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본 연구에서는 유상증자를 대주주의 지분율 증감 여부로 구분하여 유상증자 공시에 대한 시장 반응 및 유상증자 전 이익조정, 유상증자 후 장기 수익률에 대해 실증 분석하였다. 기존주주의 부를 보호하려는 경영자의 유인을 유상증자에 적용하여 유상증자를 유형에 따라서 구분하여 연구한 선행연구와 차별화 하였다. 본 연구의 실증 분석 결과를 요약하면 다음과 같다. 첫째, 대주주의 지분율이 증가하는 유상증자를 실시한 기업의 유상증자 공시일 전후의 누적초과수익률(CAR)은 대주주의 지분율이 감소하는 유상증자를 실시한 기업의 누적초과수익률보다 높게 나타났다. 둘째, 유상증자를 실시한 기업의 유상증자 실시 직전년도의 이익조정은 대주주 지분율의 증감과 유의한 음(-)의 관계로 나타났다. 마지막으로, 대주주의 지분율이 증가하는 유상증자를 실시한 기업의 유상증자 후 3개월간의 매입보유초과수익률(BHAR)이 대주주 지분율의 증감과 유의한 양(+)의 관계로 나타났다. 이러한 결과는 경영자가 기존 주주의 부를 보호하기 위해 대주주의 참여가 낮을수록 신규주주를 대상으로 신주의 발행가격을 높이기 위해 이익조정을 더 많이 하고, 대주주 지분율 증감에 따라 유상증자 공시에 대한 시장반응 및 장기 수익률이 차별적으로 나타난다는 것을 보여준다. 따라서 국내 시장의 유상증자 공시에 대한 긍정적인 반응은 유상증자를 통해 평균적으로 대주주 지분율이 증가하기 때문이며 대주주 지분율이 감소하는 유상증자의 부정적인 시장반응과 장기 저성과를 제시함으로써 증자에 참여하는 투자자의 의사결정에 시사점을 던져준다.
This study investigates the capital market reactions to announcements of seasoned equity offerings (SEOs), earnings management activities during the year before an SEO, and the decline in post-SEO stock performance. Although previous studies focus on the type of SEO and earnings management behavior, we classify SEO firms into two subsamples, those in which the largest shareholders increase their shareholding ratio and those in which they decrease their shareholding ratio, to examine management incentives that protect the wealth of existing shareholders. The announcement of an SEO in which the largest shareholders participate is good news for the market. We first seek to examine whether the response of the capital market to an SEO in which the largest shareholder’s shareholding ratio increases is more positive than its response to an SEO in which the largest shareholder’s shareholding ratio decreases. Because the cash flow of an SEO is dependent on the stock price, the management has an incentive to temporarily raise the stock price to maximize the existing shareholders’ wealth in SEO cases where the largest shareholder’s shareholding ratio decreases. Therefore, our second hypothesis is that there is greater earnings management, involving increased reported earnings, in the year before an SEO in which the largest shareholder’s shareholding ratio increases than an SEO in which it decreases. The decline in post-SEO stock performance in cases where the largest shareholder’s shareholding ratio decreases is more severe than in cases where it increases, because post-SEO performance is driven by accrual reversal. Therefore, our third hypothesis is that there is higher post-SEO stock performance in cases where the largest shareholder’s shareholding ratio increases than in cases where it decreases. The empirical results of this study are as follows. First, the cumulative abnormal returns (CAR) around the announcement date of SEOs in which the largest shareholders’ shareholding ratio increases is higher than the CAR around those in which the ratio decreases. This provides support for our first hypothesis that the capital market responds more positively to SEOs in which the largest shareholder’s shareholding ratio increases than to SEOs in which the ratio decreases. Second, the relationship between discretionary accruals during the year before an SEO and the change in the largest shareholder’s shareholding ratio is negative. This is consistent with our second hypothesis that there is more earnings management to increase reported earnings during the year before SEOs in which the largest shareholder’s shareholding ratio decreases than SEOs in which the ratio increases. Third, the relationship between the three-month buy and hold abnormal returns of SEOs and the change in the largest shareholders’ shareholding ratio is positive. This partially supports our third hypothesis that there is higher post-SEO stock performance in cases where the largest shareholder’s shareholding ratio increases than in cases where the ratio decreases. Overall, our findings show that the greater the change in the largest shareholder’s shareholding ratio, the more positive the capital market reaction to the SEO announcement, the less the earnings management, and the higher the post-SEO stock performance. The results can be explained as the incentive of management to protect the wealth of existing shareholders. We make several contributions to the literature. First, we investigate SEOs by classifying SEO firms into two subsamples, those in which the largest shareholders increase their shareholding ratio and those in which they decrease their ratio, to examine management incentives to protect the wealth of existing shareholders. Our study differs from others in the literature, which focus on the type of SEO and earnings management behavior or market responses to SEOs. Classifying firms by the change in the largest shareholder’s shareholding ratio is a more feasible way to examine management incentives to protect the wealth of existing shareholders than classifying them by the type of SEO, because the type of SEO is associated with the participation of existing shareholders. For example, in the case of a general cash offer, the largest shareholder can either participate in an SEO or not, or stand by the rights offer because there are no mandatory regulations. The largest shareholders can increase their shareholding ratio through third party allocation in cases where the third party is the largest shareholder. Our results showing that the largest shareholder’s shareholding ratio increases through SEOs in the Korean capital market explains why the positive market response to the announcement of SEOs in Korea is different from the negative market response in other countries.
