Miracle-dz/UniFAR-FTUs huggingface dataset:
Military Managers and Earnings Management

How does previous military experience affect corporate managers’ behavior in earnings management? Using a sample of listed Chinese firms, we find that managers with military experience are associated with higher levels of earnings management, through both accrual-based and real-activities manipulations. Firms run by military managers are more susceptible to financial restatements, qualified audit opinions, and penalties for violation. To alleviate endogeneity problems, we use both the instrumental variable regression and a propensity score matching approach, and our results are robust. In addition, the effect of military managers is more pronounced in state-owned firms and firms with weak internal control systems. These findings improve our understanding of the link between managerial traits and corporate financial reporting decisions.
Classification of Monetary and Fiscal Dominance Regimes Using Machine Learning Techniques

This paper identifies U.S. monetary and fiscal dominance regimes using machine learning techniques. The algorithms are trained and verified by employing simulated data from Markov-switching DSGE models, before they classify regimes from 1968-2017 using actual U.S. data. All machine learning methods outperform a standard logistic regression concerning the simulated data. Among those the Boosted Ensemble Trees classifier yields the best results. We find clear evidence of fiscal dominance before Volcker. Monetary dominance is detected between 1984-1988, before a fiscally led regime turns up around the stock market crash lasting until 1994. Until the beginning of the new century, monetary dominance is established, while the more recent evidence following the financial crisis is mixed with a tendency towards fiscal dominance.
Corporate Governance, Supply Chain Structure, and Related Party Transactions in a Multinational Firm

This paper addresses how corporate governance quality of a multinational firm is affected by its supply chain structure. We hypothesize that the parent's manager is more likely to engage in operational diversion during related party transactions with its foreign subsidiaries under the supply chain structure of upstream subsidiary-downstream parent (S-P) compared to the structure of upstream parent-downstream subsidiary (P-S). To test our hypothesis, we analyze a unique dataset on related party transactions of Korean multinational firms in manufacturing, wholesale, and retail industries from 2006 to 2013. We use the adoption of IFRS (International Financial Reporting Standards) in 2011 as a policy shock on corporate governance quality of multinational firms and support our hypothesis using difference-in-differences analysis. Our results show that operational performance of a multinational firm upon IFRS adoption improves more under the supply chain structure of P-S compared with the structure of S-P. This implies that the supply chain structure of P-S is more robust against operational diversion in related party transactions. We provide further evidence that the P-S structure can serve as a useful corporate governance mechanism even when other governance mechanisms are weak.
Targeting Bad Doctors: Lessons from Indiana, 1975–2015

For physicians, quality of care is regulated through the medical malpractice and professional licensing/disciplinary systems. The medical malpractice (med mal) system acts through ex post private litigation; the licensing system acts through ex ante permission to practice (i.e., licensure), coupled with ex post disciplinary action against physicians who engage in &#8220;bad&#8221; behavior. How often do these separate mechanisms for ensuring quality control take action against the same doctors? With what result? We study these questions using 41&#8201;years of data (1975&#8211;2015) from Indiana, covering almost 30,000 physicians. Disciplinary sanctions are much less common than med mal claims&#8212;whether paid or unpaid. Only a small number of physicians are &#8220;tagged&#8221; by both systems. Disciplinary risk increases with the number of past med mal claims. Paid claims have a greater impact than unpaid claims, and large payouts (&#8805;100&#8201;k, 2015$) have a slightly greater impact than small payouts on disciplinary risk. The risk of a paid claim increases with more severe disciplinary sanctions (i.e., revocation and suspension). Our findings suggest an obvious model for the interaction of these two systems.
Market Efficiency, Managerial Compensation, and Real Efficiency

We examine how an exogenous improvement in market efficiency, which allows the stock market to obtain more precise information about the firm's intrinsic value, affects the shareholder-manager contracting problem, managerial incentives, and shareholder value. A key assumption in the model is that stock market investors do not observe the manager's pay-performance sensitivity ex ante. We show that an increase in market efficiency weakens managerial incentives by making the firm's stock price less sensitive to the firm's current performance. The impact on real efficiency and shareholder value varies depending on the composition of the firm's intrinsic value.
Breadth of ESG disclosure and the information content of stock prices

This study examines whether ESG (environmental, social and governance) disclosure influences the capacity of stock prices to impound information about a firm’s future earnings. Our main research hypothesis postulates that greater information disclosure about ESG activities and risks should weigh on the association between returns and future earnings if that disclosure is accurate, complete and credible. An extension of the future earnings response coefficient (FERC) model is employed in that greater FERC is expected for firms which have a high rating for ESG disclosure. The study covers highly developed countries and the period spanning 2007-2018. Overall, our findings confirm the usefulness of ESG disclosure, as it affects the information content of prices about future earnings. Indeed, greater breadth of ESG disclosure is associated with greater price informativeness. Our results also suggest that disclosure about social issues matters more to price informativeness than environmental and corporate governance information. Finally, we show that the impact of breadth of ESG disclosure on price informativeness is concentrated on firms that present lower performance in terms of sustainability.
Empirical Evidence on Corporate Governance in Europe. The Effect on Stock Returns, Firm Value and Performance

