Finance

Research Highlights

Loan loss provisions and return predictability: A dynamic perspective

Phoebe Gao, Chu Yeong Lim, Xiumei Liu, Cheng Colin Zeng - China Journal of Accounting Research

The paper finds the relationship between bank loan provisions and future stock returns is contingent on bank regulations and macroeconomic conditions.

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Finance and Firm Volatility: Evidence from Small Business Lending in China

Tao Chen , Yi Huang , Chen Lin , Zixia Sheng - Management Science

Alibaba provides FinTech credit for millions of MSMEs via Ant Group. Using their data, we apply RDD and find credit access reduces firm volatility.

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Don's Column: Financial Statement Disaggregation

Chan-Ng Ai Lin & Kevin Koh - ISCA Journal

Using research evidence, the authors discuss the business case for companies to produce more detailed financial statements.

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Bank Lines of Credit as a Source of Long-term Finance

Xin Chang, Yunling Chen & Ronald Masulis - Journal of Financial and Quantitative Analysis

This research explains why firms tend to use the most long-term credit line drawdown proceeds to finance investment, especially for M&A. These drawdowns are repaid fairly quickly, often refinanced with other long-term debt – implying that long-term drawdowns are a valuable bridge financing mechanism.

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The impact of the IFRS 9 expected loss approach on accounting conservatism

Clarence Goh, Chu Yeong Lim & Kevin Ow Yong - Accountancy Business and The Public Interest

Using an experimental setting, this paper examines the impact of International Financial Reporting Standard (IFRS 9) expected credit loss approach on accounting conservatism.

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The effects of financial statement disaggregation on audit pricing 

Kevin Koh, Yen Hee Tong & Zinan Zhu - International Journal of Auditing

We find that auditors assess higher engagement risk and charge higher audit fees for clients with more disaggregated financial statements, as greater financial statement disaggregation is positively associated with litigation risk.

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Board structure, director expertise, and advisory role of outside directors

Chen Sheng-Syan, Chen Yan-Shing, Kang Jun-Koo, & Peng Shu-Cing - Journal of Financial Economics

Firms appoint more directors with China-related experience following the U.S. Congress’ grant of Permanent Normal Trade Relations status to China and their acquisitions of Chinese firms after the grant resulted in higher firm value.

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Activist-appointed directors

Kang Jun-Koo, Kim Hyemin, Kim Jungmin, & Angie Low - Journal of Financial and Quantitative Analysis

Firms appointing directors nominated by activists experience a larger value increase that goes beyond the impact of pure activist intervention without board representation.

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Monitoring the monitor: Distracted institutional investors and board governance

Claire Liu, Angie Low, Ronald Masulis, & Le Zhang - Review of Financial Studies

Distracted institutional investors are less likely to discipline directors with negative votes, causing directors to have less incentives to monitor managers.

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Improved index insurance design and yield estimation using a dynamic factor forecasting approach

Hong Li, Lysa Porth, Ken Seng Tan & Wenjun Zhu - Insurance: Mathematics, and Economics

Accurate crop yield forecasting is central to effective risk management for many stakeholders in various practices, such as crop management, insurance policy design, and premium rate setting. We investigate an innovative approach of yield forecasting and designs an enhanced weather index-based insurance (IBI) policy.

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