JournalTOCs

Review of Pacific Basin Financial Markets and Policies
Journal Prestige (SJR): 0.316

Citation Impact (citeScore): 1
Number of Followers: 0

Hybrid journal (It can contain Open Access articles)
ISSN (Print) 0219-0915 - ISSN (Online) 1793-6705
Published by World Scientific

[120 journals]

An Analysis of State Capital Share and Its Implications to the
Efficiency-Equality Nexus
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  Authors: Ying Wu, Hong Yao
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  This paper investigates the impact of state ownership on the efficiency-equality tradeoff in a mixed economy with both state and nonstate sectors. Using overall capital productivity as an efficiency proxy and state output share as an inequality proxy, we identify the efficiency threshold of state capital share that splits the efficiency-equality relationship between a tradeoff and nontradeoff. When state capital share is greater than the threshold (as evidenced in the case of China), lowering state capital share improves efficiency and reduces inequality. Furthermore, our simulation results suggest that the threshold is sensitive to capital shares in output of the both sectors. A broad scope for mutual gains in efficiency and equality exists by raising the capital share in nonstate output and lowering the capital share in state output.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-05-31T07:00:00Z
  DOI: 10.1142/S0219091522500151
The Crucial Role for Money and Business Firms for Short-Term Economic
Growth
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  Authors: Karl-Johan Bergström
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  Money and business firms are central to short-term nominal gross domestic product (GDP) growth (as opposed to nominal GDP as a flow). Money is defined as the activation of purchasing power of an item/items on a balance sheet, flowing from the buyer of a real, GDP-affecting, product to its seller. Starting from accounting identities such as the equation of exchange, a method is developed that connects sectoral buyers to aggregate expenditure (AE) growth and sellers to aggregate income (AI) growth. The main finding, using National Accounts data for Sweden, US, UK, Japan and Germany over the 1994–2020 period, is that business firms drive short-term nominal GDP growth. Their median contribution to the yearly nominal growth is 105–128%, leaving the remaining sectors to contribute negatively to growth in net terms. This means that business firms finance growth by borrowing or drawing down on assets whereas the remaining sectors are net savers. Tying the real economy variable of net lending (NL) (+)/net borrowing (NB) (–) to its financial counterpart, net financial investments (NFIs), makes it possible to define money explicitly, here applied to Swedish business firms. They primarily use three items on the liability side of the balance sheet to finance expenditure growth: debt securities, loans and trade credit.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-05-18T07:00:00Z
  DOI: 10.1142/S0219091522500102
Tax Avoidance and Corporate Investments
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  Authors: Mahmud Hossain, Gerald J. Lobo, Santanu Mitra
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  This study examines the association between firms’ tax avoidance and long-term investments. We find that tax avoidance firms make greater investment than nontax avoidance firms, and that the positive association between tax avoidance and investments holds both for firms that are financially constrained, and therefore ex-ante likely to underinvest, and for financially unconstrained firms that are ex-ante more likely to overinvest. Our results further show that CEO equity incentives and governance strength exert an incremental effect on investment decisions of tax avoidance firms. In additional analyses, we demonstrate that tax avoidance firms’ investments are associated with improved future firm performance especially when those firms are ex-ante more likely to underinvest. For tax avoidance firms that are ex-ante more likely to overinvest, current investments are associated with declined future firm performance. Tax avoidance firms have higher (lower) investment efficiency in terms of improved (declined) operating profitability in the post-investment period when they have lower (higher) CEO equity incentives and stronger (weaker) governance. Overall, our results shed light on efficiency in utilizing the available cash through tax avoidance in long-term investments that might create shareholder value for a group of financially constrained firms but diminish shareholder value for another group of financially unconstrained firms.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-05-18T07:00:00Z
  DOI: 10.1142/S0219091522500138
A Game of Power or Discipline: Minority Shareholders’ Activism in
China
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  Authors: Rui Sun
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  This paper examines 781 proposals sponsored by minority shareholders of Chinese listed companies since the Company Law was revised in 2005, which made proposals more accessible to smaller shareholders. I find that the shareholder structure is essential for minority shareholders to target a company. When the controlling ownership is smaller and minority ownership is relatively larger, a company is more likely to be targeted by minority shareholders’ proposals (MSPs). There is also evidence that minority shareholders target poor performers, but that only happens when the shareholder structure is optimal for minority shareholders to initiate activism. Power, in the form of ownership and identity, dominates the probability of activism behavior. The passage of MSPs heavily depends on whether the proposal is friendly to the management, the identity of the sponsor, and the issues involved. Being targeted by MSPs are often followed by forced top management turnover, but there are no performance improvements in the medium term. Minority shareholders’ activism is more of a game of power.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-05-18T07:00:00Z
  DOI: 10.1142/S021909152250014X
Recap of the 29th Annual Conference on Pacific Basin Finance, Economics,
Accounting, and Management
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  Authors: Cheng-Few Lee, Bharat Sarath
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-05-18T07:00:00Z
  DOI: 10.1142/S0219091522500163
Competition Effects of a New Asset on a Similar Existing Asset in the Same
Market: The iShares Versus the Closed-End Country Fund
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  Authors: Pei-Jung Tsai, Chia-Cheng Ho, Pei-Su Tsai
