{"title":"Spillover effects of MSCI inclusion announcement: Evidence and implications from China","authors":"Zhihua Wei , Deqian Wu , Aimin Zeng , Bo Li","doi":"10.1016/j.pacfin.2024.102582","DOIUrl":"10.1016/j.pacfin.2024.102582","url":null,"abstract":"<div><div>We investigate the price reactions of stocks that would not be included in the MSCI global indices to the MSCI inclusion announcement. We document a positive revaluation effect for connected stocks, but not for unconnected stocks. Based on the institutional background and existing theories, we propose three non-competing hypotheses: the signaling hypothesis, the speculative trading hypothesis, and the market integration hypothesis. With a series of tests, we demonstrate that the market integration hypothesis can explain this phenomenon. Specifically, the price revaluations of connected stocks are proportional to firm-specific conditional market risk, and this relationship is stronger in firms with high transparency and liquidity and is dampened by the existence of B- or H-shares. Our paper provides new evidence and insights into the impact of global index inclusion on asset prices and the degree of market integration.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102582"},"PeriodicalIF":4.8,"publicationDate":"2024-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142663489","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Common institutional ownership and opportunistic insider selling: Evidence from China","authors":"Jingwen Dai , Rong Xu , Tianqi Zhu , Chao Lu","doi":"10.1016/j.pacfin.2024.102580","DOIUrl":"10.1016/j.pacfin.2024.102580","url":null,"abstract":"<div><div>We examine the relationship between common institutional ownership and opportunistic insider selling. Using an unbalanced panel of 32,858 firm-year observations of Chinese A-share listed firms from 2007 to 2021, we find that common institutional ownership inhibits opportunistic insider selling, supporting the synergistic governance view. Our evidence indicates that information economies of scale and industry power acquired from shareholding networks enable common owners to exert positive governance effects. Designating directors and officers, voting at shareholders' meetings, and promoting information disclosure are the three essential channels through which common owners perform effective monitoring. Furthermore, the synergistic governance effect is more pronounced in firms with headquarters located in regions with a stronger altruistic culture, better independent director governance, and wider media coverage. Heterogeneity analyses show that non-pressure-sensitive, stable, and transactional common institutional investors effectively inhibit opportunistic insider selling, whereas pressure-sensitive common owners exhibit attenuated effects. Additional tests indicate that common owners significantly reduce the profitability of opportunistic insider trading. Our findings highlight the social attributes and ethical aspects of how common institutional shareholders restricts insider opportunism in emerging markets.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102580"},"PeriodicalIF":4.8,"publicationDate":"2024-11-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142663488","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Are pre-opening periods important? Evidence from Chinese market lunch breaks","authors":"Gang Chu , John W. Goodell , Xiao Li","doi":"10.1016/j.pacfin.2024.102577","DOIUrl":"10.1016/j.pacfin.2024.102577","url":null,"abstract":"<div><div>The Chinese stock market design offers a unique opportunity to examine the impact of pre-open call auctions on price efficiency and price discovery. By comparison, we find that opening prices of morning sessions, as determined by call auctions, are more efficient and informative than prices of the afternoon session, as determined by a continuous auction mechanism. Using corporate announcements to compare the speed of price adjustments in response to overnight information versus lunch break information, we find that prices react much more rapidly to overnight announcements, consistent with pre-open call auctions facilitating price discovery to announcements. Results also suggest that corporate announcements enhance stock liquidity with the effect of overnight announcements on liquidity being stronger than the effects of lunch break announcements. Overall, our evidence highlights the utility of pre-open call auctions.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102577"},"PeriodicalIF":4.8,"publicationDate":"2024-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142662948","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Volatility-managed portfolios in the Chinese equity market","authors":"Chuyu Wang, Junye Li","doi":"10.1016/j.pacfin.2024.102574","DOIUrl":"10.1016/j.pacfin.2024.102574","url":null,"abstract":"<div><div>This paper examines the effectiveness of the volatility-timing strategy in the Chinese equity market. We find that the volatility-managed portfolio (VMP) consistently outperforms its original counterpart. This outperformance is primarily driven by stocks with high arbitrage risks, and is further enhanced when considering the price-limit rule in China. The conditional systematic risks of volatility-managed portfolios are significantly lower during market downturns, serving as a hedge against high volatility. Additionally, the multi-factor portfolio constructed from the individual volatility-managed factors outperforms other multi-factor portfolios, especially during periods of heightened investor sentiment or diminished macroeconomic confidence.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102574"},"PeriodicalIF":4.8,"publicationDate":"2024-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142662950","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Can improving the business environment narrow the within-firm pay gap? Evidence from data on 233 Chinese cities","authors":"Qin Wan , Hongyu Pan , Jinbo Huang","doi":"10.1016/j.pacfin.2024.102575","DOIUrl":"10.1016/j.pacfin.2024.102575","url":null,"abstract":"<div><div>This paper investigates the impact of the business environment (BE) on the within-firm pay gap (WFPG) by using data on listed firms from 233 cities in China. The main finding is that a better BE reduces the WFPG between management and regular employees. After a series of endogeneity treatments and robustness tests, this conclusion remains unchanged. The results of mechanism analysis suggest that intensifying market competition and the alleviating agency problems are two important channels for this effect. Heterogeneity tests indicate a stronger effect for non-state owned enterprises, firms with worse governance, and firms in noncompetitive industries. Additional analysis indicates that human resources, the innovation environment, and financial services are the main factors through which the BE affects the WFPG. This paper provides empirical insights for practical application.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102575"},"PeriodicalIF":4.8,"publicationDate":"2024-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142662947","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Martin Bugeja , Raymond da Silva Rosa , Yaowen Shan , David Yermack
