Template-Type: ReDIF-Article 1.0 Author-Name: Kenneth Yung Author-Name: Qian Sun Author-Name: Hamid Rahman Title: Idiosyncratic Risk and Earnings Noncommonality Abstract: The seminal Campbell et al. (2001) paper showing that idiosyncratic risk has increased considerably in recent years has spawned a large number of articles to explain the phenomenon. In this paper, we propose growing earnings noncommonality as a possible source of the increasing idiosyncratic volatility. The empirical results of this research validate this proposition. Our conclusions stand the test of several robustness checks which show that market power and innovativeness previously considered in literature as sources of increased idiosyncratic volatility are not significant in the presence of earnings noncommonality. The findings of this research will be useful for analysts and investors involved in asset pricing. Classification-JEL: G32, G35 Keywords: Idiosyncratic Risk, Earnings Noncommonality Journal: The International Journal of Business and Finance Research Pages: 1-17 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:1-17 Template-Type: ReDIF-Article 1.0 Author-Name: Shih-Jui Yang Author-Name: Ai-Chi Hsu Author-Name: Show-Yen Lai Author-Name: Chien-Chiang Lee Title: Empirical Investigation of Herding Behavior in East Asian Stock Markets Toward the U.S. Market Abstract: This paper examines the shift of dominance of the American stock market. We also observe herding behavior changes of major Asia Pacific regions towards the American market in the wake of major events that affected financial markets. Events examined include the Asian financial crisis, Internet bubble, September 11 attacks, SARS outbreak, and global financial crisis. Evidence shows the American stock market still held the leading position over the East Asian markets in the wake of these major events. We define the continuing bull (and continuing bear) of the American stock market as the dummy variable of herding behavior. We compare the difference in stock returns before and after structural breaks by investigation into the stock markets in Hong Kong, Taiwan, and Japan. Finally, we propose suitable investment strategies related to herding behavior in the East Asian stock markets toward the American stock market. The examination of out-of-sample profitability revealed the proposed investment strategies contributed to significantly positive average portfolio returns, whether in continuing bull or continuing bear markets. Classification-JEL: G32, G15 Keywords: Continuing Bull, Continuing Bear, Herding Behavior, Investment Strategy Journal: The International Journal of Business and Finance Research Pages: 19-32 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:19-32 Template-Type: ReDIF-Article 1.0 Author-Name: Luisa Melo Author-Name: Michael A. Quinn Title: Oil. Foreign Direct Investment an d Corruption Abstract: This paper addresses how oil changes the corruption-foreign direct investment relationship. With the advantage of our panel data set, we are able to account for issues of endogeneity in the causality between foreign direct investment and corruption. We find that corruption has a negative impact on attracting foreign direct investment but this is mitigated based on the amount of oil the receiving country produces. Foreign direct investment inflows are found to reduce corruption in countries, but not if the receiving country is a major oil producer. Results show that poor countries without oil may be using institutional corruption to attract foreign direct investment and that receiving these investments is reinforcing this corruption. The paper’s analysis implies that oil is not only helping more corrupt regimes to attract foreign direct investment, it is also reducing the generally positive institutional benefits from receiving foreign direct investment that most middle and high-income countries receive. The analysis suggests a reinforcing relationship between corruption and foreign direct investment, which could lead to positive or negative spirals in institutional quality. Firms and international organizations must take account of the negative institutional side effects from investing in oil rich countries or when dealing with very poor governments. Classification-JEL: F2 Keywords: Corruption, Foreign Direct Investment, Oil Journal: The International Journal of Business and Finance Research Pages: 33-49 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:33-49 Template-Type: ReDIF-Article 1.0 Author-Name: Glen Hansen Title: Managerial Discretion Over Loan Loss Reserves during the Global Financial Crisis Abstract: I analyze loan loss reserves during the Global Financial Crises in the late 2000s. I develop a regression model that separates the loan loss reserve account into discretionary