Corporate Finance
  • NZFC - Corporate Governance in Mutual Funds: The Impact of Holdings Disclosure

    Source: Russell Gregory-Allen, Hatice Ozer-Balli
    Date Submitted: 19 Mar 2018
    Views: 6
    Downloads: 0
    Portfolio holdings disclosure has been a controversial issue for many years; SEC disclosure requirements in the US were relaxed from quarterly to semi-annual in 1985, then in 2004 returned to a quarterly mandate. Even today, some countries do not require holdings to be disclosed, and some are considering changing their laws to make it compulsory; New Zealand has made this change for KiwiSaver funds, and Australia is considering it. Further, in the US, there are current discussions about whether hedge funds should come under increased scrutiny, and be subject to more disclosure. In the last few years there have been several papers examining various aspects of the impact of disclosure – front-running, copycat trading, and reporting lag, in addition to the simple return performance differential. Most of these studies have either examined the before and after 2004 SEC rule change, or compare SEC disclosure vs. another disclosure mechanism. Our study examines the impact on fund return of disclosure in two ways. First, there are two markets where disclosure is not required but some funds choose to disclose – Australia and New Zealand. Second, in New Zealand in 2013 KiwiSaver funds became required to disclose top holding. The first affords us a natural experiment to compare funds that disclose with those that do not, and the second allows us to compare the same funds before and after the disclosure requirement. Based on some preliminary examinations and an earlier version of this paper, we expect to find, contrary to arguments against disclosure, that returns are not harmed by disclosure.
  • The cash flow sensitivity of cash dividends in different dividend taxation systems

    Source: Ratheshan Manickaratnam
    Date Submitted: 08 Dec 2017
    Views: 52
    Downloads: 2
    This paper investigates the cash flow sensitivity of cash dividends in different cash dividend taxation systems.  Using a cross-country study, we find that a firm's dividend policy in a single dividend taxation system (relative to a double dividend taxation system) is more sensitive to cash flow as measured by the propensity to initiate a cash dividend, propensity to pay a cash dividend, and in the size of the cash dividend. The cash flow sensitivity of cash  dividends is asymmetric -- firms in single taxation systems more aggressively adjust dividend policy when confronted with negative rather than positive cash flows.  Our findings are qualitatively identical before and after the 2003 dividend tax cut in the United States.
  • Do Corporate Managers Manipulate Disclosure through Changing 10-K File Size?

    Source: Quan Gan, Buhui Qiu
    Date Submitted: 05 Dec 2017
    Views: 84
    Downloads: 0
    File size is a simple measure of disclosure document readability. This study shows that 10-K file size change has negative and robust cross-sectional stock return predictability. A hedge portfolio based on 10-K file size change generates an abnormal return spread of more than 3% per annum. 10-K file size change also has negative predictability on future cash flow news and the return predictability of 10-K file size change reflects mainly its information content on future cash flow news. Consistent with disclosure manipulation, the return predictability of 10-K file size change is found to be stronger for firms with positive file size changes, high information asymmetry, or low recent investor attention, and it derives from the discretionary component of file size change that reflects mainly managerial disclosure discretion. Overall, the findings strongly suggest that corporate managers engage in disclosure manipulation through changing 10-K file size.
  • Too little, too late? Role of credit rating agencies in the Amtek AUTO default

    Source: Shagun Thukral
    Date Submitted: 29 Nov 2017
    Views: 84
    Downloads: 0
    In late August 2015, the sudden downgrade and eventual default of Amtek AUTO Ltd (Amtek) on its debentures upset mutual fund investors and regulators. Questions were raised about the credit rating agencies and their lack of timely action as well as about the independent credit analysis followed by fund houses to protect the interests of investors. One such investor, Suresh Nair, decided to gather all possible available information on Amtek to determine whether it was sheer negligence on the part of all parties involved or if Amtek was in fact in a situation of sudden distress. The case seeks to highlight the credit analysis process, while looking out for red flags to identify potential default or financial stress in a company.
  • Effects of Chinese Imports on U.S. Firm Innovation: Evidence from the US-China Permanent Normal Trade Relation

    Source: Yuxi Wang, Huasheng Gao
    Date Submitted: 28 Nov 2017
    Views: 71
    Downloads: 3
    We examine the effect of United States’ conferral of Permanent Normal Trade Relations (PNTR) on China—a policy that eliminates the uncertainty of future tariff increases associated with Chinese goods— on U.S. firm innovation. We find a significant increase in the number of patents and patent citations for U.S. firms that are affected by PNTR relative to firms that are not affected. This result is stronger for industries that experience a greater increase in Chinese goods following PNTR. Overall, our evidence suggests that Chinese imports induce U.S firms to invest more in innovative technology. 
  • Explaining Downward-rigid CEO Compensation: An Information Asymmetry Perspective

    Source: Yiqing Lu
    Date Submitted: 28 Nov 2017
    Views: 14
    Downloads: 0
    CEO compensation rarely gets cut, and almost every component of it increased in early 2000. I consider a two-period contracting problem in which a board privately knows its CEO's matching quality with the firm that changes over time. The board faces a trade-off: Revealing good information makes the CEO work harder, but it is costly. To save the information revelation cost, the board commits to a back-loaded compensation plan that features only upward adjustments in fixed and performance-based pay. This paper also considers extensions in which CEOs have transferable skills and sheds light on bonus caps and compensation disclosure policies.
  • CROWDFUNDING MALAYSIA'S SHARING ECONOMY - Alternative Financing for Micro, Small and Medium Enterprises

    Source: Dr Raymond Madden, Chief Executive Officer, Asian Institute of Finance, Kee Gek Choo, General Manager, Strategy, Policy Development and Research, Asian Institute of Finance
    Date Submitted: 27 Nov 2017
    Views: 3408
    Downloads: 79

    Although a relatively new phenomenon in Malaysia, crowdfunding has been greeted by the government and market alike as a part of disruptive financial technologies (FinTech) that add impetus to Malaysia’s move towards a 21st century digital economy. With the government’s policy commitment, financial assistance, regulatory supervision and other supportive measures, crowdfunding is expected to accelerate in the near future as a critical source of alternative financing for SMEs to create new employment, enhance social participation and help Malaysia adjust to the fast-shifting dynamics of the global economic and social landscape. In spite of its promising prospects, there are gaps in awareness of what crowdfunding is and the opportunities and risks it presents. There is a shortage of actionable information on: • the role of crowdfunding in the policy, business and financing environment for SMEs; • the level of understanding of crowdfunding among the public and small entrepreneurs; • their interest and willingness to participate in crowdfunded projects/activities; and • the effectiveness of the national ecosystem for crowdfunding. This report addresses these gaps to help realise the full potential of crowdfunding in Malaysia. It is based on a two-phase research study. The first consisted of a quantitative survey of the public and small entrepreneurs within the Klang Valley, and the second involved desk research and consultations with crowdfunding platform operators, national agencies/institutions, sophisticated investors and start-up entrepreneurs. The report describes a vibrant crowdfunding environment emerging in Malaysia following Bank Negara Malaysia’s policy support for alternative financing, and the Securities Commission Malaysia’s introduction of regulatory frameworks for equity crowdfunding (ECF) in 2015 and peer-to-peer crowdfunding (P2P) in 2016. Since crowdfunding continues to evolve rapidly around the world and is still at an early stage in the country, the insights offered by this report are an initial but comprehensive snapshot of the local crowdfunding environment and its future growth potential.
  • AFM - Incentive Fees: Do they bond underwriters and IPO issuers? 

    Source: Abdulkadir Mohamed
    Date Submitted: 27 Nov 2017
    Views: 71
    Downloads: 3
    We use a sample of 680 Hong Kong Initial public offering (IPO) firms  to examine the impact of incentive fees in mitigating conflicts of interest between the IPO firms and their underwriters. We find that the granting incentive fees to to the underwriters results in lower listing costs and high IPO proceeds. We also find IPOs that are large, not cash constrained at the time listing and those underwritten by reputable underwriters are more likely to offer incentive fees. Further tests show that incentive fees are granted when the market is volatile, but the average listing costs as a proportion of gross proceeds is 9.328% compared to 12.293% for IPOs that do not provide incentives to their underwriters. The listing costs decrease by 6.724% specifically for IPOs that offer incentive fees.   Overall, the evidence shows that large Hong Kong IPOs can minimise their listing costs and maximise their proceeds by offering incentive fees to their underwriters as part of their compensation package
  • Can SDGs Shape the Future of Corporate Disclosure?

    Source: Libby Bernick
    Date Submitted: 21 Nov 2017
    Views: 140
    Downloads: 0
    Businesses are showing increasing interest in using the Sustainable Development Goals (SDGs) to inform and enhance their social and environmental programs and ultimately their business strategies.
  • Predicting Credit Rating Changes Conditional on Economic Strength

