January 12, 2015, 11:48 P.M. ET
Disentangling Chaebol Isn’t Easy: Hyundai Glovis Block Sale Fails
By Shuli Ren
Chairman of Hyundai Motor Chung Mong-koo and its only son Chung Eui-sun failed to sellaround $1.25 billion of shares in the car group’s logistics arm Hyundai Glovis (086280.KW), despite a substantially discounted offer price. Continue reading
http://www.businessinsider.sg/chinas-offshore-money-circles-2015-1/
http://www.icij.org/offshore/leaked-records-reveal-offshore-holdings-chinas-elite
Here’s The Who’s Who In China’s Offshore Tax Havens
THE CENTER FOR PUBLIC INTEGRITY FINANCE JAN. 14, 2015, 1:30 AM
While Chinese officials aren’t required to disclose their assets publicly, citizens have remained largely in the dark about the parallel economy that can allow the powerful and well-connected to avoid taxes and keep their dealings secret. By some estimates, between $1 trillion and $4 trillion in untraced assets have left the country since 2000. Continue reading
Baby milk manufacturer Yashili International shares slide 6 pct on profit warning
Wednesday, 14 January, 2015, 10:05am
Benjamin Robertsonbenjamin.robertson@scmp.com
Shares in baby milk powder manufacturer Yashili International dipped 6.1 per cent in early trading after the firm said it expected 2014 year end profits to fall about 40 per cent. The Guangdong based firm blamed a slowdown in the growth of the paediatric milk powder industry and said it was reforming its marketing and distribution models, according to a recent stock market filing. Continue reading
http://www.ft.com/intl/cms/s/0/31f6073c-9af5-11e4-b651-00144feabdc0.html#axzz3OmGHjs2r
http://www.reuters.com/article/2015/01/13/us-kaisa-group-debt-bonds-idUSKBN0KM14320150113
January 13, 2015 9:48 am
Kaisa default risks waking China property bears
Josh Noble in Hong Kong
For China’s property market bears, the default by a Hong Kong-listed developer on its US dollar bonds looks like the canary in the coal mine. More are likely to follow, they argue, as the great unravelling of the heavily indebted and chronically oversupplied sector finally gets under way. Continue reading
The Impact of IFRS Adoption on Real Activities Manipulation: Evidence from China.
Chan Lyu1 Yuen, Desmond C. Y.2 Xu Zhang2 Nini Zhang2
Journal of Applied Management Accounting Research. Summer2014, Vol. 12 Issue 2, p17-39. 23p. 1 Diagram, 9 Charts, 1 Graph.
Abstract:
This paper studies the relationship between IFRS adoption and real activities manipulation, and investigates whether IFRS reduces earnings management and improves the quality of accounting information. As China steps into the era of IFRS (International Financial Reporting Standard) adoption, it is important to focus on this issue and its implementation in such emerging markets. The paper finds that real earnings management is primarily driven by abnormal production costs, and that more companies manipulate earnings through operational transactions after IFRS adoption. Our findings suggest that real activities manipulation is positively related with IFRS implementation, and that such an association is stronger for real estate firms, especially in the case of abnormal cash flows of operations.
Does Mandatory IFRS Adoption Affect Crash Risk?
DeFond, Mark L.1 Mingyi Hung1,2 Siqi Li3 Yinghua Li4
Accounting Review. Jan2015, Vol. 90 Issue 1, p265-299. 35p. 5 Charts.
Abstract:
We test whether mandatory IFRS adoption affects firm-level ”crash risk,” defined as the frequency of extreme negative stock returns. We separately analyze nonfinancial firms and financial firms because IFRS is likely to affect their crash risk differently. We find that IFRS adoption decreases crash risk among nonfinancial firms, especially among firms in poor information environments and in countries where IFRS adoption results in larger and more credible changes to local GAAP. In contrast, IFRS adoption has no effect on crash risk for financial firms, on average, but decreases crash risk among firms less affected by IFRS’s fair value provisions, and increases crash risk among banks in countries with weak banking regulations. Overall, our results are consistent with the increased transparency from IFRS adoption broadly reducing crash risk among nonfinancial firms, but more selectively among financial firms, and with financial regulations playing a complementary role in implementing IFRS among financial firms.
