State-controlled banks and income smoothing. Do politics matter?

This paper uses a new dataset to reassess the relationship between government ownership and income smoothing of commercial banks. We also evaluate how political connections affect the impact of government ownership on earnings management. We find that banks with more state-controlled shareholders located in developing countries tend to have more incentives to smooth income. The paper finds no significant difference in earnings manipulation between government-controlled and non-government banks in developed countries. Next, to investigate whether the income smoothing behavior of state-controlled banks is driven by political objectives, the paper tests whether this behavior widens during national election years; the results provide strong support for this conjecture. The magnitude of the income smoothing behavior also varies with different countries and electoral characteristics. These findings suggest that the political channel plays an important role in determining the income smoothing incentives of state-controlled banks, especially in developing countries

Are social, financial, and human capital value enhancing? Evidence from Taiwanese firms

This study examines the effects of social, financial, and human capital on the financial performance (i.e., Tobin's q) of Taiwanese firms in 2007. We find that social capital, as measured by total lending and borrowing among related-party transactions, has a positive effect on a firm's value. Human capital, such as employee productivity and research and development (R&D), also has significant positive effects on financial performance. In addition, a higher firm value is found to be associated with a better credit rating for the firm

Are social, financial, and human capital value enhancing? Evidence from Taiwanese firms

This study examines the effects of social, financial, and human capital on the financial performance (i.e., Tobin's q) of Taiwanese firms in 2007. We find that social capital, as measured by total lending and borrowing among related-party transactions, has a positive effect on a firm's value. Human capital, such as employee productivity and research and development (R&D), also has significant positive effects on financial performance. In addition, a higher firm value is found to be associated with a better credit rating for the firm.Social capital Financial capital Human capital Taiwanese firms

Dynamic correlation between stock prices and exchange rates

This article examined the interaction between stock price and exchange rate and explored their dynamic correlation influenced by the stock market volatility. We used newly developed Smooth Transition Conditional Correlation-Generalized Autoregressive Conditional Heteroscedasticity (STCC-GARCH) model and applied weekly data from Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand for the period 2000 to 2008 to test the dynamic correlation hypothesis. The empirical results indicated that there are significant price spillovers from stock market to foreign exchange market for Indonesia, Korea, Malaysia, Thailand and Taiwan. Furthermore, the correlation between stock and foreign exchange markets becomes higher when stock market volatility increases in Asian emerging markets except in the Philippines. These results are important for international investors and managers to devise hedging and diversification strategies for their portfolios. The evidence suggests that investors can hedge risk between stock and foreign exchange in domestic markets when the stock market is stable. Otherwise, when the stock market becomes volatile, investors diversify their portfolio internationally for hedging risk since the correlation between stock and foreign exchange markets becomes higher.

Response Asymmetries in Asian Stock Markets

This paper examines autocorrelation and cross-autocorrelation patterns for selected Asian stock returns. Special attention is given to examination of Asian stock returns and the impact on them of the past information. By employing a class of asymmetric specification of conditional mean and conditional variance models, we find the autocorrelation coefficient to be negative for the Japanese market and positive for the rest of the Asian markets studied. Our findings suggest that the Asian markets respond sensitively to the US market, especially on the down side. The asymmetric effects are found to be present in both mean and variance equations. The evidence is consistent with behavior in which investors in Asian markets tend to react more significantly to negative stock news originating from US sources than they do to positive news.Asymmetries, stock return, volatility, Asian stock markets, feedback trading, JEL classification: G15

What drives bank efficiency? The interaction of bank income diversification and ownership

This paper examines the relation between income diversification and bank efficiency across 83 countries over the period 2003–2012. We also evaluate how ownership structure affects the impact of bank diversification on cost efficiency. Using a stochastic frontier approach to estimate bank cost efficiency, we find evidence that increased diversification tends to improve bank efficiency but the benefits of diversification are offset by the increased exposure to volatile non-interest activities. With respect to the impact of ownership, we find that state-owned banks with fewer volatile income sources are likely to be less efficient in terms of income diversification. Our results also reveal that more diversified foreign-owned banks tend to be less efficient in developed countries, while the increased foreign ownership of banks appears to improve the diversification benefits in developing countries after the financial crisis. Our findings highlight the implications of bank income diversification and ownership for efficiency and are relevant to bank regulators who are considering additional regulations on bank management

Research on the Construction of Performance Indicators for the Marketing Alliance of Catering Industry and Credit Card Issuing Banks by Using the Balanced Scorecard and Fuzzy AHP

In recent years, strategic alliances have seen explosive growth in various practical fields. Various forms of strategic alliances and cooperation models have been widely used among various organizations and have received considerable attention from academic and practical circles. However, there are many factors that affect the success of marketing alliances, and the academic community has not reached a conclusion and consensus. Among them, the establishment and monitoring of a performance evaluation mechanism is one of the key points. In the past, many academic studies have devoted themselves to the establishment of performance evaluation mechanisms for many different industries, but few of them have focused on the establishment of performance evaluation mechanisms for marketing alliances between the service industry and the banking industry. The purpose of this study is to assist in the establishment of performance evaluation indicators for marketing alliance between the catering industry and credit card issuing banks by using expert Delphi, fuzzy analytic hierarchy process and balanced scorecard methods. The main result of this study is to establish five key performance evaluation indicators including customer factors, cooperative alliance factors, financial factors, learning and growth factors, and internal process factors. In terms of secondary indicators, there are seven customer sub-factors, six cooperative alliance sub-factors, five financial sub-factors, seven internal processes sub-factors, and five learning and growth sub-factors, totaling 30 sub-factors. The research results can be used as a reference for academic and practical areas

Return and Volatility Intra-Day Transmission of Dually-Traded Stocks: The Cases of Taiwan, Korea, Hong Kong, and Singapore

The paper applies the two-stage GJR-GARCH model to investigate the intra-day return and volatility transmission behavior between ADRs and their underlying stocks using data from Japan, Taiwan, Korea, Hong Kong, and Singapore. Empirical results show that the return transmission of ADRs and their underlying stocks from Japan, Taiwan, Korea, Hong Kong, and Singapore companies is bi-directional. The return spillover effect from underlying stocks to ADRs is stronger than that from ADRs to the underlying stocks. In addition, the volatility spillover between underlying stocks and ADRs is significant but not bi-directional. The volatility spillover effect from underlying stocks to ADRs is more significant. This result indicates that the local market is acting as the dominant market while the foreign market is acting as a satellite. Empirical results also show that all the underlying daytime stock returns have significant positive spillover effects on the subsequent ADR daytime returns. On the other hand, the ADR daytime returns have no significant spillover effect on the subsequent underlying stock returns. This result implies that the American market does not immediately incorporate all the information from local prices; instead there is a delayed reaction.ADR, spillover effect, Asian financial crisis, September 11 attacks