Xingyun Dai, Sicong Dai and Kemin Wang
Prior research has documented that managers take opportunistic timing activities to influence the exercise prices of executive stock options (ESOs). This paper aims to add to the…
Abstract
Purpose
Prior research has documented that managers take opportunistic timing activities to influence the exercise prices of executive stock options (ESOs). This paper aims to add to the literature by investigating whether such behavior is mitigated by the exercise price regulation of China.
Design/methodology/approach
Using a sample of 132 ESO reports between 2006 and 2010 in China, the authors explore whether the regulation takes effect by examining stock price movements and companies' information disclosures around the report dates.
Findings
Consistent with the conjecture that the regulation could not effectively limit managers' opportunistic behavior, the authors find that the abnormal returns decrease slowly until ten trading days before the report dates, increase gradually subsequently, and rise dramatically just after the report dates. Particularly, the return pattern is more pronounced when corporate governance is weaker. The authors also find that managers opportunistically time ESO reports based on their private information. In particular, more (less) favorable (negative) news announcements occur after the report dates than beforehand. Additionally, compared to earnings announcements, managers prefer to time ESO reports with information about forward‐looking earnings and security issuances.
Originality/value
These results suggest that the regulation could not effectively constrain managers from influencing the exercise prices. The paper also provides evidence that imperfect regulations under asymmetric information may lead to additional agency costs, especially when corporate governance is weak. The authors' findings can contribute to the improvement of regulations on ESOs.
Details
Keywords
Bo Liu and Kemin Wang
Prior research on underwriter reputation treats underwriters as the unit of analyzing, while the purpose of this paper is to analyze underwriter reputation effects after…
Abstract
Purpose
Prior research on underwriter reputation treats underwriters as the unit of analyzing, while the purpose of this paper is to analyze underwriter reputation effects after introducing discretion of underwriters’ employees. Specially, this paper investigates the damage on underwriter reputation effects when underwriters’ employees tolerate issuers’ earnings management for their self-interest.
Design/methodology/approach
In 2004, a Chinese security regulation introduced two professional employees from the lead underwriter, known as sponsors, to work as individual financial intermediaries. This paper tests whether the ability of reputable underwriters in restraining issuers from manipulating earnings decreases after the 2004 regulation, given that the regulation encourages sponsors to exchange for their private benefits by ignoring issuers’ earnings management.
Findings
The inverse relation between underwriter reputation and issuers’ earnings management is weakened after the 2004 regulation, especially when underwriters do not employ enough sponsors. Sponsors who have tolerated issuers’ earnings management will win more business in the following years. The influence of underwriter reputation on issuers’ underpricing and post-initial public offering performance is also less significant after the regulation.
Originality/value
This work extends literatures on underwriter reputation from a completely different aspect that emphasizes the self-interest of underwriters’ employees. This paper also has direct policy implications for regulators, especially in the current reform climate that Chinese government is trying to carry out the Registration System.
Details
Keywords
Kemin Li, Zhifu Huang, Hanwen Ma, Shaofei Wang, Chaofeng Qin and Pengcheng Liu
The purpose of this study was to investigate the tribological properties of bulk Fe2B with pre-oxidation treatment.
Abstract
Purpose
The purpose of this study was to investigate the tribological properties of bulk Fe2B with pre-oxidation treatment.
Design/methodology/approach
Bulk Fe2B was oxidized in an electric box furnace with a soaking time of 9 min under 750°C in air. Then, the tribological experiments were carried out on an UMT-Tribolab tester.
Findings
The oxide layer was composed of Fe, Fe2O3, Fe3O4, B2O3 and H3BO3. The oxidative direction of bulk Fe2B was perpendicular to the sample surface. But, the oxidative direction of Fe2B crystals was irregular. At 0.1 m/s, the friction coefficient was the lowest. The effects of shortening the running-in period of friction and reducing the friction coefficient by pre-oxidation treatment at 0.1 m/s were remarkable. Nevertheless, the effect of pre-oxidation treatment was futile at 0.2 m/s. Wear mechanisms of oxidized Fe2B mainly were adhesive and abrasive wear.
Originality/value
The effects of shortening the running-in period of friction and reducing the friction coefficient by pre-oxidation treatment were remarkable.
Details
Keywords
Nombulelo Zulu, Eugenie Kayitesi and Opeolu M. Ogundele
The effect of the addition of red palm olein (RPO) as a natural antioxidant to sunflower (SF) on chemical properties and deep-frying oxidative stability of resultant oil during…
Abstract
Purpose
The effect of the addition of red palm olein (RPO) as a natural antioxidant to sunflower (SF) on chemical properties and deep-frying oxidative stability of resultant oil during storage.
Design/methodology/approach
RPO was added to SF at different levels 0, 5, 10, 15, 20, 25, 50, 75 and 100 (w/w), and potato chips were fried in oil blends repeatedly at 180 °C for 2.5 min for five days to evaluate the effect on chemical properties and oxidative stability.
Findings
The results revealed that linoleic acid and total polar compound (TPC) contents decreased in all RPO and SF resultant oil after five days of storage. Colour significantly (p = 0.05) decreased, while peroxide and iodine values were significantly lowered during storage. The oxidative stability increased significantly in the resultant oil. However, an increase in free fatty acid (FFA) before frying significantly reduced with repeated frying of resultant oil during storage. RPO (5–75%) therefore retards oxidative rancidity in the resultant oil after repeated deep frying and storage.
Originality/value
SF oil is high in polyunsaturated fatty acids but prone to oxidation upon heating and storage. RPO is an important ingredient used in industrial frying rich in phytonutrients and a better replacement to synthetic antioxidants. This study indicated that supplementing SF oil with RPO may be recommended to improve the oxidative stability of oils during frying.
Details
Keywords
The purpose of this paper is to empirically test how ultimate controlling shareholders' ownership‐control rights divergence and government intervention affect choice of capital…
Abstract
Purpose
The purpose of this paper is to empirically test how ultimate controlling shareholders' ownership‐control rights divergence and government intervention affect choice of capital structure (CS), and how the relationship between controlling shareholders' ownership‐control rights divergence and choice of CS is affected by government intervention.
Design/methodology/approach
Integrating the institutional background of China, the paper adopts balanced panel data containing related continuously obtainable information of 1,076 non‐financial companies listed in Shanghai and Shenzhen from 2004 to 2008 (a total of 5,380 observed values), and applies a series of generalised least squares to empirically test how ultimate controlling shareholders' ownership‐control rights divergence and government intervention affect choice of CS, and how the relationship between controlling shareholders' ownership‐control rights divergence and choice of CS is affected by government intervention.
Findings
The empirical evidence provided by this paper indicates that: controlling shareholders' ownership‐control rights divergence is negatively correlated with leverage; government intervention is positively correlated with leverage; and government intervention will weaken the negative relationship between controlling shareholders' ownership‐control rights divergence and leverage, and make debt capital suppliers (especially financial institutions like banks, etc.) provide loans, especially long‐term ones, to companies with high ownership‐control rights divergence.
Originality/value
So far, it is still little‐known how ownership‐control rights divergence affects choice of CS and how government intervention affects the relationship between ownership and control rights divergence and choices of CS. This paper is the first to test how ultimate controlling shareholders' ownership‐control rights divergence and government intervention affect choice of CS, and how the relationship between controlling shareholders' ownership‐control rights divergence and choice of CS is affected by government intervention based on the institutional background of China.