Shing-yang Hu

The effects of the stock transaction tax on the stock market - Experiences from Asian markets

This paper examines the economic effect of the stock transaction tax, using 14 tax changes that occurred in Hong Kong, Japan, Korea, and Taiwan during the period 1975–1994. On average, an increase in tax rate reduces the stock price but has no significant effect on market volatility and market turnover. To separate noise trading from other components, I also examine the changes in idiosyncratic volatility and idiosyncratic turnover for size portfolios. For the small firm portfolio, the idiosyncratic volatility is significantly lower during the high-tax period, but not turnover. Overall, the evidence is not consistent with the hypothesis that stock transaction tax can reduce noise trading and volatility.

A Family Member or Professional Management? The Choice of a CEO and its Impact on Performance

In this study, we explore what kinds of family firms are more likely to have a family CEO or professional CEO, and investigate the performance of CEOs from different backgrounds. The results show that firms with low requirements in managerial skills and a high potential for expropriation are more likely to choose a CEO from the controlling family (nepotism). Our investigation, furthermore, shows that when a firm requires high managerial skills, using a professional CEO can help firm performance, especially if the family has low cash-flow rights and weak control. When there is large opportunity for expropriation in a family firm, the firms performance will be better if the CEO is a family member and the family has highly persuasive cash-flow rights.

What Kind of Trading Drives Return Autocorrelation

This paper proposes new tests for the prediction of Llorente, Michaely, Saar, and Wang (2002) that information trading drives positive autocorrelation. Daily data from the Taiwan Stock Exchange is used to exploit the differences in the trading motivations of three groups of institutional investors. Consistent with the predictions, we find that heavy trading by foreigners and mutual funds will increase the autocorrelation particularly for large firms, and that heavy trading by dealers will not. We also find that the sell volume of mutual funds - short sales are disallowed by regulation - has significantly smaller effect on the autocorrelation of returns than buy volume. A portfolio strategy that exploits the observed autocorrelation pattern can generate a significantly positive daily return. Key words: Institutional trading, information trading, return autocorrelation, short-sale constraints