    Source: Julia Sawici, Jun Zhou, Yonggan Zhao
    Date Submitted: 17 Nov 2017
    Views: 118
    Downloads: 0
    Predicting Credit Rating Changes Conditional on Economic Strength
    Julia Sawicki, Jun Zhou and Yonggan Zhao
    Extended Abstract 
    This paper addresses a fundamental credit analysis question: what is the probability that a firm's rating will be upgraded, downgraded or unchanged for a specific rating cohort and state of the economy? We develop a new structural model for predicting credit rating changes using both financial accounting variables and macroeconomic indicators. Economic strength (contraction / expansion) is predicted with a set of systematic factors in a Markov regime-switching model. Measures of firm-specific business and financial risk are used in a multinomial logistic regression model to estimate transition probabilities (upgrade, stay or downgrade) conditional on the predicted state of the economy. Tests of statistical differences in probabilities indicate that the likelihood of upgrade and downgrade are asymmetric across regimes; general probability of a downgrade during a recession is nearly twice the expansion downgrade probability; up-grade probabilities are relatively stable. 
    In addition to developing a sophisticated predictive model, our work sheds light on a major (and poorly-understood) concern related to broad economic ratings' determinants: the pro-cyclical nature of credit ratings. Ratings that are particularly harsh (lenient) in weak (strong) economic conditions can exacerbate tightening (loosening) of credit, contributing to volatility and uncertainty in financial markets. This potential destabilizing impact of ratings changes draws considerable attention of regulators and policy makers. Our estimates of upgrade and downgrade probabilities in expansions and recessions provide insight at the policy level and a valuable analytical tool for investors. 
    Our model is an important contribution to the literature. Research devoted to identifying the determinants of ratings has focussed primarily on entity-specific measures of operating performance and financial condition, such as profitability and leverage. While link between credit risk and macro-economic is clear (and empirical evidence points to the potential to improve ratings predictions by modelling systematic conditions), empirical work has proved wanting. The standard approach using linear regression analysis is not appropriate for predicting changes in credit ratings.[1] Our model captures macroeconomic states with regime-switching model that offers two important advantages: results are not specification dependent and the model is forward-looking in that ratings transitions are predicted contingent on a prediction about the state of the economy. Forward-looking investment decisions are based on future credit quality, including estimates of how likely a firm's rating will be upgraded or downgraded under various economic states. The ordered logistic regression analysis with the economic strength conducted in this paper provides this information. 
    Tests of statistical differences indicate that the transition probabilities in contractions are different from those in expansions. The nature of these differences largely depends upon whether the issue is investment or non-investment grade. In general, it is much easier for junk bonds to be upgraded than investment grade bonds, regardless of economic state. This is not the case with downgrades. Notwithstanding CCC and below, investment and non-investment grades share similar downgrade probabilities in expansion (ranging from 2 to 4 percent). The probability of being downgraded jumps for non-investment grade issues in contractions to a range of 5 to 11 percent. Comparing transition probabilities between states and within rating we find that investment grade issues tend to exhibit similar upgrade probabilities in both expansion and contraction, whereas downgrade probabilities are somewhat higher during contractions than during expansions. Regarding non-investment grade issues, it seems that the 'dogs' get a boost during expansions with a much higher probability of being upgraded. The differences become very pronounced as the rating falls (for, example CCC contraction upgrade probability of 3.8 percent triples to 14 percent in an expansion). The chance of a downgrade during contractions is much higher than in expansions, almost doubling in many cases. 
    While these tests provide strong evidence consistent with a procyclical nature of rating changes, an important question remains. Does the evidence point to harsher (more lenient) ratings criteria applied during weak (strong) economic conditions? Or is it indicative of permanent, rather than temporary, changes in firm-level creditworthiness? To develop some insight into this question, average changes in firm-level credit risk measures are calculated conditional on economic strength.  Preliminary analysis points towards evidence of distinct ratings criteria changes across regimes, consistent with procyclicality. This is an empirical question and the subject of further inquiry.
    By the very nature of the subjectivity involved in analyst-driven, forward-looking ratings, identifying the determinants of credit ratings will never be an exact science. However, our understanding credit ratings, in particular the factors that prompt rating changes, is vital to the well-functioning of capital markets. Our results provide insight into the stability of credit ratings. CRA publications and empirical evidence point to ratings that seek a balance between some continuum of stability (immunity from cycles) and accuracy (changing in response to changes in both firm and macroeconomic conditions). Can we be more precise in our understanding of where they might lie on a through-the-cycle and point-in-time continuum? In particular, to what extent does rating' determination reflect changes reflect the state of the maro-economy? This paper is a step towards answers to these questions which are of critical importance to financial markets, including investors, portfolio managers, corporations and regulators.  
    [1] Empirical modelling is particularly challenging because the parameters or functional forms are unstable, making it difficult to capture the complex nature of the interaction between the state of the economy and credit risk.  Figlewski et al (2013) demonstrate that results are extremely sensitive to model specification, choice of macro-variables, averages versus lagged versus contemporaneous, and time period. Estimating various specifications and they find
    that significance and macro-variable coefficient signs depend upon which variables are included in the model.
  • Family Controlled Firms in APAC: 10 Focus Areas for Investor Due Diligence

    Date Submitted: 07 Nov 2017
    Views: 1232
    Downloads: 79
    CFA Institute has recently released a 112-page report Corporate Governance far Asian Publicly Listed Family-Controlled Firms which identifies the strengths and challenges of the publicly listed family firm model in Asia. The full report is available at:

    The report is aimed at institutional and retail investors and outlines areas to focus due diligence when investing in family-controlled companies in Asia.

    In the attached guide we take highlights from the report to identify the top 10 issues that investor may encounter when investing in family firms and offer steps to mitigating those risks.
  • AFM -- Cultural diversity and capital structures of multinational firms 

    Source: Bart Frijns, Alireza Tourani-Rad, Fan John Zhang
    Date Submitted: 06 Nov 2017
    Views: 470
    Downloads: 6
    In this paper, we construct a measure of cultural diversity within the U.S. multinational firms. We then examine to what extent cultural diversity affects the capital structure of multinational firms. We find that the higher the cultural diversity, the lower the leverage ratio. The negative relation between cultural diversity and the leverage ratio holds after controlling for firm-level determinants, country-level factors, and macroeconomic risks. Further, we show that cultural diversity influences capital structures of multinationals mainly through equity issuance instead of debt reduction. Our findings suggest that cultural diversity plays a significant role in determining capital structure of firms in a multinational setting. 
  • AFM - How do Firms Finance Investments in Markets with Business Groups? Evidence from Acquisitions by India’s Listed Firms

    Source: Varun Jindal, Rama Seth
    Date Submitted: 28 Oct 2017
    Views: 293
    Downloads: 6
    We propose a new order of financing investments based on the considerations of control and financial constraints in markets with business groups. We base our analysis on a sample of 320 acquisitions, one of the largest forms of investments, made by India’s publicly listed firms from 1998 through 2016. We test the relative propensity of group-affiliated firms as well as that of standalone (non-affiliated) firms to finance their investments with stock on one extreme, and either cash or debt on the other extreme. We find that group-affiliated bidders have the highest propensity to finance their investments with stock when taking over firms affiliated with the same business group (within-group acquisitions), followed by standalone firms making acquisitions (standalone acquisitions). Finally, group-affiliated bidders acquiring either standalone firms or firms not affiliated with their group (outside-group acquisitions) have the lowest propensity to finance their investments with stock.

    [Paper Submission to 2017 Auckland Finance Meeting for Consideration for CFA Institute Asia-Pacific Capital Markets Research Award]
  • AFM - Financial Development, Macro Uncertainty and Saving-Cash Flow Sensitivity

    Source: Alexander Vadilyev
    Date Submitted: 26 Oct 2017
    Views: 78
    Downloads: 6
    This paper shows that (1) the sensitivity of corporate saving to cash flow does not systematically decrease with a country’s financial development, and (2) the sensitivity systematically increases with macro uncertainty. The first result occurs because income variability matters more for saving than external finance constraints and because income variability is strongly positively correlated with financial development. The second result occurs because macro uncertainty magnifies the effect of external finance constraints on corporate saving, raises the variability of income flows, and reduces the attractiveness of investment opportunities. Therefore, contrary to previous evidence, saving-cash flow sensitivity cannot be directly used to test for the benefits of financial (and institutional) development, but it can be used to assess the impact of uncertainty on firms’ demand for internal liquidity.
  • White Knights or Machiavellians? Understanding the motivation for reverse takeovers in Singapore and Thailand.

    Source: Pantisa Pavabutr
    Date Submitted: 16 Oct 2017
    Views: 653
    Downloads: 6
    We analyze the characteristics, return, and financial performance of 47 RTO sample firms in Singapore and Thailand between 2007-2015.  Given the existing regulatory screens imposed by Singapore and Thai exchanges, we cannot find evidence that firms choosing to list via RTOs signals a separating equilibrium of low type firms seeking a listing short-cut.  We argue that RTOs should not be evaluated as a choice of listing per se, but as part of the parcel of long-term corporate strategy.  Analysis in this paper yields important in sights on reverse takeovers from both investor and regulator perspectives.
  • FDU - Political Connections, Government Subsidies, and Capital Misallocation: Evidence from China

    Source: Zilong Zhang, Shuang Jin
    Date Submitted: 30 Sep 2017
    Views: 225
    Downloads: 5
    A research paper submitted to the Finance Down Under 2018 Building on the Best from the Cellars of Finance, for the consideration of the CFAM-ARX Award.
  • The importance of trust for inter-organizational relationships: A study of interbank market practices in a crisis

    Source: Alexander Rad
    Date Submitted: 28 Sep 2017
    Views: 414
    Downloads: 0
    The paper presents crisis contingent practices relevant for counterparty risk assessments in the interbank market.
  • Corporate Governance for Asian Publicly Listed Family-Controlled Firms - Full Report

    Source: Tony Tan, DBA, CFA, Fianna Jurdant
    Date Submitted: 26 Sep 2017
    Views: 5007
    Downloads: 95
    There is a gap in the literature concerning regulatory responses and approaches to corporate governance of controlled family firms. This report reviews the literature to develop an overview of the economic landscape of publicly listed family firms in Asia and to demonstrate the importance of these entities to the region and beyond. Another objective is to illustrate the challenges that confront policymakers in developing corporate governance policies relevant to publicly listed family firms. Discussion in the report indicates two significant hurdles for policymakers. First, there is a lack of consensus on a universal definition of a publicly listed family firm. Second, publicly listed family firms should not be perceived as a homogeneous group over which a “one size fits all” corporate governance blanket can be cast.

    The focus of the report then shifts to highlighting how an effective corporate governance system can improve performance and create value by reducing the cost of equity and reducing capital waste. The discussion examines how properties of publicly listed family firms can enhance shareholder wealth or lead to the expropriation of wealth from minority owners. The final objective of the study is to report key observations from a series of case studies spanning 14 Asian economies that cover a range of corporate governance issues central to publicly listed family firms. The case studies provide insight into current practices of Asian publicly listed family firms that may require the attention of policymakers. The issues raised in this report provide the initial building blocks for developing a more extensive road map to underpin a comprehensive analysis. Findings from this analysis can provide the foundation for evidence-based policy recommendations specific to family firms, which are a significant aspect of the Asian economic landscape and a key to the region’s current and future prosperity.
  • Why excessive aggregation “Other operating expense” in P&L?

    Source: Chie Mitsui,
    Date Submitted: 25 Sep 2017
    Views: 719
    Downloads: 52
    To explore the issue of why the line item such as "Other operating expense", presented in the P&L and notes to the financial statements, is frequently a large amount, in the context of the rest of the items in the P&L, that is not accompanied by additional detail or disaggregation. This issue results in investors having a diminished ability to understand the financial performance of those companies that do not disclose this detail. We would like to discuss the issue of why companies fail to disaggregate these line items, and think about how disclosures could be improved. In addition, 

    Source: Hays
    Date Submitted: 12 Sep 2017
    Views: 186
    Downloads: 17
    We spoke to 145 CFOs across Asia about their background, experience, business, career and interests to uncover the DNA of a CFO. From qualifications and experience to personal development and work-life balance, our report gives you an insight into what it takes to reach the top finance job.
  • HKSFA's Comment on HKEX Consultation Paper on Review of the GEM and Changes to the GEM and Main Board Listing Rules and New Board Concept Paper

    Source: The Hong Kong Society of Financial Analysts
    Date Submitted: 05 Sep 2017
    Views: 808
    Downloads: 17
    HKSFA's comment on HKEX's Consultation Paper on Review of the GEM and Changes to the GEM and Main Board Listing Rules and New Board Concept Paper
  • Mergers and acquisitions: how do you view their underlying substance?

    Source: Hong Kong Institute of Certified Public Accountants
    Date Submitted: 30 Aug 2017
    Views: 2570
    Downloads: 72
    Are you a shareholder or analyst with an interest in mergers and acquisitions? 
    The accounting standard-setters need your expertise. 

