{"title":"Company Headquarters, Local Conservatism and Earnings Management","authors":"Emrah Arioglu","doi":"10.2139/ssrn.3679513","DOIUrl":"https://doi.org/10.2139/ssrn.3679513","url":null,"abstract":"Previous literature demonstrates that local cultural values influence the corporate decisions and outcomes of companies headquartered in those locations. Based on this premise, the findings of the current study demonstrate that the conservatism levels of provinces of company headquarters of non-financial public companies quoted at the Borsa Istanbul between the years 2009 and 2017 are positively related to companies’ discretionary current accruals levels. Similar findings are derived for the provinces of corporate incorporation. The findings also demonstrate that there is a statistically significantly positive relationship between discretionary current accruals and subsequent operating performances of companies, on average. Based on the argument in previous literature that more conservative individuals are likely to make more ethical decisions, these findings can be considered suggesting that earnings are managed with an informative intend in the Turkish setting where potential motives for company executives to manage earnings opportunistically are not likely to be strong. The findings are robust to various proxies and model specifications, and they contradict the findings of the majority of previous studies.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"2161 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91376670","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Risks Facing the International Banking System","authors":"Deborah Baffour-Awuah","doi":"10.2139/ssrn.3674808","DOIUrl":"https://doi.org/10.2139/ssrn.3674808","url":null,"abstract":"The paper addresses some of the main threats facing the international banking system. Some of the issues are illiquidity, insolvency, country risk and international lending risk. Currency risk and large bureaucratic structures leading to operational risks are all threats to the international banking system.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80732062","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Executives in Politics","authors":"I. Babenko, Viktar Fedaseyeu, Song Zhang","doi":"10.2139/SSRN.3075177","DOIUrl":"https://doi.org/10.2139/SSRN.3075177","url":null,"abstract":"We study the involvement of corporate executives in U.S. politics over the last 40 years. First, we document that the share of business politicians in federal elected office increased from 13.3% in 1980% to 22.6% in 2018, with most of the increase occurring over the last two decades. Second, we find that business politicians enjoy an early fundraising advantage over their opponents, both because they are more likely to self-fund their campaigns and because they receive more campaign contributions from their firms. Third, the election of business politicians benefits their industries and firms, which experience positive abnormal stock returns when their executives win political office. We also show that business politicians, once elected, vote for policies that shift the balance of power toward corporate interests. Using close elections for identification, we show that this policy shift cannot be attributed solely to the changes in the underlying preferences of the electorate. Overall, our results indicate that corporate executives have become more involved in U.S. politics and that this involvement has benefited business interests and affected aggregate legislative outcomes. This paper was accepted by Gustavo Manso, finance. Funding: The authors thank the Digital Age Management Research Area at the China Europe International Business School (CEIBS) and Centre for Applied Research on International Markets, Banking, Finance and Regulation (BAFFI CAREFIN) at Bocconi University for financial support. The Area and the Center played no role in study design, data collection and analysis, or preparation of the manuscript. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4595 .","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"89 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83445306","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Volatility Depend on Market Trades and Macro Theory","authors":"Victor Olkhov","doi":"10.2139/ssrn.3674432","DOIUrl":"https://doi.org/10.2139/ssrn.3674432","url":null,"abstract":"This paper presents probability distributions for price and returns random processes for averaging time interval {Delta}. These probabilities determine properties of price and returns volatility. We define statistical moments for price and returns random processes as functions of the costs and the volumes of market trades aggregated during interval {Delta}. These sets of statistical moments determine characteristic functionals for price and returns probability distributions. Volatilities are described by first two statistical moments. Second statistical moments are described by functions of second degree of the cost and the volumes of market trades aggregated during interval {Delta}. We present price and returns volatilities as functions of number of trades and second degree costs and volumes of market trades aggregated during interval {Delta}. These expressions support numerous results on correlations between returns volatility, number of trades and the volume of market transactions. Forecasting the price and returns volatilities depend on modeling the second degree of the costs and the volumes of market trades aggregated during interval {Delta}. Second degree market trades impact second degree of macro variables and expectations. Description of the second degree market trades, macro variables and expectations doubles the complexity of the current macroeconomic and financial theory.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"46 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82746519","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Capital Market Consequences of the Libor Scandal and Phaseout for Public Borrowers","authors":"J. Berkovitch, Henry L. Friedman, Daniel Saavedra","doi":"10.2139/ssrn.3673505","DOIUrl":"https://doi.org/10.2139/ssrn.3673505","url":null,"abstract":"The London Interbank Offer Rate (LIBOR), based on inputs from banks, is plausibly the most important set of reference interest rates in the world. Following the LIBOR rigging scandal and the post-2008 decline in interbank lending underpinning LIBOR, banks and regulators have agreed to sustain LIBOR only through the end of 2021, after which, LIBOR updates are likely to cease. In this paper, we use an event-based design to study the implications of the LIBOR scandal and phaseout (LSP) on capital markets, focusing on firms with U.S.-traded public debt. Using LSP events as exogenous shocks to the optimality of existing contracts, we provide causal evidence on the effects of the LSP on firms and their stakeholders. Our findings suggest that the consequences of the LSP, as measured by stock and bond returns, are immaterial for the average firm, but negative for firms with fewer outside options to renegotiate or repurchase debt (i.e., with credit ratings below investment grade or lower interest coverage ratios). These results suggest that the negative consequences of the LSP have mostly been borne by the shareholders and bondholders of borrowers with limited options to renegotiate or repurchase debt.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"114 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89129188","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Colin Krainin, Kristopher W. Ramsay, Bella Wang, Joseph J Ruggiero