{"title":"Show me your hand: An examination of voting methods at annual general meetings","authors":"Martin Bugeja , Raymond da Silva Rosa , Yaowen Shan , David Yermack","doi":"10.1016/j.pacfin.2024.102576","DOIUrl":"10.1016/j.pacfin.2024.102576","url":null,"abstract":"<div><div>Until 2022 Australian companies' legislation required that resolutions at annual general meetings be decided using a show of hands of those present at the meeting unless the meeting chair called a poll vote. The use of show of hands voting has been criticised as it ignores a shareholder's ownership stake and does not count the votes of shareholders that vote prior to the meeting. Additionally, there is anecdotal evidence that resolutions have been passed by a show of hands when votes cast prior to the meeting suggested that the resolution may have failed. This study investigates the extent of inappropriate passing of meeting resolutions, along with the determinants and consequences of the voting method employed. Consistent with the anecdotal evidence we report that some firms appear to have inappropriately passed resolutions using a show of hands vote. We document firms are more likely to vote by poll when they are larger, have lower stock returns, have greater board gender diversity and lower shareholder concentration. Importantly we find that the method of voting matters to shareholders and that a move away from voting by a show of hands encourages greater shareholder voting participation and dissent at the annual general meeting. Interestingly, firms are more likely to withdraw resolutions with higher dissent prior to the AGM when show of hands voting is discouraged.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102576"},"PeriodicalIF":4.8,"publicationDate":"2024-11-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142662943","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Negative information hoarding in politically connected firms: The influence from the central environmental protection inspections","authors":"Shuai Yue, Hamish D. Anderson, Jing Liao","doi":"10.1016/j.pacfin.2024.102571","DOIUrl":"10.1016/j.pacfin.2024.102571","url":null,"abstract":"<div><div>This study examines how managerial political connections affect corporate information environment in the context of central government environmental inspections. We find that politically connected firms are associated with higher crash risk than firms without such connections after central government inspections. In addition, we find that firms are more prone to crash risk when they are with achieved political connections (e.g. appointed as members of political advisory bodies), but not ascribed political connections (i.e. have work experience as government officials). Further analyses indicate that politically connected firms are more prone to crash risk after central government inspections due to increased reputational concerns. Overall, our study highlights that politically connected firms may face more challenges in managing negative information when there is intensified regulatory scrutiny, which exacerbates the risk profile of firms.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102571"},"PeriodicalIF":4.8,"publicationDate":"2024-11-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142662949","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Geographic disparities in bank lending: Evidence from an auto loan market","authors":"Tao Liu , Yanxin Yu , Di Gong , Min Guo","doi":"10.1016/j.pacfin.2024.102573","DOIUrl":"10.1016/j.pacfin.2024.102573","url":null,"abstract":"<div><div>We investigate geographic biases against nonlocal borrowers in the Chinese auto loan market. Using proprietary loan-level data from a major commercial bank in a regional market, we discover that nonlocal borrowers encounter geographic discrimination, manifested in higher loan rates and shorter loan durations compared to similar local counterparts, even after adjusting for borrowers' risk profiles. This bias is exacerbated by information asymmetries as well as economic and institutional stereotypes. The disparity is particularly pronounced in cases involving elevated loan-to-value (LTV) ratios, higher-value or luxury vehicles, and among male or older borrowers. Our findings shed light on the human biases in lending decisions in the credit market.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102573"},"PeriodicalIF":4.8,"publicationDate":"2024-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142663491","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Gender difference in equity portfolio diversification","authors":"Zheng Wu, P. Joakim Westerholm","doi":"10.1016/j.pacfin.2024.102569","DOIUrl":"10.1016/j.pacfin.2024.102569","url":null,"abstract":"<div><div>This study provides compelling evidence that individual investors consistently maintain under-diversified portfolios, with female investors exhibiting significantly lower levels of diversification than their male counterparts. Analyzing a comprehensive dataset of retail investor trades, this study provides the first detailed examination of gender differences in trading activity, performance, and portfolio diversification. Performance, and diversification are systematically related to investor characteristics such as portfolio size, income, education, language, age, and investment experience. The result that increasing diversification improves performance for all investors corresponds with the fact that female investors are found to diversify less at the same time as they show a slightly lower aggregated performance than male investors.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102569"},"PeriodicalIF":4.8,"publicationDate":"2024-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142662942","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"ESG certification, green innovation, and firm value: A quasi-natural experiment based on SynTao Green Finance's ESG ratings: A pre-registered study","authors":"Xiao Bai , Wenyao Zhao , Geran Tian","doi":"10.1016/j.pacfin.2024.102572","DOIUrl":"10.1016/j.pacfin.2024.102572","url":null,"abstract":"<div><div>This pre-registered study executes the empirical design approved in the associated pre-registered report (<span><span>Bai et al., 2024</span></span>) to investigate the impact of environmental, social, and governance (ESG) certification on green innovation and firm value. Using the first release of ESG ratings by SynTao Green Finance as a quasi-natural experiment, the study reveals several key findings: 1) ESG certification significantly increases the quantity of green innovation while demonstrating no substantial impact on its quality. 2) the increase in green innovation quantity is primarily driven by the alleviation of financing constraints and enhanced monitoring, while the quality remains unaffected due to managerial opportunism. 3) the quality of green innovation significantly enhances the positive impact of ESG certification on firm value, whereas the quantity of green innovation does not have a significant moderating effect. These findings provide significant implications for firms aiming for green development and for emerging markets seeking to improve ESG disclosure regulations.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"88 ","pages":"Article 102572"},"PeriodicalIF":4.8,"publicationDate":"2024-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142663490","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}