    We are aware that M&As are common and can take the form of group restructurings or third party acquisitions. There is usually no question that there is underlying substance to acquisitions with third parties - the transaction price typically represents the fair market value of the acquired business. But M&As within a group might arguably be different.

    The findings of this M&A survey will be published and will help us consider whether all M&As should be accounted and reported in the same way. 

    To participate, click on this link:, or download and email us the attached survey:
  • AAM-CAMRI-CFA Institute Prize - Cross-Border Acquisitions and Employee-Engagement    

    Source: Cara Vansteenkiste, Hao Liang, Luc Renneboog
    Date Submitted: 29 Aug 2017
    Views: 66
    Downloads: 0
    Paper Submission for AAM-CAMRI-CFA Institute Prize in Asset Management
  • Information content of unexpected dividends under a semi-mandatory dividend policy: An empirical study of China

    Source: Qizhi Tao, Ruixi Nan, Haoyu Li
    Date Submitted: 17 Aug 2017
    Views: 71
    Downloads: 1
    We examine the information content of unexpected dividend changes under China’s unique semi-mandatory dividend policy, which requires firms to pay a minimum amount of cash dividends
    before they can undertake seasoned equity offerings(SEO).The cumulative abnormal returns (CARs)are significantly positive in response to unexpected dividend increase for non-SEO firms, but they are not significantly different from zero for SEO firms. For non-SEO firms, there is a significant positive relation between future earnings and unexpected dividend increases, but the relation is not significant for SEO firms. However, when considering additional refinancing costs for SEO firms caused by the mandatory dividend policy,   higher dividend payments are associated with lower future earnings. Overall, our findings are consistent with both the dividend signaling theory and the negative effects of SEOs on a firm’s value.
  • Do firms have leverage targets? New evidence from mergers and acquisitions in China

    Source: Qizhi Tao, Wenjiia Sun, Yingjun Zhu, Ting Zhang
    Date Submitted: 17 Aug 2017
    Views: 1162
    Downloads: 13
    We provide new and consistent evidence supporting the trade-off theory using China’s mergers and acquisitions (M&A) deals between 2000 and 2015 as a sample. We show that acquirers do have leverage targets and they adjust their leverage ratios toward an optimal level at which the cost and benefit of the debt are equal. In examining the leverage adjustment speed during the post-acquisition period, we find that acquirers partially adjust their leverage ratios to the optimal levels; and the adjustment speed is affected by the adjustment cost proxied by the bankruptcy risk. Finally, we are able to successfully replicate the US evidence which is consistent with the trade-off theory as well using our improved methodology.
  • Political Connections and Government Subsidies: Evidence from Financially Distressed Firms in China

    Source: Qizhi Tao, Yicheng Sun, Yingjun Zhu, Xiaolin Yang
    Date Submitted: 16 Aug 2017
    Views: 85
    Downloads: 2
    Previous studies report mixed evidence regarding the effect of political connections on firmvalue.
    We seek new evidence in China, an important emerging market with a hallmark of a relationship-based economy. Using financially distressed firms (special treatment or ST firms) as a unique sample, we identify a direct channel through which political connections enhance firm value by showing that politically connected firms receive more government subsidies. Moreover, such effect becomes stronger for state-owned enterprises (SOEs), for firms with a better chance of survival, and after the government implemented a new policy to more strictly enforce the delisting in 2012.
  • Value at Risk and Expected Shortfall Estimation for China Securities Market

    Source: Yam-wing SIU
    Date Submitted: 07 Aug 2017
    Views: 299
    Downloads: 9
    Financial system stability matters for economic growth.  Instability generates adverse effects on the economy because of their spilled over effects as observed in the recent financial crisis.  Many US and European banks required governments capital injections to stay afloat.  In January 2016, Basel Committee on Banking and Supervision of Bank for International Settlements issued a new revised market risk framework – “Minimum capital requirements for market risk”.  One of the features of the revised framework is a shift to an expected shortfall measure of risk under stress.  In this paper, we performed both value-at-risk and expected shortfall estimations for US and China securities markets.  While we use S&P 500 index, SPX, for US market, we use the time series of iShares China Large-Cap ETF, FXI, as a proxy for the broad market indicator of China securities market.  It is because there is a corresponding volatility index, VXFXI, for this Large-Cap ETF.  In this study, efforts have been made to turn volatility index into a risk management tools in the context of value-at-risk and expected shortfall.  It is found that it would be inappropriate to simply scale up the 1-day volatility by multiplying the square root of time (or the number of days) ahead to determine the risk over a longer horizon of i days.  Instead, empirical constants that are used to multiply the levels of volatility indexes, VIX and VXFXI, for estimating value-at-risk and expected shortfall of various significance levels for 1 to 22 days ahead for SPX and FXI have been statistically determined using 16 years and 4.75 years of daily data respectively.  Results show that the shift to expected shortfall approach with significance level of 2.5% yields an unexpected impact on regulatory capital requirements from the value-at-risk approach with significance level of 1%.
  • RMBI Newsletter Issue 13 (Financial Crime Risk: Anti-Money Laundering and The Rise of Text Mining in Financial Markets)

    Source: Tsang Chiu Yu, Derek, Wong Ching Ip, Venice, Chiu Hok He, Angus, Li Chin Wa, Chin
    Date Submitted: 26 Jul 2017
    Views: 414
    Downloads: 0
    In the latest issue (Issue 13 – August 2017), it covers the stories of:
    Financial Crime Risk : Anti-Money Laundering Practices in Banking
    To understand anti-money laundering, we have to understand what money laundering is. Money Laundering is the process of converting illegal funds into seemingly legitimate assets with the purpose of concealing the ownership or original source of these funds. This makes it difficult for the authorities to trace the origins of the funds. To counter this, the banking sector has established a set of internal regulations and system known as anti-money laundering. These are legal controls taken by financial institutions to investigate suspicious transactions to help prevent money laundering activities within the banking sector.
    The Rise of Text Mining in Financial Markets
    The world is awash in data. Financial markets are awash in data. We are generating around 2.5 quintillion (2.5×1018) bytes of information every day, and there is an average of 4,000 brokerage reports a day comprising around 36,000 pages in 53 languages. As market participants try to maximize their competitive edge from the growing mountain of information, the nancial world increasingly feels there is a need to harness the power of big data and it has been shaping the way they acquire, analyze and utilize data. The recent development is the rapid expansion of text mining. Hence, this article will focus on the development of Text Mining technology as well as Text Mining technique.
  • 温氏投资逻辑

    Source: 杨杰
    Date Submitted: 25 Jul 2017
    Views: 229
    Downloads: 9


    当前10年期国债收益率3.6%附近,2倍于10年期收益率,要求投资收益率等于7.2%。也即E/P=7.2% P/E=13.89。按照13.89P/E17-21年末的期望价格为,16元,34元,50元,53.2 元,55.2 元。考虑到当前的价格为19.82,当前买入持有该标的,到17-21年,每年末期对应的理论收益为:-17%73%152%168%179%。考虑到一定的交易策略,未来2-3年的时间,投资温氏股份,可以实现200%的收益率。再考虑到温氏集团作为大公司,市场系统性风险Beta低,而高市值对应的流动性很强。因此,投资温氏集团在接下来2-3年可以获得,低风险下的200%收益。

  • Corporate Governance for Asian Publicly Listed Family-Controlled Firms - Executive Summary

    Source: Tony Tan, DBA, CFA, Fianna Jurdant
    Date Submitted: 18 Jul 2017
    Views: 3277
    Downloads: 0
    Good corporate governance is increasingly considered one of the prime drivers of business success. Through transparency, equitable treatment of all shareholders, and a robust system of sound practices and procedures, good corporate governance can enhance performance and growth, both in the individual firm and at the national level.

    A solid corporate governance framework is particularly important for family firms, which face unique challenges as they balance the advantages and disadvantages of family involvement in the business.

    Based on an analysis of 56 family-controlled listed companies in 14 jurisdictions,* the CFA Institute report, Corporate Governance for Asian Publicly Listed Family-Controlled Firms, identifies opportunities to enhance corporate governance structures for family firms in the region. The report reveals how effective corporate governance can help these companies—and the regions in which they operate—continue to achieve economic success.

    Over the last few decades, Asian family firms have played a pivotal role in fueling the region’s economic growth, and their influence will continue to rise. By 2025, the number of firms in Asia with revenue exceeding USD1 billion is expected to be nearly equivalent to that in developed economies globally. Family firms will represent 75% to 80% of those entities.
    However, the growth of Asian economies in recent decades has been largely propelled by low labor and production costs. As the performance of Asian economies begins to mirror that of developed economies, their future capacity for growth will not be sustainable if they are competing on cost alone. To remain competitive, Asian family firms must innovate, expand outside of traditional markets, and professionalize, which will necessitate the tapping of global talent and capital. This will put pressure on these firms to have a corporate governance structure in place that can meet international standards and investor expectations.

    Challenges of Internationalization
    Between 2000 and 2010, the total market capitalization of Asian family firms grew significantly. A major driving force behind this was an entrepreneurial desire among Asian family firms to use capital market funding to expand in new markets, with the number of listed family firms increasing 62%. As more family firms use capital markets to fund their internationalization plans, they will face the challenge of developing sound corporate governance frameworks that meet the needs of the heightened regulatory environment and the scrutiny that comes with being listed.

    Challenges of Professionalization
    Although Asian family firms prefer to pursue family-management succession plans, many recognize the need to capitalize on external talent to meet future business pressures. Efforts to professionalize a family firm, however, may be double-edged.

    On the one hand, professionalization might boost a firm’s effectiveness. On the other hand, professionalization might give rise to additional agency costs, such as the need to offer incentives to align the interests of professional management with those of family members. If a family firm is to realize the benefits of bringing in external talent, then that incoming management will need the freedom to do the job for which they were hired. Defining an optimal equilibrium between family culture and external professionalism is therefore imperative to facilitate future value creation without incurring greater expenses.

    Challenges of Dispersed Ownership
    The average percentage of family ownership of large-size family firms in Asia is substantially lower than that seen in their European and North American counterparts. This implies increased ownership diversity, which can result in two major issues. First, with a widely dispersed minority ownership structure, the entity is potentially exposed to greater majority/minority owner conflicts. Second, Asian family owners who wish to expand their businesses while still retaining control may rely more on creditors than on further equity dilution. This could potentially lead to greater shareholder/creditor conflicts. Family firms should develop corporate governance policies to address these concerns.

    Research is inconclusive on whether the family-firm construct enhances or diminishes corporate governance practices. In theory, the long-term horizon and closer alignment of principal-agency interest in family firms should improve corporate governance. However, those same features could prove problematic by increasing risk, whether as a result of a lack of transparency, entrenchment, or wealth expropriation from minority owners.

    A solid corporate governance framework is essential for family firms to effectively balance the advantages and disadvantages of family involvement in the business. Combining governance, management, and ownership in the hands of family can bring benefits, but this centralized decision-making structure inevitably brings risks. Sound corporate governance practices can help family firms include different perspectives on their boards, which can mitigate risks. Moreover, such practices can help family firms balance the interest of different stakeholders, a task essential to the long-term sustainability of these entities. As well, sound corporate governance practices can help family firms reduce their cost of capital and reduce capital waste, making them more attractive investment targets and more competitive entities.

