Default risk, state ownership and the cross-section of stock returns: evidence from China

We apply a structural model to estimate firm-level default risk in China and investigate the stock return predictability of default risk and the moderating effects of state ownership for the sample period from 2003 to 2015. We show unique evidence that in China, default risk is positively associated with expected stock returns and state ownership matters considerably to the return predictability of default risk. We find investors of state-owned enterprises (SOEs) are not compensated appropriately in China despite of their higher default risk exposure. Our empirical evidence supports the conjecture on shareholder advantages and suggests that a strong bargaining power of equity holders would have a negative impact on stock returns

Comparing GAAP with NIPA earnings

Title on author’s file: Comparing GAAP to NIPA earnings202206 bcfcAccepted ManuscriptSelf-fundedPublishe

A re-examination of the holiday effect in stock returns: the case of Hong Kong

A strong pre-holiday effect is revealed in this study of Hong Kong stock returns. Importantly, the effect does not appear to be modulated by day-of-the-week effects, which themselves are highly volatile and inconsistent across various sub-periods. As documented in earlier studies for the 1970s and 1980s, a Chinese Lunar New Year (CLNY) effect has been highly significant in explaining Hong Kong's overall pre-holiday return effect. Re-examination of the issue here indicates that the effect has continued throughout the last 15 years. More tellingly, after controlling for Hong Kong holidays, a pre-US holiday return effect is absent from Hong Kong returns for the 1990-2005 sub-period despite its significance between 1975 and 1990. Besides confirming earlier evidence of an inherited US holiday effect in Hong Kong returns during the 1970s and 1980s, it is instructive to note that the waning US pre-holiday effect, as documented in various studies since, can be viewed through the prism of Hong Kong returns. While the US pre-holiday effect appears to have been purged, Hong Kong's own holiday effect, other than that relating to the CLNY, has generally weakened. Finally, despite the persistence of a strong CLNY pre-holiday daily return effect, a 'seasonal' run-up in stock returns in the weeks prior to the CLNY is less apparent than hitherto.

What drives the comparability effect of mandatory IFRS adoption?

We investigate the effects of mandatory IFRS adoption on the comparability of financial accounting information. Using two comparability proxies based on De Franco et al. [2011] and a comparability proxy based on the degree of information transfer, our results suggest that the overall comparability effect of mandatory IFRS adoption is marginal. We hypothesize that firm-level heterogeneity in IFRS compliance explains the limited comparability effect. To test this conjecture, we first hand-collect data on IFRS compliance for a sample of German and Italian firms and find that firm-, region-, and country-level incentives systematically shape IFRS compliance. We then use the identified compliance determinants to explain the variance in the comparability effect of mandatory IFRS adoption and find it to vary systematically with firm-level compliance determinants, suggesting that only firms with high compliance incentives experience substantial increases in comparability. Moreover, we document that firms from countries with tighter reporting enforcement experience larger IFRS comparability effects, and that public firms adopting IFRS become less comparable to local GAAP private firms from the same country