Financial reporting fraud and other forms of financial reporting misconduct are a significant threat to the existence and efficiency of capital markets. This study reviews the literature on financial ...reporting misconduct from the perspectives of law, accounting, and finance. Our goals are to establish a common language for researchers interested in this line of research, describe the main findings and challenges in these literatures, and provide directions for future research. Although research on financial reporting misconduct faces challenges, those challenges provide significant opportunities to advance the literature, as the answers to many questions on financial reporting misconduct remain unsettled.
A growing body of research has analysed the variegation of financialization processes and the role of states as important actors therein. Contributing to this literature, this paper argues that more ...than important actors facilitating financialization, states can also (partially) exert control over, actively manage and shape financialization. In the context of China's variegated financialization process, this paper analyses the crucial role of securities exchanges in the development of China's capital markets since the global financial crisis 2007-2009. These state-owned exchanges act as intermediaries between the Chinese state, society and finance by shaping the infrastructural arrangements of capital markets. Thereby, they facilitate the authorities' ability to control markets and direct their outcomes towards state policies. Financialization is thereby decoupled from a neoliberal policy paradigm, and rather than a break with China's authoritarian capitalism, exchanges facilitate state control within and through financialization.
The Real Effects of Short-Selling Constraints Grullon, Gustavo; Michenaud, Sébastien; Weston, James P.
The Review of financial studies,
06/2015, Volume:
28, Issue:
6
Journal Article
Peer reviewed
We use a regulatory experiment (Regulation SHO) that relaxes short-selling constraints on a random sample of U.S. stocks to test whether capital market frictions have an effect on stock prices and ...corporate decisions. We find that an increase in short-selling activity causes prices to fall, and that small firms react to these lower prices by reducing equity issues and investment. These results not only provide evidence that short-selling constraints affect asset prices, but also confirm that short-selling activity has a causal impact on financing and investment decisions.
Intelligent transformation plays a crucial role in advancing sustainable development in manufacturing while also enhancing the information environment. This study examines the role of intelligent ...transformation in China’s manufacturing sector, spanning theoretical and empirical dimensions and being anchored in the context of capital market information efficiency. The theoretical framework highlights how intelligent transformation mitigates information asymmetry, aligning a firm’s valuation with its intrinsic value, thereby elevating the information efficiency of capital markets. Leveraging annual reports from China’s A-share manufacturing firms, this study employs textual analysis to construct indicators assessing the extent of intelligent transformation across these entities. The empirical findings of this study harmonize with the theoretical constructs. Notably, intelligent transformation emerges as a pivotal driver in enhancing information efficiency in capital markets, substantiated by a negative correlation between intelligent transformation and stock price synchronicity within the manufacturing domain. This correlation withstands a battery of robustness tests and endogeneity treatment. The mechanism driving this transformative impact lies in intelligent transformation’s ability to enhance productivity and magnify market attention, thereby positively influencing capital market information efficiency. The insights not only provide empirical support but also offer practical guidance for improving real-world company operations and developing high-quality capital markets.
We develop a dynamic agency model in which payout, investment, and financing decisions are made by managers who attempt to maximize the rents they take from the firm, subject to a capital market ...constraint. Managers smooth payout to smooth their flow of rents. Total payout (dividends plus net repurchases) follows Lintner's (1956) target adjustment model. Payout smooths out transitory shocks to current income and adjusts gradually to changes in permanent income. Smoothing is accomplished by borrowing or lending. Payout is not cut back to finance capital investment. Risk aversion causes managers to underinvest, but habit formation mitigates the degree of underinvestment.