In this paper we analyze whether good corporate governance leads to higher common stock returns and enhances firm value in Europe. Throughout this study we use Deminor Corporate Governance Ratings for companies included in the FTSE Eurotop 300. Following the approach of Gompers, Ishii and Metrick (2003) we build portfolios consisting of well-governed and poorly governed companies and compare their performance. We also examine the impact of corporate governance on firm valuation. Our results show a positive relationship between these variables and corporate governance. This relationship weakens substantially after adjusting for country differences. Finally, we analyze the relationship between corporate governance and firm performance, as approximated by Net-Profit-Margin (NPM) and Return-on-Equity (ROE). Surprisingly, and contrary to Gompers, Ishii and Metrick (2003), we find a negative relationship between governance standards and these earnings based performance ratios for which we discuss possible implications.
Impact of Employee Displayed Emotion on Perceived Waiting Time of Clients among Islamic Banks of Paksitan

The core and main objective of this study is to examine the relationship of employee displayed emotions on perceived waiting time that is ultimately affect the approach behavior of clients in a service environment. This study examined the different effects of environmental elements with the path of perceived waiting time and the path of emotions too. We surveyed on an adapted questionnaire 191 clients among Islamic banks of Pakistan during rush hour. We found some interesting facts that there is no significant effect of employee displayed emotions on perceived waiting time of clients. There is a strong significant effect of employee displayed emotion on approach behavior which shows an alarming mindset of clients of Islamic Banks. There is no change in approach behavior of clients of Islamic banks even they have not been treating in a well behavior or professionally.
The Intraday Impact of Macroeconomic News on Price Moves of Financial Instruments

This paper studies the impact of major U.S. macroeconomic news releases on price movements of selected instruments in asset classes including equity, foreign exchange, and fixed income over different time spans within a day. The results show that U.S. macroeconomic news surprises affect different asset classes to varying degrees. Price movements of long-term U.S. Treasury bond yield return and news surprises of non-farm payroll, as well as ADP employment change are positively correlated. The impact is also higher within five minutes after release. The results are consistent with earlier research which shows the bond market reacts more to macroeconomic news. Such information can help traders with risk management and alpha generation when trade macroeconomic data. The paper also examines recent news about equity performance on employment data which shows they are not always consistent.
Theory of Capital Structure - a Review

This paper is a review of the central theoretical literature. The most important arguments for what could determine capital structure is the pecking order theory and the static trade off theory. These two theories are reviewed, but neither of them provides a complete description of the situation and why some firms prefer equity and others debt under different circumstances. The paper is ended by a summary where the option price paradigm is proposed as a comprehensible model that can augment most partial arguments. The capital structure and corporate finance literature is filled with different models, but few, if any give a complete picture.
Directors’ and Officers’ Liability Insurance: Evidence from Independent Directors’ Voting

Directors’ and officers’ liability insurance (D&O insurance) is one of the most controversial and least understood governance tools. Using manually collected voting data for all director types, we provide the first evidence for the impact of D&O insurance on directors’ voting decisions and the subsequent effects on corporate governance and financial performance. We find that independent directors at firms carrying D&O insurance are more likely to dissent when benchmarked against their peers in the same firm on the same proposal. Our results are robust to endogeneity checks. We identify channels through which the incentive effects of D&O insurance operate. We also find that the positive effect of D&O insurance on independent director dissension is associated with better firm performance and monitoring outcomes, including less litigation and lower claim values, less underinvestment, better internal control quality, and improved CEO pay- and turnover-performance sensitivities. Our results have important policy implications.
Does the Corporate Capital Structure Theory Apply to Banks? Evidence from the Field

This paper investigates the value relevance of banks’ capital structure voluntary choices, their determinants, and preference in terms of funding mix policy models, using a unique survey-based dataset gathered through a face-to-face interview structured questionnaire, conducted to a sample of 51 Portuguese banks’ CEOs (89.5% survey response rate), over the 1989-1998 period. Survey participants, elicited ownership structure managerial control, growth opportunities, reputation in banking markets, financial flexibility, information signaling, bank size, share listing, business risk, dividend policy, and debt tax-shields, as the most relevant capital structure determinants at the bank level. The supervisory and regulatory discipline was indicated as the more influential external determinants for capital structure choice. A majority of 60 percent of state-owned bank CEOs declared a preference for following pre-determined guidelines on bank funding as capital structure policy model. Almost 53 percent of the privately-owned bank CEOs revealed a significant preference for the tradeoff capital structure policy model. The pecking order and the market-timing theories received moderate to weak preference. The paper extends the literature, providing field evidence that banking capital structure choice do matter and may be explained within the framework of the conventional corporate capital structure theory.
Feeding and Survival Responses of Reticulitermes flavipes (Kollar) to Extractives of Wood from 11 Coniferous Genera