    The complex challenges facing publicly listed family firms in Asia are influencing the underlying corporate governance frameworks of those firms. Through a holistic understanding of corporate governance features supporting firm performance and value across the region, these firms will be better able to address the difficulties they face and to thrive in the future. The development of policy recommendations that assist in enhancing the corporate governance practices of Asian publicly listed family firms will also increase protection for minority owners from wealth expropriation by the majority, controlling family owners.

    Learn more about how corporate governance can impact family firm value and success at
  • Earnings Management and Dividend Policy: Empirical Evidence from Major Sectors of Pakistan  

    Source: Farhan Ahmed, Neha Advani, Muhammad Kashif
    Date Submitted: 17 Jul 2017
    Views: 1051
    Downloads: 19
    This paper means to inspect the regression between Price earning (P/E) ratio as a proxy of earning management and payout proportion that is dividend policy. This paper utilises multivariate analysis to examine the relationship between price-earnings ratio and dividend policy. Using 10 years annual data from 2006-2016, this paper delivers new confirmation demonstrating that when the return on equity is more prominent than the required rate of return, the P/E ratio and dividend payout ratio shows a negative relationship and positive convexity or vice versa.
  • The Economic Reality of Non-Cash Charges

    Source: Gaurang S. Trivedi
    Date Submitted: 13 Jul 2017
    Views: 198
    Downloads: 16
    Statutory statements prepared for reporting purposes are a combination of accounting rules formulated to characterize the accrual process, management estimates based on past experience applied to projected events, and managerial judgment that is subject to cost-benefit rationale. The net earnings per share number, which in the ultimate analysis increases shareholders’ equity, is mostly neglected in management discussions and analysis. A majority of the managerial analysis is concentrated on alternative numbers arrived at by massaging the earnings information. The ensuing treatise is an endeavor to reconnect the economic implications of the accounting for depreciation, goodwill amortization/impairment charges (universally assumed to be non-cash charges), as well as other one-time charges, that are being neglected by most investors when analyzing manipulated pro-forma earnings reports from corporate managements. Since earnings comprise an integral part of expected returns, a sound knowledge of accounting theory and concepts is essential for conducting insightful financial analysis. The purpose of this research is to generate a healthy debate amongst accounting, finance, and other professionals who are consumers of company information to evaluate the efficacy of reported financial statements, management discussion and analysis that accompanies them, and current valuation methodologies practiced. Contrary to popular notions, if cognitive biases are removed, one may find that accounting earnings do mirror economic reality.
  • Title: A Resolution to the Problem of Multiple IRR: A Modified Capital Amortization Schedule (MCAS) Method for Non-Normal Cash flow (NNCF) to Obtain a Unique IRR (July 11, 2017).

    Source: Kannapiran C. Arjunan
    Date Submitted: 12 Jul 2017
    Views: 54
    Downloads: 0

    Title: A Resolution to the Problem of Multiple IRR: A Modified Capital Amortization Schedule (MCAS) Method for Non-Normal Cash flow (NNCF) to Obtain a Unique IRR 


    The problem of multiple IRR remained unresolved for almost a century. This problem is associated only with some of the non-normal net cash flow (NNCF) that wrongly includes reinvestment income as income or benefit stream. The reinvestment income, which is not a benefit from the investment or project under analysis, causes the multiple IRR problem. This is often misinterpreted as problem of IRR but its neither a problem with IRR nor NPV. It is a problem associated with some NNCF data and the failure to update the discounted cash flow (DCF) or capital amortization schedule (CAS) methods to handle such problem.
    Using NNCF data, analyses are conducted with special emphasis on topics such as:

    a.      A modified CAS (MCAS) method that eliminates multiple IRR associated with NNCF data;
    b.      Multiple IRR problem and the Descartes rule of sign and Norstrom’s criteria;
    c.      A NNCF data with a unique IRR under DCF / CAS methods vs IRR by MCAS method;
    d.      Resolving the problem of multiple IRR by MCAS Method Versus MIRR; and
    e.      A critical review of the GIRR and AIRR Methods to Estimate NNCF.
    The salient findings of the present analysis are:
    a.      The MCAS method, presented in this paper, identifies and eliminates the reinvestment income associated with NNCF investments (with positive opening balance in one or more years in the CAS) from the benefit stream;
    b.      This new method overcomes the multiple IRR problem and leads to a unique and real IRR; The effectiveness of MCAS to handle the NNCF data is illustrated with numerical analysis;
    c.      The assumption of reinvestment at IRR or at hurdle rate in NPV are false assertions in the cases of normal NCF and some of the NNCFs. However, such reinvestment is evident only with NNCFs with positive opening balance in one or more years under the CAS.
    d.      The reinvestment income under the benefit stream causes multiple IRRs and multiple NPVs too. As NPV is a static point estimate (at hurdle rate) the multiple NPVs are not exposed. Without eliminating the reinvestment income, none of the criterions viz. NPV, IRR or MIRR, is useful as a decision criterion. Neither NPV or MIRR is a preferred criterion, under such circumstances, as recommended in some published works.
    e.      The MCAS method is appropriate for both normal NCF and NNCF as illustrated in this paper. CAS or DCF method is appropriate only for normal NCF investments.
    f.       Even when there is no multiple IRRs with some NNCFs under DCF/CAS method, the MCAS method estimated IRR or NPV, without reinvestment income, are different from that of the DCF/CAS estimated IRR and NPV. For a consistent estimate of IRR and NPV, the MCAS method is most appropriate both for NCF and NNCF investments.
    g.      The generalized IRR (GIRR) and the Average IRR (AIRR) are also not appropriate estimates for NNCF and they are not NCF consistent as discussed in this paper. The problem of multiple IRR associated with the popular cases of NCF investments used in GIRR and AIRR, are also resolved now.
    In conclusion, the MCAS method resolves the problem of multiple IRR and leads to a unique IRR that is real and NCF-consistent. Neither the NPV nor the MIRR could resolve the problem of multiple IRR.

  • Interest in ESG Investing Poised to Grow Further in Asia Pacific

    Source: Chan Fook Leong, CFA
    Date Submitted: 10 Jul 2017
    Views: 2111
    Downloads: 0
    • CFA Institute further extends ARX ESG Investing Series to Singapore to discuss motivations for ESG integration in the region.
    • Panelists from S&P Dow Jones Indices, City Developments Ltd., ADL Infra Capital Myanmar, and ESGuru spoke to a full house of CFA Institute members and local practitioners on developments in green finance.
    • Participants concluded that despite challenges, green finance would continue to attract investor interest; supply of green instruments needs to catch-up.
    • Social and governance considerations still in their infancy in the region.
    • The question of alpha potential inconclusive.
    Dr. Tony Tan, CFA, head, global society advocacy engagement at CFA Institute kicked off the May 11, 2017 lunch-time talk entitled ‘Is green finance a fad? Or does it possess alpha potential?’ The event, organized by CFA Institute and CFA Society Singapore follows the first of the ARX ESG Investing Series, hosted in Hong Kong. This series has been developed in response to demand for ESG-related research on research platform, Asia-Pacific Research Exchange (
  • Operating? /non-Operating? Is current disclosure helpful for understanding companies?

    Source: Chie Mitsui
    Date Submitted: 26 Jun 2017
    Views: 257
    Downloads: 17
    Is current disclosure of Operating profit /expense helpful for understanding companies?
    We discussed how difficult to distinguish whether Operating / Non operating in financial statements recently with investors, information providers, accounting setters in Hong Kong. 
    It makes lower comparability and becomes barrier of understanding company value.
    We discussed several points of view to solve it and revealed that disclosure issues of IFRS are highly common among investors globally.
  • Evaluation of company’s value in acquisition & ideal disclosure

    Source: Chie Mitsui
    Date Submitted: 23 Jun 2017
    Views: 2540
    Downloads: 71
    "How investors analyse and what managements need to explain, when M&A happened?" We discussed this issues in Japan, with some accounting standard setters.  
    We have been discussing about comparability issue and line item classification issue from users’ point of view in the past workshops. At the last workshop ( , we discussed on whether “share of profit/loss of associates” is “operating” or “investing” may differ by company or its business, focusing on the point that “What is really comparable? Does same account name mean same substance? Which is same in substance?”.

    The way of business for companies are changing nowadays, that we should focus on the point that more M&A is happening in place of building factory and hiring people in old times. So we focused on the point how investors should evaluate companies’ value in acquisition and what companies need to explain in our discussion.
  • Presentation deck of ARX seminar - Stock Market Efficiency, Participants and Investment Delegation

    Source: Yeguang Chi
    Date Submitted: 09 Jun 2017
    Views: 2216
    Downloads: 19
    Presentation deck of CFA China Shanghai seminar - Stock Market Efficiency, Participants and Investment Delegation

    In December 2016 CFA Institute supported the 29th Australasian Finance and Banking Conference by sponsoring two research awards in Banking / Finance / Investment Management in Asia-Pacific markets and the winner of the first prize goes to Yeguang Chi, associate professor of Shanghai Jiaotong University SAIF.

    In addition to uploading Professor Chi’s winning paper “Private Information in the Chinese Stock Market: Evidence from Mutual Funds and Corporate Insiders onto ARX, to bridge the gap between academics and practitioners we have created a Practitioner’s Brief, a short practitioner-focused digest of the research paper and an accompanying video edition of that digest.  The brief and video were well received and CFA China Shanghai decided to bring it to life by hosting the first o2o seminar on June 6.

    During the event Professor Chi first illustrated the conditions of China’s stock market in terms of trading volume of retail investors and performance of mutual funds. Then he presented his research findings on how and why mutual funds and institutional investors in China outperform the market, highlighted the disadvantages retail investors possess in a considerably inefficient market and encouraged retail investors in China to consider delegate the investment decision to fund managers, trade less or to go for passive investments. Meanwhile he also urged for more disclosures on private meetings and stronger enforcement against insider trades to enhance market efficiency.

    Professor Chi's presentation deck can be downloaded in the attached.
  • 洪灝:新监管下的风险重新定价

    Source: Hao Hong, CFA
    Date Submitted: 01 Jun 2017
    Views: 213
    Downloads: 4
    This research appears on WenXin's blog "洪灝的中国市场策略" on 24 May 2017.
  • Re-pricing Risks under New Regulations

    Source: Hao Hong, CFA
    Date Submitted: 01 Jun 2017
    Views: 169
    Downloads: 9
    This research appears on WenXin's blog "Hong Hao China Strategy" on 24 May 2017.
  • Valuation Insights - India Edition, May 2017

    Source: Varun Gupta
    Date Submitted: 09 May 2017
    Views: 2061
    Downloads: 0

    Valuation Insights is a quarterly e-newsletter that provides you with the latest news from Duff & Phelps and the trends and changes in valuation and accounting that could affect your business transactions in Asia.

