Ming-Te Lee, Chyi Lin Lee, Ming-Long Lee and Chien-Ya Liao
The purpose of this study is to examine the linkages between Australian house prices and stock prices under the Toda and Yamamoto test framework. Specifically, it investigated…
Abstract
Purpose
The purpose of this study is to examine the linkages between Australian house prices and stock prices under the Toda and Yamamoto test framework. Specifically, it investigated whether there is a capital switching effect between house prices and stock prices.
Design/methodology/approach
This study examined the linkages between house prices and stock prices under the Toda and Yamamoto test framework. To accommodate the impact of the global financial crisis (GFC), a sub-period analysis was undertaken. To assess the impact of investor structure, the tests were also performed for small cap stocks and large cap stocks individually.
Findings
The empirical results reveal a negative lead–lag relationship between house prices and stock prices in Australia, suggesting the existence of capital switching activities between housing and stocks. The impact of the GFC on the lead–lag relationship between house prices and stock prices is also documented. Before the crisis, a causality transmission was running from house prices to stock prices, whilst stock prices appeared to lead house prices after the crisis. The capital switching activities between housing and stocks are more evident for small cap stocks.
Originality/value
This study is the first to examine the linkages between house prices and stock prices under the Toda and Yamamoto test framework. This is the first study to explore the impacts of the GFC on the lead–lag relationship between the two asset prices under the capital switching framework. This study is also the first to provide empirical evidence regarding the existence of capital switching activities between housing and stocks. In addition, the impact of investor structure on the interrelationship between the two asset prices is examined for the first time under the capital switching framework.
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The purpose of this paper is to address the opposing views of the relationship between directors’ and officers’ liability insurance (D&O insurance) and stock price crash risk in a…
Abstract
Purpose
The purpose of this paper is to address the opposing views of the relationship between directors’ and officers’ liability insurance (D&O insurance) and stock price crash risk in a major Asian emerging stock market.
Design/methodology/approach
This paper finds an endogenous relationship between D&O insurance and stock price crash risk. Hence, the two-stage least squares regression analysis is used to address the endogeneity issue when the relationship is examined. Moreover, this paper further controls the quality of other corporate governance mechanisms to investigate whether D&O insurance still has an effect on stock price crash risk.
Findings
The effect of D&O insurance coverage is significantly negatively related to firm-specific stock price crash risk in Taiwan. More importantly, even when the quality of other corporate governance mechanisms is controlled, the negative relationship between D&O insurance coverage and firm-specific stock price crash risk remains significant. The evidence supports that D&O insurance serves as an effective external monitoring mechanism, strengthens corporate governance, and thus reduces stock price crash risk.
Originality/value
Emerging Asian markets suffer a dearth of research on the relationship of D&O insurance coverage and the firm-specific stock price crash risk. Investigating the relationship in Taiwan, the present study fills the research void. The findings show that D&O insurance plays an important role in reducing stock price crash risk of Taiwanese firms even when other corporate governance mechanisms are in place.
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The purpose of this paper is to test opposing views of the relationship between corporate social responsibility (CSR) and stock price crash risk in a major Asian emerging stock…
Abstract
Purpose
The purpose of this paper is to test opposing views of the relationship between corporate social responsibility (CSR) and stock price crash risk in a major Asian emerging stock market.
Design/methodology/approach
This paper suggests an endogenous relationship between CSR and stock price crash risk. Hence, this paper uses two-stage least squares regression analysis to address the bias and inconsistency associated with endogeneity issues. Moreover, previous studies argue that the level of effectiveness of corporate governance significantly affects firm-specific stock price crash risk. Thus, this paper further divides the overall sample into two sub-samples according to the median of the corporate governance index. Furthermore, this paper investigates the impact of CSR on stock price crash risk under corporate governance.
Findings
The empirical results show that CSR significantly mitigates Taiwanese stock price crash risk. This finding is consistent with the notion that socially responsible Taiwanese firms commit to a higher standard of transparency and engage in less bad news hoarding, thus reducing crash risk. The empirical results also show that CSR has a more pronounced effect in mitigating crash risk for Taiwanese firms with less effective corporate governance.
Originality/value
The study findings indicate that CSR plays a more important role in reducing crash risk for Taiwanese firms with weak governance mechanisms.
