Louis T. W. Cheng

• DBA Louisiana Tech Univ
• Professor at The Hang Seng University of Hong Kong

ESG rating divergence is an important empirical and debatable issue that can lead to confusion from corporate users [Berg, F, JF Koelbel and R Rigobon (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315–1344] but also possible additional information disclosure as a result of subjective interpretations of analy...

This paper applies an advanced machine learning algorithm, the Artificial Neural Network (ANN), to examine both linear and nonlinear effects between firm-level characteristics and ESG performance of all firms listed on the Hong Kong Stock Exchange (HKEX) with ESG scores during 2019-2021. To mitigate the problem of data-specific findings due to rati...

Purpose This study aims at proposing and testing a model delineating how and when the quality of a special B2B professional service, investment relations (IR), would drive corporate intangible value. Design/methodology/approach This study employs a proprietary dataset on voting records of an annual investment relations (IR) awards event and the co...

Converging corporate carbon performance (CCP) to a higher level is necessary to achieve the global goal of controlling temperature rise. However, it remains uncertain whether all international firms endeavour to improve CCP. Using a panel of 19,913 public companies from 76 countries during the 2010–2019 period and two visual tools of the distributi...

In this study, we examine corporate carbon performance globally from the perspective of country-level dispersion. The average carbon performance of listed companies in the non-OECD countries increases more after the Paris Agreement than that of listed companies in the OECD countries. However, under an increasing trend of average country-level carbo...

The literature shows that investor attention to customer–supplier disclosure increases when suppliers’ information arrival is anticipated. Due to the widespread of city lockdowns in China and the implementation of social distancing to control the COVID-19 pandemic, investor attention to potential disruption of the supply chain spikes, leading to a...

This paper shows that brand reputation alone may not be sufficient to help firms successfully issue green bonds and that they may need superior corporate social responsibility performance in the form of high ESG (Environmental, Social, and Governance) scores to unlock the full potential of their brand reputation. Using a sample of 338 international...

Exploiting the staggered deregulation of short sales in China as a quasi‐experiment, we investigate whether firms change investor relations (IR) strategy when they face short‐selling pressure. We document significant increases in IR efforts as measured by the frequency of company visits when firms’ stocks become shortable in the market. Our cross‐s...

In this paper, we report on the analysis of data collected from 684 students majoring in Accounting and Finance, to examine the relationship between academic outcomes and Work-integrated Education (WIE) and International Study Exchange (ISE) experiences. Both WIE and ISE are common elements of undergraduate business education because of the benefit...

This paper investigates the effect of insider ownership on stock price synchronicity. Specifically, for countries with poor investor protection, the managerial entrenchment effect dominates. When ownership increases, synchronicity increases at an increasing rate. However, for countries with strong investor protections, managerial entrenchment effec...

This paper extends the growing research on the dark side of B2B relationships by exploring the differences in third-party certification effects based on social capital with professional financial services firms, using a proprietary dataset with confidential voting records of the nominations for Investor Relation Awards in Hong Kong. Results confirm...

We examine the role of ESG performance during market-wide financial crisis, triggered in response to the COVID-19 global pandemic. The unique circumstances create an inimitable opportunity to question if investors interpret ESG performance as a signal of future stock performance and/or risk mitigation. Using a novel dataset covering China’s CSI300...

Capstone projects are common in undergraduate programmes, providing students with a culminating educational experience designed to draw on the knowledge and skills accumulated over the course of their studies. While there are many benefits to capstone projects, they are not without challenges. In particular, when these projects are conducted in gro...

This paper explores the differences in the impact of political connections on the performance of Chinese exporter and non-exporter firms and among three types of exporter firms; private-owned (POE), local state-owned (LSOE) and central state-owned (CSOE). Our sample has 7,326 firm-year observations from 1,945 firms listed on Shanghai and Shenzhen s...

This paper applies a real option framework to suggest that the takeover premia in mergers and acquisitions can be influenced by (a) the pre-bid ownership of target and (b) the real option characteristics of both acquirer and target firms. Our findings show that pre-bid ownership reduces the takeover premia, which is consistent with the argument tha...

Previous studies point to the positive effect of Classroom Response Systems (CRS) on teaching and learning. We explore two learning dimensions that may influence the effectiveness of CRS: 1) Type of knowledge taught (conceptual vs. procedural knowledge and 2) Social presence (students’ participation level in group learning through informal chat gro...

We examine the determinants of correlation patterns between green and black bond markets. Both the correlations and determinants are time-varying and estimated using a two-stage sequential methodology, extracting dynamic conditional correlations (DCC) in the first, then applying dynamic model averaging (DMA) in the second to establish the determina...