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  The study examines an old but unique event from a new perspective and provides important insights to the financial literature. The result suggests that the competition from the later-launched iShares funds can improve pricing efficiency but decrease liquidity of the corresponding existing country funds. Furthermore, these effects are more profound for emerging country funds than for developed country funds.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-05-11T07:00:00Z
  DOI: 10.1142/S0219091522500114
Special Editorial Page
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  Authors: Cheng-Few Lee
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-04-21T07:00:00Z
  DOI: 10.1142/S0219091522010019
The Paradoxical Prices of Options
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  Authors: Gianluca Marcato, Tumellano Sebehela
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  The synchronized relationship between financial and fundamental prices has been topical for years now. It seems that option pricing theory has not been used to disentangle that relationship between two prices during merger and acquisition (M&A) activities. This paper uses Put-Call parity theorem to explore the divergence of financial and fundamental prices in any firm during the acquisition process. The results illustrate that price differentials are persistent; moreover, the differentials are caused by the exponential factor. Despite the fact that some principles are drawn from the real estate investment trust (REIT) literature, the results have wider implications for industries with similar traits to REITs.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-04-13T07:00:00Z
  DOI: 10.1142/S0219091522500096
Executive Compensation and Firm Performance Relationship
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  Authors: Umar Nawaz Kayani, Christopher Gan
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  The relationship between executive compensation and firm performance is well documented in the existing literature. However, in the case of Asia Pacific firms, the least attention is paid while investigating this relationship. This study examines the relationship between executive compensation and firm performance in the Asia Pacific firms throughout 2007–2019. We use the total salary paid to chief executive officers and equivalent, the total compensation paid to the CEO, and the equivalent and total salaries and bonuses paid to the CEO and equivalent as a measure of executive compensation. For the firm performance, both accounting measure (ROA) and market measure Tobin’s [math] (TQ), and various control variables were used. We found that a firm performance has a positive relationship with total compensation paid to CEO and total salaries and bonuses paid to the CEO. Our results support the agency theory by confirming that higher CEO compensation will lead towards higher firm performance by motivating executives to maximize shareholder benefits. However, the total salary does not have any significant relationship. The overall result of the study indicates that the results of the Asia Pacific regions complement the results obtained in another part of the developed world. The results are supported by the social comparison theory. The study has a practical implication for policymakers, business owners, shareholders, and executives by suggesting aligning their business strategies based on compensation parameters for achieving the best firm performance.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-03-03T08:00:00Z
  DOI: 10.1142/S0219091522500084
Analyst Recommendations: Evidence on Hedge Fund Activism and Managerial
Ability
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  Authors: Yan Yan, Xiaohui Yang
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  This study investigates analysts’ attitudes toward the cooperation/conflict between hedge fund activists and target firm management by examining the impact of managerial ability on analyst recommendations around hedge fund activism. We find that analysts are more likely to reiterate recommendations and less likely to downgrade recommendations for target firms with high managerial skills following the arrival of hedge fund activists. This may be because analysts recognize advantages associated with target firm management’s superior ability that enables managers to avoid costly fights with hedge fund activists. We also show that stronger managerial ability is associated with the higher analyst forecast accuracy during hedge fund intervention. Our results are robust to a cross-sectional analysis of recommendation changes after activists’ takeover. Collectively, our evidence supports the positive impact of managerial ability on analysts’ opinions within the context of hedge fund activist campaigns and sheds light on the information gathering and processing ability of financial analysts.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-02-26T08:00:00Z
  DOI: 10.1142/S0219091522500047
Corporate Investment and Stock Return Momentum
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  Authors: Ki C. Han, Abu Jalal, Karen Simonyan
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  We investigate the link between corporate investment and the momentum effect in stock returns. We argue that the momentum effect in a firm’s stock returns tends to be generated as a result of a series of information exchanges between stock market investors and firm insiders regarding the firm’s investment opportunities. Our theoretical setup predicts that past winners (losers) are likely to increase (decrease) their net investment, and the more they invest (disinvest) the more likely they are to realize positive (negative) returns in subsequent periods. Our empirical tests using a large sample of firms in 1984–2017 provide support for our hypotheses. We further design a momentum trading strategy, which buys past winners with positive predicted changes in net investment and sells past losers with negative predicted changes in net investment, and demonstrate that this trading strategy generates superior returns compared to a simple momentum trading strategy.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-02-26T08:00:00Z
  DOI: 10.1142/S0219091522500060
The Expectation of Exchange Rate and Foreign Share Discount: The Evidence
from Hong Kong H-Share Discount
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  Authors: Kevin Zhao
