Edward Lee's research while affiliated with The University of Manchester and other places

Publications (102)

Article
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We re-examine previous seminal studies on conditional conservatism (CC) that apply the asymmetric timeliness (AT) measure of Basu (1997) and compare the outcomes with those based on the modified AT (MAT) measure of Badia, Duro, Penalva, & Ryan (2021) and the spread in conditional variances (SCV) measure of Dutta & Patatoukas (2017). Our conclusions...
Article
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In this paper, we examine the influence of business strategy on dividend policy. We find that firms following an innovation-oriented strategy (prospectors) pay significantly lower dividends than those following an efficiency-oriented strategy (defenders). Our cross-sectional analyses show that such association is more pronounced among firms with gr...
Article
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We examine whether and how collusive and coercive forms of corporate corruption influence firm value. Our identification strategy exploits (i) the exogenous criminal prosecutions of regional government officials as part of China’s anti-corruption campaign as demand-side shocks and (ii) the unique reporting of entertainment and travel costs by Chine...
Article
This study examines whether and how firms adjust their accounting conservatism in response to government support through industrial policies, which reduce firms’ dependence on external financing from the capital market. Based on China’s unique economic programme called ‘Five-Year Plan’ from 1991 to 2015, we observe a decline in accounting conservat...
Article
Unlike prior research that focuses on determinants of firm‐specific stock price crashes (SPCs), we study the consequences of SPCs on market information efficiency. The tension underlying our research question stems from two competing explanations. As an unanticipated shock, a SPC could stimulate (distort) information efficiency by triggering invest...
Article
CEOs with substantial short-term equity incentives behave myopically out of concerns for the stock price. We argue that corporate tax avoidance, given its positive impact on stock prices, is one potential target for managerial myopia. We show that, ceteris paribus, CEO short-term equity incentives are associated with declines in cash effective tax...
Preprint
We examine the relation between corporate tax planning and firm-level productivity. Using a sample of U.S.-listed firms from 1994 to 2017, we show that, ceteris paribus, lower effective tax rates lead to higher production efficiency. Consistent with the "funding gap" of innovative investments due to debt market frictions, the results indicate that...
Article
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This paper examines the influence of bank branch deregulation on corporate borrowers' stock price crash risk. Using a large sample of U.S. public firms over the period 1962–2001, we provide robust evidence that intrastate branch reform contributes to the reduction of firms' stock price crash risk. Further analysis shows that the negative relation b...
Article
This paper investigates the impact of business strategy on firms’ trade credit policies. We find that firms following an innovation-oriented strategy (prospectors) offer significantly more trade credit to their customers than those following an efficiency-oriented strategy (defenders). Furthermore, by exploiting two exogenous shocks to the supplies...
Article
We utilize the mandatory corporate social responsibility (CSR) disclosure regulation in China as an exogenous shock to evaluate the impact of such disclosures on investors as end users of accounting information based on the analysis of share price responses to earnings announcements. Specifically, we observe that firms with mandated CSR disclosure...
Article
We examine the relation between corporate tax planning and firm-level productivity. Using a sample of U.S.-listed firms from 1994 to 2017, we show that, ceteris paribus, lower effective tax rates lead to higher production efficiency. Consistent with the "funding gap" of innovative investments due to debt market frictions, the results indicate that...
Article
Motivated by Cao et al. (2015), we utilize China’s one-child policy reform as a unique and exogenous setting to examine the economic impact of a potential rise in bequest motives among family firms, which is driven by the prospect of family and clanship expansion after the reform. A bequest motive is the economic incentive to accumulate wealth pres...
Article
We examine foreign lenders’ use of performance pricing provisions (PPPs) in syndicated loan contracts. First, we find that foreign lenders, as a result of both higher information asymmetry and greater renegotiation costs than their domestic counterparts, adopt PPPs instead of tight covenants in their contracts. Second, foreign lenders have a greate...