This study examines the performance implications of guanxi-related perk expenditures among listed Chinese firms. Specifically, it investigates how these expenditures influence long-term market-based corporate performance (Tobin's Q and market share) as compared with marketing expenditures. It also examines if political connections moderate this inf...

The international business education literature suggests that a global mindset can be acquired and benefit students to embrace new ideas and improve their critical thinking. Using a sample of 1,448 undergraduate students in Corporate Finance, International Finance, and Business Law subjects during 2013–2015, our results indicate that students with...

Since 1993, foreign institutional investors (strategic and corporate) have been permitted to invest in Chinese companies listed in Hong Kong as H-shares. We examine the impact of strategic and corporate investors on H-shares before, during, and after their IPOs. We observe that strategic and corporate investors select their investment candidates ba...

Mainland Chinese government employs two related strategies to protect its national and economic interests in the process of financial liberalization. It grants government protection to industries of national interest. In addition, it also maintains political-linkage with certain firms to assert their influence. We term these firms as strategic firm...

Through the interest rate deregulation and banks’ off-balance-sheet activities (OBSAs) in Hong Kong, this study investigates the debate over the impact of banking deregulation on banks’ risk-taking behaviour. On the one hand, the Arrow effect implies that increased competition caused by the interest rate deregulation motivates Hong Kong banks to sp...

Previous research on R-square has focused on the cross-sectional effects of the level of R-square and the results are mixed. We argue that changes in R-square can capture how new information is incorporated into stock prices. We examine the changes in R-square and stock price synchronicity upon compliance disclosures of earnings and regulatory repr...

Recent management literature shows that demographic characteristics of top management and corporate performance are related. Bamber et al. (2010) conclude that managers' voluntary disclosure styles are related to demographic characteristics. Also, Francis et al. (2008) demonstrate a negative relation between CEO reputation and earnings quality. We...

On November 20, 1998, the Hong Kong Futures Exchange started opening its markets fifteen minutes earlier than the opening time and closes its markets fifteen minutes later than the closing time of the Hong Kong Stock Exchange. In this paper we utilize the Geweke feedback measures to examine the effect of extended trading hours of the Hong Kong inde...

While the literature shows that perks can affect firm values positively or negatively, we argue that firms with higher perks are more likely to be associated with a lower quality of financial reporting, which, in turn, can affect the informativeness of stock prices. Based on hand-collected data on perks from Chinese listed firms, we find that firms...

DeAngelo and Masulis (1980) demonstrated that the presence of corporate tax shield substitutes for debt implies that each firm has a "unique interior optimum leverage decision..." Masulis (1983) argued further that when firms which issue debt are moving toward the industry average from below, the market will react more positively than when the firm...

The literature shows that insider trading activities and dividends contain information content and serve as signals to firm value. If insider return is a proxy for information asymmetry, we should expect a positive relation between dividends and insider returns. Using a sample of unambiguous (good and bad) news concerning earnings and dividend anno...

By analysing archival data of 5451 Chinese listed companies, this investigation offers insights into how the relational demographic differences between the highest ranking executives (chairperson and general manager) may affect corporate performance in a Chinese cultural context. Overall, the findings derived from the regression analyses reveal tha...

Drawing on upper echelons theory, the resource-based view of the firm (RBV) and managerial networking theory, we hypothesize that management demography of chairpersons is important and reflects valuable resources of the firm. Our empirical examination of Chinese firms supports this hypothesis by showing that various management demographic character...

This paper examines the transitory price effects of index futures trading extension on the underlying stock market. Based on the model formulation of George and Hwang (1995) and Amihud and Mendelson (1987) and using the Hong Kong data, we find that the extension of futures trading hour helps to reduce the opening pricing errors and change the corre...

Comprehensive data on corporate announcements of Chinese firms allows us to examine the preference for, and determinants of, cash and stock dividends. The results indicate that Chinese public investors prefer stock dividends over cash dividends, which are preferred by large state and legal person shareholders generally. Stock dividends, which do no...

We conjecture that an introduction of the Hong Kong Hang Seng Chinese Enterprise Stock Index (H-share Index) futures induces additional speculating activities in the underlying equities, leading to an increase in volatility and volume of the underlying stocks. Whereas, a subsequent introduction of H-share index options increases the level of inform...

Using data from 24 accounting journals during 1991 to 2005, we examine the determinants for coauthorship ordering. While there is a significant increase in the percentage of co-authored papers throughout the period, about 75 percent of all co-authored papers have the authors' names listed alphabetically in most years. Our logit regression results s...

