150 research outputs found
The effect of corporate governance on the performance of US investment banks
This paper focuses on the impact of the corporate governance, using a plethora of measures, on the performance of the US investment banks over the 2000-2012 period. This time period offers a unique set of information, related to the credit crunch, that we model using a dynamic panel threshold analysis to reveal new insights into the relationship between corporate governance and bank performance. Results show that the board size asserts a negative effect on performance consistent with the âagency costâ hypothesis, particularly for banks with board size higher than ten members. Threshold analysis reveals that in the post-crisis period most of investment banks opt for boards with less than ten members, aiming to decrease agency conflicts that large boards suffer from. We also find a negative association between the operational complexity and performance. Moreover, the CEO power asserts a positive effect on performance consistent with the âstewardshipâ hypothesis. In addition, an increase in the bank ownership held by the board has a negative impact on performance for banks below a certain threshold. On the other hand, for banks with board ownership above the threshold value this effect turns positive, indicating an alignment between shareholdersâ and managersâ incentives
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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
Assessing bankruptcy prediction models via information content of technical inefficiency
Multi-criteria ranking of corporate distress prediction models: empirical evaluation and methodological contributions
YesAlthough many modelling and prediction frameworks for corporate bankruptcy
and distress have been proposed, the relative performance evaluation of prediction models
is criticised due to the assessment exercise using a single measure of one criterion at
a time, which leads to reporting conflicting results. Mousavi et al. (Int Rev Financ Anal
42:64â75, 2015) proposed an orientation-free super-efficiency DEA-based framework to
overcome this methodological issue. However, within a super-efficiency DEA framework,
the reference benchmark changes from one prediction model evaluation to another, which
in some contexts might be viewed as âunfairâ benchmarking. In this paper, we overcome
this issue by proposing a slacks-based context-dependent DEA (SBM-CDEA) framework
to evaluate competing distress prediction models. In addition, we propose a hybrid crossbenchmarking-
cross-efficiency framework as an alternative methodology for ranking DMUs
that are heterogeneous. Furthermore, using data on UK firms listed on London Stock
Exchange, we perform a comprehensive comparative analysis of the most popular corporate
distress prediction models; namely, statistical models, under both mono criterion and
multiple criteria frameworks considering several performance measures. Also, we propose
new statistical models using macroeconomic indicators as drivers of distress
The association between quarter length, forecast errors, and firmsâ voluntary disclosures
Approximately 60 percent of adjacent fiscal quarters contain a different number of calendar days. In preliminary analyses, we find the change in quarter length is significantly associated with the changes in sales and earnings and that analysts condition on the prior quarter's results when making their forecasts. These results indicate that it is important for analysts to adjust for changes in quarter length when making forecasts. However, we find the quarterly change in days is positively associated with analystsâ sales and earnings forecasts errors, where forecast error equals the actual earnings minus the forecasted earnings. These results indicate that analysts systematically underestimate (overestimate) performance when quarter length increases (decreases). We find evidence indicating investors make similar errors as returns around earnings announcements are positively associated with the change in quarter length, but only when changes in firm performance is more sensitive to changes in quarter length. Corroborating these findings, managers are more (less) likely to discuss quarter length during conference calls when quarter length decreases (increases). These results are consistent with managersâ strategic disclosure incentives. In summary, our evidence suggests analysts and investors fail to fully take account of the quasi-mechanical effect that quarter length has on firm performance and managers strategically alter their voluntary disclosures to take advantage of these failures
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