Woods unfavorable to Reticulitermes flavipes (Kollar) in a force-feeding test on heartwood blocks of 11 American coniferous genera included Port-Orford-cedar, eastern redcedar, western redcedar, baiacypress, redwood, and ponderosa pine. The same woods were not attacked in a choice test of all the woods except Port-Orford-cedar, which was omitted because of its toxicity. Only one of two sources of western redcedar was unfavorable in both force and choice tests; one source of western hemlock was not attacked in the choice test. In force-feeding tests on sawdusts, solventextracted sawdusts, and the corresponding wood extracts on filter paper, overall survival was best on test materials of Douglas-fir, subalpine fir, and western larch, followed by western hemlock and Engelmann spruce Many of the extracts prepared from the unfavorable woods contained substances detrimental to termite survival.
Any Non-welfarist Method of Policy Assessment Violates the Pareto Principle: A Counter Example

I make a key point that social welfare functions that only rely on individual utility still may reflect what people typically think of as a non-welfarist approach by critiquing Kaplow and Shavell (Journal of Political Economy, 2001) who propose and “prove” a proposition asserting that “Any non-welfarist method of policy assessment violates the Pareto principle. ” The fundamental mistake made by Kaplow and Shavell is that their definition of welfarism equates welfarist methods and social welfare functions that only rely on individual utility. As a result, their definition of (non-)welfarism does not always coincide with common interpretations of (non-)welfarist methods.
De l’(in)utilité des agences de notation (On the (Dis)utility of Credit Rating Agencies)

<b>French Abstract. </b> Depuis la crise des emprunts hypothécaires risqués aux Etats-Unis, plus personne n’ignore l’existence des agences de notation. La population, les responsables politiques et même certains économistes se posent légitimement les questions suivantes : pourquoi les agences de notation ont-elles été créées ? Quelles sont leurs particularités ? Pourquoi jouent-elles un rôle si prépondérant aujourd’hui ? Quelles réformes faudrait-il mettre en oeuvre ? En abordant ces questions, cet article montre que les agences de notation ne sont ni des usurpateurs de pouvoir, ni des facteurs de transparence indispensables. Les réformes actuelles doivent inciter les acteurs économiques à déterminer et utiliser des notations plus conservatrices, que ces notations soient émises par une agence officielle, une institution financière, ou calculée à partir de prix observés sur le marché. <br><br><b>English Abstract. </b> Since the subprime mortgage crisis in the United States, no one has been unaware of the existence of rating agencies. The population, politicians and even some economists legitimately ask themselves the following questions: why were rating agencies created? What are their particularities? Why do they play such a prominent role today? What reforms should be implemented? By addressing these questions, this article shows that rating agencies are neither usurpers of power nor indispensable factors of transparency. Current reforms should encourage economic actors to determine and use more conservative ratings, whether these ratings are issued by an official agency, a financial institution, or calculated from market prices.
Predictive Ability of Directors’ and Officers’ Liability Insurance Coverage for Class Action Lawsuit Settlements

The primary conclusion from prior literature is that firm size, as a measure of firm resources and capacity to pay, is a key predictor of class action securities settlement amount, and the merits of the case are less important in settlement negotiations. The purpose of this study is to shed additional light on the settlement determination process: given defendant incentives to avoid paying out of pocket and plaintiff incentives to settle quickly with maximum settlement, does directors’ and officers’ (D&amp;O) insurance coverage limit explain variation in settlement amounts? I find that D&amp;O coverage limit has predictive ability for settlement size, even when controlling for firm size. I also find that the association depends on the level of coverage; high D&amp;O coverage has stronger explanatory power for settlements than low coverage, presumably due to the marginal benefits of plaintiff attorney effort at high levels of coverage to yield the big payoff. In sum, this paper contributes to the existing literature on predicting class action securities lawsuit settlements, which even though D&amp;O coverage levels are unobservable to investors, impacts decision-making important to shareholders.
Uncertainty and Dispersion in Professional Interest Rate Forecasts: International Evidence and Theory

We examine the cross-country relationships between measures of forecast uncertainty, forecast dispersion across individual forecasters and the variabilities of short-term interest rates and long-term yields. The main findings are: (i) Forecast uncertainty and forecast dispersion are positively and significantly related across countries for both short-term interest rates and long-term yields. (ii) A positive, albeit weaker, relation is found between forecast uncertainty and interest rate variability. (iii) Forecast dispersion of short-term interest rates and rates' variability are also positively associated. The evidence is followed by a Bayesian learning model that discusses conditions under which the results above are implied by theory.
The Transaction Costs of Stakeholder Board Membership. The Case of Ben & Jerry’s Homemade, Inc.

