Miracle-dz/UniFAR-FTUs huggingface dataset:
Executive Director Remuneration in Blockholder-Dominated Firms: How Do Italian Firms Use Stock Options?

Shareholder rights and director remuneration represents a highly debated but still controversial issue in corporate governance. The purpose of this study was to explore why blockholder-dominated listed firms use stock options as directors' remuneration tools. By using a unique hand-collected dataset comprising plans granted by Italian non financial listed companies, this paper shed light on why blockholder-dominated listed companies granted stock option plans to their directors. Specifically, empirical evidence concerning the characteristics and beneficiaries of the stock option plans given to Italian directors suggests that their diffusion may be hardly explained by optimal contracting theory. Optimal contracting theory seems able to explain no more than 40 out of the 161 plans analysed. In fact, we found evidence that other competing theories, such as rent-extraction theory, seem to provide a better explanation of corporate reality in blockholder-dominated listed firms.
The Cash Flow Permanence and Information Content of Dividend Increases vs. Repurchases

We hypothesize that the payout method chosen to distribute a cash flow shock is primarily determined by the permanence of the shock. Dividend increases will be observed following cash flow shocks with a relatively large permanent component while repurchases will be used to distribute shocks that are primarily transient. Further, this implies that the market will use the announcement of the payout method to update its beliefs about the permanence of past and contemporary cash flow shocks. Using a large sample of dividend increases and repurchases, we find support for these hypotheses. The post-shock cash flows of dividend increasing firms do not fully revert back to pre-shock levels. Those of repurchasing firms completely revert to pre-shock levels, even settling below them. The stock price reactions to the announcements of both repurchases and dividend increases show strong evidence that the information in a payout announcement is not only the size of the payout, but also the method used to distribute the cash. The announcement of a payout method that does not match the market's expectations causes the market to update its previous assessment of the permanence of the cash flow shock.
Optimal trade execution and absence of price manipulations in limit order book models

We analyze the existence of price manipulation and optimal trade execution strategies in a model for an electronic limit order book with nonlinear price impact and exponential resilience. Our main results show that, under general conditions on the shape function of the limit order book, placing deterministic trade sizes at trading dates that are homogeneously spaced is optimal within a large class of adaptive strategies with arbitrary trading dates. This extends results from our earlier work with A. Fruth. Perhaps even more importantly, our analysis yields as a corollary that our model does not admit price manipulation strategies. This latter result contrasts the recent findings of Gatheral [12], where, in a related but different model, exponential resilience was found to give rise to price manipulation strategies when price impact is nonlinear.
Retail Investor Information Demand - Speculating and Investing in Structured Products

We study the impact of retail investor information demand on trading in bank-issued investment and leverage structured products, which are specifically designed for retail investors. Stock-specific information demand positively predicts speculative trading activity. Further, we find a positive relationship between market-wide information demand and order aggressiveness and order uncertainty for speculating and investing activity. Whereas information supply is associated with speculative long positions, information demand does not induce investors to be predominantly long or short. Finally, we do not find retail investor information demand to contribute to an upward price pressure on security prices. In contrast, information supply exerts negative price pressure. Overall, retail investor trading in individual stocks is much more strongly influenced by market-wide information instead of firm-specific information demand. This implies a low informational efficiency of retail investor speculation and investing activity.
Counterproductive Work Behavior Among Chinese Knowledge Workers

The purpose of this study was to investigate the frequency and antecedents of Chinese knowledge workers’ counterproductive work behavior (CWB) by using a self‐developed indigenous scale. The paper consisted of two studies. Study 1 developed an indigenous measure of knowledge workers’ CWB. Study 2 investigated the frequencies and antecedents of Chinese knowledge workers’ CWB using the indigenous measure with a sample of 366 participants. The results showed that CWB among Chinese knowledge workers was rather prevalent. The results also showed that personality variables (i.e., agreeableness, conscientiousness, neuroticism, and locus of control) were more important than other variables (e.g., demographic and job characteristics) in predicting CWB.
The Halloween Indicator, 'Sell in May and Go Away': Everywhere and All the Time

To answer the sceptics, we use all historical data (62962 observations) on all stock market indices worldwide to verify the robustness of the so-called Halloween Indicator or Sell in May effect. The effect seems remarkably robust with returns on average 4% higher during November-April period than during May-October. A new test for the effect offers some additional insights. Worldwide excess returns during summer seem negative (around -1%) and often significantly so suggesting a flat or negative risk return relation. Only for Mauritius do we find a significantly positive risk return relation during May-October. Our dataset also allows for a new (upper bound) estimate for the equity premium of around 4%.
Does Mandatory IFRS Adoption Affect Crash Risk?