and nondiscretionary components. The nondiscretionary (expected) component is based on current, past due, restructured, and non-accrual loans. The discretionary reserves component is the residual from the regression model. This component measures both managerial misinformation and managerial miscalculations since it is unrelated to the quality of the loan portfolio. I find that loan quality decreased during the financial crisis as shown by an increase in lower quality loans (restructured, past due, and non-accrual loans). Managers also set aside more loan loss reserves during the financial crisis. This paper demonstrates that all of the increase in the loan loss reserve account is attributable to the nondiscretionary component of loan loss reserves. The discretionary reserves component actually decreased during the financial crises consistent with managers using their discretion to window-dress their balance sheets and improve outside perception of the banking industry financial condition. Classification-JEL: G01, G21, G34, M41 Keywords: Loan Loss Reserves, Financial Crisis, Earnings Manipulation Journal: The International Journal of Business and Finance Research Pages: 51-61 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:51-61 Template-Type: ReDIF-Article 1.0 Author-Name: Atturo Rubalcava Title: Impact of Sarbanes-Oxley Act on Seasoned Equity Offerings by Canadian Cross-Listed Firms: Evidence from Bought Deals vs. Firm Commitment Abstract: This paper examines the impact of the Sarbanes-Oxley Act on the market reaction and underwriting fees of two methods of choice for underwriting seasoned equity offerings: Bought deals and firm commitment, by Canadian firms cross-listed on major U.S. exchanges. After controlling for offer and firm characteristics, it finds the market reaction to offer announcements is more positive for bought deals than for firm commitment during the pre-Sarbanes period only. This shows that bought deals lost their indirect cost advantage after the passage of the Act. On the other hand, the underwriting fees are lower for bought deals than for firm commitment during the pre-Sarbanes period only. This shows that bought deals also lost their fees cost advantage after the passage of the Act. Classification-JEL: G24, G32 Keywords: Sarbanes-Oxley Act, Seasoned Equity Offerings, Cross-Listed, Market Reaction, Underwriting Fees, Bought Deals, Firm Commitment Journal: The International Journal of Business and Finance Research Pages: 63-71 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:63-71 Template-Type: ReDIF-Article 1.0 Author-Name: Hsin-Yu Liang Title: Empirical Evidence on Firm-Bank Relationships in the G-8 Countries Abstract: This study sets out to explore the relationships between the banking and night-industry types of nonbanking sectors of the G8 over the years of 1994-2004—before the Kyoto Protocol was enacted in 2005. Our findings show that these relationships are still conditional upon the financial structure of these countries, including financial systems, regulations on banking activities, bank competition and the protection of the rights of creditors. By extending the Shen and Huang (2003) approach into different industries, this study provides additional information on firm-bank relationships among nine major industries with a longer period analysis. Bank concentrations intensify firm-bank relationships; that is, improving the banking sector through an overall increase in bank concentration can help to improve the performance of the non-banking sector. A bank-based system mitigates the relationship between bank performance and firm performance by bringing the inter-temporal smoothing function into operation. Unlike separated banks, universal banks tend to intensify the relationship between the performance of the firms and the banks as mere myopic investors. One rather unexpected result is the finding that this relationship is intensified by the existence of appropriate methods of protection for the rights of creditors. Classification-JEL: G21 Keywords: Bank-Based Systems, Gramm-Leach-Bliley Act, Bank Concentration, Protection of Creditors’ Rights Journal: The International Journal of Business and Finance Research Pages: 73-87 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-6.