Article
We examine whether corporate social responsibility (CSR) disclosure affects the valuation decision of foreign investors. Our research is set in China's segmented market where some Chinese firms issue two classes of shares with identical voting and cash flow rights, but with one class traded largely by domestic investors and the other traded largely...
Article
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We examine the potential for IFRS to influence the market for SEOs in the UK and France. The divergence between the UK domestic accounting standards and IFRS is minor (low-divergence firms) whereas domestic accounting standards in France differ materially from IFRS (high-divergence firms); however, both countries have similar legal enforcement and...
Article
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We exploit the mandatory adoption of International Financial Reporting Standards (IFRS) as a source of exogenous shock to the corporate financial information environment to study the potential effect that this information shock might have on the dividend payout policy and dividend value relevance in the UK and France. We employ a difference-in-diff...
Article
This paper investigates the impact of legal institutions on the external governance role of equity analysts in enhancing the corporate information environment. By analysing a sample of Chinese listed firms between 2003 and 2013, we find that analyst coverage is positively related to stock price informativeness. Firms located in provinces where lega...
Article
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We find that firms with a larger proportion of short-term debt have lower future stock price crash risk, consistent with short-term debt lenders playing an effective monitoring role in constraining managers’ bad-news-hoarding behaviour. The inverse relationship between short-maturity debt and future crash risk is more pronounced for firms that are...
Article
We evaluate whether voluntary corporate social responsibility (CSR) disclosure is influenced by the economic incentives of controlling shareholders. To examine this research question, we apply the natural experiment setting based on the Split Share Structure Reform in China. Following this Reform, Chinese state shareholders are allowed to trade the...
Article
This paper examines whether state subsidy is a determinant of the voluntary corporate social responsibility (CSR) disclosures of Chinese listed firms. Using archival data from a sample of manufacturing firms listed on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2012, we find that state subsidies have a material influence on CSR disclosur...
Article
Full-text available
We find that firms with a larger proportion of short-term debt have lower future stock price crash risk, consistent with short-term debt lenders playing an effective monitoring role in constraining managers’ bad-news-hoarding behavior. The inverse relation between short-maturity debt and future crash risk is more pronounced for firms that are harde...
Article
Full-text available
Conference calls have become a widely used medium for voluntary corporate disclosure, especially among firms associated with greater information asymmetry, intangible assets, and external competition. These features are common in high-tech sectors, which dominate the Taiwanese economy and render it a useful research setting for investigating whethe...
Article
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Following the financial crisis and recent recession, the center of gravity of global economic growth and competitiveness is shifting toward emerging economies. As a leading and increasingly influential emerging economy, China is currently attracting the attention of academics, practitioners, and policy makers. There has been an increase in research...
Article
We examine the value relevance of alleged corporate bribery expenditure implied by accounting information. Existing studies have generated mixed evidence regarding the impact of corporate bribery on firms, and often rely on survey-based data that could be prone to bias. The mandatory accounting disclosure of entertainment and travel costs (ETC) by...
Article
We examine whether accounting academics on the board of directors affect their firm's financial reporting quality. While regulations mandate firms to include financial experts as outside directors to enhance transparency, there is also a shortage of suitable individuals with both the relevant expertise and the appropriate management and communicati...
Article
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We examine whether business groups’ influence on cash holdings depends on ownership. Group affiliation can increase firms’ agency costs or benefit firms by providing an internal capital market, especially in transition economies characterized by weak investor protection and difficult external capital acquisition. A hand-collected dataset of Chinese...
Article
We examine the comparability benefits for analyst forecast accuracy following IFRS adoption in the EU. We argue that improvements in forecast accuracy are more likely to follow when IFRS implementation increases the number of closely relevant peer firms. To test this idea, we derive a firm-specific Expected Comparability Benefit (ECB) score as the...
Chapter
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Banks play a central role in the financial system and also in the real economy, as the 2008 financial crisis has vividly illustrated. The measurement of banking performance has gained importance for both policy makers and practitioners in relation to their decision making. Hence, empirical assessment of the efficiency of banking institutions has re...