    In this edition, our top stories cover the Financial Accounting Standards Board issuing an Accounting Standards Update, robust fair value measurement, the International Valuation Standards Council releasing the 2017 edition of its International Valuation Standards, and a recent Duff & Phelps study about fairness opinions.

    We will also look at important Duff & Phelps reports and articles, including a recorded forum presentation by Professor Damodaran and the Duff & Phelps Global Regulatory Outlook 2017.

  • Stock Market Market Crash of 2008: an empirical study of the deviation of share prices from company fundamentals

    Source: Taisei Kaizoji, MIchiko Miyano,
    Date Submitted: 06 May 2017
    Views: 254
    Downloads: 31
    The aim of this study is to investigate quantitatively whether share prices deviated from company fundamentals in the stock market crash of 2008. For this purpose, we use a large database containing the balance sheets and share prices of 7,796 worldwide companies for the period 2004 through 2013. We develop a panel regression model using three financial indicators–dividends per share, cash flow per share, and book value per share–as explanatory variables for share price. We then estimate individual company fundamentals for each year by removing the time fixed effects from the two-way fixed effects model, which we identified as the best of the panel regression models. One merit of our model is that we are able to extract unobservable factors of company fundamentals by using the individual fixed effects. Based on these results, we analyze the market anomaly quantitatively using the 
    divergence rate–the rate of the deviation of share price from a company’s fundamentals. We find that share prices on average were overvalued in the period from 2005 to 2007, and were undervalued significantly in 2008, when the global financial crisis occurred. Share prices were equivalent to the fundamentals on average in the subsequent period. Our empirical results clearly demonstrate that the worldwide stock market fluctuated excessively in the time period before and just after the global financial crisis of 2008. 
  • HUT - Real Estate Segment Drags Down 2017 Growth

    Source: Son Nguyen, Thien Viet Securities JSC
    Date Submitted: 28 Apr 2017
    Views: 217
    Downloads: 9
    We attended HUT’s Conference Day with following highlights: 
  • Analyst Report - Best World International Ltd

    Source: Charles Phan Zhong Wei, Jeremy Liang Jinrong, Ai Xin
    Date Submitted: 27 Mar 2017
    Views: 298
    Downloads: 36
    Sell-side research report on Best World International Ltd. Initiate a Buy Call with upside of 47.7%. Includes: - detailed report of analysis - slide deck to pitch the stock recommendation - financial model with detailed accounting adjustments, performance analysis, forecasts and valuations
  • Mergers & Acquisitions: The Good, the Bad, and the Ugly (and how to tell them apart)

    Source: Richard Tortoriello, Temi Oyeniyi, CFA, David Pope, CFA, Paul Fruin, CFA, Ruben Falk
    Date Submitted: 25 Mar 2017
    Views: 237
    Downloads: 23
    This is a Quantamental Research published by S&P Global Market Intelligence in August 2016.
  • APEI LBO Case Competition 2017 - LBO of AmorePacific Corporation

    Source: Charles Phan Zhong Wei, Chua Kian Chong, Chan Jun Hao, Sylvester Yeo Kai Ren
    Date Submitted: 20 Mar 2017
    Views: 543
    Downloads: 64
    Advisory for the AmorePacific Group's leveraged buyout of AmorePacific Corporation (target). The following key points are addressed: - Executive summary - Recent financial / operating performance of AmorePacific Group - Industry overview - Strategic alternatives to an LBO - Recommendations to restruture the combined firm - Deal structure and financing - Valuation summary - Returns Analysis - Risk(s) related to the deal
  • PLAYING WITH A STRAIGHT BAT - A Concise Report on brand values in the Indian Premier League

    Source: Varun Gupta
    Date Submitted: 16 Mar 2017
    Views: 682
    Downloads: 22
    Duff & Phelps has published the third edition of our annual* study of Brand Values in the Indian Premier League (IPL). The report ranks the franchise brand values for six teams in the IPL based upon a relief from royalty analysis coupled with an assessment of six other factors; including management strength and on-field performance, marketing strategy, celebrity influence and marquee players, geographical location, governance and transparency and social media engagement. Key findings include: Total value of the IPL has grown by 19% over the last five quarters to reach US$ 4.2 billion. Mumbai Indians had the highest brand value in the IPL Royal Challengers Bangalore were the biggest gainers with brand value increasing by 31%, while Kings XI Punjab were the biggest losers.
  • CSR Practice and Sustainable Business Performance: Evidence from the Global Financial Centre of China

    Source: Tai Min Wut, Artie Ng
    Date Submitted: 17 Feb 2017
    Views: 517
    Downloads: 6
    The Hong Kong Special Administrative Region of China (Hong Kong) has long been positioned not only as an international capital market but also as the global financial centre for China. To position themselves for overseas expansions, major enterprises in China are now listed with the Stock Exchange of Hong Kong and adopt internationally accepted corporate practices. In particular, there have been emphases by multinationals on Corporate Social Responsibility (CSR) practices for the potential benefits of enhanced business performance as demonstrated in prior studies. The aim of this paper is to explore the relationship between business performance and CSR practices among listed companies in Hong Kong. We have investigated and made comparisons between two groups of listed companies in Hong Kong -- those included in the Hang Seng Corporate Sustainability index and the other major ones in Hong Kong not included in the Index. It is found that there is a significant difference between the two groups in the sample. A direct association between adoption of CSR practice and sustainable business performance in financial aspects is observed over an extended period of time. However, we argue that there is not yet sufficient disclosure in relation to the quality of their overall CSR and sustainability performance.
  • Disclosure Level and Cost of Equity Capital of IPO Firms: Evidence from Singapore

    Source: Ming Jian, Ming Xu
    Date Submitted: 17 Feb 2017
    Views: 239
    Downloads: 5
    This paper examines the tendency of initial issuers to exhibit lower levels of disclosure in their prospectuses ensuing relaxed disclosure requirements by the exchange. It focuses on disclosure pertaining to issuers’ corporate governance structures with the element of disclosure branched into quality and quantity which we find to be highly correlated. Despite general postulation that disclosure quality and quantity will decline after relaxation, the results suggest otherwise. The departure is however largely attributed to companies’ responses to investors’ demand for enhanced disclosure following high-profile corporate failures. Furthermore, it also investigates the association between cost-of-equity capital and the quality and quantity of disclosure. The findings are consistent with economic theory which advocates a negative relationship between them, suggesting that disclosure levels have a part to play in asset-pricing models.

    Source: Omar Berbiche
    Date Submitted: 09 Feb 2017
    Views: 422
    Downloads: 12
    AMC Theatres, a huge but in trouble American cinema operator, was about to be the next victim of an LBO with negative net results for few years. Therefore, the Hollywood tycoons and industry were very surprised when Dalian Wanda Group announced the acquisition of AMC Theatres for US$2.7 billion in 2012. Private equity funds, owners of AMC Theatres had left the theatre chain to deteriorate day after day compared to its competitors so that the bulbs of the projectors were not changed, projecting poor quality films. AMC is an old cinema chain, in a sector where competition is fierce and with no growth market. One might even wonder if Wanda can make money after the acquisition, or simply enjoy a company in difficulty, help them getting their head above water and make another disastrous Chinese investment. Nevertheless, 15 months later, Wang Jianlin, owner and chairman of Dalian Wanda Group and the second richest man in China at that time, saw the value of its shares in AMC Entertainment more than doubled, making a gain of US$800 million. This essay aims to analyze and evaluate in detail how to value a cross-border acquisition from a Chinese perspective in the entertainment industry, analyse how China ownership impacted America's AMC performance and how Dalian Wanda got strategic gains like film distribution, chain management and production standards bringing new content or technology back to China. This analysis includes industry conditions and market conditions since the two companies went public, assess the rational of the transaction in the operating performance and how the two markets and business model differ from each other. Meanwhile, this essay elaborates in detail how, through this acquisition, Wanda has turned into the biggest cinema operator in the world, and has gained a global key position, spreading Chinese soft power abroad.
  • Chinese Investment in the Carbon Risky Canadian Oil and Gas Industry

    Source: Jonathan Hammond
    Date Submitted: 09 Feb 2017
    Views: 1484
    Downloads: 10
    Chinese investor Tri-Win International Investment Group Inc. (Tri-Win) acquired Calgary, Canada based oil and gas producer Hyperion Exploration Corporation (Hyperion) on January 9th 2015 for CAD$31.9 million taking the previously listed Toronto Venture Exchange traded company private. In the developing climate sensitive landscape of Canada, increasing importance is being placed on combatting climate change and putting a price on carbon dioxide emissions. Due to the carbon intensive production of unconventional Canadian oil and gas products, current and future Chinese investors within this industry must adequately quantify their financial exposure to carbon risk in their valuation models. This thesis seeks to critically analyze whether Chinese investor Tri-Win used a methodology for quantifying and valuing carbon risk with the acquisition of Canadian oil and gas producer Hyperion and if it was sufficient or not. The implications from this thesis for Chinese investors stem from a unique methodology for quantifying carbon risk in oil and gas investments within the country of Canada. Through this analysis, it will be shown that Tri-Win did not accurately quantify their exposure to carbon risk leading to significant future carbon risk exposure. This lack of accurate valuing of carbon risk exposed them to substantial impending financial liabilities with regards to an encumbering stricter landscape for carbon emitters.

    Source: Zhu Qiqi
    Date Submitted: 09 Feb 2017
    Views: 324
    Downloads: 8
    Horizontal M&A between market dominant players can bring in tremendous synergy but faces tight constraints and conditions. This paper aims to detect the keys to success of Ctrip acquiring Qunar and offer lesson to other horizontal M&As. The key success factors can be divided into four parts: For negotiation counterparty, this paper analyzes conflicts on M&A decision. Given the shareholder structure of Qunar, Baidu is actually the decision marker. That’s why Ctrip successfully reached M&A agreement with Baidu without approval from management of Qunar. Shareholder structure and board seat are two keys for acquirer to find proper target and right counterparty to negotiate with. For choice of payment, from answering why Ctrip acquired Qunar through share-exchange with Baidu, this paper illustrates the significant role of stock-for-stock payment and consideration in a real case. For determination of stock exchange ratio, this paper utilizes market approach and equity value approach to decide valuation range for Ctrip and Qunar, which provides valuation example for such horizontal stock-for-stock merge. For transaction structure design and regulation, such horizontal M&A may result in higher concentration ratio of an industry and will face regulation of anti-trust law. This paper studies anti-trust law in China and find out why Ctrip only acquires less than 50% of Qunar to offer a lesson for other deals.

