Earticle

본 연구는 한국지배구조원(KCGS)에 의해 2006년부터 2010년까지 산출된 기업지배구조지수를 이용하여 기업지배구조가 기업성과와 기업가치에 미치는 영향, 기업지배구조가 외국인지분보유율에 미치는 영향, 외국인지분보유율이 기 업성과와 기업가치에 미치는 영향에 관해 실증 분석하였다. 주요 연구결과는 다음과 같다. 첫째, 좋은 기업지배구조를 가진 기업일수록 기업의 성과 및 가치가 높다는 가설을 검증하기 위해 회귀 분석한 결과 매출액 영업이익률, 주가순자산비율, Tobin's Q 모두에서 양(+)의 영향을 미치는 것으 로 나타났다. 둘째, 기업지배구조와 외국인지분보유율의 관계에서 유의한 양 (+)의 영향을 미치는 것으로 나타났다. 셋째, 외국인지분보유율과 기업의 성과 및 가치의 관계를 회귀 분석한 결과 주가순자산비율, Tobin's Q, 초과수익률에 서 양(+)의 영향을 미치는 것으로 나타났다.

This study investigates the effects of improved corporate governance on the firm value as well as the firm performance. We also examine if there is any causal relationship between corporate governance and the foreign investors’ share holdings. For these purposes, we utilize the corporate governance index data for the period of 2006 through 2010 published by the Korea Corporate Governance Service. The main results of this study are as follows: Firstly, firms with relatively good corporate governance yield better firm performance, which in turn results in greater firm values. Specifically, we found through regression analyses that corporate governance index is significantly positively related with EBIT/SALES, Tobin's Q, and PBR. Secondly, corporate governance index has a significantly positive impact on the ownership of foreign investors. Thirdly, the foreign investors' share holdings affect positively on the firm performance measured by PBR, Tobin's Q, and abnormal returns.

SEO registrations galvanize information gathering about issuing firms. Issuers also provide additional information in the registration period. We posit that market reaction to such new information influences issuers’ decision about their final offer size. The offer size relative to the amount filed initially further reveals the quality of the issuing firm and helps predict subsequent firm performance. Improved offerings, whose offer size exceeds the amount registered originally, record significantly positive price reaction on the offer date and do not underperform post- issuance. The converse is true for their complement: Regular offers experience significantly negative reaction on the offer date and underperform their benchmark following issuance.

Using U.S. data over the period 1972-2008, we identify a J-shaped relation between dividends and firm value. On average, top-dividend-payers are valued higher than all other firms including nondividend- payers, while non-dividend-payers are valued higher than low-dividend-payers. This Jshaped relation is highly stable over time, given that it is observed in nearly every individual year. Moreover, the J-shaped pattern persists after controlling for key firm characteristics as well as endogeneity. We also find similar J-shaped relations in other stock markets including Australia, Canada, France, Germany, Japan and U.K. Further analyses indicate that existing dividend theories, such as the dividend catering, free-cash-flow and dividend clientele hypotheses, do not offer satisfactory explanations for the J-shaped dividend-value relation.

Using trading data from the Korean equity market, we investigate whether there is any difference amongst individual investors, domestic institutional investors, and foreign institutional investors in trading responses to analyst reports. We also examine the determinants of the trading responses of each investor type to analyst reports, where we use firm characteristics as well as analyst characteristics as the determinants of the release date trading volumes of each investor type. Our findings are as follows. First, individual investors are the most responsive investor group to the analyst reports, suggesting that institutional investors (domestic and foreign) perceive analyst reports to be less informative than do the individual investors. In particular, individual investors are more responsive to analyst reports on small firms, firms neglected by analysts, and firms with large inside ownership as well as analyst reports with optimistic forecasts. Second, domestic institutional investors are more responsive to reports on neglected firms and firms with high volatility, which are characterized by large information asymmetry. Furthermore, the increase in trading volume by domestic institutional investors occurs prior to the release date of analyst reports, suggesting that domestic institutional investors are informed traders. Third, foreign institutional investors do not show meaningful responses to research reports by local analysts, suggesting that foreign institutional investors do not find the information provided by local analysts as being informative.