We examine the impact of mandatory IFRS adoption on firm-level “crash risk,” defined as the frequency of extreme negative stock returns. An important feature of our study is that we separately analyze industrial firms and firms in finance-related industries. This is important because IFRS adoption is likely to affect industrial firms through different mechanisms than financial firms, and as a result may affect crash risk differently. We find that for companies in poor information environments, crash risk decreases among industrial firms and increases among financial firms after the IFRS mandate. We also find that crash risk decreases relatively more among industrial firms where IFRS results in more credible changes to local GAAP, and that crash risk increases relatively more among banks with less restrictive regulations. In addition, we find that earnings volatility declines after IFRS adoption for industrial firms but increases for financial firms. Overall, our findings are consistent with mandatory IFRS adoption decreasing crash risk among industrial firms by improving reporting quality, and increasing crash risk among financial firms by inducing greater volatility and affording more opportunities for manipulation.
Liquileaks

A security’s liquidity properties have been studied in terms of mean and variance: liquidity level and liquidity risk, respectively. This paper explores tail events, liquidity disaster risk. Liquidity might not be a worry to investors in normal market conditions, but it does become a first-order concern in case the security not only hits an illiquid state, but is also trapped in it so that waiting a day will not restore liquidity. Empirically, such events, referred to as liquidity leaks or liquileaks, can be characterized with a Markov regime-switching model that alternates between a liquid and an illiquid state. Liquileak risk is naturally defined as the probability of finding the security in the illiquid state for more than a week. This probability is estimated based on an unbalanced sample of 2147 stocks from 1963 through 2008. Standard Fama-MacBeth regressions show that a one standard deviation increase in liquileak probability commands an annual premium of 1.33%. This premium has increased over time.
Macroeconomic Activity and the Malaysian Stock Market: Empirical Evidence of Dynamic Relations

This study uses time-series analysis to investigate the long-run relationships and short-run dynamic interactions between the stock market and various macroeconomic variables in Malaysia over the period 1980:01 to 2006:12. The study applies the multivariate cointegration methodology to establish the possible causal relations between these variables. The cointegration test and the vector error correction model demonstrates the evidence of positive long-run relationships between real stock returns and measures of aggregate economic activity including industrial production, consumer price index, money supply and real exchange rate. The long-term elasticity coefficients of the macroeconomic variables on stock returns display relationships that are theoretically grounded. Further analysis using variance decompositions lends evidence of the dominant influence of certain macroeconomic variables namely; consumer price index, money supply and real exchange rate in forecasting stock price variance.
If It’s Good for the Firm, It’s Good for Me: Insider Trading and Repurchases Motivated by Undervaluation

My findings suggest that information inherent in insider trading can be used to identify undervalued repurchasing firms. I examine the relation between insider trading and the performance of open market repurchase (OMR) firms. I show that firms with high net insider buying prior to open market repurchase announcements not only earn abnormal stock returns in both the short- and long-run, but also exhibit better operating performance. Overall, the evidence is consistent with insiders timing their trades prior to open market repurchase announcements.
Ownership Structure and Intellectual Capital Performance in Malaysia

The performance of intellectual capital (IC) depends on the efficiency of investments in tangible and intangible resources devoted to value creation activities. The performance of IC investments is important because it affects a company's long term competitive advantage. This paper examines whether ownership structure (whether it is management, foreign, government or family ownership) can explain the variation in a company's IC performance. It provides additional insight into the role and incentives of firm owners and could affect the company's ability to increase value (value creation activities). This research relies on an empirical model using VAICTM to measure IC performance. The data consists of all companies listed on the Malaysian Exchange of Securities Dealing and Automated Quotation Market (MESDAQ) market in between 2005 and 2007. Family ownership appears to have a negative effect on IC performance. A high degree of family ownership implies a high probability of opportunistic behaviour among families pursuing their objectives at the expense of value creation activities. The results are valuable for capital market regulators in monitoring the efficiency of value creation investments.
Priority Rules!