We use financial data on poorly performing firms in Hong Kong to examine the motives behind paying out cash dividends when they suffer an earnings decline. We test three hypotheses behind the cash dividend policy: the maturity hypothesis, the free cash flow hypothesis, and the self-interest hypothesis of directors (i.e., the cash channeling hypothe...

This study examines whether insiders (directors) exploit information advantage of their firms by trading stocks before the simultaneous earnings and dividend announcements in Hong Kong. Our findings show that there are significant net-insider-buying activities before the announcements of good news ('Earnings-Dividend Increase') and significant net-...

This study examines shareholder reactions to the announcements of OSHA penalties in the press over the years 1979-89. The analysis demonstrates that investors react negatively to the announced sanctions over the time interval immediately surrounding the announcement day. The decreases in the values of the subject firms are, however, found to be unr...

Owing to the rapid globalization of equity markets, equity returns from different international markets have become more correlated. This synchronization of markets makes diversification more challenging than ever. The recent popularity of wealth management services, especially in Asia, allows less wealthy individuals to gain access to advanced str...

We use Granger causality tests and an EGARCH model to analyze the pricing relations in the US between two exchange traded funds, the iShares FTSE/Xinhua China 25 Index (FXI) and the S&P 500 Index Fund (IVV). Daily data indicates that Hong Kong home market basically drives the FXI returns in the US. In case of intraday analysis, the US-based IVV app...

This paper reexamines the dynamic relation between intraday trading volume and return volatility of large and small NYSE stocks in two partitioned samples, with and without identifiable public news. We argue that the sequential information arrival hypothesis (SIAH) can be tested only in periods containing public news. After partitioning the sample...

We provide a global ranking of accounting research and examine the elite degree and elite affiliation effect. Based on 24 accounting journals during the period 1991-2005, the top 5 most productive countries in accounting research are in the following order: the USA, the UK, Australia, Canada and Hong Kong. We find a significant elite degree effect,...

The literature has suggested that earnings and earnings forecasts provide stronger signals than dividends about future performance of a firm. We test the information effects of simultaneous announcement of earnings and dividends in the Hong Kong market, distinguished by three interesting features (concentrated family-shareholdings, low corporate tr...

Based on the transactional theory of international joint ventures, we examine the stock price reactions for B-shares of the Chinese partners during the Sino-foreign venture announcements. Significant and positive announcement effects are found in the Shanghai and Shenzhen stock markets. We also attempt to identify determinants of the shareholders v...

This paper examines the overall wealth effects of selloffs. When sellers and buyers are examined separately, abnormal returns are found around the announcement days. However, a combination of matched-pair buyers and sellers in value-weighted portfolios wipes out these gains. In a sample of 182 selloff portfolios, 93 of them experience positive retu...

Previous research on unit management buyouts, UMBs, has shown that selling firms benefit from the selloff transaction. The current research demonstrates that when the selling firm has either poor liquidity or poor earnings, selling firm shareholders do not benefit as much. We hypothesize that the unit managers have knowledge about the selling firm'...

Using a unique market setting in Hong Kong, where (i) all firms release earnings and dividend information in the same announcement; (ii) corporate transparency is low; (iii) dividend income is non-taxable and (iv) corporate ownership is highly concentrated, we re-examine the corroboration effects of earnings and dividends. We use the control firm a...

This study provides a ranking in accounting research output in Europe during 1991-2002. We use a set of 19 accounting journals to rank accounting programmes for 253 European universities. UK universities are overwhelmingly represented in the top ranking. Over the entire period, the top three universities are the University of Manchester. London Sch...

We investigate net buying pressure in the Hong Kong Hang Seng Index options market during the Asian financial crisis from July 1997 to August 1998. Our findings suggest that during this period, the dramatic changes in volatility overwhelmed the dynamics of supply and demand in the options market. The extremely high realized volatility drove market...

This study examines the impacts of directors' dealings on firm liquidity. Consistent with the information asymmetry hypothesis, spread widens and depth falls on insider trading days as compared to non-insider trading days. This result suggests that increased share trading by insiders impairs liquidity. In addition, the spread (depth) measures are p...

We examine the impact of option trading activity on implied volatility changes to returns in the index futures option market. Controlling for option moneyness, delta-to-option-premium ratio, and liquidity, we find that net buying pressure, profit-maximization behavior, and liquidity are interrelated and affect asymmetric responses of implied volati...

We employ a sample of 3,177 events from Hong Kong industrial firms during the 1993–1999 period to examine insider trading activities around earnings and dividends announcements. By controlling for earnings management, special dividends, and other firm level financial indicators, we find that the presence of insider trading, its trading direction, a...