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본 연구는 상품시장에서의 경쟁위협이 기업의 위험추구행태에 미치는 영향을 실증적으로 확인한다. 실증분석 결과, 경쟁위협의 증가는 기업의 위험추구행태를 약화시키는 것으로 나타났다. 이는 경쟁위협에 기인한 투자위험 및 파산비용의 증가로 인해 기업의 위험추구 성향이 약화되기 때문으로 해석이 가능하며, 대리인이론 측면에서 상품시장에서의 경쟁이 일종의 경영통제장치로 이해될 수 있음을 의미한다. 추가적으로 기업의 위험추구행태와 상품시장에서의 경쟁 수준에 대한 다양한 대용치를 활용한 경우, 내생성 문제를 통제한 경우, 산업수준에서의 분석을 수행한 경우에도 동일한 결과가 관찰되어 강건성을 확인할 수 있었다. 또한 이러한 결과는 시장점유율이 낮거나, 대규모 기업집단에 소속되지 않아 경쟁위협에 대한 민감도가 클 것으로 예상되는 기업에서 보다 강하게 관찰되었다. 한편, 경영통제장치로서 좋은 지배구조는 기업의 위험추구행태를 약화시키는 것으로 나타났으며, 이러한 효과는 비경쟁적인 상품시장에서만 주로 관찰되고, 경쟁적인 상품 시장에서는 사라지는 것으로 확인되었다. 이는 지배구조가 기업의 과도한 위험추구행태를 통제하는 효과가 상품시장에서의 경쟁위협에 의해 대체될 수 있음을 의미한다. 본 연구의 결과는 국내 자본시장에서 다양한 재무적 의사결정과 연관되는 기업의 위험추구행태와 상품시장에서의 경쟁 간의 관계를 최초로 제시함으로써, 향후 시장구조 형성에 관련한 정책 입안시 중요한 시사점을 제공할 수 있을 것으로 판단된다.
We examine how competitive threat in a product market, as an external environmental factor of the firm, influences corporate risk-taking behavior. Product market competition as a control mechanism is an issue of growing importance in the academic field of corporate finance (Giroud and Mueller, 2011; Kim and Lu, 2011). Firms in competitive industries have high investment and bankruptcy risks and low marginal profits, and thus need to lower their production costs to gain a competitive edge. Moreover, to decrease the cost of capital and signal the firm’s reputation to the market, firms should reveal their inside information and alleviate information asymmetry. Competitive threat is also an important factor in agency theory, as it is related to managerial compensation (Karuna, 2007) and to management’s pursuit of private benefits of control. In sum, competitive threat influences managerial decisions in various ways. Therefore, we investigate the relationship between competitive threat and firms’ risk-taking behavior to better understand its role as an external control device. The relationship between product market competition and corporate risk-taking behavior is not yet theoretically defined; therefore, empirical evidence from this study will provide significant academic and practical implications. One strand of the literature argues that managers should be reluctant to pursue risk in a competitive environment, due to the high risk of bankruptcy (Griffith, 2001) and high turnover sensitivity based on performance. Managers are expected to build conservative investment portfolios to lower the cost of capital. A similar argument is that competitive threat mitigates the risk-pursuing behavior of management based on the overinvestment incentive (Alchian, 1950; Stigler, 1958). The other strand of the literature argues that firms in competitive industries pursue more risks to acquire market power and a competitive edge. Under strong competition, managers are endowed with greater discretion to make managerial decisions quickly (Hubbard and Palia, 1995; Christie, Joye, and Watts, 2003), and hence can take risks to make large profits. In addition, in a competitive environment with lower profits, managers might pursue higher risks to increase their monetary compensation (Hernalin, 1992; Raith, 2003), or pursue private benefits by overinvesting in risky projects. We empirically investigate which of these two competing theories is supported in