Miracle-dz/UniFAR-FTUs huggingface dataset:
Leverage Constraints Affect Portfolio Choice: Evidence from Closed-End Funds

The market for auction rate securities collapsed in February 2008, significantly constraining some closed-end funds' access to leverage. We use this exogenous shock to study empirically how leverage constraints affect investors' portfolio choice. We find that tightened constraints result in an increased appetite for systematic risk: in the months following the shock, the affected funds bought significantly more high-beta stocks, and sold significantly more low-beta stocks, than their unaffected peers. Our results are consistent with the theoretical predictions of Black (1972) and Frazzini and Pedersen (2014) and provide causal evidence of the central mechanism underlying asset pricing under leverage constraints.
Profit Shifting During Foreign Tax Holidays

We undertake the first empirical analysis of profit shifting by U.S. firms during foreign tax holidays. We show that foreign tax holidays have become a prevalent and powerful tax planning strategy among U.S. firms. We find that U.S. firms significantly increase their outbound profit shifting while participating in foreign tax holidays. However, we also find that profit shifting associated with tax holidays comes at the cost of increased tax uncertainty. Our results have important implications for policy making and for understanding firm behavior.
Cross Listing, Bonding and Firms' Reporting Incentives: A Discussion of Lang, Raedy and Wilson (Jae 2006)

Lang, Raedy and Wilson (2006) examine the properties of U.S. GAAP accounting numbers provided by cross-listed firms and compare them to those of U.S. firms. Using a wide range of properties related to earnings management, timely loss recognition, and value relevance, LRW show that accounting data are not comparable across cross listed and U.S. firms, despite the fact that all firms use the same accounting standards. In this paper, I discuss how these findings advance the literature and what they imply for the effectiveness of cross listing as a bonding mechanism. My discussion highlights that the documented reporting differences cannot be solely attributed to weak U.S. legal and SEC enforcement. I emphasize that accounting standards provide discretion and that cross-listed firms are likely to have different incentives than U.S. firms to use this discretion. To illustrate, I document that cross listed and U.S. firms differ with respect to their ownership concentration and that these differences are associated with differences in earnings management. Consistent with the authors' findings, I also provide evidence that home-country institutions continue to influence cross-listed firms' reporting behavior.
Brain Gains: A Cross-Country Study on the Relationship Between Remittances and Entrepreneurship

This paper asks: do remittances promote entrepreneurship? Remittances have become one of the largest forms of cross-country financial inflows, even exceeding other prominent forms of financial flows, including foreign aid and foreign direct investment (Meyer &amp; Shera, 2017). By directly providing relief, remittances are an important income and capital source for family members of immigrant workers in home countries. We hypothesise and empirically document a positive link between remittances and entrepreneurship rates across countries. Our results suggest that remittances promote early-stage business development, particularly for opportunity-seeking entrepreneurs. In addition, we find that female opportunity driven entrepreneurs and entrepreneurs with a secondary education and from a middle-class background benefit more from remittances.
Buying and Selling Entrepreneurial Assets

How are the options to buy and sell a business relevant for entrepreneurs? Prospective entrepreneurs value the purchase of mature firms while incumbents want to recover both the tangible and intangible value of their businesses upon exit. We introduce a theory of entrepreneurial assets transfer consistent with empirical evidence and centered around a businesses for sale market that lets entrepreneurs trade the maturity components of their firms. We find that shutting that market down leads to a substantial drop in aggregate output and alters the pool of firms, incentives to enter and exit, and the wealth distribution.
Do Big 4 Auditors Enhance Audit Quality? An Analysis of Client Selection and Audit Adjustments

Recent research challenges the notion that the Big 4 auditors provide a higher quality audit relative to non-Big 4 and suggests that the Big N effect could be due to self-selection. We contribute to this debate by controlling for pre-audit earnings quality, an important omitted variable in prior research. Using proprietary data from the Chinese Institute of CPAs, we first replicate prior studies by documenting lower earnings management and restatement likelihood for clients of Big 4 than those of non-Big 4. However, we find that pre-audit earnings quality is higher for the Big 4 clients. After controlling for pre-audit earnings quality, we do not find a significant difference between the Big 4 and non-Big 4 clients in earnings management and restatement frequencies. We also find that the Big 4 auditors are less likely to make income-decreasing audit adjustments than non-Big 4 auditors and audit adjustments proposed by non-Big 4 auditors enhance earnings quality, while results are mixed for the Big 4 auditors. Collectively, the findings cast doubt that the Big 4 provide better audit quality in China and indicate that besides client size, clients’ pre-audit earnings quality is a significant driver of the Big N effect.
International Stock Return Predictability and Asset Pricing Models