The primary difference between continuous market mechanisms is in the priority rules that they use to match buyers and sellers. In most markets price takes precedence, but if two or more parties are willing to pay the same price, then various markets use different secondary priority rules to break such ties. These rules can have a major impact on the performance of a financial market. We develop a model that examines price and size competition under two different priority rule systems. The model predicts that price/time priority rule systems will foster price competition. The model also predicts that a secondary priority rule of pro-rata sharing provides incentives for size competition. We test these hypotheses on a sample of 402 Toronto Stock Exchange stocks that had their secondary priority rule changed from time to pro-rata sharing. We find results consistent with a decrease in price competition and an increase in size competition, as predicted by the model. We also find that for a sub-sample of 48 stocks that were cross-listed in the U.S., the TSE increased its market share following the rule change. However, this increase was probably due to brokers supporting a rule change for which they had lobbied, rather than order flow migrating to a preferred trading environment.
Equity-Based Incentives, Risk Aversion, and Merger-Related Risk-Taking Behavior

Using a sample of 3,688 mergers and acquisitions over the period of 1992 to 2005, we find that post-merger equity risk declines roughly 18% in the year after the announcement. We find that post-merger equity risk is negatively related to the sensitivity of CEO wealth to stock return volatility (vega). The negative relation between vega and equity risk over the post-merger period is concentrated in CEOs with high proportions of options and options that are more in-the-money. The reduction in post-merger equity risk is accomplished through both industrial diversification and reduced business segment focus, with the probability of industrial diversification decreasing in vega. In addition, we find that the decline in post-merger equity risk results in a significant decrease in shareholder wealth. This decrease is concentrated among firms with CEOs having the highest delta and the highest delta and vega, with the effect of vega also conditional on option ownership characteristics. Our results suggest that the increased convexity provided by option-based compensation does not necessarily increase risk-taking behavior by CEOs.
Creditor Control Rights, State of Nature Verification, and Financial Reporting Conservatism

I examine the impact of state-contingent allocation of creditor control rights on financial reporting. Using a discontinuity analysis, I find that firms’ financial reporting becomes more conservative immediately after covenant violations and this effect persists for at least eight quarters. The conservatism effect is more pronounced when creditors possess greater bargaining power, when firms’ operations are more volatile, and when creditors put Chief Restructuring Officers in place. My findings identify a specific channel through which debt financing shapes corporate financial reporting and provide direct evidence supporting the debt contracting explanation for conservatism posited in Watts (2003).
Corporate Governance, Companies’ Disclosure Practices, and Market Transparency: A Cross Country Study

We examine the link between corporate governance, companies’ disclosure practices and their equity market transparency in a study of more than 5,000 listed companies in 23 countries covering the period 1 January 2003 to 31 December 2008. Our results confirm the belief that better-governed firms make more frequent disclosures to the market. We also find greater disclosure in common law relative to code law countries. However firms with better governance in both code and common law countries make more frequent disclosures. We measure market transparency by the timeliness of prices. In contrast to single country studies, results show, for the 23 countries collectively, better corporate governance is associated with less timely share prices. This would suggest that a firm substitutes better corporate governance for transparency. We are thus led to the conclusion that even if information is disclosed more frequently by better-governed firms, it does not necessarily follow that information is reflected in share prices on a timelier basis.
The Market’s Reaction to Unexpected Earnings Thresholds

We examine differences in quarterly earnings announcement returns as a function of meeting or missing each of three earnings thresholds – reporting a profit, reporting an increase in earnings, and meeting analysts’ forecasts. In contrast to prior research, the research design identifies the incremental market reaction to the profit and earnings increase thresholds, after controlling for the effect of meeting or missing analysts’ forecasts. Using this methodology, we find little evidence of incremental threshold effects beyond meeting analyst forecasts. In other words, zero earnings and a zero change in earnings do not appear to be “special” points that elicit a differential response by investors. Our results are robust to including a number of control variables and alternative tests. The fact that we find little evidence to support market-related incentives to manage earnings at the profit and earnings increase thresholds suggests either that managers have other incentives to manage earnings at these thresholds or that managers perceive market rewards and penalties when none exist.
Auditor Conservatism and Banks’ Measurement Uncertainty during the Financial Crisis

During the most recent financial crisis, the economic difficulties, along with potentially high uncertainties associated with fair value estimates, increased the audit risks for bank auditors. We analyze a sample of U.S. public banks during the crisis (2008-2009) and after the crisis (2010-2011), and provide contrasting evidence concerning auditors’ role on conservative financial reporting (proxied by higher discretionary loan loss provisions). Specifically, we document a significant positive association between discretionary loan loss provisions and the role of auditors (proxied by higher amounts of audit fees and abnormal audit fees) during the crisis. However, the positive association disappears following the financial crisis. Similarly, we document that during the crisis, auditors are less likely to issue unmodified audit opinions to banks that subsequently filed for bankruptcy. Thus, our evidence is consistent with elevated auditor conservatism for the sample banks during the financial crisis. Our evidence also suggests that bank auditors raise fees more to maintain accounting quality than to price protect from aggressive accounting choices.
Extreme-Downside-Risk Spillover from the United States and Japan to Asian-Pacific Stock Markets

