Chuck C.Y. Kwok

The day-of-the-week regularity in the stock markets of China

Abstract This paper examines the day-of-the-week effect in the stock markets of China. We find negative returns on Tuesday after January 1, 1995. This Tuesday anomaly disappears after taking the non-normality distribution and spillover from other countries into account. The finding suggests that this day-of-the-week regularity in China may be due to the spillover from the Americas. The evidence of the day-of-the-week anomaly in China is clearly dependent on the estimation method and sample period. When transaction costs are taken into account, the probability that arbitrage profits are available from the day-of-the-week trading strategies seems very small. This conclusion is obviously consistent with an efficient market approach.

Announcements of withdrawal from South Africa revisited: Making sense of contradictory event study findings

This research addressed empirical and conceptual issues raised by McWilliams and Siegel (1997) in light of the contradictory findings of several recent event studies dealing with announcements of w...

Persistence in foreign exchange rates

Abstract This study examines the long-run behavior of seven daily nominal exchange rates using univariate and multivariate persistence measures. Our results indicate that for some currencies, the long-run behavior deviates from that of a pure random walk in certain periods. The multivariate estimates reflect the effect of both the EMS Exchange Rate Mechanism and increased post-Louvre Accord coordinated intervention. A large portion of the effect of a shock in one currency on another currencys long-run value can be attributed to contemporaneous effects on the other currencies.

Foreign exchange rates and the corporate choice of foreign entry mode

Abstract This study is the first attempt at examining the effects of foreign exchange (FX) rate and volatility on the corporate choice of foreign entry mode and shareholder wealth. For all worldwide US-related foreign direct investments (FDIs) announcements in 1995, we find evidence that, on average, a stronger home currency is related to a higher propensity to choose a subsidiary and that the change in shareholder wealth around subsidiary announcements is greater when the home currency is stronger for non-US parents. On the effects of host currency volatility, the data support the flexibility option (international diversification) hypothesis for the US (non-US) parents.

Why Do US Firms Choose Global Equity Offerings

This study examines the economic motivation for global seasoned equity offerings made by US firms. We find that firms announcing global offerings have significantly less-negative market reactions than had they limited the issues to domestic only. The extent of the reduced price drop at issue announcement is found to be negatively associated with pre-announcement price run-up, firm size, and market-to-book equity, but positively associated with unsystematic risk. We also find that global issuing firms outperform their domestic counterparts for up to three years following the offerings.

Corporate use of innovative foreign exchange risk management products

Abstract In todays competitive global markets, firms are threatened by the increasing exchange rate volatility. Over the last two decades, a plethora of new financial products has been introduced in the marketplace to help multinational corporate managers handle currency risks. In this study, the authors examine how extensive are the various major innovative foreign exchange products used by U.S. corporations, and categorize these products into three generations. They find that the popularity of the simpler, first-generation product (forward contracts) has not been overtaken by the sophisticated new entrants, and that the adoption of innovative foreign exchange risk management products is not as common as expected.

Domestic and international practice of deposit insurance: a survey

Abstract The literature on deposit insurance tends to be mostly confined to a discussion of the reform proposals and risk-related premium assessment methodologies. The theoretical explanation of the alternatives to the major components of a deposit insurance scheme is sketchy. Comparisons on the international practice of deposit insurance are not extensive and comprehensive enough. To fill the gaps in the literature, this paper examines the theoretical foundations of the key issues of a deposit insurance scheme, provides a critical comparison on the international practice of deposit insurance, and makes suggestions on how a complete deposit insurance scheme can be properly designed and implemented.

Does the Japanese stock market react differently to public security offering announcements than the US stock market

Abstract We examine the equity valuation effects of common stock, straight debt, warrant bond and convertible bond offerings by Japanese firms during the period 1984–1991. We find that Japanese stock market reactions to announcements of common stock, straight debt and warrant bond offerings are quite similar to those of the US market. The only inconsistency is in convertible bond offerings where we find insignificant abnormal returns. Our results provide some evidence that the underlying financial factors in both countries may be similar and strong enough to overcome the effect of environmental and institutional differences.