We propose a new methodology for predicting international stock returns and evaluating international asset pricing models. Our Bayesian framework performs probabilistic selection of predictors and factors that can shift at multiple unknown structural break dates. The approach generates significantly more accurate forecasts of international stock returns than a range of popular models that are economically meaningful for a risk-averse mean-variance investor. Allowing for regime-specific variable selection reduces considerably the international diversification of an unhedged U.S. investor's portfolio. Our framework improves the ability of international asset pricing models to explain the cross-section of expected returns.
Executive Compensation Contracts in the Presence of Adverse Selection

We develop three complementary tests to examine how adverse selection affects the design of executive compensation contracts: First, we show that externally-hired CEOs receive higher total pay and have fewer equity incentives relative to internally-promoted CEOs, consistent with their ability to extract larger information rents due to greater private information. These differences are more pronounced when less is known about the prospective CEO, but quickly dissipate over time. Second, we show that external CEOs’ initial contracts differ more from those of their firm’s incumbent senior managers than do those of internal CEOs—particularly in terms of accounting performance metrics and equity-based pay, in line with the use of these features to elicit private information. Third, we find that following an unanticipated change in option vesting schedules prompted by SFAS 123R, newly appointed executives do not increase their option exercises and share sales—despite their newfound ability to do so—while longer-tenured executives do, consistent with contracts initially being designed to screen for certain types of managers before shifting to encourage certain behaviors. Combined, our evidence supports the distinct role of adverse selection in the design of executive compensation contracts.
Ordeal by Innocence? Mandatory Data Breach Revelation and Strategic Manipulation of Real Business Activities

In this paper, we demonstrate that the mandatory revelation of data breaches may have an unintended consequence, i.e., the induction of the intended manipulation of firm’s real business activities. Employing a difference-in-differences methodology based on the staggered adoption of data breach disclosure laws across various U.S. states, we find that mandatory data breach revelation triggers firms’ multidimensional real earnings manipulation through twisting production costs, discretionary expenses, and cash flow from operations to buffer against potential adverse consequences. This effect is more pronounced for firms faced with higher exposures of cyberattacks and under tighter short-term market pressures. Further, the adoption of such laws is associated with fewer patenting activities. Overall, our findings indicate that certain laws oriented at mitigating information opacity may have the side effect of breeding managerial myopia and the distortion of real business activities.
State Ownership and Debt Structure

We provide the first firm-level evidence of the relation between state ownership and debt structure. Using an international sample of newly privatized firms (NPFs) from 76 countries over the 1998–2017 period, we find that state ownership is associated with a more diversified debt structure. This evidence is more pronounced for higher levels of state control, and is robust to accounting for endogeneity, using alternative samples, and controlling for other owner types. Additional analysis shows that our main evidence is consistent with the soft budget constraint, political, and social views of state ownership. Our results have several policy implications for financial system stability and the efficient allocation of financial resources in the economy.
Imperfect Mobility

This study investigates why the strong form of the spatial equilibrium is weakly supported in the literature. Using a discrete choice model, it shows that the strong form of the spatial equilibrium is rarely observed because workers are imperfectly mobile from the perspective of researchers. Incorporating the discrete choice model, a Markov chain is used to model the spatial dynamics of the population distribution. For a given location choice set, the population distribution is shown to converge to a unique spatial steady state. Microdata from the American Community Survey show that the model assumption is reasonable and support the model predictions.
The Impact of Aggressive Working Capital Management Policy on Firm’s Value: A Mediating Effect of Company’s Profitability

The study will examine the value of the firm and aggressive working capital management while considering the mediating effect of a firm's profitability. The study consist of 147 non-financial firms listed on the Pakistan Stock Exchange. The study period consists of years from 2009 to 2014. The finding reveals that aggressive working capital financing policy has a significant negative impact on profitability and firm value while aggressive investment policy discloses a significantly positive relationship with profitability. Profitability has a significant and positive impact on the firm's valuation therefore, profitability can mediate the relationship between the aggressive working capital management and the value of the firm. Therefore, we conclude that to enhance profitability through optimization of investment on current assets and by adding the proportion of long term financing in working capital. In the end, we have discussed some of our limitations and future research opportunities.
The Role of Convex Equity Incentives in Managers’ Forecasting Decisions