Chapter
The media, such as newspapers and TV broadcasting, serves as an important outlet for disseminating information to the general public. Because information covered in the media could be obtained from other sources, such information is regarded as “stale information” (Tetlock, 2008) or “second-hand information” (Davies and Canes, 1978). According to t...
Article
We examine whether cross-border lending in the syndicated loan market is affected by an exogenous change in accounting standards comparability through a natural experiment based on the mandatory adoption of International Financial Reporting Standards (IFRS) across Europe. Existing studies on the economic consequences of IFRS in the debt market do n...
Article
We examine whether firms have increased their timely loss recognition with the mandatory adoption of International Financial Reporting Standards (IFRS) across Europe since 2005. We estimate firm-specific asymmetric timeliness using the Khan and Watts (2009) C-score, which accounts for size, market-to-book, and leverage. We use firms that voluntaril...
Chapter
The influence of the recent credit crisis and excess risk taking by banks on the well-being of the wider economy on a global scale provides a stark reminder of the importance of the capital market and corporate governance to modern capitalist economy. A well functioning capital market seeks to promote the efficient allocation of financial resources...
Article
Full-text available
We examine the impact of managerial financial reporting incentives on accounting quality changes around International Financial Reporting Standards (IFRS) adoption. A novel feature of our single-country setting based on Germany is that voluntary IFRS adoption was allowed and common before IFRS became mandatory. We exploit the revealed preferences i...
Article
We use institutional-related theories and a unique natural experiment that enables an exogenous test of the influence of controlling shareholders on managerial accountability to corporate fraud. In China, prior to the Split Share Structure Reform (SSSR), state shareholders held restricted shares that could not be traded. This restriction mitigated...
Article
We examine whether analyst coverage influences corporate fraud in China. The fraud triangle specifies three main factors, i.e. opportunity, incentive, and rationalization. On the one hand, analysts may reduce the fraud opportunity factor through external monitoring aimed at discouraging managerial misconduct, which can moderate agency problems. On...
Article
This introduction summarises the International Small Business Journal special issue on ‘Exploring Entrepreneurial Activity and Small Business Issues in the Chinese Economy’ and discusses the future research agenda.
Article
We provide evidence that value stocks significantly underperformed growth stocks during the subprime credit crisis, despite a positive value premium before the crisis. The reversal in the value premium concentrates in financially constrained firms, suggesting it was due to the adverse influence of the crisis rather than confounding effects. These f...
Article
Between 2000 and 2003 a series of disclosure and analyst regulations curbing abusive financial reporting and analyst behavior were enacted to strengthen the information environment of U.S. capital markets. We investigate whether these regulations reduced security mispricing and increased stock market efficiency. After the regulations, we find a sig...
Article
This paper studies the effects of bank accounting conservatism on the pricing of syndicated bank loans. We provide evidence that banks timelier in loss recognition charge higher spreads. We go onto consider what happens to the relationship between spreads and timeliness in loss recognition during the financial crisis. During the crisis, banks timel...
Article
Consistent with the prevailing socio-political ideology of China, the Chinese government offers financial assistance to firms, including many listed companies. Government subsidies are provided for several reasons including support for investment, support to enable firms to pursue social objectives, and support to prop up ailing firms in order to p...
Book
Full-text available
China is an increasingly influential emerging economy that is currently attracting the attention of academics, practitioners, and policy makers. The efficient allocation of financial resources is a key determinant of economic growth. Therefore, the development of a capital market is set to play a crucial role in China's ascension toward becoming on...
Chapter
Full-text available
Guidelines issued by the China Securities Regulatory Commission (CSRC) require companies to appoint independent directors to their boards. According to the Guidelines about Establishing an Independent Director System in Listed Companies, ever since 2002, it has been a requirement to have at least two independent directors. This rule was amended in...
