Category-based Tail Comovement

Traditional financial theory predicts that comovement in asset returns is due to fundamentals. An alternative view is that of Barberis and Shleifer (2003) and Bar- beris, Shleifer and Wurgler (2005) who propose a sentiment based theory of comovement, delinking it from fundamentals. In their paper they view comovement under the prism of the standard Pearson's correlation measure, implicitly excluding extreme market events, such as the latest financial crisis. Poon, Rockinger and Tawn (2004) have shown that under such events different types of comovement or dependence may co-exist, and make a clear distinction between the four types of dependence: perfect dependent, independent, asymptotically dependent and asymptotically independent. In this paper we extend the sentiment based theory of comovement so as to cover the whole spectrum of dependence, including extreme comovement such as the one that can be observed in financial crises. One of the key contributions of this paper is that it formally proves that assets belonging to the same category comove too much in the tail and reclassifying an asset into a new category raises its tail dependence with that category

Category-based Tail Comovement

Traditional …financial theory predicts that comovement in asset returns is due to fundamentals. An alternative view is that of Barberis and Shleifer (2003) and Bar- beris, Shleifer and Wurgler (2005) who propose a sentiment based theory of comovement, delinking it from fundamentals. In their paper they view comovement under the prism of the standard Pearson's correlation measure, implicitly excluding extreme market events, such as the latest …financial crisis. Poon, Rockinger and Tawn (2004) have shown that under such events different types of comovement or dependence may co-exist, and make a clear distinction between the four types of dependence: perfect dependent, independent, asymptotically dependent and asymptotically independent. In this paper we extend the sentiment based theory of comovement so as to cover the whole spectrum of dependence, including extreme comovement such as the one that can be observed in …financial crises. One of the key contributions of this paper is that it formally proves that assets belonging to the same category comove too much in the tail and reclassifying an asset into a new category raises its tail dependence with that category.Interest rates ; Yield curve ; ICA ; PCA

Monitoring of Corporate Groups by Independent Directors

Both the United States and Korea have reformed their corporate governance in recent years to put increasing responsibilities on independent directors. Independent directors have been found to be an important force protecting the interests of shareholders when it comes time to make certain highly salient decisions, such as firing a CEO or selling the company. This article compares the role of independent directors in the US and Korean systems. I argue that the US may have placed regulatory burdens on independent directors that they are unlikely to be able to satisfy, given their part-time status. By contrast, in the chaebol system of Korea, independent directors may have a critical role to play in limiting self dealing by controlling shareholders. Given the dominance of these controlling shareholders in the Korean economy, independent directors will need strong backing to be effective in protecting the interests of public shareholders

National Culture, IFRS Convergence, and The Accounting Quality: Evidence from EAGLEs Countries

This study aims to evaluate the influence of national culture on the relationship between IFRS convergence and accounting quality of companies in Emerging and Growth Leading Economies (EAGLEs) countries. This study uses measurements of accounting quality: earnings management, timely loss recognition, and value relevance. Cultural factors are measured using Gray's (1988) measurements. The sample in this study were 14 countries with a total of 6,832 observations in the 2012-2018 period. The data in this study used secondary data obtained from the Osiris Database. The results of this study provide evidence that accounting quality in EAGLE countries is positively related to the level of IFRS convergence, especially in earnings management and timely recognition of losses. This shows that IFRS convergence can reduce earnings management and improve the timely recognition of losses. Other results in this study, cultural factors, especially on the value of conservatism, partially support the relationship of IFRS convergence and accounting quality, while the value of secrecy is not support. Keywords: IFRS convergence, accounting quality, national culture, accounting standards, EAGLEs countrie

The Benefits and Costs of Group Affiliation: Evidence from East Asia

business group, group affiliation, East Asian corporations

The Riddle of the Great Pyramids

Large pyramidal family controlled business groups are the predominant form of business organization outside America, Britain, Germany, and Japan. Large pyramidal groups comprising dozens, even hundreds, or listed and unlisted firms place the governance of large swathes of many countries' big business sectors in the hands of a few of their wealthiest families. These structures plausibly substitute for weak market institutions in economies undergoing rapid early-stage industrialization. They may also substitute for weak governments in coordinating Big Push growth programs to establish numerous interdependent simultaneously. However, no such role is evident in developed or in slowly growing developing economies, where such structures appear prone to agency problems and political rent-seeking. If sufficiently large, they may also add to economy volatility by rendering the risk of misgovernance systematic, rather than firm-specific.