Prior literature suggests that voluntary disclosures of forward-looking information tend to lead to capital market benefits, but these disclosures may also result in negative capital market consequences if subsequent performance falls below expectations. We, therefore, hypothesize that convex equity incentives, which reward managers for stock price gains while limiting their exposure to losses, should promote greater voluntary forward-looking disclosure. Consistent with our hypothesis, we find a significantly positive association between equity incentive convexity and forecast issuance and frequency. We also find that the positive association is more pronounced for firms with higher sales volatility and managers with shorter tenure, in which cases managers are more concerned with missing their own forecasts. Our study suggests that the risks arising from providing voluntary disclosures are important considerations in managers’ disclosure decisions.
Idiosyncratic Momentum and the Importance of the Asset Pricing Model

Using four different asset pricing models to estimate the residual returns, I show empirically that there are no material differences in the statistical and economic significance between idiosyncratic momentum strategies based on different asset-pricing models. I also show that idiosyncratic momentum is priced in the cross-section of returns, but spanned by a combination of risk factors when the combination includes price momentum. Despite being explained by common risk factors, the results suggest that idiosyncratic momentum is a stronger factor than price momentum and has a lower exposure to earnings momentum than price momentum.
Gender Differences in Responding to Management Supports, Work Engagement, and Service Recovery Performance: A Test of Moderated Mediation Model

This study investigates the moderating role of gender in the relationship between management supportiveness and service recovery performance mediated by work engagement. Little attention has been given to understand the work engagement on service recovery performance and the influence of individual differences; therefore, the study responded to the call for additional research to improve service behavior. The data set was analyzed based on 1,232 call centers from three service companies, located in Bangkok, Thailand. The results showed that work engagement mediates the relationship between management supports and service recovery performance for both males and female differently. Particularly, the results reveal that work engagement fully mediated the relationship between management supports (high performance work practices and perceived supervisory support) and service recovery performance for male, unlike for female. As to the implication, the study contributes to the boundary condition that may influence the manifestation of management supports and work engagement on employee behavior through the inclusion of gender as a moderator of the exchange relationship between management and employees. Thus, managers should take into account on both work engagement and management supports by providing supportive people policies and emotional support to improve employee service delivery. Especially for male employees, management should ensure that necessary level of resources is being made available for the implementation of all HR practices. This should go along with the emotion support by supervisor and is delivered synthetically in order to enhance employees’ work engagement that provides the highest benefit to the process of recovery service failures.
Profiting from Connections: Do Politicians Receive Stock Tips from Brokerage Houses?

Abstract This study investigates whether brokerage houses appear to provide stock tips to politicians. Our results indicate that trades by politicians who are politically connected to the brokerage house where the trade is executed are more profitable. Our estimates suggest that these connected trades earn an incremental 0.3% over a five-day window relative to the politician’s average profitability. Given the average number of trades our sample politicians execute in a year, the 0.3% return per trade translates to an incremental $3,411 in trading profits each year. We provide additional support by investigating the frequency and differential profitability of politicians’ trades immediately before the brokerage house issues a revised recommendation, as well as during a period when Goldman, Sachs & Co. was sanctioned for providing stock tips to high priority clients. Additional tests suggest that brokerages may provide stock tips to politicians in exchange for favorable legislative outcomes or political information.
The Effect of Implementation Regional Financial Accounting System, Human Resource Competency and Infrastructure Facilities to the Quality of Financial Report

This study aims to analyze the effect of the implementation regional financial accounting system, human resource competency and infrastructure facilities to the quality of financial report at Social Agency Bantaeng Regency, either partially or simultaneously. <br><br>This research was conducted at Social Agency Bantaeng Regency Office. The research will be conducted for 3 months. The source of data in this study is a secondary data sourced from information in place of research, scientific journals and books related to the object of research and primary data obtained directly from the respondents or who became the sample in this study. Data analysis in this research use multiple linear regression analysis. <br><br>The number of samples used is all employees who amounted to 35 respondents. Data analysis used multiple linear regression analysis by performing partial test (t-test) and simultaneous test (F-test). <br><br>The result of the research shows that 1) The Implementation regional financial accounting system has a positive and significant partially effect on the quality of financial report at Social Agency Bantaeng Regency; 2) The human resources competence has a positive and significant partially effect on the quality of financial report at Social Agency Bantaeng Regency; 3) Infrastructure facilities has positive and significant partially effect on the quality of financial report at Social Agency Bantaeng Regency and 4) Implementation regional financial accounting system, human resource competence and infrastructure facilities have positive and significant simultaneously effect on the quality of financial report at Social Agency Bantaeng Regency.
Media-Expressed Tone, Option Characteristics, and Stock Return Predictability