This paper intends to investigate herding behavior of mutual fund managers participated in Taiwan stock market, especially as they were facing the regional and global financial crises in 1997 and 2008. Furthermore, it identifies fund managers’ optimal choices of trading strategies as they are facing the shallow-dish characteristics in Taiwan stock market. The empirical results reveal that fund managers do herd as they are picking up their portfolios. Instead of pursuing stocks with high speculative intensity, mutual fund managers adhere to the prudent rule to trade. However, the trading styles are not robust during the period of 1997 Asian financial crisis.

I examine the simultaneous associations between institutional ownership and capital structure of a firm. I find that a firm’s leverage decreases when institutional ownership increases. This result implies that a firm reduces its debt level as institutional monitoring substitutes for the external debt monitoring, and indirectly suggests institutional investors’ activism. More importantly, I also find that a firm’s suboptimal leverage increases when the institutional ownership increases, and institutional ownership decreases when a firm’s suboptimal leverage increases. This finding directly shows that institutional investors not only actively monitor the management but they also passively sell their shares when dissatisfied with the management. In addition, I find that the monitoring evidence on a firm’s leverage and suboptimal leverage are more pronounced when the institutional investors are less likely to have business relationships with a firm or the information asymmetry is high in the market.

This study investigates the relation between IPO underwriting and subsequent lending. We find that when a bank underwrites a firm’s IPO, the bank is more likely to provide the issuer with future loans at a lower cost, compared to banks without an IPO underwriting relationship. The evidence also suggests that the underwriting banks share information surplus with the IPO firms in the post-IPO loans, supporting the cost-saving hypothesis. Finally, when borrowing firms are more satisfied with the IPO outcomes, they are more likely to retain their underwriting banks as subsequent lenders. We find no evidence that underwriting banks would exploit such satisfaction by charging higher interest rates in the post-IPO loans.

This paper examines the determinants and the consequences of congruence between the CEO and other executives focusing on the role of previously-built school and regional ties. Using a sample of 2,129 firm-years from 2003 to 2006 for all firms listed on the Korea Stock Exchange, we find that executives are more likely to share the same school or regional background as the CEO when the firm is small, foreign ownership is low, or the CEO is a family member of the controlling shareholder. We also find that such congruence increases firm value when the firm is young and foreign ownership is large, but decreases firm value in firms tightly controlled by family member CEOs through large voting rights. These results suggest that congruence within the top management may facilitate communication when the nature of information being transmitted is “soft”, but may aggravate agency problems when CEOs are entrenched.

To test the effectiveness of position limits, this study examines the impact of the relative size of hedger and speculator open interests on the price discovery process in both JPY-USD and EUR-USD futures markets. Hedging trading has a negative impact, regardless of its size, on price discovery in futures markets. Hedgers are less likely to be information motivated, so their trading uniformly delays the price discovery process. However, there is a positive and nonlinear impact of speculators’ trade size on price discovery, the contribution of which depends on the relative size of the speculative open interest. Contrary to conventional wisdom among regulators, speculative trading does not harm the market in terms of price discovery; more important, as long as speculative trading is lower than an endogenously determined threshold, it even improves futures market efficiency.

This paper examines the transmission of pricing information of dual-listed stocks between class A and H shares of Chinese companies. There still exists a large price discount for H shares relative to the A shares. We hypothesize that if price discount or price disparity between two shares is larger, the effect of these price disparity on the transmission of pricing information between two shares will be stronger because of increasing price arbitrage pressure. We also compare the transmission of pricing information in the pre-liberalization period and in the post-liberalization period between two markets. We find that the spillover of the pricing information is strong between two shares in the post-liberalization period and all the sample periods between two markets both for the firms of high price discount or price disparity and for the firms of low price discount or price disparity. However, the spillover of the pricing information is relatively weak for the firms of low price discount, compared with for the firms of high price discount or price disparity only in the pre-liberalization period. Thus, we find that the price disparity can have only partial effect on the transmission of pricing information only in the pre-liberalization period. Transmission of pricing information is much stronger in the post-liberalization period, compared with in the pre-liberalization period. We concludes that liberalizations have much more effect on the transmission of pricing information rather than price discount or disparity between two class of shares.

We investigate the information content of trading activity in S&P 500 component stocks, S&P 500 index options and VIX options on the future realized volatility of S&P 500 index returns and find that the only consistently useful information on the determination of future realized volatility is provided by trading activity in VIX calls. We also find a discernible increase in the level of predictability when investors are more worried, when the level of information asymmetry in the VIX call market is higher, and when the transaction costs of VIX calls are lower, relative to S&P 500 index options.

