First voluntary disclosure: is it less opportunistic?

Young-Soo Choi*, Sungkyunkwan University, Korea

Abstract
The objective of voluntary disclosure regulation is to mitigate information asymmetry between the management and outside users. However, prior studies on voluntary disclosures provide mixed evidences on managers’ incentives. Using a setting of voluntary non-generally accepted accounting principles earnings per share (GAAP EPS) reporting, this study attempts to examine whether the first non-GAAP EPS reporting is less dominated by opportunistic incentives. Consistent with the predictions of this research, it reveals that the duration to the first adjusted EPS disclosure is not more sensitive to negative transitory items, and moreover investors’ perception on the first non-GAAP EPS is more positive compared to subsequent ones. The less opportunistic behaviour on the first disclosure can be well explained by the management’s awareness of intensified monitoring by outside stakeholders.

RMB Bilateral Swap Agreements: how China chooses its partners?

Alicia Garcia-Herrero and Le Xia*, BBVA Research, Spain, and BBVA Research, Hong Kong

Abstract
As part of the measures taken to foster the internationalization of the RMB, China has signed RMB Bilateral Swap Agreements (BSAs) with a number of countries. Although the Chinese Government has stressed the importance of trade as the key driver of signing RMB BSAs, its validity hasn’t been tested yet. This paper analyzes empirically the key determinants for China to choose its RMB BSA partners. We find that the gravity factors are predominant (closeness to China and a bigger size increase a country’s likelihood of signing an RMB BSA). In addition, closer trade links also have a positive impact on China’s choice of BSA partners, as claimed by the authorities. Institutional strength is not relevant although China does seem to have a preference for countries with a sovereign default history and financial closedness.

Keywords: RMB internationalization; Bilateral Swap Agreements
JEL: F33; F36; F42

Family firms and the incentive contracting role of accounting earnings

Yu-Lin Chen* and Chao-Jung Chen, Chung Yuan Christian University, Taiwan

Abstract
We investigate how family controls affect the sensitivity of the variable pay of top management to the firm’s accounting-based performance (PPS) in order to deal with both the traditional agency problem between owners and managers, and the central agency problem between controlling and minority shareholders. Using five-year data from Taiwan-listed firms, our results show that PPS is stronger for both non-family managers employed by family firms, and family managers, and is weakest for managers in non-family firms. Additionally, PPS is more pronounced in family firms with potential central agency problems, when the CEO is not a family member than when the CEO is.

Keywords: contracting role of accounting earnings; family control; central agency problem
JEL codes: G34; J33

Do financial expert directors affect the incidence of accruals management to meet or beat analyst forecasts?

Pei Hui Hsu*, California State University, USA

Abstract
Evidence that firms adjust accruals to meet or beat analyst forecasts is pervasive. However, the implications for earnings quality are not clear. Managers can use this practice to mislead investors or to signal future earnings growth. Assuming boards are concerned about providing higher quality financial information, they should discourage managers from adjusting earnings to beat the target if adjustment diminishes earnings quality. Consistent with this prediction, I find a significantly negative relation between the probability that a firm beats the target by adjusting accruals and the presence of independent audit committee financial expert for firms with poor future performance.

Keywords: earnings management; corporate governance; board of director; financial experts; analyst forecasts
JEL classification: M40; M41; G34; G38

Trade and market integration with heterogeneous labor

Cheng-Te Leea*, Chinese Culture University, Taiwan
Deng-Shing Huangb, Academia Sinica, Taiwan

Abstract
This paper explores the impact of labor market integration between an advanced country (North) and backward country (South) on income distribution and pattern of trade (POT) by making use of a two-sector, competitive trade model with heterogeneous labor. We prove that, for the North, the labor market integration increases income inequality. And, for the South, the integration decreases income inequality. In addition, we find that the POT for the integrated economy might reverse.

Keywords: diversity; market integration; pattern of trade; income distribution
JEL classification: F15; F22

CEO gender and corporate cash holdings. Are female CEOs more conservative?

Sanyun Zeng and Lihong Wang*, Xiamen University, China

Abstract
In this paper, we empirically investigate how CEO gender affects corporate cash holdings and the over-investment of free cash flow among Chinese listed firms. Thereby, we utilize a sample of 468 listed firms with female CEOs and a matched sample of firms with male CEOs during 2007–2011. We then make a distinction between listed SOEs and non-SOEs in China. The empirical results show that female CEOs are associated with a higher level of corporate cash holdings, especially in Chinese listed non-SOEs. Compared with their male counterparts, female CEOs are more concerned with the precautionary motive of cash, while they care less about the opportunity cost of cash. Besides, we find that female CEOs moderate the over-investment problem of free cash flow, again indicating that they are more conservative than their male counterparts. The latter finding is more pronounced in the subsample of Chinese listed SOEs.

Keywords: CEO gender; cash holdings; over-investment; free cash flow; state control
JEL classifications: G30; G34; J16