National culture: The missing country-level determinant of corporate governance

It is well known that firm-level corporate governance practices vary mainly between rather than within countries, but country-level factors such as legal and financial institutions explain less than 50% of this cross-country variation. In this article we show that two dimensions of national culture – individualism and uncertainty avoidance – capture about 90% of the country fixed effects and outperform the country-level explanatory variables used in prior literature. We argue that culture works through a tradeoff between managerial expertise and certainty of control, a tradeoff largely overlooked by prior literature, that captures a country’s preference for the Anglo-Saxon approach versus the direct control approach for governance. Consistent with this argument, we find that the effect of culture on corporate governance varies across firms with different needs for managerial expertise and certainty of control. We also find that culture interacts with other factors to determine firm-level governance.RésuméIl est bien connu que les pratiques de gouvernance au niveau de l’entreprise varient principalement entre pays plutôt qu’au sein des pays, mais les facteurs liés aux pays tels que les institutions légales et financières expliquent moins de 50% de cette variation entre les pays. Dans cet article, nous montrons que deux dimensions de la culture nationale – l’individualisme et le contrôle de l’incertitude – couvrent environ 90% des effets liés aux pays et dépassent les variables explicatives au niveau des pays utilisées dans la littérature antérieure. Nous argumentons que la culture fonctionne comme un compromis entre l’expertise managériale et la certitude du contrôle, un compromis largement négligé dans la littérature antérieure qui explique seulement la préférence d’un pays pour l’approche anglo-saxonne versus l’approche de contrôle direct pour la gouvernance. En cohérence avec cet argument, nous trouvons que l’effet de la culture sur la gouvernance d’entreprise varie selon les entreprises avec des besoins différents concernant l’expertise managériale et la certitude du contrôle. Nous trouvons aussi que la culture interagit avec d’autres facteurs pour déterminer la gouvernance au niveau de l’entreprise.ResumenEs bien sabido que las prácticas de gobernanza corporativa a nivel de la empresa varían principalmente entre países y no dentro de ellos, pero factores a nivel nacional como las instituciones legales y financieras explican menos del 50% de las variaciones entre países. En este artículo mostramos que dos dimensiones de cultural nacional – el individualismo y la evitación de la incertidumbre – capturan cerca del 90% de los efectos fijos del país y superan a las variables explicativas a nivel país usadas en la literatura anterior. Argumentamos que la cultura funciona a través de compensar entre la experiencia gerencial y la certidumbre de control, una compensación en buena medida desatendida en la literatura anterior, que captura la preferencia de un país por el enfoque Anglosajón versus el enfoque de control directo de gobernanza. En concordancia con este argumento, encontramos que el efecto de cultura en la gobernanza corporativa varía entre empresas con diferentes necesidades por experiencia gerencia y certeza de control. Encontramos también que la cultura interactúa con otros factores para determinar la gobernanza a nivel de empresa.ResumoÉ sabido que as práticas de governança corporativa em nível de empresa variam principalmente entre países e não tanto dentro de países, mas fatores em nível de país, como instituições jurídicas e financeiras, explicam menos de 50% dessa variação entre países. Neste artigo, mostramos que duas dimensões da cultura nacional – individualismo e esquiva da incerteza – capturam cerca de 90% dos efeitos fixos do país e superam as variáveis explicativas em nível de país utilizadas na literatura existente. Argumentamos que a cultura funciona por meio de uma troca entre expertise gerencial e certeza de controle, uma troca largamente negligenciada pela literatura existente, que captura a preferência de um país pela abordagem anglo-saxônica versus a abordagem de controle direto para governança. Em consonância com esse argumento, verificamos que o efeito da cultura sobre a governança corporativa varia de empresa para empresa com diferentes requisitos de conhecimento gerencial e certeza de controle. Também concluímos que a cultura interage com outros fatores para determinar a governança em nível de empresa.概要众所周知,公司层面的公司治理实践主要是在国家之间而不是在国家内部有不同,但国家层面的因素,如法律和金融制度对这种跨国变异的解释小于50%。在这篇文章中,我们表明,国家文化的两个维度 – 个人主义和不确定性规避 – 捕捉到国家固定效应约90%,并超越以前文献中使用的国家层面的解释变量。我们认为,文化通过管理专长和控制确定性之间的权衡起作用,这个权衡大多被现有的文献所忽略,而且文化捕捉国家对盎格鲁 - 撒克逊模式对比直接控制治理模式的偏好。与此论点一致,我们发现,文化对公司治理的影响随公司对管理专长和控制确定性的不同的需要而变化。我们还发现,文化与其它因素互动来确定公司层面的治理。

The pricing of global and domestic initial public offerings by US companies

Abstract This study examines the pricing of global initial public offerings made by US companies as compared to purely domestic offerings. We find that global participation can significantly reduce underpricing by about four percentage points. Moreover, the degree of underpricing declines as larger proportions of shares are allocated to foreign investors. Our results suggest that US companies time their global offerings when foreign demand for US shares is high. There is also evidence that global offerings alleviate the downward pricing pressure associated with new share offerings.