    Source: Zhang Fan
    Date Submitted: 09 Feb 2017
    Views: 291
    Downloads: 5
    With the introduction of Growth Enterprises Market Board in China, we are posed with great challenges to understand M&A from light assets industries, with high market to book value. A representative sub industry is game industry. This thesis used the format of case study and took Ourpalm Co., Ltd’s serial acquisitions as an example. This thesis discussed about motivations for conducting serial acquisitions, valuation method and characteristics of game companies, rationality of target companies’ valuation, level of synergy, and deal term feature in game industry M&A. It was found that one of the targets, Hainan Dovo was fairly priced, but market zeal for acquiring game companies played a significant role. Post-acquisition analysis showed that sharing of channel resources was the most important synergy in game industry M&A. This thesis displays insight of game industry M&A in A-share market, and provides reference for acquirers and investors in future game M&A deals. Since the acquiring company was the only listed game company in mainland China back to 2013, it offered us a unique opportunity to examine the synergy among them, and compare the serial acquisitions horizontally. In addition, many conclusions are also applicable for other light assets companies. Since China’s economy is now undergoing an extensive transformation from heavy assets driven to light assets driven, our understanding of light assets companies’ M&A becomes more important.

    Source: Yu Zhonghai
    Date Submitted: 09 Feb 2017
    Views: 216
    Downloads: 8
    This paper discusses theories about debt restructuring with an extensive case study of the debt restructurings of Kaisa, a Hong Kong listed real estate developer in China. This paper serves to help understand disadvantages of foreign debt holders in restructurings, as well as key considerations of debt holders in debt restructurings, especially with family firms as the borrowers. The case study starts from the two restructuring plans of Kaisa as well as the reaction of the market and offers real world evidence for theories above. This paper achieves the following main results. Firstly, foreign debt holders suffer from information asymmetry and under-collateralization issue which are caused by geographic disadvantage and capital regulation policies in China. Secondly, major considerations of the debt holders include economic return, security of restructured debts, as well as lower bargaining cost and feasibility which help to close the restructuring faster. Especially when the borrowers are family firms, debt holders should be cautious to use equity injections and debt-for-equity swaps since family firms are sensitive to dilution of control power. Kaisa’s case is the first default and first debt restructuring event of oversea bonds issued by Chinese real estate companies. This study provides references and experience for foreign investors’ future investment in similar securities. Moreover, this case could also be teaching material of corporate finance course as it is originally designed.

    Source: Chai Jingjing
    Date Submitted: 09 Feb 2017
    Views: 191
    Downloads: 5
    By the combination of theoretical analysis and a case study on Stellar ABS, this paper helps to understand the how two-tier SPV structure differs from traditional ABS structure and the benefits of applying two-tier SPV structure. The analysis would be done in mainly three aspects: the advantages of enterprise ABS, the differences of one-tier and two-tier SPV structure and their applicability, and the benefits & costs of two-tier SPV structure. The research has got the following main results. Firstly, enterprise ABS has its strengths over bank loans and corporate bonds on the liquidity it provides and the flexibility over financing scale and duration. Secondly, two-tier SPV uses a trust scheme as the second SPV. So trust beneficiary right becomes the underlying asset while cash flow from issuers becomes the trust loan repayment source. So one-tier SPV structure is more applicable to enterprises whose existing and specific assets can generate sustainable cash flow within the duration of ABS with contractual or regulatory proof. For other enterprises that have sustainable cash flow but cannot fulfill all the criteria, two-tier SPV structure is suggested. Finally, two-tier SPV structure helps sidestep several constraints, making it possible for some companies to finance through securitization. Economies of scale can be realized by combining related income categories or companies together in one asset pool. Risk diversification effect can also be realized by involving different assets with low correlation into the same asset pool. Taking account of the immaturity of ABS market, enterprise ABS with risk diversification feature would be more appealing to investors. This case study contributes to the research and practice by providing implications on the applicability and benefits of two-tier SPV structure in enterprise ABS.

    Source: Zhou Qi
    Date Submitted: 09 Feb 2017
    Views: 194
    Downloads: 5
    This thesis analyzes the key success factors of online travel business models and their influence on the company’s valuation. We propose three most important key success factors, which are 1) core function design; 2) profit model’s consistency with core function; 3) closed loop O2O system. These factors can influence representative companies’ abilities to acquire users and turn users into revenue, thus influence their valuation.  The good core function design should provide simple and convenient travel information and services. This kind of core function can significantly improve companies’ ability of user acquisition.  The profit model’s consistency with the core function is the key success factor that can increase user’s willingness to pay, thus improve companies’ ability to turn users into revenue.  Closed loop O2O system is the online transaction—off-line consumption—online feedback circle. It can strengthen users’ trust in service quality and improve companies’ ability to turn users into revenue. Huoli Holdings’ case is used as an example to study in detail the key success factors’ influence on its user acquisition and revenue generating abilities. We also analyze how those KSFs determine firm valuation by influencing these core abilities. The conclusion contributes to theoretical study of online travel business models, and the key success factors can also be used in practical as guidance for related companies.

    Source: Zhou Mao
    Date Submitted: 09 Feb 2017
    Views: 369
    Downloads: 13
    This thesis analyzes private equity’s exit strategy for investments in Chinese overseas listed companies based on the case study of Jin Jiang acquiring Keystone from the following perspectives. Firstly, motivations and functions of PE investors in the PPP (Public-Private-Public) process of Chinese overseas listed companies are discussed. Valuation arbitrage opportunity between overseas and domestic markets is the most direct reason for PE investors to participate in this process. Secondly, exit options and criteria of PE investors in formulating exit strategies are investigated. For investments of Chinese companies delisted from overseas market, there are four typical exit options in China: IPO, backdoor listing, New Three Board listing and M&A. This paper thoroughly analyzes their differences and practical issues PE investors need to consider under each option. PE investors will evaluate each option by various criteria including return, convenience, risk, timeliness and liquidity. For investments in Chinese companies delisted from overseas market, PE investors especially value three criteria of the exit option: timeliness, risk and convenience. Thirdly, exit payment method and post-investment managements are discussed. In terms of payment methods in an M&A transaction, cash payment has advantages of avoiding post-deal risk, high certainty and high timeliness for PE investors. In terms of post-investment management, active management of PE investor is beneficial for its successful exit. The contribution of this thesis comes from two sides. Theoretically, this thesis investigates a practical and timely issue based on theoretical frameworks; Practically, this thesis provides guidance and insights for PE investors in their future investments.

    Source: Huang Mengwei
    Date Submitted: 09 Feb 2017
    Views: 181
    Downloads: 2
    The real estate industry in China is typically capital-dependent with one of the highest leverage levels compared to other industries. Motivations for choosing high leverage and how real estate firms manage the leverage risk and achieve high growth are very important topics in corporate management and corporate finance. In this paper, I combine theoretical and empirical analyses to study the phenomenon of high leverage commonly employed by Chinese real estate firms. In particular, I study Yango Group Co., Ltd (“Yango”), a real estate firm publicly listed in the Shenzhen Stock Exchange since 1996. In 2012, Yango changed the location of its headquarter from Fuzhou to Shanghai. Since then, Yango has employed high-leverage and achieved 1000% sales growth in just 3 years. By using a high-turnover strategy and diversifying its financing channels, Yango has managed the leverage risk as well. This case study will provide valuable insights to publicly listed real estate firms, especially small and medium sized developers. Although bank loans were recognized as the most frequently used and most traditional financing channel, government policies have driven real estate firms to finance through non-bank innovative financial instruments such as trust, fund, stock pledge, etc. Because Chinese real estate firms’ financing needs are not met by traditional debt or equity financing channels, these firms have incentives to resort to other forms of leverage channels. As a result of their aggressive expansions with high leverage, these firms face risks of inventory pile-up, cash flow management failure and bankruptcy. Real estate firms could implement high turnover strategy and diversified financing channels in order to manage high leverage risk.
  • Private Equity in China Concept Stocks’ Privatization and Relisting —A case study of CITIC PE and 3S Bio

    Source: Zhou Xinling
    Date Submitted: 13 Jan 2017
    Views: 534
    Downloads: 0
    China Concept Stocks’ “returning home”, privatization and relisting, is a hot topic in recent years. And private equity firms play important roles in this trend. However, understanding to private equity’s investment decisions and roles in this area is very limited. Motivated by this phenomenon, this paper combines theoretical analysis and the case study of CITIC PE investing 3S Bio, one of the latest and most successful cases, to conduct comprehensive research. Innovatively, this paper highlighted special considerations for private equity firms in the following 4 aspects: 1) favored characteristics of the target companies for privatization and relisting projects 2) considerations in choosing relisting exchange 3) intrinsic value creation of the target company 4) return creation of such investments.
  • NZFC - Agency Theory, Corporate Governance and Dividend Payout in New Zealand

    Source: Helen Roberts, Travis Brown
    Date Submitted: 10 Jan 2017
    Views: 307
    Downloads: 6
    This study examines the effect of internal corporate governance on the likelihood and the level of dividend payout in New Zealand during the period 2004 - 2012.
  • Agency Theory, Corporate Governance and Dividend Payout in New Zealand

    Source: Helen Roberts, Travis Brown
    Date Submitted: 05 Jan 2017
    Views: 265
    Downloads: 2
    This paper examines the effect of internal corporate governance on the likelihood and the level of dividend payout in New Zealand. We find a positive relationship between the level of dividend payout and internal corporate governance. Interestingly, our results also support a non-linear relationship between dividend policy and beneficial director ownership levels. We find evidence to suggest that lower dividend payout coincides with decreasing agency costs arising from increased director-shareholder alignment for beneficial director share ownership less than 26%. The relationship becomes negative when ownership exceeds 56%. The high levels of ownership invoke managers to invest surplus cash to maximize firm value, with dividend policy acting as a substitute for director oversight. Entrenchment exists for ownership levels between 26% and 56%. We also find that external ownership combined with strong board governance may mitigate agency problems.
  • AFM - Leverage and the Japanese Financial Crisis

    Source: Robert B. Durand, Joye Khoo
    Date Submitted: 27 Nov 2016
    Views: 249
    Downloads: 8
    Japanese firms responded to the country’s Lost Decades (失われた20年) by reducing their debt. Average leverage fell from 27.49% in 1990 to 19.34% in 2014. Nearly-all-equity firms (firms with less than 5% leverage ratio) increased from 7.5% of the sample in 1990 to 28.3% in 2014. (Paper submitted for consideration for the award of "CFA Best Paper Award on Asia-Pacific Capital Markets" in the Auckland Finance Meeting conference."
  • AFM - Driving the Presence of Investor Sentiment: the Role of Media Tone in IPOs

    Source: Zhe Shen, Jiaxing You, Michael Firth
    Date Submitted: 23 Nov 2016
    Views: 185
    Downloads: 1
    This paper examines whether the media can drive the presence of investor sentiment around the IPO event through the tone channel. Using word frequency analysis to define whether one newspapers article is positive or negative and measuring media tone as the number of positive in excess of negative newspapers articles in the pre-IPO period, we find robust evidence that media tone is positively related to IPO first-day returns while negatively related to long-run abnormal returns for a sample of Chinese book-built IPOs over the 2005-2012 period. One positive newspapers article can predict not only an increase of up to 6.95 percentage points in first-day returns but also a decrease of 10.93 percentage points in three-year abnormal returns. Further analysis suggests that media tone tends to increase first-day retail trading and attracts more retail investors to subscribe new shares in the primary market. Taken together, these findings are consistent with our hypothesis that media tone drives retail demand for IPOs, leading to a temporary deviation from fundamentals in post-IPO prices.
  • AFM - Do Analysts Play a Role in Shaping the Rival Response of Target Firms? International Evidence