This paper proposes a probit approach to measure and forecast extreme downside risks in Asian Pacific markets given information on extreme negative shocks in the U.S. and Japanese markets. The extreme downside risk of a market is measured as the occurrence of market returns falling below left-tail Value at Risk in a Markov switching framework. The empirical findings are consistent with the following notions. First, extreme downside movements of the S&amp;P 500 and Nikkei 225 are significantly predictive for extreme downside movements in all of the investigated Asian-Pacific markets. Second, the majority of Asian-Pacific markets become more sensitive to the Japan’s extreme negative shocks when the Japanese market switches into turbulent periods, whereas the U.S. spillover effect is enhanced only on Taiwan during the U.S. turbulent periods. Third, mainland China is overall the least affected by the extreme negative shocks in the United States and Japan, while Australia is the most sensitive to the United States and Singapore is the most vulnerable to Japan.
CEO Turnover, Financial Distress and Contractual Innovations

The design of CEO incentives is particularly important for firms in financial distress. We compare the resolution of CEO incentive problems in distressed firms between the 1980s versus the 1990s, focusing on how changes in contractual provisions, as well as in the executive labor market, resulted in a shift to a new equilibrium. Our analyses provide evidence that the increased bargaining power of creditors, together with changes in the use of contractual provisions in the 1990s, enabled creditors to more effectively retain highly skilled CEOs with firm specific knowledge and provide them with incentives to improve firm performance.
Why Are Firms Unlevered?

In this paper, we examine the relative explanatory power of three motivations for firms to remain debt free - managerial entrenchment, need for financial flexibility, and credit constraints. Consistent with the hypothesis that they lack access to debt markets, these firms are small, young, profitable, and lack a credit rating, and make fewer investments than their control firms. We reject the hypothesis that zero-leverage policies are driven by entrenched managers attempting to avoid the disciplinary pressures of debt. These firms do not have weaker internal or external governance mechanisms. The debt initiation decisions of these firms are not preceded by shocks to their entrenchment, such as takeover threats or the emergence of activist blockholders. These firms are able to access debt financing when profitable investments arise, allowing them to credibly certify the use of funds to lenders, who are mainly banks or other private lenders. A majority of the firms explicitly state in their 10-Ks that they raise debt to finance investments, indicating a causal link between debt initiation and investments.
Skirting the Issues? Experimental Evidence of Gender Bias in IPO Prospectus Evaluations

Given that women executives are present in the top management teams of IPO firms in increasing numbers, the lack of female-led IPO firms is a curious fact, especially since women-owned private businesses represent almost half of the new businesses formed in the United States, with patterns of founding similar to male-owned businesses. It hints at a potentially larger problem – a gender-based capital gap for new ventures. Given the empirical evidence suggesting a positive association between the presence of female executives and firm performance, we test whether investor perceptions are aligned with these empirical patterns. Using a sample of MBA students we construct a simulated initial public offering (IPO) manipulating the gender demographics of the top management team. Our results suggest that female CEOs may be disproportionately disadvantaged in their ability to attract growth capital when all other factors are controlled. Despite identical personal qualifications and firm financials, firms led by females were seen as having a poorer strategic position than those led by males, female Founder/CEOs were perceived as less capable then their male counterparts, and IPOs led by female Founder/CEOs were considered less attractive investments.
Prospect Theory, Liquidation and the Disposition Effect

There is a well known intuition linking prospect theory with the disposition effect, the tendency of investors to sell assets that have risen in value rather than fallen. Recently, several authors have studied rigorous models in an attempt to formalize the intuition. However, some have found it difficult to predict a disposition effect whilst others produce a more extreme prediction where investors never voluntarily sell at a loss. We solve a model of asset liquidation where investors realize utility over gains and losses, and utility is concave over gains, and convex over losses. Under the preferences of Tversky and Kahneman (1992) and lognormal asset prices, investors exhibit a disposition effect as gains are realized at a greater rate than losses. Nonetheless, in contrast to the extant literature, we find that the investor will ``give up'' and sell at a loss, when the asset has a sufficiently low Sharpe ratio.