Capital market liberalization has been a key battle in the debate on globalization for much of the previous two decades. Many developing countries, often at the behest of international financial ...institutions such as the IMF, opened their capital accounts and liberalized their domestic financial markets as part of the wave of liberalization that characterized the 1980s and 1990s and in doing so exposed their economies to increased risk and volatility. Now with even the IMF acknowledging the risks inherent in capital market liberalization, the central intellectual battle over the effects of capital market liberalization has for the most part ended. Though this new understanding of the consequences of capital market liberalization is reshaping many policy discussions among academics and international institutions, ideological and vested interests remain. Critical policy debates also remain, such as how much government should intervene and what tools are available. Although capital market liberalization might not produce the promised benefits, many economists and policymakers still worry about the costs of intervention. Do these costs exceed the benefits? What are the best kinds of interventions, under what circumstances? To answer these questions, we have to understand why capital market liberalization has failed to enhance growth, why it has resulted in greater instability, why the poor appear to have borne the greatest burden, and why the advocates of capital market liberalization were so wrong. Bringing together some of the leading researchers and practitioners in the field, this volume provides an analysis of both the risks associated with capital market liberalization and the alternative policy options available to enhance macroeconomic management. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/economicsfinance/9780199230587/toc.html Contributors to this volume - Andrew Charlton, London School of Economics Randall Dodd, Financial Policy Forum Gerald Epstein, University of Massachusetts Roberto Frenkel, Centro de Estudios de Estado y Sociedad (CEDES) Ilene Grabel, University of Denver Stephany Griffith-Jones, Institute of Development Studies, University of Sussex K. S. Jomo, United Nations Department of Economic and Social Affairs (DESA) Martin Khor, Third World Network Jose Antonio Ocampo, United Nations Under-Secretary-General for Economic and Social Affairs Gabriel Palma, University of Cambridge Avinash Persaud, Intelligence Capital Liliana Rojas-Suarez, Center of Global Development; Latin American Shadow Financial Regulatory Committee Benu Schneider, Financing for Development Office of the United Nations Department of Economic and Social Affairs Shari Spiegel, New Holland Capital Joseph E. Stiglitz, Initiative for Policy Dialogue Sergio L. Schmukler, Development Research Group of the World Bank
Paraguay, like other economies, has two financial circuits, one corresponding to monetary flow and the other to intangible assets; the purchase and sale of the latter are carried out through the ...Capital Market. This market allows physical and legal economic agents from both the private and public sectors to request resources to finance the purchases of goods and the contracting of services, required to carry out the inherent activities of their organization. For this purpose, these economic agents quote fixed income securities, bonds, or variable income, shares; that are bought by those who seek to channel their savings to investment (Fabozzi, Modigliani and Ferri, 1996).
This paper develops a theory of how angel and venture capital markets interact. Entrepreneurs first receive angel then venture capital funding. The two investor types are ‘friends’ in that they rely ...upon each other׳s investments. However, they are also ‘foes,’ because at the later stage the venture capitalists no longer need the angels. Using a costly search model we derive the equilibrium deal flows across the two markets, endogenously deriving market sizes, competitive structures, valuation levels, and exit rates. We also examine the role of legal protection for angel investments.
We investigate the effect of financial development on the formation of European corporate groups. Because cross-country regressions are hard to interpret in a causal sense, we exploit exogenous ...industry measures to investigate a specific channel through which financial development may affect group affiliation: internal capital markets. Using a comprehensive firm-level data set on European corporate groups in 15 countries, we find that countries with less developed financial markets have a higher percentage of group affiliates in more capital-intensive industries. This relationship is more pronounced for young and small firms and for affiliates of large and diversified groups. Our findings are consistent with the view that internal capital markets may, under some conditions, be more efficient than prevailing external markets, and that this may drive group affiliation even in developed economies.
This paper was accepted by Bruno Cassiman, business strategy.
The extent to which conglomerates face frictions in external capital markets has implications for their internal capital allocation. We find that, during recessions, when external financing costs are ...higher, conglomerates improve the efficiency of internal capital markets by increasing the allocation of funds to high
q divisions relative to low
q divisions. The improvement is significantly higher for conglomerates that are likely to face more binding financial constraints. This evidence suggests that although financial constraints impair managers’ ability to undertake positive net present value projects, they improve the quality of project selection by reducing free cash flow and pressuring managers to fund the more valuable investment opportunities. It is consistent with theories stressing the benefits of internal capital markets in the presence of external capital market imperfections.
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