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:73-87 Template-Type: ReDIF-Article 1.0 Author-Name: Dev Prasad Author-Name: Yash R. Puri Author-Name: Ravi Jain Title: Return to Profitabiolity after a Financial Crisis Abstract: The financial crisis in October 2007 that sent the stock markets in a downward spiral all around the globe started more than six years ago. Many countries are still experiencing the ripple effects despite intervention by several governments, acting singly and collectively, to help stem the crisis and support recovery. Yet, many firms around the globe have not firmly returned to profitability. This study, therefore, addresses the question: When do firms return to profitability after a financial crisis? and examines the time taken by industrial firms in three of the hardest hit Asian countries to return to profitability after the 1997 Asian financial crisis. Earlier studies at the ‘micro’ level has mainly focused on the profitability of financial institutions and generally been limited to the pre-crisis period and/ or a few years of the postcrisis period. This paper takes a longer perspective of the post-crisis period and focuses. The results show that, in each country, there are significant differences in the profitability of industrial firms in the shortterm before and after the crisis as well as in the longer-term post-crisis period. Further, the speed of recovery and the extent of the return to profitability vary from country to country. Classification-JEL: G02, G32 Keywords: Financial Crisis, Profitability, Asia, Ratios Journal: The International Journal of Business and Finance Research Pages: 89-101 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:89-101 Template-Type: ReDIF-Article 1.0 Author-Name: H. Swint Friday Author-Name: Nhung Hoang Title: Seasonality in the Vietnam Stock Index Abstract: This study examines seasonality in the Vietnam Stock Market Index over 10 years, since the market’s establishment on July 28th, 2000 until December 31st, 2010. The study found significant positive returns in April and significant negative returns in July for the VN-Index. Also, the Halloween Effect or Go away in May come back Halloween Day effect is observed in the Vietnam Stock Market Index. The authors posit these results are partially driven by the rainy season in Vietnam where monthly rainfall reaches up to 1000 mm. Classification-JEL: G11, G14 Keywords: Halloween Effect, January Effect, Seasonality, Vietnam Stock Market Journal: The International Journal of Business and Finance Research Pages: 103-112 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-8.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:103-112 Template-Type: ReDIF-Article 1.0 Author-Name: Ya-Hui Wang Author-Name: Chien-Chih Lai Title: The Effect of Limit Order Book Information on Investors with Different Risk Attitudes Abstract: The Taiwan Stock Exchange Corporation (TSEC) started to disclose information on the best five bid/ask prices and volumes ever since January 2, 2003. With such disclosure, investors can now judge the market conditions according to the limit order book information and then decide their order aggressiveness and order placement strategies. The purpose of this study is to investigate the relationships and effects of risk attitudes, limit order book information, and price clustering. Using random sampling, we administered the questionnaires to investors living in Taiwan from February 1, 2012 to May 1, 2012. The research results show there are in fact significant relationships among risk attitudes, limit order book information, and price clustering. Moreover, investors will conduct strategic trading behavior when they face price clustering. Classification-JEL: G11, G14, G28 Keywords: Best Five Bid/Ask Prices and Volumes, Risk Attitude, Limit Order Book Information, Price Clustering Journal: The International Journal of Business and Finance Research Pages: 113-120 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-9.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:113-120 Template-Type: ReDIF-Article 1.0 Author-Name: Han-Ching Huang Author-Name: Yong-Chern Su Author-Name: Hsin-Ying Wang Title: Market Efficiency around the Announcement Day of Self-Tender Offers Abstract: We examine the dynamic relationship between self-tender returns, volatility and order imbalances. Since market makers care more about volatilities than inventory risk, they tend to lower the bid-ask spread to mitigate volatility. This result is different from the previous argument whereby market makers tend to raise the bid-ask spread to control inventory risk. A time-varying GARCH model also confirms the results that an order imbalance does not affect volatility during self-tender market convergency. We develop an imbalance-based trading strategy which is to buy (sell) according to whether order imbalances are positive (negative). The empirical findings support self-tender market efficiency. Classification-JEL: G12, G14 Keywords: Self Tender, Order Imbalance, Information Asymmetry, Volatility Journal: The International Journal of Business and Finance Research Pages: 121-128 Volume: 9 Issue: 1 Year: 2015 File-URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-10.pdf File-Format: Application/pdf Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:121-128