Article
SYNOPSIS We examine whether the mandatory adoption of International Financial Reporting Standards (IFRS) affects the credit ratings of foreign firms cross-listed in the U.S. Consistent with the influence of accounting information quality on credit ratings that is established in the literature, we find significantly higher credit ratings among these...
Article
We examine the influence of institutional investors on corporate transparency in China. Institutional investors are expected to serve as an effective external governance mechanism since they are more sophisticated and influential than individual investors to monitor firms. Corporate transparency is expected to be higher among well governed firms si...
Article
The Split Share Structure Reform in China enables state shareholders of listed firms to trade their restricted shares. This renders the wealth of state shareholders more related to share price movements. We predict this reform will create remuneration arrangements that increase the relationship between Chinese firms’ executive pay and stock market...
Article
This paper investigates the association between analyst coverage and stock price informativeness in China. The analysis of a sample of Chinese listed firms between 2003 and 2008 supports our conjecture that there is a positive association between stock price informativeness and analyst coverage. We further find that such association is more pronoun...
Article
We use institutional-related theories and a unique natural experiment that enables an exogenous test of the influence of controlling shareholders on managerial accountability to corporate fraud. In China, prior to the Split Share Structure Reform (SSSR), state shareholders held restricted shares that could not be traded. This restriction mitigated...
Chapter
Following the recent financial crisis and ongoing decline experienced by developed economies, the weight of global economic growth is shifting increasingly toward emerging economies. China is widely recognized as playing a leading role in spearheading this shift of economic power. Indeed, China, an increasingly influential emerging economy, is curr...
Article
There is growing evidence in the finance literature that media coverage can influence security pricing by facilitating news dissemination and reducing informational frictions even if it does not provide new information. This study examines the role of media coverage in the well-known foreign share discount puzzle in China. We show that differential...
Article
We examine the impact of mutual fund ownership on stock price informativeness in China. Existing evidence shows that stock price informativeness is low in China, and attributes this to firms’ lack of disclosure incentives under the weak investor protection institutional environment. Mutual funds are more sophisticated and influential than individua...
Article
This paper examines the impact of analyst coverage, which serves as a part of the external governance mechanism, on the corporate transparency reflected through financial reporting quality captured by modified audit opinion (MAO). Based on a sample of Chinese listed firms between 2003 and 2008, we find that analyst coverage is negatively associated...
Article
Previous studies of relative performance evaluation (RPE) for executive compensations in Western developed markets have produced mixed findings. This is partly because the dispersion of share ownership in Western capital markets does not closely correspond with the single-principal/multi-agent theoretical setting assumed by Holmstrom (1982). In thi...
Chapter
Full-text available
We investigate the impact of CEO networking on compensation arrangements. Unlike existing studies that are largely based on board interlocks, we use a unique measure that calculates the direct ties the CEO has created during her life. We show that a CEO’s compensation is significantly affected by her power in the managerial labour market. We find t...
Article
We examine the influence of state ownership on CEO accountability to corporate fraud by using the unique setting of the Split Share Structure Reform in China. This reform enables state shareholders to trade their shares in the stock market, which increases the sensitivity of their wealth to the market value of their firms. Therefore, this reform al...
Article
Full-text available
We examine the impact of state ownership on share price informativeness by using the unique setting of the Split Share Structure Reform in China. This reform abolishes the trading restriction of shares held mainly by state shareholders, which in turn renders their wealth more sensitive to share price movement and decreases their conflict of interes...
Article
Full-text available
We examine the impact of the Split Share Structure Reform on the well-known foreign share discount puzzle in China. Existing literature confirms that foreign investors are more concerned about insider expropriation because of their information disadvantage relative to domestic investors. The split share structure of the ownership of Chinese listed...
Article
This research adds independent evidence to the ongoing debate over whether the size and book-to-market premiums are due to characteristics or covariance risk. To maximize comparability with previous studies, we apply the Daniel and Titman (1997) approach to the UK. In addition to the characteristic-balanced model, we construct the factor-balanced m...