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  This paper examines the causal relationship between the expectation of exchange rate and the Hong Kong H-share discount relative to China A-shares over the period 2006–2015, during which the Chinese currency transitioned from a pegged regime to a managed floating regime. Results show that the expected appreciation of the Chinese yuan leads to the decline in the H-share discount after controlling for the effect of different market sentiments and several other factors that explain the foreign share discount in the existing literature. Our results remain robust after adopting alternative model specifications.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-02-26T08:00:00Z
  DOI: 10.1142/S0219091522500072
Convolution Approach for Value at Risk Estimation
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  Authors: Yam Wing Siu
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  Formally, Value at risk (VaR) measures the worst expected loss over a given horizon under normal market conditions at a given confidence level. Very often, daily data are used to compute VaR and scale up to the required time horizon with the square root of time adjustment. This gives rise to an important question when we perform VaR estimation: whether the values of VaR (i.e., “loss”) should be interpreted as (1) exactly on [math]th day and (2) within i days. This research attempted to answer the above question using actual data of SPX and HSI. It was found that, in determining the proportionality of the values, (i.e., slopes) of VaR versus the holding period, the slopes for within i days are generally greater than those for exactly on [math]th day. This has great implications to risk managers as it would be inappropriate to simply scale up the one-day volatility by multiplying the square root of time (or the number of days) ahead to determine the risk over a longer horizon of [math] days. The evolution of log return distribution over time using actual data has also been performed empirically. It provides a better understanding than a series of VaR values. However, the number of samples in actual data is limited. There may not be enough data to draw reliable observation after it has been evolved a few times. Numerical simulation can help solve the problem by generating, say, one million log returns. It has been used to provide many insights as to how the distribution evolves over time and reveals an interesting dynamic of minimum cumulative returns. Numerical simulation is time consuming for performing evolution of distribution. The convolution approach provides an efficient way to analyze the evolution of the whole data distribution that encompasses VaR and others. The convolution approach with modified/scaled input distribution has been developed and it matches the results of numerical simulation perfectly for independent data for both exactly on [math]th day and within i days. As the autocorrelation of the single index is mostly close to zero, results show that the convolution approach is able to match empirical results to a large extent.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-02-25T08:00:00Z
  DOI: 10.1142/S0219091522500059
Other Side of Voluntary Clawback Provisions in Executive Compensation
Contracts: Evidence from the Investment Efficiency
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  Authors: Sohyung Kim, Cheol Lee, Santanu Mitra
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  This study examines how firm-initiated clawback provisions in executive compensation contracts affect firms’ investment efficiency. While existing the literature provides evidence on positive aspects of adopting clawback provisions, the potential impact of clawback adoption on firms’ long-term investment efficiency remains unexplored. Using three investment proxies (i.e., capital expenditure, new investment, and total investment), we find that clawback adopters tend to reduce their long-term investments after the clawback provisions are put in place, compared to nonadopters. In particular, we find evidence that the adoption of clawback policies decreases the investment efficiency in the post-adoption period, especially for the firms whose ex ante probability of underinvestment is high. Our additional analyses reveal that observed reduction in the investment efficiency for the firms that are likely to underinvest is more evident for the firms with financial con straints and the firms that adopt risk-taking and performance-based clawback triggers. In contrast, the clawback adopters that are likely to overinvest do not change their investment behavior in the post-adoption period. Overall, our findings suggest that the impleme ntation of clawback provisions may lead to unintended consequences for firms’ long-term investment practices, resulting in a decrease in the investment efficiency.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-02-12T08:00:00Z
  DOI: 10.1142/S0219091522500011
Corporate Tax Avoidance: Evidence from Vietnamese Firms
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  Authors: Ha Kieu Oanh, Christopher Gan
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  This paper examines the effect of corporate tax avoidance on firm value using a sample of Vietnamese nonfinancial listed firms for the period 2007 to 2018. Using fixed effect, ordinary least square and system generalized method of moment estimation, the results show a positive and statistically significant relationship between corporate tax avoidance and firm value. Our result demonstrates the bright side of corporate tax avoidance at the firm level. Further analysis shows that the positive effect of corporate tax avoidance on firm value can be intensified by the effectiveness of the board of directors in monitoring management.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-02-07T08:00:00Z
  DOI: 10.1142/S0219091522500023
Remittances Vis-à-Vis Bank Credit and Investment: Evidence From Fiji
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  Authors: Jakhongir Kakhkharov, Lan Archer, Matia Tuisawau, Akata Taito, Mitieli Cama, Parmendra Sharma
  Abstract: Review of Pacific Basin Financial Markets and Policies, Ahead of Print.
  This study is among a very few to investigate the impact of international remittances on bank credit and household investment. Using Fiji as a case study and the most recent available data on Household Income and Expenditure Survey together with applying three distinct econometric techniques, we find that remittances significantly increase the likelihood that households receiving remittances obtain income from investing. Remittances also positively influence the value of bank credit, although this effect is statistically weak.
  Citation: Review of Pacific Basin Financial Markets and Policies
  PubDate: 2022-02-07T08:00:00Z
  DOI: 10.1142/S0219091522500035