Haejung Na’s research while affiliated with California State University Los Angeles and other places

This study examines how globalization affects stock market quality, whether investor protection serves as a channel in this relationship, and how the channel effect varies depending on the legal system. Our empirical analysis confirms that there is a positive causal relationship between globalization and market quality. Also, since we find that globalization induces stronger investor protection, we disentangle the component of investor protection predicted by globalization. Our analysis shows that the globalization-induced component of investor protection has a significantly positive effect on market quality, which demonstrates the role of investor protection as a channel. Finally, we show that these relationships among globalization, investor protection, and market quality are present in civil law countries but not in common law countries. This illustrates that globalization enhances financial market quality via a stronger ability to effect institutional change and investor protection in civil law countries.

This study investigates the predictive power of informed traders’ activities in stock price movements by employing neural networks. Specifically, we examine whether informed investors’ trading activities can predict drastic changes in stock prices in the subsequent 5-day period. Our empirical results show that the probability of the model being correct can be as high as 74%. In addition, the simulated trading strategies based on our trained model lead to significantly positive risk-adjusted returns and show strong performance measures. Overall, we find that informed traders’ activities contain informational content and may provide actual investors with information that is useful for stock price prediction.

This study investigates the effect of managerial discretionary activities on the anomalous negative relation between analyst forecast dispersion and future stock returns. Our results show that higher discretionary earnings and lower nondiscretionary earnings amplify the analyst dispersion anomaly and suggest that investors follow analysts’ overly optimistic forecasts for firms with higher discretionary earnings and overprice them. Moreover, this relation is more prevalent in subsamples with more severe arbitrage constraints. Such results indicate that higher discretionary earnings, as managerial opportunistic behaviors, are associated with overvaluation in high dispersion stocks.

Tax haven investors’ large shareholding may lead to more lenient surveillance of the target company, which is expected to have a negative effect on firm value by deteriorating agency problems for companies with relatively poorer investor protection. By crawling data from online filings and constructing a unique dataset of tax haven investors’ shareholding, we find that disclosures of large shareholding by tax haven investors lead to a significantly larger decreases in firm value than those by non-tax haven investors. Moreover, the decrease in value is related to market participants’ concerns about agency problems when tax haven investors increase their shareholding. We suggest that financial supervisory authorities recognize and reflect these findings in their foreign investment promotion and monitoring policies.

We examine whether the results supporting the sentiment‐related overpricing story by Stambaugh, Yu, and Yuan (J. Financial Economics, v. 104, p. 288–302) are still valid after controlling for macroeconomic conditions. We no longer find the results consistent with the sentiment‐related overpricing story after adjusting for the effect of macroeconomic conditions. The risk factors associated with macroeconomic conditions are mostly priced, and the average return spread in the anomalies is largely accounted for by the expected return spread implied by the risk factors. Their results might be a consequence of the use of an inadequately constructed sentiment index. It is premature to argue that the returns in the anomalies are driven by investor sentiment.

This paper specifically examine how the extent of the distress puzzle differs according to the degree of mispricing and short sale constraints. We find that the distress puzzle observed for overpriced stocks, not for underpriced stocks, becomes insignificant after adjustment for short sale constraints due to an asymmetric pricing effect of short sale constraints only on the short-leg side of distress. However, after adjustment for arbitrage risk, the distress puzzle remains unchanged. These results indicate that the distress puzzle is mainly attributable to short sale constraints, rather than other limits-to-arbitrages such as arbitrage risk, which has a bi-lateral pricing effect on both short-leg and long-leg sides of distress. To mitigate a possible endogeneity problem relation among financial distress, mispricing, and short sale constraints, we measure these variables with different timing.

In this study, we examine the empirical association between corporate social responsibility (CSR) and information asymmetry by investigating their simultaneous and endogenous effects. Employing an extensive U.S. sample, we find an inverse association between CSR engagement and the proxies of information asymmetry after controlling for various firm characteristics. The results hold using 2SLS considering the reverse side of information asymmetry influencing CSR activities. The results also hold after mitigating endogeneity based on the dynamic panel system generalized method of moment. Furthermore, the CSR–information asymmetry relation is amplified in high-risk firms due to managers’ efforts to build a good reputation. Last, we find that CSR engagement is inversely associated with reputational risk measure and lower predicted value of reputational risk is positively associated with lower information asymmetry measures. We interpret these results as supporting the stakeholder theory-based, reputation-building explanation that considers CSR engagement as a vehicle to build and maintain firm reputation thereby enhancing the information environment.

In this paper, we derive higher-moment liquidity risks theoretically and examine whether they are empirically priced. We discover that when investors add trading cost to the utility function, the expected return of a stock should contain premia related to three higher-moment liquidity risks. We show that one of our higher-moment liquidity risks, or liquidity coskewness risk, measures an individual stock's marginal contribution to the skewness of portfolio liquidity and is consistently priced. In addition, our analysis of the Hansen-Jagannathan distance and the maximum Sharpe ratio show that the liquidity coskewness risk plays a substantial role in asset pricing and portfolio management.

In this article, we examine the empirical influence of the combined effect of Corporate social responsibility (CSR) and the degree of local community religiosity on firm risk by investigating their unidirectional and endogenous effects. Employing a large US sample, we find an inverse association between CSR–religiosity and firm risk after controlling for various firm characteristics. Also, after mitigating endogeneity bias, we still find a negative association between CSR–local community religiosity and firm risk. We interpret these results to support the social license to operate (SLO) explanation: the lower the level of firm risk, the higher the level of SLO.

Previous studies use cross-sectional forecast dispersion in examining the relation between forecast dispersion and future stock returns and report an anomalous negative dispersion-return relation. This paper examines how time-series forecast dispersion is distinct in the relation to stock returns from the negative dispersion-return relation. We find that contrary to the previously-known negative dispersion-return relation, there is a strong positive relation between time-series forecast dispersion and stock returns. We also find that time-series forecast dispersion apparently contains systematic risk components and that such risk is priced in stock returns.