Favoritism and Corporate Law: The Confused Corporate Opportunity Doctrine in the Hyundai Motor Case

Core legal principles of U.S. corporate law are often met with perplexity in foreign jurisdictions – this is especially true when a particular principle remains controversial even in the U.S. This Article takes the corporate opportunity doctrine and examines how it has been exported to the civil law regime in Korea. Korean conglomerates such as Samsung Group and Hyundai Motor Group have become major players in the global market, but corporate law and practice in Korea have had a difficult time keeping up with the developments in the business sector. The Hyundai Motor Case demonstrates an ambitious but ill-fated attempt at adoption of U.S. corporate legal doctrine in Korea. This Article explains and analyzes the case and the new codified corporate opportunity doctrine rule in the Korean Commercial Code from a comparative perspective, and suggests that the dialogue surrounding the corporate opportunity doctrine in Korean legal and business communities are oriented in the wrong direction and that the new rule needs substantial refinement

Favoritism and Corporate Law: The Confused Corporate Opportunity Doctrine in the Hyundai Motor Case

Core legal principles of U.S. corporate law are often met with perplexity in foreign jurisdictions. This is especially true for legal principles that are controversial even in the U.S. This Article takes the corporate opportunity doctrine and examines how it has been exported to the civil law regime in Korea. Korean conglomerates such as Samsung Group and Hyundai Motor Group have become major players in the global market, but corporate law and practice in Korea have had a difficult time keeping up with developments in the business sector. The Hyundai Motor Case demonstrates an ambitious, but ill-fated, attempt at the adoption of U.S. doctrine in Korea. This Article explains and analyzes the case and the new codified corporate opportunity doctrine rule in the Korean Commercial Code from a comparative perspective, and suggests that the dialogue surrounding the corporate opportunity doctrine in Korean legal and business communities is oriented in the wrong direction and that the new rule needs substantial refinement

Favoritism and Corporate Law: The Confused Corporate Opportunity Doctrine in the Hyundai Motor Case

Core legal principles of U.S. corporate law are often met with perplexity in foreign jurisdictions. This is especially true for legal principles that are controversial even in the U.S. This Article takes the corporate opportunity doctrine and examines how it has been exported to the civil law regime in Korea. Korean conglomerates such as Samsung Group and Hyundai Motor Group have become major players in the global market, but corporate law and practice in Korea have had a difficult time keeping up with developments in the business sector. The Hyundai Motor Case demonstrates an ambitious, but ill-fated, attempt at the adoption of U.S. doctrine in Korea. This Article explains and analyzes the case and the new codified corporate opportunity doctrine rule in the Korean Commercial Code from a comparative perspective, and suggests that the dialogue surrounding the corporate opportunity doctrine in Korean legal and business communities is oriented in the wrong direction and that the new rule needs substantial refinement

Controlling Shareholders and Corporate Governance: Complicating the Comparative Taxonomy

The focus of comparative corporate governance scholarship is shifting from takeovers to controlling shareholders in recognition of the fact that public corporations everywhere but in the U.S. and U.K. are characterized by a shareholder with effective voting control. Debate is now turning to the merits of controlling shareholder systems, both on their own terms and in comparison to the U.S. and U.K. widely held shareholding pattern. To date, the debate has treated the controlling versus widely held distinction as central, disagreeing over whether a particular country owed its characteristic shareholder distribution to the quality of minority shareholder legal protection or to politics. This simple dichotomy is far too coarse to provide an understanding of the diversity of ownership structures and their policy implications. This article complicates the analysis of controlling shareholders and corporate governance by providing a more nuanced taxonomy of controlling shareholder systems. In particular, it distinguishes between efficient and inefficient controlling shareholders, and between pecuniary and non-pecuniary private benefits of control. The analysis establishes that the appropriate dichotomy is between countries with functionally good law, which support companies with both widely held and controlling shareholder distributions, and countries with functionally bad law, which support only controlling shareholder distributions. In this account, the United States and Sweden are the same side, rather than on opposite sides of the dividing line. The articles examines the different understanding of the role of controlling shareholders in corporate governance and the policy implications that flow from a taxonomy that focuses on support of diverse shareholder distributions