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Recent Journal Publications by COB Faculty

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Academic Journal
Finance

“Bank-firm relationships, financing and firm performance in Germany”

Close bank”firm relationships that characterize the financial systems in Germany and Japan are often credited for reducing agency costs and increasing access to capital, thus improving the performance of firms. Critics of these banking systems cite the alternative possibility that conflicts of interests may also arise from both the banks' multiple roles with the firm, and the opportunity the banks have to use private information to shift risk or to otherwise participate in rent-seeking activities. We extend the empirical literature by systematically investigating the impact of bank-influence on the financing choices and performance of the firm. We find that bank-influenced firms in Germany do benefit from increased access to capital. There is, however, no evidence to support the hypothesis of either higher profitability or growth for bank-influenced firms. Results suggest that the interest payments to debt ratio is significantly higher for bank-influenced firms, which supports the hypothesis that German universal banks may engage in rent-seeking activities and provides evidence of a conflicting interests between creditors and shareholders.
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Academic Journal
Finance

“Board members' influence on resource investments to start-ups and IPO outcomes: Does prior affiliation matter?”

Using data that contains career paths of start-up board members, we examine how their prior affiliations with various types of venture capital (VC) firms promote financial and human resource investments from the affiliated VC firm. We find that the likelihood of affiliation-based resource investments such as financing and board member engagement depends on the type of VC firms (e.g., bank-affiliated, corporate). Meanwhile, we find little evidence that affiliation-based resource investments lead to lower IPO costs and better post-IPO performances (i.e., return on assets, buy-and-hold abnormal returns, and failure rate). While prior affiliation could improve the inflow of resources, it might worsen screening and monitoring activities.
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Academic Journal
Finance

“Business Cultural Intelligence Quotient: A Five-Country Study”

Cultural intelligence (CI) has often been linked to performance at the individual, team and firm levels as a key factor in international business success. Using a new measure of CI, the business cultural intelligence quotient (BCIQ), our study provides empirical evidence on several key antecedents of CI using data onbusiness professionals across five diverse countries (Austria, Colombia, Greece, Spain and USA). The findings suggest that the most important factors leading to cultural intelligence, in order of importance, are: the number of countries that business practitioners have lived in for more than six months, their level of education and the number of languages spoken. We find that cultural intelligence varies across countries, suggesting that some countries have a higher propensity for cross-cultural business interactions. By teasing out the common antecedents of BCIQ among professionals, our findings may help with screening and training professionals for international assignments. Future research may examine the environmental (country-specific) factors associated with a higher propensity for cultural intelligence (such as immigration, cultural diversity, languages spoken, and international trade) to explain the effect of country of origin on cultural intelligence in the professional community.
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Academic Journal
Finance

“Can Institutional Change Impact High-Technology Firm Growth: Evidence from Germany's Neuer Markt”

To facilitate the transformation of the German economy from the traditional manufacturing industries towards emerging new technologies, a new segment of the Frankfurt exchange was introduced in 1997 — the Neuer Markt. To examine whether the Neuer Markt was successful, we compare the relationship between firm size and growth for firms listed on the Neuer Markt and contrast the results with two benchmarks: (1) for German firms prior to the 1990s (to reflect the older traditional manufacturing sector) and (2) for the stylized results for the US. This study provides evidence that not only did many new firms obtain funding from the Neuer Markt; but that for the first time in recent history, Germany succeeded in enabling smaller firms to grow faster than larger firms. This suggests that the new policies were not only successful in promoting a new type of firm that otherwise might not exist, but in transforming the sources of growth and innovation within the German economy.
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Academic Journal
Finance

“Chinese Lunar New Year Effect, Investor Sentiment, and Market Deregulation”

This paper provides empirical evidence and a behavioral explanation for the Chinese Lunar New Year (CLNY) effect and investigates whether the holiday effect weakens after market deregulation. Using emotion proxies from literature, we find that positive emotion plays an important role in contributing to higher returns surrounding the CLNY. We also show that the CLNY effect weakens when foreign investors’ participation increases, suggesting that the market deregulation may have contributed to this diminishing calendar anomaly.
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Academic Journal
Finance

“Corporate Governance and Capital Accumulation: Firm Level Evidence from Italy”

This study investigates the impact of investor protection on firm ownership and investment decisions in a model where investor protection is allowed to vary across firms. Using firm panel data for Italy, we construct firm level variables to capture the degree of investor protection which is specific to the firm and observable by outside shareholders. Empirical evidence indicates that the stronger the investor protections the lower the fraction of equity that is owned by insiders. Results also suggest that higher insider equity ownership is linked to a larger risk premium and higher costs of capital for the firm. Finally, our findings indicate that the magnitude of capital stock distortions is important when shareholder protection is weak and ownership concentration is high.
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Academic Journal
Finance

“Corporate Governance: What We Know And Don't Know”

The corporate governance literature provides a rich framework for examining the theoretical models and related mechanisms by which a firm is operated and controlled, but there are a number of challenges for future research that remain. This paper identifies some of the key studies and contributions of the existing corporate governance literature, while identifying several fruitful areas for research where our understanding of corporate governance is incomplete. For example, what is the relationship between corporate governance and corporate social responsibility, and how might this change in different institutional environments? Expanding standard models to include more nuanced factors within diverse and dynamic institutional environments is one challenge we face in modeling governance more comprehensively. In addition, as data becomes more easily available on smaller countries, transitional economies, and in frontier and emerging markets, we also need to expand our studies beyond the large Western country context. Future empirical work should undertake to better understand and examine the institutional structures, systems, mechanisms and incentives within understudied regions around the world. Beyond the notion of replication studies, careful cross-country studies would enable us to compare outcomes with existing studies and better inform us on fundamental differences (and similarities) between systems, contributing to our discussions on the limits of conversion between governance systems.
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