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The purpose of this paper is to examine empirically the financing hypothesis of Lang et al. for asset sales in the context of corporate real estate transactions.
Abstract
Purpose
The purpose of this paper is to examine empirically the financing hypothesis of Lang et al. for asset sales in the context of corporate real estate transactions.
Design/methodology/approach
Exploiting the concept that monitoring can reduce agency problem of managerial discretion, this paper employs the event‐study methodology and regression analysis to empirically verify the hypothesis.
Findings
The empirical results show that the stock market responds more favorably to arm's‐length corporate real estate sales by low agency‐cost firm‐years than those by high agency‐cost firm‐years. The result supports the financing hypothesis that implies a negative relation between stock market responses to asset sales and degrees of agency costs.
Research limitations/implications
Given the separation of ownership and control, management cannot be expected to make value‐enhancing decisions on corporate real estate sales without appropriate mechanism to align managerial and shareholder interests.
Originality/value
This paper not only adds to the literature on corporate sell‐offs, but also contributes to those on corporate real estate sales. Existing studies focusing on corporate real estate sales have not yet examined Langet al.'s hypothesis. This paper contributes to the literature by providing empirical evidence supporting the financing hypothesis in the context of corporate real estate transactions.
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Ming‐Te Lee, Bang‐Han Chiu, Ming‐Long Lee, Kevin C.H. Chiang and V. Carlos Slawson
US real estate investment trusts (REITs) typically distribute more dividends than required by tax regulations. This paper aims to focus on discretionary dividends, and examines…
Abstract
Purpose
US real estate investment trusts (REITs) typically distribute more dividends than required by tax regulations. This paper aims to focus on discretionary dividends, and examines the impact of information asymmetry on this excess component of dividends.
Design/methodology/approach
This paper considers a set of US REITs with reported taxable income figures over the 2000‐2007 period, and employs regression analysis to examine the influence of information asymmetry on the excess component of dividends. The explained variable is specified as excess dividends scaled by total assets. Excess dividends are dividends paid over the mandatory dividend payments calculated with taxable income, instead before‐tax net income. Following the REIT studies of Hardin and Hill and Han, this study employs Tobin Q as the proxy for asymmetric information.
Findings
Contrary to Hardin and Hill's conclusion, but consistent with dividend signaling theory as well as agency cost explanations, the results indicate that REITs with higher level of asymmetric information pay out significantly more excess dividends. Nevertheless, in contrast to Deshmukh's study on manufacturing firms, the REIT results are against the prediction of the pecking order theory.
Originality/value
The paper is one of the few studies that explicitly examine the factors influencing REIT decision on discretionary dividends. Contrast to previous studies, this study is able to obtain taxable income and compute the discretionary dividends more accurately. Furthermore this paper is able to provide evidence against the pecking order theory, which is not investigated in the existing REIT dividend studies.
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The Revenue Reconciliation Act of 1993, implemented since 1 January 1994, facilitates the increase of institutional investment in the real estate investment trust (REIT) market…
Abstract
The Revenue Reconciliation Act of 1993, implemented since 1 January 1994, facilitates the increase of institutional investment in the real estate investment trust (REIT) market. Utilizing this particular feature in the market, we examine the time‐series effect of institutional holdings to distinguish the tax‐loss‐selling hypothesis and the window‐dressing hypothesis for REITs. Consistent with the tax‐loss‐selling hypothesis, we have evidence that the January premiums decreased with the level of institutional involvement for REITs. Furthermore the January premiums declined significantly for equity REITs only that attracted more institutional investors than mortgage REITs. On the other hand, the January premiums did not decrease significantly for mortgage REITs. Overall the results suggest that trading strategies to profit the higher January returns may work only when institutional investors exit and leave the market.
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Muhammad Jawad Haider, Maqsood Ahmad and Qiang Wu
This study examines the impact of debt maturity structure on stock price crash risk (SPCR) in Asian economies and the moderating effect of firm age on this relationship.
Abstract
Purpose
This study examines the impact of debt maturity structure on stock price crash risk (SPCR) in Asian economies and the moderating effect of firm age on this relationship.