The China Securities Regulatory Commission requires all listed firms to make earnings announcements by the end of April each year. This requirement creates a unique opportunity for us to evaluate the timing of earnings announcements in a four-month cluster. Firms, which are willing to make early announcements, tend to surprise the market, as indica...

In this paper, we introduce two measures of allotment ratios for small investors to examine the strategic share allocation strategy of IPO underwriters in Hong Kong. Employing a sample of 267 IPOs from 1993 to 1997 and statistical analyses including two-sample comparisons and regression models, we find evidence that underwriters use non-discretiona...

Using a set of 18 accounting journals and a sub-set of top five journals from 1991 to 2002, we rank the research productivity in accounting for a total of 119 Asia-Pacific universities. For the whole sampling period, the top five universities are the University of New South Wales, Hong Kong University of Science and Technology, Nanyang Technologica...

We test the implications of overconfidence behavior using U.S. intraday trading data. We propose several testable hypotheses for return autocorrelations, trading volume, return volatility, and for the causal interrelations between volume and volatility. As predicted by overconfidence behavior, return autocorrelations are positive for short lags and...

This paper investigates the short-term return performance and long-term operating performance of 36 partial mergers in Hong Kong during the period 1984-1996. We first conduct an event-study to evaluate the short-term market performance of the target, the bidder and a simulated combined portfolio consisting of both firms involved in the acquisition....

We use the net buying pressure hypothesis of N. P. B. Bollen and R. Whaley (2004) to examine the implied volatilities, options premiums, and options trading profits at various time-intervals across five different moneyness categories of Hong Kong Hang Seng Index (HSI) options. The results show that the hypothesis can well describe the newly develop...

The recent extension of trading hours for Hang Seng Index Futures provides an opportunity to examine whether extended futures trading contains useful information about spot returns. Using the weighted price contribution measure, we find that pre-open futures trades are associated with significant price discovery. We extend the model from T. Hiraki,...

Asian initial public offerings (IPOs) require investors to pay subscription funds up-front upon submission of applications, and these funds are locked-up for 1–3 weeks without interest. Hence, the IPO process entails an explicit financing cost (opportunity cost) whether investors borrow funds or use their own funds to apply for IPO shares. The IPO...

This paper evaluates the ability of US-based Asian mutual fund managers in coping with the 1997 Asian financial crisis. We find that the actively managed mutual funds under-perform with respect to the market portfolio by 1.71 percent in average monthly return. Such poor performance is caused by fund managers' relative weakness in country selection...

We examine the intertemporal and asymmetric response from implied volatility changes to price changes under different levels of option moneyness and evaluate the cause–effect relation between implied volatilities and price changes. Based on Hang Seng Index (HSI) options transaction data, we find that asymmetric responses are essentially driven by n...

In order to outperform his peers, a mutual fund manager may decide to invest in stocks that are considerably different from his competitors. By investing in a unique portfolio, the fund manager has a greater chance of either outperforming or underperforming his peers than those managers who invest in a common portfolio (i.e., herding). This study f...

Asian initial public offerings (IPOs) require investors to pay a subscription cost upfront upon submission of an application, and these funds are locked up for one to three weeks without interest. Hence, the IPO process entails an explicit financing cost (opportunity cost) whether investors borrow funds or use their own funds to apply for IPO share...

The authors examine the marketing research productivity of Asia-Pacific universities using a set of 20 marketing journals during 1991-2000. A weighted Journal of Marketing-equivalent page count is used to account for different font and page sizes of the journals, different lengths in articles, coauthorships, and affiliations. A total of 106 univers...

This study examines the mispricing and time between arbitrage trades of the Hong Kong Hang Seng index futures and index options contracts under various stressed market conditions. Ex-ante trading profits and differences in time between trades across up and down as well as stressed and non-stressed markets are used to measure how well the derivative...

This study empirically examines how Chinese executives perceive the role of guanxi and ethics played in their business operations. By factor-analyzing 850 valid replies collected from a comprehensive survey, the present study identifies three distinct ethics-related attitudes and two distinct guanxi-related attitudes for Chinese executives. The clu...

Do European investments in China create shareholders’ value? The question is posed, but does not ask for a definite answer. Many factors have to be considered when analyzing the valuation effect of European direct investment in China and its determinants. The aim of this article is to better understand the real impact of the Sino-European joint ven...

On November 20, 1998, the Hong Kong Futures Exchange started opening its markets fifteen minutes earlier than the opening time and closes its markets fifteen minutes later than the closing time of the Hong Kong Stock Exchange. In this paper we utilize the Geweke feedback measures to examine the effect of extended trading hours of the Hong Kong inde...