Article
Full-text available
Since the 1990s there has been a surge in the mutual fund industry across the world. Mutual funds offer individual investors both the diversification of investment risk and the expertise to monitor corporate decisions. We find the effect of mutual fund ownership in reducing corporate fraud activities among listed firms in China. This confirms that...
Article
We argue that controlling shareholders have a pronounced role in corporate governance and fraud prevention in emerging markets. We propose that corporate fraud is much more likely to lead to CEO turnover among non-state controlled firms relative to state controlled firms in emerging markets. Only the most serious cases that invoke public outrage ar...
Article
Existing studies on the determinants of corporate fraud in emerging markets mainly focus on the internal governance mechanism and little is known about the impact of external governance features such as the analyst coverage. Analysts have been recently found to play a direct role in the detection and report of fraud in developed countries such as t...
Article
The literature on the determinants of fraud mainly focuses on the internal and external governance mechanisms. Although sound mechanisms still need to be implemented or coordinated by executives, the role of their integrity is underresearched. Following the intuition in Jensen et al. (2004), we use earnings management to proxy the lack of integrity...
Article
We compare the impact of mandatory against voluntary ownership transfer on stock price informativeness using the unique research setting provided by the Split Share Structure Reform in China. Ownership transfers from state to private entity are expected to improve corporate governance, which in turn reduce managerial incentives to withhold value-re...
Article
Over the past decade, six proxies have been put forward in the finance literature to assert the impact of illiquidity risk on expected returns, i.e. Amihud (2002), Pastor and Stambaugh (2003), Acharya and Petersen (2005), Liu (2006), Sadka (2006), and Chordia, Huh, Subrahmanyam (2009). A positive relation between these proxies and subsequent return...
Article
ABSTRACT We examine whether earnings reconciliation from U.K. generally accepted accounting principles (GAAP) to International Financial Reporting Standards (IFRS) convey information. As a result of debt contracting, mandatory accounting changes are expected to affect the likelihood of violating existing covenants based on rolling GAAP, leading to...
Article
We exploit a unique setting of accounting regulation change to examine how accounting information quality affects the well-documented accrual anomaly. We show a significant reduction in the negative return predictability of accruals among UK companies with poorer accounting information quality following the introduction of Financial Reporting Stand...
Article
Full-text available
We examine the impact of incentives on accounting quality changes around IFRS adoption. In particular, we examine earnings management and timely loss recognition, constructs often used to assess accounting standards quality. While existing literature documents accounting quality improvements following IFRS adoption, we find that improvements are co...
Article
"This study examines the long-run return performance following UK corporate sell-off announcements. We observe significant negative abnormal returns up to five years subsequent to sell-off announcements. Our finding is robust to various specifications, irrespective of the intended use of proceeds. We also find a significantly positive association b...
Article
We examine whether media coverage of company CEOs affects the market valuation of dividends. Assuming that higher media coverage proxies for lower agency costs and/or greater managerial ability, and assuming these underlying effects will offset any taxation disadvantage of dividends, we argue that investors will attach higher (lower) value to divid...
Article
This study examines the economic consequences for UK firms of the European Union's decision to impose mandatory IFRS. We hypothesize that the impact varies across firms and is conditional on the perceived benefit. We estimate a counter-factual proxy for a UK firm's willingness to adopt IFRS from the prior GAAP choices of German firms. We show that...
Article
We value UK executive stock options (ESOs) as American options that are awarded conditional on the probability of the holders achieving some performance criteria. Unlike the standard Black and Scholes (BS) model, which is universally used both in the literature and practice, this provides a more realistic representation of UK ESOs. We show that UK...
Article
"We evaluate the Fama-French three-factor model in the UK using the approach of Daniel and Titman (1997) to determine whether characteristics or covariance risk better explains the size and value premiums. Across all three factors, we find that return premiums bear little relationship to the corresponding loadings. We show that small and value stoc...