Characterizations of optimal reinsurance treaties: a cost-benefit approach

This article investigates optimal reinsurance treaties minimizing an insurer’s risk-adjusted liability, which encompasses a risk margin quantified by distortion risk measures. Via the introduction of a transparent cost-benefit argument, we extend the results in Cui et al. [Cui, W., Yang, J. & Wu, L. (2013). Optimal reinsurance minimizing the distortion risk measure under general reinsurance premium principles. Insurance: Mathematics and Economics 53, 74–85] and provide full characterizations on the set of optimal reinsurance treaties within the class of non-decreasing, 1-Lipschitz functions. Unlike conventional studies, our results address the issue of (non-)uniqueness of optimal solutions and indicate that ceded loss functions beyond the traditional insurance layers can be optimal in some cases. The usefulness of our novel cost-benefit approach is further demonstrated by readily solving the dual problem of minimizing the reinsurance premium while maintaining the risk-adjusted liability below a fixed tolerance level.     

A transparency Disclosure Index measuring disclosures: Chinese listed companies

This study addresses the question whether transparency matters among Chinese listed companies. We construct a comprehensive scorecard, based on the OECD Principles of Corporate Governance, in order to assess the transparency of 100 major Chinese listed companies. Based on the scorecard, we construct a Transparency Index (TI) which is used to assess these major Chinese listed companies during 2004–2007. The results reveal that there is a positive and significant relation between company transparency and market valuation. When we further split the TI into Mandatory and Voluntary Disclosure Indexes, it is found that market valuation is only related to the Voluntary Disclosure Index. Finally, we find that more profitable, overseas-listed, and companies with a separate CEO and board chairman tend to disclose more on a voluntary basis.     

Corporate Governance in China: a Step Forward

Recently, the presumed benefits of corporate governance have become one of the most contentious issues especially for emerging markets in Asia where institutional settings are quite different from other parts of the world. Using an internationally accepted benchmark (OECD's Principles of Corporate Governance, OECD, 2004 ), this study evaluates the progress of corporate governance practice of Chinese listed companies. A corporate governance index (CGI) is constructed to measure the quality of corporate governance practices of the 100 largest listed firms in China during 2004‐2006. The results show that Chinese companies have been making progress in the corporate governance reform. The findings also show a positive relation between market valuation and overall corporate governance practices, as measured by the CGI, among these Chinese listed companies. Additional investigation reveals that the rights of shareholders are the main driver in the relationship.     

Buy high,sell low: How listed firms price asset transfers in related party transactions

We examine a sample of 254 related party and arms’ length acquisitions and sales of assets in Hong Kong during 1998–2000. Our analysis shows that publicly listed firms enter deals with related parties at unfavourable prices compared to similar arms’ length deals. Firms acquire assets from related parties by paying a higher price compared to similar arms’ length deals. In contrast, when they sell assets to related parties, they receive a lower price than in similar arms’ length deals. With the exception of audit committees, corporate governance characteristics have limited impact on transaction prices. Firms with audit committees on their boards pay lower prices to related parties for acquisitions and receive higher prices from related parties from divestments.     

Stock returns,order imbalances,and commonality: Evidence on individual,institutional, and proprietary investors in China

Using a unique dataset from the Shanghai Stock Exchange, we study the relation between daily open-to-close stock returns and order imbalances, and the commonality in order imbalances across individual, institutional, and proprietary investors. We find that institutional (proprietary) order imbalances have a larger price impact, but account for a significantly smaller proportion of daily price fluctuations. Commonality is much stronger for individual, rather than institutional (proprietary), order imbalances. Institutional (proprietary) investors favor large capitalization stocks, and co-movement in institutional (proprietary) order imbalances is stronger for these stocks.     

Speculative attacks: A laboratory study in continuous time

We examine speculative attacks in a controlled laboratory environment featuring continuous time, size asymmetries, and varying amounts of public information. Attacks succeeded in 233 of 344 possible cases. When speculators have symmetric size and access to information: (a) weaker fundamentals increase the likelihood of successful speculative attacks and hasten their onset, and (b) contrary to some theory, success is enhanced by public access to information about either the net speculative position or the fundamentals. The presence of a larger speculator further enhances success, and experience with large speculators increases small speculators' response to the public information. However, giving the large speculator increased size or better information does not significantly strengthen his impact.     

On the nature of mean-variance spanning

Asset spanning tests are very useful tools for the determination of which asset classes belong to an investor's portfolio. There are numerous applications of such tools in the finance literature. What is not so obvious is the proper decision an investor should make if the extra asset classes are spanned by some existing assets. Should the investor make a conscious decision not to invest in them as they add no value? Should the investor invest in them anyway as they do no harm? This study provides an analytical solution to the puzzle and also offers an economic rationale.     

Supervisor–Subordinate Guanxi and Employee Work Outcomes: The Mediating Role of Job Satisfaction

In this study, we attempt to explain the divergent results found in the relationships between supervisor–subordinate guanxi and employee work outcomes. Specifically, we propose that the relationships between supervisor–subordinate guanxi and participatory management, turnover intentions, and organizational commitment are mediated by job satisfaction. Based on the data collected from a sample of 196 employees of three local manufacturing firms in Zhejiang Province, China, we found that job satisfaction fully mediated the effects of supervisor–subordinate guanxi on participatory management and intentions to leave, but partially mediated the relationship between supervisor–subordinate guanxi and organizational commitment. Theoretical and practical implications are discussed.     

Family-friendly policies in the workplace and their effect on work–life conflicts in Hong Kong

As in many other big cities, employees in Hong Kong face competing demands from their work and family and are under a tremendous conflict between work and life. Recently, the Hong Kong Special Administrative Region Government has put a lot of effort into promoting family-friendly policies, but the availability and effectiveness of these policies are largely unknown. The social distribution of work–life conflicts across social status and the dimensions of stratification in Hong Kong have already been documented. This paper examines these issues by way of a telephone survey of over 1000 employees in Hong Kong. We argue that certain groups of workers are particularly vulnerable to work–life conflicts, and target interventions must be devised to address their needs. Moreover, we also suggest that a regulatory approach to implementing family-friendly policies must be undertaken once implementation on a voluntary basis has failed, owing to the low availability of family-friendly policies in the Hong Kong workplace. Lastly, we show the effectiveness of three measures – namely flexible work time, a five-day work week and career breaks – in reducing both work–life conflicts and their negative consequences. We argue that more rigorous randomized intervention must be undertaken to provide more conclusive evidence so as to convince employers to implement these policies in their enterprises.     

The non-monotonicity of the bias and mean squared error of the two stage least squares estimators of exogenous variable coefficients

Owen (1976) [Owen, A.D., 1976. A proof that both the bias and mean squared error of the two stage least squares estimator are monotonically non-increasing functions of sample size. Econometrica 44, 409–411.] has shown that in a two equation static simultaneous equation model both the bias and mean squared error of the two stage least squares estimator of the endogenous variable coefficient are monotonically non-increasing functions of the sample size. This paper shows that neither property carries over to the exogenous variable coefficient estimator.