the Korean economy. This is the first study to empirically examine the effect of product market competition on corporate risk-taking behavior in the Korean economy. External factors that influence risk-taking behavior are not actively discussed in the academic field, thus we aim to fill this academic gap. Moreover, we extend recent studies that analyze the effect of product market competition by investigating its effect on firms’ risk-taking behavior. Under the agency theory, we test the disciplinary effect of competition in the Korean product market and explain how it disciplines managers or agency problems based on the risk-taking behavior of controlling shareholders. We use firms listed on the Korean Stock Exchange and run regressions while controlling for various firm characteristics and environmental factors. Measuring the level of product market competition, we use the Herfindahl-Hirschman index, which is commonly used in the field of corporate finance and industrial organization. To estimate corporate risk-taking behavior, we follow previous studies in using the standard deviation of the profit or net income over the past five years, standardized by total assets. Empirically, we find that competitive threat has a significantly negative effect on corporate risk-taking behavior. This means that managers burdened by high investment risks and bankruptcy costs in more competitive product markets do not want to form risky investment portfolios. It also implies that competitive threat can be considered as an external control device in the agency framework. The result is robust to control of the potential endogeneity problem, and to the use of alternative proxies for the level of product market competition and corporate risk-taking behavior. Furthermore, we find similar results when we perform an industry-level analysis. Our result is more strongly observed in firms with a low market share and those that do not belong to business groups. Meanwhile, examining the effect of the interaction between corporate governance and product market competition on corporate risk-taking behavior, we find that firms with good corporate governance are less likely to pursue risk. However, the negative effect of corporate governance on corporate risk-taking behavior exists only in less competitive product markets. We interpret this result as indicating that there is a substitution effect between internal corporate governance and competitive threat in product markets in determining corporate risk-taking behavior.
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본 연구는 자동조기상환형 주가연계증권(Auto-Callable ELS; 이하 AC_ELS)의 투자 효용을 포트폴리오 관점에서 실증분석하였다. 즉, 무위험채권, 주식 및 AC_ELS에 대한 투자가 허용될 때, 기대효용이론(expected utility theory)/전망이론(prospect theory) /안전우선이론(safety first theory)에 따른 각 투자자들의 최적 포트폴리오를 분석 하였다. AC_ELS의 수익률 분포는 우선 주가 자료로부터 GJR-GARCH(1, 1) 모형을 추정한 후, 이를 토대로 몬테카를로 시뮬레이션(MCS)을 적용하여 도출하였다. 본 연구의 주요 실증결과는 다음과 같다. 첫째, 기대효용을 극대화하려는 투자자나 손실회피적 투자자를 가정하였을 때, AC_ELS는 최적 포트폴리오에 포함되지 않는 잉여자산 (redundant asset)에 불과한 경우가 대부분이다. 둘째, 안전우선이론을 적용하여 도출된 최적 포트폴리오에는 AC_ELS가 대부분 포함되며, 이 때 AC_ELS는 주로 채권의 대체재 로써 기능한다. 셋째, 발행구조를 달리 하거나, 발행 수수료 및 금융위기의 영향 등을 고려하더라도 전술한 실증결과에 본질적인 차이는 없다. 결론적으로 본 연구를 통해 포트폴리오 관점에서 AC_ELS의 경제적 효용은 특정 유형의 투자자에게만 발생함이 확인된다.