    Source: Zhe An, Zhian Chen, Donghui Li, Michael Murong
    Date Submitted: 23 Nov 2016
    Views: 228
    Downloads: 5
    Employing a sample of 4271 initial-industry target firms across 34 countries from 1989 to 2013, this paper shows that analyst following positively impacts the cumulative announcement returns (CARs) of the rivals of target firms. Furthermore, a transparent macro information environment can substitute the role of analysts in determining the CARs of rivals. In addition, it shows that those rivals that have a higher probability of becoming targets subsequently, or that do in fact become targets subsequently, exhibit higher CARs. The results are unchanged by using the exogenous decrease in analyst following (i.e., brokerage closure and merger) as an instrumental variable. Overall, the findings support the Acquisition Probability Hypothesis.
  • AFBC - Environmental Risk, Bank Certification, and Stock Market Reaction

    Source: Hung Manh Nguyen
    Date Submitted: 16 Nov 2016
    Views: 288
    Downloads: 6
    This paper has been accepted to present at the 29th AFBC Conference in Sydney. Submission Number: 2825863. The original title for AFBC submission was: "Mirror, Mirror, on the Wall: The Role of Banks in Mitigating Information Asymmetries Nowadays" The current title for ARX submissions is: "Environmental Risk, Bank Certification, and Stock Market Reaction".
  • The Performance of Governmental Venture Capital Firms: A Life Cycle Perspective and Evidence from China

    Source: Yuejia Zhang, David Mayes
    Date Submitted: 16 Nov 2016
    Views: 470
    Downloads: 8
    The Performance of Governmental Venture Capital Firms: A Life Cycle Perspective and Evidence from China
  • ESG and Firm Performance in an Emerging Economy

    Source: Dipasha Sharma , Shagun Thukral , Sonali Bhattacharya
    Date Submitted: 08 Nov 2016
    Views: 527
    Downloads: 0
    The primary motive of any firm has always been to generate profits and maximize value for its shareholders. However with global economic crisis unfolding one after the other since the start of the millennium there has been a shift in the focus of governments, regulators, investors and corporations to a more “socially responsible” behavior by firms in addition to profit maximization. This includes the importance given by firms to areas such as sustainability, environmental, social and governance (ESG) concerns and ethical considerations. This has generated lot of research interest in comparison of performance of firms that do show due consideration to these factors versus those that do not. In this study we highlight the gaps in the existing literature and follows econometric modelling to discuss following hypothesis: Hypothesis 1: High Level of Corporate Sustainable Performance in terms of Environmental, Social and Governance will be associated with high financial performance Hypothesis 2: Size of the firm will moderate the relationship between Corporate Sustainable Performance in terms of Environmental, Social and Governance and financial performance. Hypothesis 3: Industry classification of the firm will moderate the relationship between Corporate Sustainable Performance in terms of Environmental, Social and Governance and financial performance.
  • Do Franking Credits Matter? Exploring the Financial Implications of Dividend Imputation

    Source: Andrew Ainsworth, Graham Partington, Geoff Warren
    Date Submitted: 07 Nov 2016
    Views: 311
    Downloads: 1
    Examines the implications of dividend imputation for stock prices and returns, cost of capital, project evaluation, capital structure, payout policy and investor portfolios. it is argued that its removal would be detrimental.
  • Are imputation credits capitalised into stock prices?

    Source: Shaun Saiu, Stephen Sault, Geoff Warren
    Date Submitted: 07 Nov 2016
    Views: 317
    Downloads: 0
    Examines DCF valuations and earnings yields, and finds at best mixed and largely unconvincing evidence of imputation credits being capitalised into share price levels for Australian shares.
  • HKUST Risk Management and Business Intellegence (RMBI) Newsletter Issue 9

    Source: Wong Yuen Man, Kwong Wing Man, Chan Ling Fung, Lo Ka Chun, Ng Wing Leong, Tam Kiu Fai, Lee Tung Kiu, Lee Kwok Ho
    Date Submitted: 02 Nov 2016
    Views: 410
    Downloads: 0
    In this issue, we discuss about the current situation of Hong Kong's Logistics Industry, including ogictics business cycle and its embbeded risk, big data and new technologies, as well as the future development and suggestions to the logistics industry. Basel III, the histroy and its evolution, impact on locan banks and lessons leanred from overseas.
  • AFBC - Uncertainty Major Investment and Capital Structure Dynamics

    Source: Hyun Joong Im, Chang Yong Ha, Ya Kang, Janghoon Shon,
    Date Submitted: 21 Oct 2016
    Views: 201
    Downloads: 4
    This study examines the effects of uncertainty on firms’ capital structure dynamics. We find that high-uncertainty firms have significantly lower leverage targets and significantly higher adjustment speeds toward targets, and that over-levered firms faced with high uncertainty have much higher adjustment speeds, while under-levered firms’ adjustment speeds are not influenced by uncertainty. An investigation of leverage adjustment behavior of over-levered and under-levered firms during major and routine investment periods in relation to uncertainty provides evidence that bankruptcy threat, agency costs, and real option channels account for various aspects of leverage dynamics.
  • Financial insight: challenges and opportunities

    Source: ACCA Global
    Date Submitted: 14 Oct 2016
    Views: 440
    Downloads: 5
    This report suggests ways the nance function can improve current approaches to business partnering. It proposes nine pragmatic actions to improve partnering practices anchored in three core component parts: creating the mandate, xing the information and deploying the talent.
  • Analyst Report - Starhub (Oct 15)

    Source: Sylvester Yeo, Cheng Jun Song, Kenny Tay, Lim You Jie, Sarah Leong,
    Date Submitted: 11 Oct 2016
    Views: 339
    Downloads: 15
    Research report on Starhub dated October 2015 with a sell call
  • AFBC Voluntary Disclosure and Market Competition: Theory and Evidence from The U.S. Services Sector

    Source: Nathan Dong, Eda Orhun
    Date Submitted: 24 Sep 2016
    Views: 275
    Downloads: 2
    A research paper studying the incentives behind voluntary disclosures in a market competition scenario.
  • AFBC - The Value Relevance of Regulatory Capital Components

    Source: Martien Lubberink, Roger Willett
    Date Submitted: 21 Sep 2016
    Views: 372
    Downloads: 11
    Our paper examines how investors value regulatory bank capital components, e,g. Tier 1 Hybrids, deduction of Goodwill, etc.
  • AFBC - Learning and Contractual Evolution: The Case of Leveraged Loans

    Source: Edison Yu, Mitchell Berlin, Gregory Nini
    Date Submitted: 21 Sep 2016
    Views: 273
    Downloads: 6
    A working paper to be presented at the 29th Australian Finance and Banking Conference
  • AFBC-Asset diversification and efficiency: Evidence from the Chinese banking sector

    Source: Kai Du, Andrew C. Worthington, Valentin Zelenyuk
    Date Submitted: 20 Sep 2016
    Views: 400
    Downloads: 11
    This paper investigates the impact of earning asset diversification on Chinese bank efficiency from 2006 to 2011. To do so, we adapt the Simar and Wilson (2007) (Journal of Econometrics) approach to panel data context so that approach allows for technology change over time. Regression results reveal that increasing the asset share of other earning assets (including securities and derivatives) is positively associated with bank efficiency. Decreasing the share of nonearning assets in total assets or increasing total equity has a similar impact. Our results also suggest that financial reforms currently being undertaken in China, including removing the regulatory requirement concerning the ratio of loans to deposits (a new draft amendment to the existing commercial banking law) and interest rate liberalization (a proposed draft amendment), are likely to induce a significant positive effect on bank efficiency in China.
  • AFBC – The Complementary Roles of Board Incentives and Market Monitoring: Theory and Evidence

    Source: Peter L. Swan
    Date Submitted: 18 Sep 2016
    Views: 392
    Downloads: 7
    Australasian Finance and Banking Conference Submission
  • Business Group Discount: Evidence from China

    Source: Lewis Tam, Jingyi Chen
    Date Submitted: 30 Aug 2016
    Views: 291
    Downloads: 10
    A study on business group discount in China
  • CIBT Education Group Inc. (TSX: MBA) – Q3 Update: Positioning to Capitalize on the Tight Vancouver Rental Market

    Source: Sid Rajeev, CFA
    Date Submitted: 28 Jul 2016
    Views: 260
    Downloads: 3
    Fundamental Research Corp is issuing an update “CIBT Education Group Inc. (TSX: MBA) – Q3 Update: Positioning to Capitalize on the Tight Vancouver Rental Market ” in a report dated July 21, 2016. The full report is now at MBA is an FRC Top Pick
  • Predictive Analytics in Capital Markets

    Source: Nitin Singh
    Date Submitted: 13 Jul 2016
    Views: 363
    Downloads: 13
    Predictive Analytics in Capital Markets
  • What Does the Chaori Default Mean for the Chinese Financial Markets? Share on Facebook Share on Twitter Share on LinkedIn Share via E-Mail

    Source: Larry Cao, CFA
    Date Submitted: 29 Jun 2016
    Views: 232
    Downloads: 0
    This is a blog posted on CFA Institute's website on 13 March 2014.
  • Dividend-Price Ratios and Stock Returns: International Evidence

    Source: Bradford Cornell
    Date Submitted: 28 Jun 2016
    Views: 602
    Downloads: 0
    The Gordon growth formula can be written in the form of the dividend–price ratio as (Dt/P0) = R – g, under the assumptions that future dividends will grow at a constant rate (i.e., g) forever and that the expected returns on equity (i.e., R) will never change. The ability of this ratio to predict future returns is a question of widespread debate among both academics and market participants because some believe that the dividend–price ratio is a predictor of future dividend growth. Empirical research has revealed that the dividend–price ratio can forecast future returns because the ratio is high when expected returns are likely to be high and vice versa. But as the author hypothesized in previous work, the relationship is dependent on the volatility of real dividend growth.
  • How to Read between the Lines of Asian Financial Statements

    Source: Larry Cao, CFA
    Date Submitted: 27 Jun 2016
    Views: 686
    Downloads: 0
    This is a blog posted on CFA Institute's website on 24 August 2014.
  • Technical Basic Guide to Deep Learning

    Source: Syed Danish Ali
    Date Submitted: 23 Jun 2016
    Views: 252
    Downloads: 3
    Investigate the basic tenets of deep learning and why deep learning is becoming very important for investments.
  • 当投资者不再接受常识之后

    Source: 黄凡, CFA
    Date Submitted: 21 Jun 2016
    Views: 417
    Downloads: 0
    This article is published on 22 June 2016.
  • Three Clues for Assessing Management