This paper first dichotomizes risk drivers into “stock” or “flow” attributes. Stock risk drivers are prices of tradable securities and flow risk drivers are rates represented by the stochastic movements of a term structure of securities. This paper then shows that the Black Scholes model is the relative valuation model for the stock risk drivers while the proposed unified model is for the flow risk drivers. The unified model can be described in the Ho-Lee model framework. We apply this model to five different flow risk drivers: interest rate, credit risk, liquidity risk, energy risk, and inflation risk. We then show that the unified model provides an analytical framework for securities that are subjected to several of these flow risk drivers, offering many applications. For example, the 2008 financial crisis clearly shows the importance of the use of a unified model in enterprise risk management. The crisis demonstrates that risk management should not take a silo approach to manage each flow risk driver, such as interest rate risk and credit risk. We propose an integrated approach to manage risks using the unified model.

The main purpose of this paper is to derive the analytic valuation formulae of …xed range accrual notes (FiRAN) and ‡oating range accrual notes (FlRAN) in the context of an a¢ ne term-structure model incorporating stochastic long-run mean, stochastic volatility and jumps according to the empirical …ndings of An- dersen et al.(2004). We propose a quasi-analytic pricing and hedging solutions for range accrual notes and these solutions are demonstrated in sensitivity analysis. Our numerical results show all these three factors signi…cantly a¤ect the values and hedging strategies of range accural notes, and the factor of stochastic mean plays the most important role in either valuation or hedging.

This paper examines how malicious corporate raiders operating under poor investor protection environment may actually raid target firms’ resources through takeovers. Our perspective is distinct from both (1) conventional free cash flow theory where the central conflict of interests lies between bidder’s shareholders and managers, and (2) intra-business group tunneling where resources are transferred among existing member firms through non-arm’s length transactions. Using a large sample of publicly traded firms in Korea, we find that the probability of explicit looting through embezzlement or breach of fiduciary duty conditional on a recent change in control amounts up to 12%, almost 10 times as large as the corresponding probability when control remains intact. This finding is robust to controlling for the factors that induced the control change in the first stage. Such misbehaviors are more likely in targets with more liquid assets or multiple control changes. Market reactions to changes in control are initially positive but revert back within 6 months, mostly due to the persistent negative returns for those that later become subject to embezzlement or breach of duty. These findings suggest that market for corporate control may aggravate agency problems when investor protection is insufficient.

While an extensive literature shows that R&D intensities and increases are positively related to firm performance, there is little research on the valuation of R&D reductions. This paper examines the long-term performance following significant R&D reductions. We find that, contrary to conventional wisdom, large R&D cuts are associated with significantly positive future stock returns. This return drift cannot be explained by a battery of asset pricing factors, including R&D intensities and R&D increases. We explore two potential economic motives behind R&D reductions—R&D spillover and firm life cycle. We show that operating performance deteriorates immediately before R&D reductions but exhibits no abnormal pattern afterward. While firm growth falls substantially and variability in profitability reduces, firms with low or declining investment opportunities outperform. These findings are inconsistent with the spillover hypothesis, but lend support to a firm life cycle story that firms attempt to resolve the overinvestment problem that arises as they move to a lower growth stage. We further show a significant decline in the cost of capital after R&D reductions; however, the market appears to underestimate the improvement in the cost of capital.

Using a unique, comprehensive data set from a survey on corporate governance practices among Korean listed firms, we find that firms with sound governance practices are associated with both high firm value and high dividend payout ratios. Although high in firm value, firms in major business groups (or chaebol) have lower dividend payouts on average than independent firms do. This relationship is driven primarily by the corporate governance sub-components of poor shareholder protection and the relatively weak role of chaebol firms’ boards of directors. Our evidence suggests that the entrenched control by chaebol firm owners stemming from the control rights much above the cash flow rights puts less weight on protecting the minority shareholders and distributes less corporate wealth to shareholders.

We investigate the investment strategies of individual day traders in the Taiwan Index Futures market, along with their impact on market liquidity and volatility. Our results indicate a tendency among most individual day traders to behave as irrational contrarian traders. We also present consistent evidence to show that most individual day traders provide market liquidity by reducing the bid-ask spread, temporary price volatility and the temporal price impacts. Our results, which are consistent with the experimental results of Bloomfield et al. (2009), provide no support for the general criticism that day trading destabilizes the market while also exacerbating market volatility.

