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Volume 23, Issue No. 1, March 2016
- Min Zhang, Wen Zhang* and Sheng Zhang*, National culture and firm investment efficiency: international evidence, 1-21
- Min-ho Jang and Joon-hwa Rho*, IFRS adoption and financial statement readability: Korean evidence, 22-42
- Ju-Chun Yen*, Shu-Hsing Li and Kuo-Tay Chen, Product market competition and firms’ narrative disclosures: evidence from risk factor disclosures, 43-74
- Jaimin Goh, Wonwook Choi and Jungeun Cho*, Changes in chaebol firms’ overinvestment after the Asian financial crisis: a long-term perspective, 75-111
- Burçak Polat and Cem Payaslıoğlu*, Exchange rate uncertainty and FDI inflows: the case of Turkey, 112-129
National culture and firm investment efficiency: international evidence
Min Zhang, Renmin University of China and Collaborative Innovation Centre for State-owned Assets Administration, China
Wen Zhangc*, Beijing Information Science and Technology University, China
Sheng Zhangd*, Zhongnan University of Economics and Law, China
Abstract
This paper examines the impact of national culture on firm investment efficiency using data of listed companies from 18 countries. We measure culture using Hofstede’s four cultural dimensions: power distance, uncertainty avoidance, individualism, and masculinity. We follow extant literature to measure firm investment efficiency. Our results indicate that individualism is positively correlated with firm investment bias and that uncertainty avoidance and masculinity are negatively correlated with firm investment bias. In addition, the influence of national culture on firm investment efficiency was more pronounced during the global financial crisis of 2008. Our results show that national cultures have significant influence on firm investment efficiency. This paper enriches the literature on the relationship between national culture and firm investment and has important implications for the investment decisions of firms.
Keywords: national culture; firm investment efficiency; investment bias; financial crisis
JEL Codes: G31; M14 |
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IFRS adoption and financial statement readability: Korean evidence
Min-ho Jang, Geumgang University, Korea
Joon-hwa Rho*, Chungnam National University, Korea
Abstract
Accounting is often called a language of business and the grammar of the language is now under transition to a new one – the IFRS. Does the IFRS regime help make accounting a better business language than do other accounting regimes? That is our research question, and to answer the question we examine the effect of IFRS adoption on readability of firms’ financial disclosures. As a global accounting regime, the IFRS puts greater emphasis on understandability in financial reporting than do any other existing accounting standards. In many countries, however, adopting the IFRS involves the process of translating the original IFRS into local non-English languages, and apparently, the IFRS Foundation sticks to word-for-word or literaltranslation policy to ensure an adopter country’s complying with the original IFRS. Understandability and literal translation, however, might be less than a good match. It is, therefore, timely and relevant to examine whether financial statement understandability has improved under the IFRS regime in non-English speaking settings. Korea serves as a real-world setting for research on readability of accounting information because Korea has two concurrent accounting regimes for two years before her complete IFRS adoption. We compare the 57 IFRS adopter firms and 943 nonsuch firms for readability of their disclosed financial statement footnotes. The univariate and multivariate results indicate that the IFRS-based financial statements have significantly lower, not higher, readability than those based on the local accounting standards. Results also show that minority shareholder population and firm age have significantly positive influence on the association between IFRS adoption and financial statement readability. The findings of this study have both academic and policy implications.
Keywords: IFRS; understandability; word-for-word translation; financial statement footnotes; translation policy |
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Product market competition and firms’ narrative disclosures: evidence from risk factor disclosures
Ju-Chun Yen*, Shu-Hsing Li and Kuo-Tay Chen, National Taiwan University, Taiwan
Abstract
This study examines how product market competition affects firms’ narrative disclosures of Item 1A Risk Factors in 10-K filings. We find that firms in more concentrated industries tend to disclose a greater quantity of narrative risk information. Besides, such firms provide risk disclosures more similar to those of their competitors, hence reducing the quality of the disclosure. We also document similar findings for idiosyncratic risk disclosure, which is inherently more firm-specific. The results imply that firms in more concentrated industries avoid divulging risk information in their narrative disclosures by disclosing more similar information rather than by reducing the amount of risk disclosure.
Keywords: product market competition; industry concentration; proprietary cost; risk factor disclosure; textual analysis
JEL classification: D43; M40; M41 |
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Changes in chaebol firms’ overinvestment after the Asian financial crisis: a long-term perspective
Jaimin Goh, Inha University, South Korea
Wonwook Choi and Jungeun Cho*, Yonsei University, South Korea
Abstract
This paper examines chaebol firms’ overinvestment practices before and after a financial crisis in Korea. In comparison to non-chaebol firms, chaebol firms signifi- cantly reduced overinvestment after the Asian financial crisis. Also, chaebol firms were less inclined to engage in earnings management for overinvestment after the financial crisis. The results suggest that governance and financial reforms focusing on chaebol firms and emphasizing long-term firm value after the crisis discouraged chaebol firms’ overinvestment practices, bringing about a sharp rebound in their business performance.
eywords: chaebol; overinvestment; earnings management; Asian financial crisis; future operating performance
JEL Classifications: G18, G31, G38, M40, M41 |
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Exchange rate uncertainty and FDI inflows: the case of Turkey
Burçak Polat and Cem Payaslıoğlu*, Eastern Mediterranean University, Turkey
Abstract
In this paper, using monthly data for the period of 2004–2014, we employ a Markov switching model to examine the impact of the level and volatility of real exchange rate (RER) on foreign direct investment (FDI) inflows to Turkey along with a set of control factors. Our estimation results do not support any effect of volatility or the RER. On the other hand, internal factors such as agglomeration effect, inflation, new incentive measures of 2009, and external factors such as Euro area policy interest rate and risk appetite turn out to be effective in driving FDI into the host country.
Keywords: FDI; real exchange rate; Markov switching model; volatility; GARCH
JEL Codes: C22, C51, F21, F29, F31 |
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