher leverage ratio and higher investment risk is more likely to issue a callable bond. Finally, after a callable bond is issued, a firm with a poor performance and a low investment activity tends to call back a bond without refunding; a firm with the best performance and highest investment activity tends to call back a bond and refund its call; and a firm with mediocre performance and investment activity tends to not call its bonds.     

Corporate Risk Management under Information Asymmetry

This paper examines the financial and operational hedging activities of US pharmaceutical and biotech firms that are subject to a high level of information asymmetry stemming from R&D investments during 2001–2006. We find evidence in support of the information asymmetry hypothesis à la Froot, Scharfstein and Stein (1993) that hedging helps mitigate the under‐investment problem. Specifically, we find that the use of financial derivatives is associated with greater firm value and that the value enhancement is larger for firms subject to greater information asymmetry and better growth opportunities. There is a synergy between financial hedging and operational hedging where the latter is used to counter product development risk. The results are robust with respect to alternative performance measures, industry‐specific growth measures, and the endogeneity problem. Our work is differentiated from existing studies that examined commodity‐based industries without addressing information asymmetry.