Pair-wise analyses of a sample of nine developed and 12 emerging markets suggest that emerging country currency returns are positively correlated with their stock returns. These strong ties between currency and stock returns appear generated by international capital flows based on “flight-to-quality” in down-markets. The positive correlation of global equity markets implies that currencies provide added risks for investors in developed nations investing in emerging markets and natural hedges for investors in emerging nations investing in developed countries. Analyses of a unique sample of 27 “Siamese Twin” Korean international mutual fund pairs holding identical underlying foreign assets but offering different currency hedging alternatives suggest that hedging currency risks undoes the natural hedge and increases the total return volatility.

This paper conducts an extensive empirical study on the predictive ability of the value spread based on a sample of 42 MSCI countries. Methodologically, we extend Liu and Zhang's (2008) analysis in an international framework, and nd consistent results that the value spread has little predictive ability on stock returns, while the two components (the book-to-market spread, and the market-to-book spread) predict stock returns with signicant yet opposite signs. Compared with the book-to-market spread and the value spread, the market- to-book spread demonstrates particularly stronger predictive power not only for country-specic returns, but also for returns of regional and industrial port- folios.

This study is an empirical study regarding how the financial policies, which are represented by debt ratio, dividend policy, and ownership structure, affect the enterprise value of listed companies having different growth opportunities. It was conducted on the manufacturing companies listed in the Korean Stock Exchange from 2001 to 2011. Based on the MBE ratio, which is a variable for measuring growth opportunities, this study conducted a regression analysis by dividing the upper 40 % group with many growth opportunities and the lower 40% group with fewer growth opportunities. As a result, it was found that dividends have a significantly positive (+) effect on enterprise value regardless of growth opportunities, and insider equity has a nonlinear relationship with enterprise value. It is interesting to note that the debt ratio has a significant negative (-) relationship with enterprise value in the group having many growth opportunities, whereas in the group having fewer growth opportunities, the debt ratio has a significantly positive (+) relationship with enterprise value. We have also conducted robustness analysis by dividing groups into an upper 20% and a lower 30% based on the MBE ratio in order to increase the reliability of the research. In the analysis, although there are differences in numerical values, it shows similar results; that is, in the group having many growth opportunities, the debt ratio has a negative (-) relationship with enterprise value, whereas in the group having fewer growth opportunities, the debt ratio has a positive (+) relationship with enterprise value. Those results coincided with the research results of McConnell and Servaes (1995) which was conducted on the NYSE and AMEX-listed companies. It proves that such phenomena could be observed in newly emerging markets such as Korea.

This paper examines whether firms with more research and development (R&D) expenditure earn higher return when they have good corporate governance. After controlling for many asset pricing factors in the existing literature, such as size, book-to-market ratio, momentum, asset growth, accruals, and abnormal capital expenditure, we find that R&D-intensity firms indeed earn higher stock returns when they experience well-established corporate governance. This finding suggests that good governance is able to prevent potential overinvestment in R&D spending and thereby increase the rate of returns on R&D spending firms. Namely, R&D strategy, in terms of buying well governance R&D investing firms, is more effective in well-governed firms.

This study develops a structural framework to value insurers' contingent capital with counterparty risk (CR) and overcomes the problem of price endogeneity (PE) in the valuation model. Our results on the focal contingent capital instrument - catastro- phe equity put option (CatEPut) - indicate that prices can easily be overestimated by 110 basis points without considering CR and be underestimated by 17{34 basis points without considering PE. This study also examines how CatEPuts aect the buyer's probability of default (PD). Our results show that buying CatEPut lowers the buyer's PD; however, if we ignore the new equity eect due to share issuance, the result is not true in some scenarios. Without taking CR and PE into account, one may signicantly overestimate the credit enhancement provided by the CatEPuts.