Structured derivatives markets, including equity linked securities (ELS), derivatives linked securities, structured notes and credit linked notes have grown dramatically since the mid-2000s in Korea, but little attention has been paid to how much these securities contribute to the improvement of investors’ performance from a portfolio perspective. This study fills the gap by examining the optimal portfolio choice of investors who are allowed to invest not only in stocks and bonds, but also in ELS (especially auto-callable ELS). As ELS are generally regarded as alternative assets to enhance portfolio performance, their economic benefits should be considered from a portfolio perspective rather than on a stand-alone basis. In addition, even though the majority of ELS in Korea include an auto-callable feature, there is little study for this specific type of product. This study is the first step in understanding the investment benefits of ELS. In our analysis, we first estimate the return distributions of the KOSPI200 index, a risk-free asset, and a typical auto-callable security linked to the KOSPI200 index. Taking the complexity of the payoff structure into consideration, it is very difficult to theoretically determine the return distributions of the auto-callable ELS. Unlike stocks and bonds, even from an empirical point of view, any standard statistical method to derive the empirical distributions from the observed historical returns cannot be applied to the auto-callable ELS as we do not have a large enough sample (i.e., independent or non-overlapping return data) to obtain a reliable estimate. For example, even if we assume that all of the auto-callable ELS issued during the past 10 years were exercised early on the first possible exercise date, the maximum number of independent returns we can observe is only about 20, and thus we cannot estimate the return distributions in a valid manner. To reconcile this problem, we estimate the GJR-GARCH (1,1) model from the observed returns of the KOSPI200 index from 2003 through 2015, and then derive the empirical return distributions of the ELS via Monte Carlo simulations using the estimated GARCH model. Second, we use three portfolio selection models to derive investors’ optimal portfolio choice given access to the ELS market: (1) the conventional expected utility theory, (2) the prospect theory of Kahneman and Tversky (1979), and (3) the safety first theory of Telser (1956), which is the cornerstone of the behavioral portfolio theory with mental accounts proposed by Das, Markowitz, Scheid, and Statman (2010). Our main empirical findings are as follows. First, auto-callable ELS are shown to be unnecessary for the construction of the optimal portfolio for all investors trying to maximize their expected utility, regardless of their degree of risk aversion. Second, the auto-callable ELS do not improve performance for the majority of loss-averse investors. That is, the auto-callable ELS are regarded as a redundant asset according to both expected utility theory and prospect theory. Third, we find that auto-callable ELS are valuable assets that play a key role in improving the portfolio performance of the majority of investors who make investment decisions based on the safety first theory. This suggests that auto-callable ELS can be a very effective investment tool for investors who try to maximize the expected returns of a portfolio with a restricted probability of failing to reach a pre-specified threshold return. The difference in our empirical results depending on the portfolio selection models arises fundamentally from the structural characteristics of the auto-callable ELS. Their risk and return profile indicates that losses occur infrequently, but when they do, the expected losses can be considerably large. Similarly, although gains occur frequently, they tend to be very marginal. These characteristics of auto-callable ELS are very similar to those of selling deep out-of-the-money (OTM) put options. In this sense, for investors assumed by safety first theory, who measure risk by the frequency rather than the amount of expected losses, auto-callable ELS can be effective in enhancing the investment opportunity set. However, for investors with expected utility theory or prospect theory preferences, the relative advantages of auto-callable ELS over common stocks and bonds are weakened as the portfolio risk is generally recognized and measured by the expected losses rather than the frequency of losses. Finally, our robustness test results indicate that the findings remain valid when we consider other types of auto-callable ELS, issuing costs, and the effect of the global financial crisis.
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본 연구는 신용 등급감시(credit watch)의 정보적 가치에 대해 분석한다. 즉 등급감시가 국내에서는 정보 전달(delivering information)과 암묵적 계약(implicit contract) 중 어느 기능을 주로 수행하는가를 알아본다. 또한 등급변경 이전에 등급감시가 선행되는 기업의 특성 및 등급감시와 등급변경의 일치성에 영향을 주는 요인들을 도출한다. 이와 함께 등급하락 시 부정적 등급감시 선행 여부에 따른 시장반응의 차이도 살펴본다. 실증분석 결과 국내의 경우 긍정적 보다는 부정적 등급감시 의견이 많았으며 등급감시가 보수적으로 운영되고 있는 것으로 나타났다. 등급감시의 정보적 가치와 관련해서 국내에서는 암묵적 계약 보다 정보전달 기능을 주로 수행하고 있는 것으로 밝혀졌다. 즉 기업규모, 고정자산 비율, BBB 여부 등 정보전달 기능을 나타내는 대부분의 변수는 유의함을 보인반면 암묵적 계약을 나타내는 변수 중에서는 현금비율만이 유의성을 보였다. 하지만 평가 시기나 등재시기에 따라 등급감시의 역할이 상이, 수시평정과 등급변경 동시등재의 경우는 정보전달과 함께 암묵적 계약 기능도 수행하는 것으로 나타났다. 또한 기업규모가 클수록, 등급변동 폭이 클수록, 신용등급이 낮을수록 등급 하락 이전에 부정적 등급감시가 선행되었고 등급감시기간이 짧을수록, 정기평정일 수록, 신용도가 낮을수록 등급감시와 등급변경의 방향성이 일치하였다. 이와 함께 등급감시 등재가 선행된 등급하락의 경우 직접 등급하락 시보다 음(-)의 누적초과 수익률이 더 큰 것으로 나타났다. 또한 투자등급, 수시평정, 등급변경과 동시에 진행한 등급감시의 경우 더 큰 규모의 음(-)의 누적초과수익률을 기록했다.