{"title":"War with Sovereign Debt","authors":"Colin Krainin, Kristopher W. Ramsay, Bella Wang, Joseph J Ruggiero","doi":"10.2139/ssrn.3241101","DOIUrl":"https://doi.org/10.2139/ssrn.3241101","url":null,"abstract":"Current thinking on the causes of war focuses on bargaining strategies, resources on hand, and the ability to make transfers as drivers of conflict. This view ignores the important role access to credit can play in shaping war and peace. We explore how financial markets impact the potential for interstate war. We demonstrate that access to capital markets increase the possibility of peace, but preventive war remainspossible. The effects of the market on crisis outcomes is through the price of debt and that prices are determined by market conditions like the risk free interest rate and state specific conditions like the likelihood of default.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"12 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89689689","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Expected Market Returns in the International Cross-Section","authors":"H. Berkman, H. Malloch","doi":"10.2139/ssrn.3671472","DOIUrl":"https://doi.org/10.2139/ssrn.3671472","url":null,"abstract":"Two recent articles, Martin (2017) and Chabi-Yo and Loudis (2019), derive a lower bound for the expected market risk premium that does not require parameter estimation and can be computed in real time. Based on evidence from 15 international markets, we cannot reject the hypothesis that these expected return lower bounds are tight. Furthermore, asset pricing factors that are insignificant in asset pricing tests if realized returns are used as expected return proxy become significant when expected market risk premium lower bounds are used instead; for example, the lower bound is higher for countries with greater exposure to global and regional stock markets and for countries with high exposure to the dollar and carry factors. Finally, we find that a strategy that takes a long position in markets with relatively high expected returns and a short position in markets with relatively low expected returns, yields statistically significant positive returns that are not explained by traditional risk factors.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"108 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82560859","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Advanced Proposed Architecture of Eco-Currency; Technical Analysis of West Africa Single Currency Program","authors":"Emmanuel Tweneboah Senzu","doi":"10.2139/ssrn.3663885","DOIUrl":"https://doi.org/10.2139/ssrn.3663885","url":null,"abstract":"The different target of the time period has been established over the past two decades in the institutionalization of a single currency union in West Africa. Depending on varied reasons the proposed programs have always failed before the set timelines in respect of ECOWAS monetary unification and single currency adoption. As a result, the paper explored and developed its argument based on the existing studies of structured economic shocks, significant to the failure of the single currency union, and its major causal factors. And with observed structured analysis propose catalytic activator method as a theoretical guide to attain the single currency union within three (3) years ahead, if the necessary requirement as the commitment level of members’ State is applied towards the single currency unification program. It then elaborates in the spirit of precision the process required to sustain the eco-currency program in other to elevate members State in an out-date of its domestic currencies struggling as a subservient economic bloc to the adoption of a new anticipated domineering currency in its own merit to shoulder with the global dominating hard currencies.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"4 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73276756","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Financial Friction and Gains (Losses) from Trade","authors":"M. Ebrahimian, Hamid Firooz","doi":"10.2139/ssrn.3662834","DOIUrl":"https://doi.org/10.2139/ssrn.3662834","url":null,"abstract":"How does financial friction influence gains from trade? To answer this question, this paper develops a general equilibrium model of international trade with cross-country financial friction heterogeneity, as the source of comparative advantage. Although product markets are competitive, production of firms in finance-dependent sectors of a closed economy is supported by a markup over marginal cost, so that a higher profit prevents firms from strategically defaulting on loans. Trade liberalization reduces the price of the finance-dependent good, which benefits the consumers; however, economic rents of producing finance-dependent goods flow out to the financially less-frictional economy, which is welfare-reducing. In sum, gains/losses from trade is determined by the financing friction severity of the partner country. We test the empirical predictions of the model. In particular, while we show that financial development matters for the growth of finance-dependent industries in open economies, we do not find such an evidence for closed economies.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"31 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91119830","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Insights into Auditor Public Oversight Boards: Whether, How, and Why they 'Work'","authors":"Michelle Hanlon, Nemit Shroff","doi":"10.2139/ssrn.3527584","DOIUrl":"https://doi.org/10.2139/ssrn.3527584","url":null,"abstract":"We survey 170 inspectors, representing 27% of the inspection staff, from auditor public oversight boards (POBs) in 20 countries to understand whether, how, and why auditors change auditing practices in response to POB oversight. We ask about several theories and areas in the literature. We find that a large majority of POB inspectors believe that auditors frequently respond to inspector feedback by changing audit procedures and quality control systems. Inspectors perceive inspections to have broad effects on several aspects of auditing, ranging from documentation, scrutiny of management estimates, and training to changes in the audit-quality review process, firm culture and on occasion even compensation policies. Inspectors perceive that the primary reasons why auditors respond to their feedback are 1) POB enforcement capabilities, 2) the perceived authority of the POBs, 3) public disclosure of inspection findings, and 4) that POBs have a culture conducive for detecting auditing deficiencies. Cross-sectional tests suggest that inspection frequency and the number of inspectors employed by a POB also affect the perceived extent to which auditors respond to inspection feedback.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-07-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81528602","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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