The Economic Consequences of Financial Restatements: Evidence from the Market for Corporate Control.
Amel-Zadeh, Amir1 Yuan Zhang2
Accounting Review. Jan2015, Vol. 90 Issue 1, p1-29. 29p. 1 Diagram, 7 Charts, 2 Graphs.
Abstract:
This paper investigates whether and how financial restatements affect the market for corporate control. We show that firms that recently filed financial restatements are significantly less likely to become takeover targets than a propensity score matched sample of non-restating firms. For those restating firms that do receive takeover bids, the bids are more likely to be withdrawn or take longer to complete than those made to non-restating firms. Finally, there is some evidence that deal value multiples are significantly lower for restating targets than for non-restating targets. Our analyses suggest that the information risk associated with restating firms is the main driver of these results. Overall, this study finds that financial restatements have profound consequences for the allocation of economic resources in the market for corporate control.
Earnings Management Using Classification Shifting: An Examination of Core Earnings and Special Items.
McVay, Sarah Elizabeth
Accounting Review. May2006, Vol. 81 Issue 3, p501-531. 31p. 11 Charts, 1 Graph.
Abstract:
This paper examines the classification of items within the income statement as an earnings management tool. Evidence is consistent with managers opportunistically shifting expenses from core expenses (cost of goods sold and selling, general, and administrative expenses) to special items. This vertical movement of expenses does not change bottom-line earnings, but overstates “core” earnings. In addition, it appears that managers use this earnings management tool to meet the analyst forecast earnings benchmark, as special items tend to be excluded from both pro forma and analyst earnings definitions.
http://ww2.cfo.com/gaap-ifrs/2015/01/fasb-rids-income-statements-extraordinary-items/?
FASB Rids Income Statements of ‘Extraordinary Items’
FASB issues an accounting standards update that eliminates the “Extraordinary Items” classification.
January 13, 2015 | CFO.com | US
In accounting terms, could the effects of the terrorist attacks of Sept. 11, 2001 be called an “extraordinary and unusual” item, appropriate for separate reporting on corporate income statements? Continue reading
Interesting commentary by Nureen CHAN Wan Wei (Year 4 accounting undergrad at SMU): https://asianextractor.com/2015/01/13/tunneling-through-intercorporate-loans-the-china-experience/comment-page-1/#comment-94
KB: So investors will not invest in firms with poor corporate governance (e.g. asymmetric information) that are more susceptible to accounting fraud and expropriation risk?
– Quick comments on Gianetti and Simonov (2006, JF): Individuals connected with company insiders are more likely to invest in weak corporate governance companies as they are able to extract private benefits or access private information to earn higher returns. Investors’ preferences for stocks are not driven only by conventional proxies for risk!
– Quick comments on Morck et al (2005): In emerging markets, investors invest in family-controlled firms, even if they knew that there are adverse selection costs and that there are potential expropriation of assets, because they perceive that it is far better to earn some returns with these dominant family firms when few alternatives are available
http://onlinelibrary.wiley.com.libproxy.smu.edu.sg/doi/10.1111/j.1540-6261.2006.00879.x/abstract
Which Investors Fear Expropriation? Evidence from Investors’ Portfolio Choices
MARIASSUNTA GIANNETTI and ANDREI SIMONOV*
The Journal of Finance
Volume 61, Issue 3, pages 1507–1547, June 2006
ABSTRACT
Using a data set that provides unprecedented detail on investors’ stockholdings, we analyze whether investors take the quality of corporate governance into account when selecting stocks. We find that all categories of investors (domestic and foreign, institutional and small individual) who generally enjoy only security benefits are reluctant to invest in companies with weak corporate governance. In contrast, individuals connected with company insiders are more likely to invest in weak corporate governance companies. These findings suggest that it is important to distinguish between investors who enjoy private benefits or access private information, and investors who enjoy only security benefits.
AsianExtractor: Unearthing Accounting Fraud in Asia 