Lee-Seok Hwang
College of Business Administration
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Publication
Featured researches published by Lee-Seok Hwang.
Journal of Business Finance & Accounting | 1998
Sudipta Basu; Lee-Seok Hwang; Ching-Lih Jan
We theorize that accounting systems affect analysts’ forecast accuracy through changes in earnings variability. We argue that the matching and historical cost principles reduce earnings variability, and hence, reduce analysts’ earnings forecast errors. We also argue that restricting the choice of accounting methods can result in larger forecast errors. We argue that more informative disclosure environments should reduce forecast errors. We test whether variation in these factors across countries explain variation in analysts’ earnings forecast bias and accuracy. Our results indicate that these characteristics of financial accounting systems are complements, and that they affect financial analysts’ earnings forecast errors.
Journal of Accounting, Auditing & Finance | 2000
Ashiq Ali; Lee-Seok Hwang; Mark A. Trombley
We explore whether the association between accruals and future returns documented by Sloan (1996) is due to fixation by naïve investors on the total amount of reported earnings without regard for the relative magnitude of the accrual and cash flow components. Contrary to the predictions of the naïve investor hypothesis, we find that the predictive ability of accruals for subsequent annual returns and for quarterly earnings announcement stock returns is not lower for large firms or for firms followed more by analysts or held more by institutions. Further, we find that the ability of accruals to predict future returns does not seem to depend on stock price or transaction volume, measures of transaction costs, also contrary to predictions of the naïve investor hypothesis. These results are robust to regression and hedge portfolio tests. We conclude that the predictive ability of accruals for subsequent returns does not seem to be due to the inability of market participants to understand value-relevant information.
Journal of International Financial Management and Accounting | 2003
Gordon M. Bodnar; Lee-Seok Hwang; Joseph Weintrop
In this paper we examine the value relevance of geographical earnings disclosures for firms listed and domiciled in Australia, Canada and the United Kingdom. We find that foreign earnings in all three countries are valued differently than domestic earnings. The estimate of the association coefficient for foreign earnings changes with returns is positive in all three countries and statistically larger than the association coefficient for domestic earnings changes in Canada and the United Kingdom. Further tests show that this difference is related to relative growth opportunities of overseas operations to domestic operations. These findings are similar to results for foreign earnings association coefficients for American-based multinationals found in Bodnar and Weintrop (1997). These results indicate that across countries the market perceives the results of foreign operations as value relevant and suggests that greater emphasis should be placed on the required disclosure of segmental data rather than on the concern that all countries prepare the segmental information using a common GAAP.
Journal of Accounting, Auditing & Finance | 1997
Stephen H. Bryan; Lee-Seok Hwang
Prior studies argue that a firms investment opportunity set affects the level of information asymmetry and thereby the structure of CEO compensation. We test whether the political constraints imposed in a regulatory environment incrementally affect both the level and the structure of CEO compensation, while controlling for the effects of investment opportunity set and other firm characteristics. We hypothesize that increased political constraints reduce the need and the opportunity to pay management bonuses, stock options, and other incentive-based compensation, in addition to a base salary. We test our hypothesis using CEO compensation data from electric utility companies during 1990–1995. We develop refined measures for different levels of regulation and monitoring within the electric utility industry. Our results provide evidence that increased political constraints affect both the level and structure of CEO compensation, after controlling for investment opportunity set and other firm characteristics, such as firm size, systematic risk, and performance.
The Journal of Business | 2005
Stephen H. Bryan; Lee-Seok Hwang; Steven B. Lilien
The 1992 National Energy Policy Act (NEPA) intensified competition in the electric utility industry by allowing nonutility generators to produce and sell power in wholesale energy markets. Congress expected NEPA to lead to improved operating efficiencies by substituting market forces for regulation. A data set that is unique to the utility industry allows us to test how and whether utility firms reallocated resources to improve efficiencies and, more important for this study, whether CEO compensation changed in accordance with agency theory predictions that CEO compensation would become more incentive-based and more equity-based in the competitive operating environment.
Abacus | 2013
Lee-Seok Hwang; Woo-Jong Lee
In an influential paper, Frankel and Lee (1998) conclude that the stock return predictability of the value-to-price ratio (V/P) results from market mispricing. This paper confirms whether the V/P reflects the rational risk premiums associated with the V/P factor or is better explained by market inefficiency. Following Daniel and Titman (1997), this paper examines whether the V/P characteristics or the V/P factor loadings predict stock returns. The findings show that the V/P loadings are positively associated with average returns even after controlling for the V/P characteristics in both time series and cross-sectional tests. The overall results suggest that the mispricing explanation of the V/P effect is premature.
Archive | 2010
Lee-Seok Hwang; Byungcherl Charlie Sohn
This study documents the prominent role of idiosyncratic risk in impeding arbitrage activities with regard to a new value-to-price anomaly. Adopting the theoretical foundation and empirical specification of Hwang and Sohn’s (2010) real-option-based valuation model, we measure the intrinsic value of a firm’s equity (Vo) by explicitly incorporating the shareholders’ abandonment option into the residual-income-based value estimate. This new value-to-price (Vo/P) ratio has a unique return predictability after controlling for previously known return determinants (such as beta, the book-to-market ratio, and momentum), especially when the probability of exercising the shareholders’ abandonment option is high. We call the power of Vo/P to predict future returns the “Vo/P anomaly.” We find that this Vo/P anomaly is exacerbated by idiosyncratic risk to a greater extent than by any other arbitrage risk factor, including institutional ownership, analyst coverage, bid-ask spread, and trading volume. This evidence is consistent with an emerging stream of literature that claims that idiosyncratic risk is the single greatest impediment to market efficiency. We also find that the impact of idiosyncratic volatility on the Vo/P anomaly is more pronounced for firms with a high probability of exercising the abandonment option. Our findings are robust to various sensitivity tests.
Journal of Corporate Accounting & Finance | 1998
Hugo Nurnberg; Lee-Seok Hwang
The authors present a useful template for estimating employee stock option fair value, using the Black-Scholes pricing model.
Journal of Accounting Research | 2004
In-Mu Haw; Bingbing Hu; Lee-Seok Hwang; Woody Wu
The Journal of Business | 2000
Stephen H. Bryan; Lee-Seok Hwang; Steven B. Lilien