Review of Pacific Basin Financial Markets and Policies

We justify the occurrence of rescission by examining the ex-ante optimality of rescission of executive stock options while considering the associated accounting rules in response to this controversial practice. Rescission may be the least favorable practice from shareholders’ ex-post viewpoint but we find that shareholders will be almost always better off in terms of expected initial payoffs under rescission than under do-nothing policy. Our empirical data show that rescission is followed by a 34.66% drop in stock return and the cumulative abnormal returns of the sample firms nearly fall to −50% on the rescission date. Simulation results show that the subjective value-added to executives for pre-committed rescission feature on ESOs is 14% while the estimated agency cost under rescission is twice as much as that under do-nothing policy. These empirical evidences and analytical predictions provide a more comprehensive and in-depth understanding of rescission, which help shed some light on devising option-based incentive contracts with variable terms.

Investors and professional money managers typically categorize assets into different styles to facilitate portfolio management and capital allocations. As market participants move funds among assets of different styles based on their relative performance, correlated trading generates return comovement and style momentum, and affects risk premia. This paper reviews existing literature on style investing, and presents new evidence in a large bond market. The paper shows that style is an important factor that helps explain return comovement, momentum and risk premia in a bond market traditionally dominated by institutional and long-term investors thought to be less behaviorally biased.

In the current information era, there is a high need for a stakeholder approach when preparing the financial statements. This would enhance the usefulness of the financial statements, aiming to prepare financial statements that are useful to a variety of stakeholders. This is an explanatory study in Cyprus that aims to establish whether certain themes (16 in total) employees require from their company’s financial statements. The reliability analysis shows a Cronbach’s alpha of 0.803 which suggests very reliable data. Similarly, the correlation analysis between three variables suggests the same with a correlation between these variables close to 0.65. The regression results show an $R$ squared of 0.284 (16 predictors) through the linear regression model in SPSS. Most of the variables were valid as they produced a positive standardized beta coefficient value. Therefore, stakeholders do require a plethora of business information for their decision-making purposes.

Cryptocurrency (CRP) has grown in popularity over the last decade. Since there is no central body to control the Bitcoin (BTC) markets, they are extremely volatile. However, several similar variables that cause price volatility in traditional markets also affect cryptocurrencies. Several bubble phases have taken place in BTC prices, mostly during the years 2013 and 2017. Other digital currencies of primary importance, such as Ethereum and Litecoin, also exhibited several bubble phases. Among traditional methods of analysis for this volatile market, only a small number of studies focused on Machine Learning (ML) techniques. The present study objective is to get an in-depth knowledge of the time series properties of CRP data and combine volatility models with ML models. In the hybrid method, we first apply the Nonlinear Generalized Autoregressive Conditional Heteroskedasticity (NGARCH) model with asymmetric distribution to calculate standardized returns, then forecast the UP and DOWN movement of standardized returns through ML models such as Logistic Regression (LR), Linear Discrimination Analysis (LDA), Quadratic Discrimination Analysis (QDA), Artificial Neural Networks (ANNs), K-Nearest Neighbors (KNN), and Support Vector Machine (SVM). The findings show that the proposed hybrid approach of time series models and ML accurately predicts prices; specifically, the KNN model reveals that the scheme can be applicable to CRP market prediction. It is deduced that ML methods combined with volatility models have the tendency to better forecast this volatile market.

We explore the moderating effect of firm life cycle on the relation between staggered boards (classified boards) and innovation. To examine this relationship, a panel data fixed effects model is used to account for unobserved time-invariant heterogeneity. Results indicate the presence of a staggered board in the introduction stage of firm life cycle hinders innovation leading to a decreased number of patents. The outcomes of this research enable the decision-makers of companies and regulators to make more informed decisions regarding the varying corporate governance mechanisms that may be beneficial to their set of circumstances and inform investors of the nuanced consequences of staggered boards.

This study creates, models and calibrates the prices of real estate investment trusts (REITs) within an option pricing framework. Unlike Barraclough et al. [(2013). Using option prices overpayments and synergies in M&A transactions. The Review of Financial Studies, 26(3), 695-772] and Marcato and Sebehela [(2022). The paradoxical prices of options. Review of Pacific Basin Financial Markets & Policies, 25(2), 2250009], this study went further and incorporated new information in the form of news. The results show that for a target (acquiring) firm, the exponential risk premium is made up of the cost of carry plus (less) new news. The same illustration applies equally in a merged entity.

This study conceptualized and created the three-person cooperative game. To date, the existing cooperative game is the two-person cooperative game by [Nash, J (1953). Two-person cooperative games. Econometrica, 21(1), 128-140]. The three-person cooperative game leads to cross-subsidization. Therefore, in the context of real estate investment trust (REIT) acquisitions, friendly deals are more beneficial than hostile mergers. The latter finding is consistent with prior studies such as [Womack, KS (2012). Real estate mergers: Corporate control & shareholder wealth. The Journal of Real Estate Finance and Economics, 44(4), 446–471].