    Source: A. Michael Lipper, CFA
    Date Submitted: 17 Jun 2016
    Views: 393
    Downloads: 0
    This is a blog posted on CFA Institute's website on 30 November 2015.
  • Planning, Budgeting and Forecasting: An eye on the future

    Source: O'Mahony, J., Lyon, J.
    Date Submitted: 10 Jun 2016
    Views: 487
    Downloads: 11
    A global report (first of three) jointly commissioned by the ACCA and KPMG to evaluate how the Enterprise Performance Management capability within finance functions is providing the business with insightful profitability and cost analysis through appropriate people, processes and technology.
  • The Costs of Corporate Litigation in Australia

    Source: Asjeet S. Lamba, Ian Ramsay
    Date Submitted: 07 Jun 2016
    Views: 589
    Downloads: 0
    This paper presents the results of a study that measures the costs associated with litigation for plaintiff and defendant companies for a sample of companies listed on the Australian Securities Exchange. The study uses event study methodology to examine the effects of litigation initiation announcements, settlement announcements and judgment announcements. The study also examines whether the impact of an announcement is related to the type of plaintiff (such as corporate plaintiff or a government plaintiff) and whether the impact differs according to the type of legal claim (such a breach of contract, a trade practices matter, an intellectual property infringement or securities fraud).
  • The Role of Executive Stock Options in On-Market Share Buybacks

    Source: Asjeet S. Lamba, Vivek M. Miranda
    Date Submitted: 07 Jun 2016
    Views: 403
    Downloads: 0
    The increasing use of on-market buyback programs in Australia may not be fully explained by the typical motivations of information signaling and free cash flows offered by previous researchers. For some firms at least, management may believe the shares are overvalued. It is in this context that we examine whether managers of firms with high levels of executive stock options have an incentive to initiate buyback programs. It has been argued that managers may be motivated to undertake on-market buyback programs in order to neutralize the dilution of earnings per share caused by their stock options, rather than for signaling purposes. Our findings are consistent with this argument because we find that the higher the proportion of executive stock options outstanding the more likely it is for firms to undertake larger on-market buyback programs. Overall our results indicate that the existence of executive stock options influences managers' decision to implement on-market buyback programs but that it is not the only factor that managers take into consideration.
  • Comparing Share Buybacks in Highly Regulated and Less Regulated Market Environments

    Source: Asjeet S. Lamba, Ian Ramsay
    Date Submitted: 07 Jun 2016
    Views: 520
    Downloads: 0
    Do changes in the legal and regulatory environment of a country affect companies' financing/investment decisions? In this paper, we address this question by examining the market's reaction to announcements of share buybacks in Australia. Before 1989, Australian companies were prohibited from repurchasing their shares and, until 1995, they were heavily regulated with few companies repurchasing their shares. In December 1995, the regulations governing share buybacks were simplified making it considerably easier for companies to repurchase their shares. The changing Australian legal regulation of share repurchases provides a unique opportunity to test the effects of legal regulation on companies' financing/investment decisions. We find that, unlike in the United States, the market reacts most positively to on-market buybacks (equivalent to open-market repurchases), while the reaction to other types of share buybacks is positive but not statistically significant. We also find that the abnormal returns earned by resource sector companies announcing share buybacks are higher than the abnormal returns earned by share buybacks announced by companies in the industrial and financial services sectors. An examination of matched companies announcing share buybacks before and after the regulatory changes in December 1995 shows that the market attaches a substantially higher value to the removal of stringent regulations governing share buybacks. This evidence is consistent with the expectation that the stringent regulation of share buybacks during 1989-1995 made them less effective as a credible signaling mechanism.
  • What Motivates Block Share Ownership?

    Source: Asjeet S. Lamba, Geofrey P. Stapledon
    Date Submitted: 07 Jun 2016
    Views: 438
    Downloads: 0
    Diffuse share ownership is not as pronounced in the U.S. as many would assume. This has led to a body of research examining large shareholders, or blockholders. Issues addressed include whether firms with a blockholder perform better or worse than widely-held firms; whether firms with a blockholder pay their executives differently to widely-held firms; and whether the presence of a blockholder increases or decreases the incidence takeovers. Another issue, which this paper explores, is what motivates block share ownership. Bebchuk (1999a, 1999b) develops a model which predicts that a firm is more likely to have a controlling blockholder if the anticipated private benefits of control at that firm are comparatively large. This paper examines the factors associated with ownership structure among publicly traded Australian firms. Our results indicate that private benefits of control are a significant factor in explaining the differences in ownership structure among Australian firms. As importantly, we also find that the relationship between the existence of a blockholder and private benefits of control is endogenous. That is, the presence of a controlling blockholder strongly influences the prevalence of these private benefits of control.
  • Dual-Class Shares: From Google to Alibaba, Is It a Troubling Trend for Investors?

    Source: Matt Orsagh, CFA, CIPM
    Date Submitted: 07 Jun 2016
    Views: 504
    Downloads: 3
    This is a blog posted on CFA Institute's website on 1 April 2014
  • Corp Gov Roundup: Risk, Compliance, Shareholder Value “Alignment Gap,” Proxy Access

    Source: Matt Orsagh, CFA, CIPM
    Date Submitted: 07 Jun 2016
    Views: 409
    Downloads: 1
    This is a blog posted on CFA Institute's website on 2 December 2014.
  • Alibaba IPO: What It Says about Shareholder Rights in Asia

    Source: Paul Smith, CFA
    Date Submitted: 07 Jun 2016
    Views: 434
    Downloads: 2
    This is a blog posted on CFA Institute's website on 21 October 2013.
  • Institutional Investors Reject Tata Motors Pay Resolutions: Is Tide Changing in India?

    Source: Padma Venkat, CFA
    Date Submitted: 07 Jun 2016
    Views: 437
    Downloads: 1
    This is a blog posted on CFA Institute's website on 23 July 2014.
  • Hontex IPO: How Did It Happen and Who’s to Blame?

    Source: Alexander Flatscher
    Date Submitted: 06 Jun 2016
    Views: 436
    Downloads: 2
    This is a blog posted on CFA Institute's website on 29 June 2012.
  • Does Institutional Shareholding Affect Firm Value_An Empirical Analysis in Indian Market

    Source: Dr. Amiya Kumar Sahu
    Date Submitted: 29 May 2016
    Views: 5722
    Downloads: 141
    This is a working paper from my PhD thesis on "MONITORING BY FINANCIAL INSTITUTIONS AND IMPACT ON FIRM PERFORMANCE: EVIDENCE FROM INDIA". The paper empirical provides evidence of emergence of Institutional monitoring in India's corporate governance sphere dominated by foreign institutions (FIIs).
  • Property Fund valuation in Thailand

    Source: Pongtum Thavaramara
    Date Submitted: 29 May 2016
    Views: 559
    Downloads: 18
    Thailand's market in Property funds (REITs) is characterized by a large number of externally managed small funds, most of which are traded at a discount from their Net Asset Values (NAV). This paper will analyze the relationship between the REIT structure and deviations from NAV. Using panel data from 36 different Thai property funds from 2008 to 2014, a random effects model is applied to explain the variations from NAV. Empirical results show that factors that managers can control have significant positive effect on premia, and that the effect is observed in the very short run. This provides evidence that investors are willing to pay a premium for REITs with better fundamentals.
  • Dual Class Shares - Is India Ready for it?

    Source: Aditya Jadhav CFA
    Date Submitted: 27 May 2016
    Views: 3085
    Downloads: 62
    This research article intends to create awareness about DVRs/Dual class shares in India, to study the international as well as domestic experience and tries to examine the various factors that affect DVR share prices. This is an Accepted Manuscript of an article published by Taylor & Francis in Macroeconomics and Finance in Emerging Market Economies on 01 March 2012, available online:
  • The Disaster of Dick Smith explained in detail

    Source: Angelo Aspris
    Date Submitted: 10 May 2016
    Views: 4818
    Downloads: 237
    This is a presentation that provides a detailed analysis of the Dick Smith collapse chronicling the acquisition by Anchorage from Woolworths in September 2012 through to its passing into voluntary administration in early 2016. This presentation addresses the role of Anchorage and senior management in this collapse. It also provides some commentary around PE listings and the role of auditors and investigative accountants. Questions and comments are welcome.
  • Earnings Management, IPO Underpricing, and Post-Issue Stock Performance of Chinese SMEs

    Source: Jing Gao, Ling Mei Cong, John Evans
    Date Submitted: 15 Apr 2016
    Views: 268
    Downloads: 3
    This article empirically examines the association between earnings management and initial public offering (IPO) performance (underpricing and post-issue stock performance) of Chinese small and medium enterprises (SMEs).
  • Payout Policy preference of Listed Firms in the Philippines Stock Exchange

    Source: Mary Joy V. Imperial
    Date Submitted: 27 Mar 2016
    Views: 440
    Downloads: 9
    Payout Policy preference of Listed Firms in the Philippines Stock Exchange using Aggregate cash dividend expenditures and shares repurchase expenditures
  • A Company Outlook on Aboitiz Power Corporation 2015 onwards

    Source: Jeffrey Ayo, Daniel Camagay, Ronald Tan, Martin Whalley
    Date Submitted: 17 Mar 2016
    Views: 659
    Downloads: 33
    A general outlook on Aboitiz Power Corporation, a publicly listed company on the Philippine stock exchange.
  • Insight on: ASEAN Integration and its impact on Banking and Finance sector in the Philippine setting

    Source: Fiona Rhea Yntela
    Date Submitted: 14 Mar 2016
    Views: 946
    Downloads: 13
    The paper is about a commentary regarding the ASEAN integration, its purpose and objectives, plans and benefits towards banking industry in the Philippine setting. Pros and cons have been discussed but it is limited to what is seen in the banking and finance markets of the said country.
  • Banking is necessary, banks are not

    Source: Aditya Jadhav CFA
    Date Submitted: 07 Mar 2016
    Views: 794
    Downloads: 0
    There will always be a need for financial services. However, the developed world is waking up to a new idea that traditional i.e. high cost banking, which has not evolved for more than century, might not be the best way to carry out financial transactions. Bill Gates sees this as a big opportunity for technological innovation. No wonder he has said: “Banking is Necessary. Banks are Not.”
  • Impact of Corporate Governance on Financial Practices of New Zealand Companies

    Source: Hardjo Koerniadi
    Date Submitted: 22 Feb 2016
    Views: 439
    Downloads: 6
    This article has been published in Applied Finance Letters, Volume 2(2), 2013, pp. 14-19.
  • First Trading-Day Returns and Post-Issue Stock Performance of PRC Primary Foreign Listing Firms

    Source: Cong Ling Mei, J-L.W. Mitchell Van der Zahn, Greg Tower
    Date Submitted: 18 Dec 2015
    Views: 263
    Downloads: 1
    Analysis of first day trading returns and post-issue stock performance of PRC firms with a primary foreign listing.