We distill tone from a huge assortment of NASDAQ articles to examine the predictive power of media-expressed tone in single-stock option markets and equity markets. We find that (1) option markets are impacted by media tone; (2) option variables predict stock returns along with tone; (3) option variables orthogonalized to public information and tone are more effective predictors of stock returns; (4) overnight tone appears to be more informative than trading- time tone, possibly due to a different thematic coverage of the trading versus the overnight archive; (5) tone disagreement commands a strong positive risk premium above and beyond market volatility.
Perception of Digital Risks: Evidence from 54 Countries

While the digital economy has contributed substantially to productivity growth and the emergence of new forms of civic discourse and connectivity, it has also exposed consumers and businesses to various risks associated with use of digital technologies. A chorus of global policy elites regularly sounds the alarm about the growing magnitude of these risks and the urgent need for businesses and governments to respond. And yet, despite the drumbeat of warnings, policy elites regularly express deep dissatisfaction with the status quo. What explains this apparent discrepancy between elite’s demands for more cyber resilience and their political systems’ apparent failure to deliver that resilience? We believe that part of the answer may have to do with the perceptions of digital risks by ordinary individuals. Researchers who have examined cyber risk from an economic perspective have emphasized how information asymmetries and especially externalities contribute to underinvestment in cybersecurity. Our findings in this study add an additional dimension to this work: consumers underestimate risk even when the distribution of costs affects them more directly, as is the case with fraud.
Corporate Governance and Firm Performance in Malaysia

This study explores the effect of internal corporate governance mechanism of Malaysian public listed firms towards firm performance. This study attempt to determine by using recent available financial data whether the internal corporate governance mechanism are expected to be effective in enhancing firm performance. The internal corporate governance investigate in this study are board independence, board meeting, board size, duality, women director appointment as well participation of family member in the boardroom. The result derived suggests that board meeting is negatively and significantly associated with firm performance while other internal corporate governance mechanism found to be insignificant in this study. Thus, it is suggested that firm with frequent board meeting most likely indicate as firm’s response to the firm’s poor performance.
Undervaluation and Non-Financial Disclosure: Evidence from Voluntary CSR News Releases

In this paper, we examine whether stock market imperfection plays a role in a firm’s decision to disclose non-financial information and if yes, what are the underlying channels. To address our questions, we web-scraped corporate social responsibility (CSR) news for a sample of publicly traded non-financial US firms from CSRwire and explored the exogeneous variation in stock valuation driven by institutional price pressure. Our empirical results show that firms facing stock market undervaluation are more likely to release CSR news and the effect is concentrated in firms with low CSR commitment and low stock price informativeness. Lastly, we find evidence that stock market reacts positively to CSR news released by undervalued firms, and more so for undervalued firms with high information asymmetry.
Should Investors Choose Both the Highest-Return and Small-Variance Assets When the Mean-Variance Rule Says No? A Study of Health Care and T-Bill in the Investment

The high-speed growth of the health care sector has given this sector an increasingly important role in the stock market. This sector however has the highest mean in our study and a low correlation with the business cycle. On the other hand, T-Bill is also an important asset in investment because of its positive return and low variance. In this paper, we examine the conjecture of whether investors should choose both the highest-return and small-variance assets even when the mean-variance rule says “NO”. This conjecture is explored by making a comparison of the performance of portfolios with and without health care and 6-M T-bill in the U.S. market using portfolio optimization, mean-variance and stochastic dominance approaches. Our findings imply that all risk averters prefer to invest in portfolios with both health care and 6-M T-bill, regardless of whether they buy long or sell short in the market. Our findings do not support the existence of any arbitrage opportunity in the markets we studied but do support market efficiency. We also show that risk averters as well as investors with components of both risk aversion and risk seeking will choose both the highest-return and small-variance assets even when the mean-variance rule says NO.