There has been interest in the literature on whether investor sentiment as expressed in messages posted on Internet message boards has predictive power for stock returns. To study this issue, we use more than 32 million messages on 91 firms posted on the Yahoo! Finance message board in the period January 2005 to December 2010. What distinguishes our study is the use of sentiment information explicitly revealed by retail investors for individual firms and a longer sample period relative to other studies that use similar sentiment information source. As a proxy for investor sentiment, we use investor sentiment indexes constructed from sentiment explicitly revealed by retail investors and as classified by a machine learning classification algorithm. In intertemporal and cross-sectional regression analyses, we find no evidence that investor sentiment forecasts future stock returns at either the aggregate or individual firm level. Rather, we find evidence that investor sentiment is positively affected by prior stock price performance. We also find no evidence that investor sentiment from Internet postings has predictability for volatility and trading volume. We find no significant predictive ability for retail investor sentiment for the direction of the next period’s stock price movement across demographic characteristics such as gender, age, and professionality.

Rational asset-pricing theory asserts that higher risk should be accompanied by higher expected return. The credit-risk puzzle, however, states a negative cross- sectional relationship between credit risk and future stock returns (Dichev, 1998; Grin and Lemmon, 2002; Campbell et al., 2008; Avramov et al., 2009). This pa- per examines the credit-risk puzzle using an independent dataset from Taiwan's stock market. We document the existence of the credit-risk premium in both portfolios and individual stocks, and demonstrate that it can not be explained by well-known asset-pricing models which include the CAPM, Fama and French's (1993) three-factor model, and Liu's (2006) liquidity-augmented CAPM. Unlike the evidence in the U.S. market, rating downgrades only have limited impact on stock returns in Taiwan. Further analysis indicates that credit rating serves as a better proxy for distress risk, and is thus priced in Taiwan's stock market.

We propose a new explanation for the abnormal return on ex dates. The ex date is a high-publicity event that attracts attention of small investors and moves stock prices, even when there is no tax and no price discreteness. We test this "attention hypothesis" by using a sample of stock dividend distributions in Taiwan. We find that small investors are significant buyers on ex dates, and their purchases are higher for high-attention stocks. The ex-date returns are also higher for the same kinds of stocks. Our attention hypothesis imposes nonlinear restrictions on coefficients across regressions, and we cannot reject them.

This paper investigates whether regulatory forbearance for savings banks in Korea affects the market discipline of depositors using data from 2000 to 2010, which are characterized by a series of exits of savings banks. We find that depositors’ sensitivity to the savings banks’ asset quality decreases when there is regulatory forbearance for failing savings banks. This forbearance effect is also observed in the behavior of the depositors of the neighboring savings banks in the same business area. These results suggest that regulatory forbearance may cause depositors to misjudge bank risks, increasing the expected costs of bank failure.

The ad hoc Black-Scholes model is one of the most widely used models for forecasting implied volatility. In this paper, we propose a methodology that provides more accurate out-of-sample implied volatility forecasts. Standard approaches estimate the whole volatility smile using both out-of-the-money puts and calls. The improvements from our method are obtained by taking advantage of information contained in the asymmetric slopes of the put and call implied volatility sneers that result in a discontinuity when moneyness is equal to 1. These improvements in out-of-sample implied volatility forecasts are large and significant. Our results are robust across several dimensions, including: time period, forecast horizon, moneyness, and model specification.

This study empirically investigates whether low-frequency liquidity proxies that are popular among researchers capture liquidity effectively and, if they do, which of the proxies measures liquidity best in emerging markets. We carry out a comprehensive analysis using a tick data that covers 1,183 stocks from 21 emerging markets. The use of a tick data allows us to compare various low-frequency liquidity proxies with a range of high-frequency transaction cost and price impact measures. We have several important findings. We find rich dispersion in transaction costs and price impacts across emerging markets. We also find that most of the spread proxies including Roll’s spread, LOT, and Zeros perform relatively well in emerging markets. But when the effectiveness is defined as how accurately a proxy measures actual transaction costs, LOT is most effective in the majority of the emerging markets considered in our study. When it comes to price impact proxies, the Amihud measure is clearly the most effective one with Amivest being the close second. Furthermore, certain firm and market characteristics such as turnover, return volatility, firm size, investibiity, legal origin, and trading mechanism significantly affect how accurately a proxy measures liquidity. Finally, it is important to recognize that there is no one universal proxy that captures liquidity best across different emerging markets. One that works best in most of the markets does not necessarily performs best in a specific market. Hence, it is important to know which proxy is the best liquidity proxy in a specific emerging market. In this regards, the results presented in this paper can be useful when one opts to identify the most efficient liquidity proxy in a specific emerging market.