If board voting membership for stakeholders is inefficient and thus likely to be unfeasible, as Transaction Cost Economics (TCE) posits, How can Ben & Jerry’s (B&J’s) be accounted for? This question, overlooked by TCE scholars and stakeholder advocates alike, is answered in this paper. Shareholder-centric corporate boards are the only feasible option according to TCE. However, just as the U-form firm structure is costlier in terms of governing transactions than the M-form, yet the U-form is warranted when a more fine-grained follow-up on decisions is required and diversification is uncalled-for, stakeholder board voting membership may also be needed for the survival of transactions specific to social-purpose hierarchies, despite admittedly being costlier than proprietary, shareholder-centric hierarchies. This paper’s finding is that by granting board voting membership to stakeholders, B&J’s has spearheaded a departure from motivational credible commitments that rely on reciprocal bilateral exchanges, and toward a form of imperative credible commitments, which represent a stringent form of commitment that is plausibly costlier compared to alternatives, yet they are warranted to increase the reliability of transactions with stakeholders who otherwise would be left with a circumstantial assurance of continuity.
Impact of International Oil Price, and Its Volatility on Profitability of Top Oil and Gas Companies: The Role of Exchange Rate, Governance Institutions, and Human Development of Their Origin Country

In the current era, according to the floating industrial ratings, the topmost industry in the world is the Petroleum Marketing Industry. This sector has been able to earn high returns over the investment which has created more interest to determine major factors that are needed to be focused on while evaluating the profitability of the Oil Marketing Companies. This study explored whether this high return is due to the rise in oil prices or not. This would further establish if the rise is due to supply-side factors like the higher cost of production, or demand side, as supply-side factors would not lead to profitability. We also explore the role of other factors like volatility in oil prices and origin country institutional quality, human development, and exchange rate. Other factors such as GDP and stock market return of origin country were also taken as control. For this, the dataset of 24 oil and gas companies were taken for the year 2000 to 2018 from their annual reports. For regional comparative analysis, these companies are divided into 3 regions (Asia, Europe, America). The measures of profitability i.e. Returns on Equity (ROE) and Return on Asset (ROA) were taken as the dependent variable. Results from the panel regression showed oil prices seem to have a significant and positive impact on profitability (ROA), regional analysis also shows a strong and positive effect on both ROA and ROE in European and ROA of American based companies. Human development also seems to significantly predict ROE, overall, as well as both ROA and ROE of Asian based companies. Surprisingly, American-based companies seem to have a significant negative effect on human development. Other striking findings were the quality of institutions, which have a significant negative effect on profitability (both ROA and ROE) in Asian origin firms, however, this relationship was significant and positive in the overall sample. The exchange rate also seems to be negatively impacting both ROA and ROE overall as well as in the American sample, whereas it has a positive impact on the Asian sample. Lastly, the effect of oil price volatility on profitability remained inconclusive. The study confirms that the rise in oil price seems to be demand-driven, causing spikes in profitability, moreover, this profitability was conditional to the quality of institutions as well as human development in their country of origin.
Claim Models: Granular and Machine Learning Forms

The purpose of this paper is to survey recent developments in granular models and machine learning models for loss reserving, and to compare the two families with a view to assessment of their potential for future development. <br><br>This is best understood against the context of the evolution of these models from their predecessors, and the early sections recount relevant archaeological vignettes from the history of loss reserving. <br><br>However, the larger part of the paper is concerned with the granular models and machine learning models. Their relative merits are discussed, as are the factors governing the choice between them and the older, more primitive models. <br><br>Concluding sections briefly consider the possible further development of these models in the future. <br>
High-speed Rail and Industrial Developments: Evidence from House Prices

With unique house transaction data, we study the distributional effect of high-speed rail (HSR) by examining the house price premium of industrial parks in two important core-periphery pairs of China. For “Shanghai-Suzhou” pair, the premium of manufacturing industrial parks grows in the core, but the growth in the periphery area near HSR stations is larger. The premium of service industrial parks grows in the core, but drops in the periphery area far from HSR stations. Such patterns do not hold for “Beijing-Tianjin” pair; we discuss the rationales. Overall, HSR decentralizes (agglomerates) the manufacturing (service) industry from (towards) the core.