Design/methodology/approach
The study utilized annual data from 432 nonfinancial firms publicly listed in six Asian countries: China, Hong Kong, Japan, Singapore, Pakistan and India. The observation period covers 14 years, from 2007 to 2020. The sample was categorized into three groups: the entire sample and one group each for developing and developed Asian economies. A generalized least squares panel regression method was employed to test the research hypotheses.
Findings
The results suggest that long-term debt has a significant negative influence on SPCR in Asian economies, indicating that firms with high long-term debt experience lower future SPCR. Moreover, firm age negatively moderates this relationship, implying that older firms may experience a more pronounced reduction in SPCR due to high long-term debt. Finally, firms in developed Asian economies with high long-term debt are more effective in mitigating the risk of a significant drop in their stock prices than firms in developing Asian economies.
Originality/value
This study contributes to the literature in several ways. To the best of the researcher’s knowledge, this is the first of such efforts to investigate the relationship between debt maturity structure and crash risk in Asia. Additionally, it reveals that long-term debt influences SPCR directly and indirectly in Asia through the moderating role of firm age. Lastly, it is likely one of the first studies by a research team in Asia to compare the nonfinancial markets of developed and developing Asian countries.
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Muhammad Jawad Haider, Maqsood Ahmad and Qiang Wu
This study examines the influence of investor protection on stock price crash risk (SPCR) in Asian economies.
Abstract
Purpose
This study examines the influence of investor protection on stock price crash risk (SPCR) in Asian economies.
Design/methodology/approach
This study used yearly data from 432 nonfinancial companies publicly listed firms in six countries (i.e., China, India, Pakistan, Hong Kong, Japan and Singapore) from 2007 to 2020 to investigate the relationship between investor protection and the risk of stock price crashes. The hypothesis was tested using a generalized least square panel regression.
Findings
The results suggest that investor protection significantly affects SPCR in Asian economies. Furthermore, the findings show that the stocks of firms whose investors received the best protection were less prone to crash in developed Asian economies. However, in developing Asian economies, the stocks of firms whose investors received the best protection were more prone to crashes.
Practical implications
It provides awareness and understanding of how the level of investor protection affects SPCR, which could be useful for decision-makers and professionals across a spectrum of financial and non-financial institutions, such as portfolio managers and traders in commercial banks, investment banks and mutual funds. This knowledge enables informed decision-making and the formulation of effective policies to manage stock market volatility.
Originality/value
This study appears to be the first of its kind to focus on the link between investor protection and SPCR within the specific context of developed and developing Asian economies.
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Chih Wen-Hai, Chien-Yun Yuan, Ming-Te Liu and Jiann-Fa Fang
All previous research seldom considered the proliferation process from the perspective of consumers or from a negative perspective to examine the desire for revenge and negative…
Abstract
Purpose
All previous research seldom considered the proliferation process from the perspective of consumers or from a negative perspective to examine the desire for revenge and negative word of mouth (WOM) caused by deficiencies in innovative products. The purpose of this paper is to investigate consumers’ subsequent behaviors after they have outward and inward negative emotions such as anger and regret. The objective of this study is to explore the different effects of customers’ anger and regret on desire for revenge and negative WOM.
Design/methodology/approach
This research uses structural equation modeling to analyze 226 samples.
Findings
The results showed that regret has significant and positive effects on desire for revenge and negative WOM but anger has only a significant and positive effect on desire for revenge. Moreover, desire for revenge has a significant and positive effect on negative WOM. In addition, the desire for revenge plays a crucial mediator between anger and negative WOM as well as regret and negative WOM.
Practical implications
Corporations can use tangled emotions among consumers to predict the development of the desire for revenge and immediately implement remedies for deficiencies to prevent consumers from developing the desire for revenge and spreading negative WOM regarding the corporation or product, or engaging in other revenge behaviors. Corporations can easily detect and prevent the path between anger and revenge behaviors simply based on the desire for revenge. In contrast to the outward negative behavior that is anger, regret is implicit and internal.
Originality/value
This study explored two negative emotions of affect (anger and regret) based on affection and conation/action of the tricomponent attitude model and their different effects on consumers’ revenge behaviors such as desire for revenge and negative WOM. The contributions of this research are to clarify the different relationships between outward negative emotion (anger) and desire for revenge/negative WOM as well as inward negative emotion (regret) and desire for revenge/negative WOM.