This paper analyzes the information value of a credit watchlist in the Korean credit rating market. Credit rating agencies issue credit watches to indicate the direction of ratings changes within a short time horizon of three months on average. Credit watches are marked as either up, down, or uncertain. A watch is usually triggered by discrete corporate events such as mergers, acquisitions, restructuring, and announcements of plans expected to affect credit quality, or by trends in the issuer’s operations or financial weaknesses such as financial performance, liquidity and leverage, and accounting fraud. The watchlist either improves the information-certification role of credit ratings (delivering information), or allows rating agencies to influence the risky choices of issuing firms by threatening them with imminent rating downgrades and subsequent investor reactions (implicit contract). This study tests these two different explanatory lines to determine the information value of the credit watchlist. This study also identifies the features of firms with rating changes that are preceded by credit watches, and the factors affecting the agreement between a credit watch and subsequent rating changes. In addition, it examines whether the market reaction to rating changes depends on whether it is preceded by a negative credit watch. It is observed that there is a greater proportion of credit watches marked as “down” in Korea than in the US, and that the credit watchlist has been operated quite conservatively. Using the Nice’s credit rating and watchlist data from 2000 to 2014, the results support the delivery of information argument more than the implicit contract argument. Most of the variables that represent delivery of information, such as size, fixed assets, and BBB rating, are statistically significant, whereas the only significant variable associated with an implicit contract is cash ratio. However, the watchlist by provisional evaluation and simultaneous announcement with rating change presents a role of the implicit contract as well as the delivering information A negative watchlist followed by a downgrade is more likely to occur with larger issuers, greater rating changes, and lower credit ratings. Moreover, the extent to which the direction of credit watches coincides with the direction of subsequent rating changes is greater when there is a shorter duration between the watchlist and the rating change, periodical evaluation, and lower credit ratings. In terms of market reactions to downgrades, the negative watch-proceeded downgrades rather than the direct downgrades exhibit greater negative cumulative abnormal returns, which deepen in investment grade, provisional evaluation, and simultaneous announcement of watchlist and rating change. Meanwhile, the issuing firm’s cumulative abnormal return is statistically significantly negative when a negative watchlist is issued, but insignificantly positive when a positive watchlist is issued. Therefore, the information value of the credit watchlist can be summarized as follows. First, the watchlist in the Korean credit rating market generally fulfills the delivery of information rather than the implicit contract role. Analysis of the characteristics of firms that are issued with a negative watchlist indicates that the proxies measuring the delivery of information, such as size, fixed assets, and BBB of credit rating, are statistically significant. The role of the implicit contract is also partly observed in that the downgrades are actually executed in less than seventy percent of the issued negative watchlist cases. Furthermore, the credit watches by provisional evaluation and simultaneous announcement with rating change are also observed to present the implicit contract role. Second, the watchlist provides more information about issuers with investment credit ratings than speculative credit ratings. There is a greater deterioration in negative cumulative abnormal returns for investment than for speculative grades when a negative credit watch is issued. This phenomenon also appears when the downgrade is subsequent to a negative credit watch. The watchlist is less likely to be issued to speculative or default credit ratings. Third, the watchlist together with rating changes magnifies a negative market reaction in Korea, which is inconsistent with the results for the US market due to the unique timing of announcements, as the watchlist tends to be issued simultaneously with rating changes. This study makes three contributions to the literature. First, it is the first study to document the watchlist in the Korean credit rating market. Most studies have examined market reactions with respect to rating changes. The findings will be useful for academics and practitioners. Second, the study comprehensively investigates the role of the watchlist in Korea and discloses the genuine economic function of the delivery of information. Finally, the paper suggests policy implications for encouraging more issuance of speculative grades, separation from grade changes, and periodic evaluations.
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