Browsing by Author "Chung, Huimin"

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A note on board characteristics, ownership structure and default risk in Taiwan
(2015-03-01)
Chiang, Shu-Mei
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Chung, Huimin
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Huang, Chien-Ming
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This study applies dynamic generalized method of moments estimation to examine the influences of ownership structure and board characteristics on default risk for a full samples and two subsamples (high-tech and conventional) of publicly listed firms in Taiwan. Our findings reveal that certain characteristics of corporate governance have explanatory power for default probability, but the impact is not straightforward. In particular, the impact of internal and external governance structures on default risk is industry dependent. Accordingly, governance proposals that encourage higher ownership among directors and large block shareholdings in high-tech firms or reduce managerial ownership in conventional companies can have a counterproductive effect on corporate governance and result in higher bankruptcy possibility.
A Two-Stage Probit Model for Predicting Recovery Rates
(2016-12)
Hwang, Ruey-Ching
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Chung, Huimin
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Chu, C. K.
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
We propose a two-stage probit model (TPM) to predict recovery rates. By the ordinal nature of the three categories of recovery rates: total loss, total recovery, and lying between the two extremes, we first use the ordered probit model to predict the category that a given debt belongs to among the three ones. Then, for the debt that is classified as lying between the two extremes, we use the probit transformation regression to predict its recovery rate. We use real data sets to support TPM. Our empirical results show that macroeconomic-, debt-, firm-, and industry-specific variables are all important in determining recovery rates. Using an expanding rolling window approach, our empirical results confirm that TPM has better and more robust out-of-sample performance than its alternatives, in the sense of yielding more accurate predicted recovery rates.
A value-at-risk analysis of carry trades using skew-GARCH models
(2013)
Wang, Yu-Jen
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Chung, Huimin
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Guo, Jia-Hau
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交大名義發表
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資訊管理與財務金融系註：原資管所+財金所
We carry out a value-at-risk (VaR) analysis of an extremely popular strategy in the currency markets, namely, "carry trades," whereby a position purchased in high interest rate currencies is funded by selling low interest rate currencies. Since the natural outcome of the truncated normal distribution of interest-rate spreads combined with the normal distribution of exchange rate returns is a skew-normal distribution, we consider a skew-normal innovation with zero mean for our analysis of carry trade returns using generalized autoregressive conditional heteroskedasticity (GARCH) models. The stress testing results reveal that skew-normal or densities are suitable for the measurement of VaR for carry trade returns involving, for example, taking up a long position in Australian Dollars or Argentine Peso which are funded by selling Japanese Yen.
An empirical analysis of the Shanghai and Shenzhen limit order books
(2013-08-01)
Chung, Huimin
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Gao, Cheng
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Lu, Jie
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Mizrach, Bruce
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資訊管理與財務金融系註：原資管所+財金所
This paper investigates the market microstructure of the Shanghai and Shenzhen Stock Exchanges. The two major Chinese stock markets are pure order-driven trading mechanisms without market makers, and we analyze empirically both limit order books. We begin our empirical modeling using the vector autoregressive model of Hasbrouck and extend the model to incorporate other information in the limit order book. We also study the market impact on A shares, B shares and H shares, and analyze how the market impact of stocks varies cross sectionally with market capitalization, tick frequencies, and turnover. Furthermore, we find that market impact is increasing in trade size. Order imbalances predict the next day's returns, with small order imbalances having a negative effect. (C) 2012 Elsevier B.V. All rights reserved.
Arbitrage opportunities, liquidity provision, and trader types in an index option market
(1970-01-01)
Chen, Chin-Ho
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Chiu, Junmao
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Chung, Huimin
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This study examines the impact of arbitrage in put-call futures parity (PCFP) violations on option market liquidity and explores the liquidity provision process by trader type during periods of arbitrage exploitation. Using a unique data set comprising the complete history of transactions, we find that PCFP violations contain toxic arbitrage opportunities. Hence, more frequent toxic arbitrage opportunities can cause liquidity to deteriorate because arbitrageurs create adverse selection costs and order imbalances in the option market. In addition, when the law of one price breaks down, market makers dominate by providing liquidity compared with individual, domestic, and foreign institutional traders.
Assessing bankruptcy prediction models via information content of technical inefficiency
(2011-12-01)
Hwang, Ruey-Ching
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Siao, Jhao-Siang
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Chung, Huimin
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Chu, C. K.
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資訊管理與財務金融系註：原資管所+財金所
We use a stochastic frontier model with firm-specific technical inefficiency effects in a panel framework (Battese and Coelli in Empir Econ 20:325-332, 1995) to assess two popular probability of bankruptcy (PB) measures based on Merton model (Merton in J Financ 29:449-470, 1974) and discrete-time hazard model (DHM; Shumway in J Bus 74:101-124, 2001). Three important results based on our empirical studies are obtained. First, a firm with a higher PB generally has less technical efficiency. Second, for an ex-post bankrupt firm, its PB tends to increase and its technical efficiency of production tends to decrease, as the time to its bankruptcy draws near. Finally, the information content about firm's technical inefficiency provided by PB based on DHM is significantly more than that based on Merton model. By the last result and the fact that economic-based efficiency measures are reasonable indicators of the long-term health and prospects of firms (Baek and Pagan in Q J Bus Econ 41:27-41, 2002), we conclude that PB based on DHM is a better credit risk proxy of firms.
Attendance of board meetings and company performance: Evidence from Taiwan
(2013-11-01)
Chou, Hsin-I
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Chung, Huimin
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Yin, Xiangkang
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交大名義發表
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National Chiao Tung University
This paper empirically investigates board meeting attendance and its effects on the performance of Taiwanese listed corporations. Directors with higher qualifications attend board meetings more often by themselves. The ownership of the largest shareholder of a company also has a positive effect on director's own meeting attendance. High meeting attendance by directors themselves can enhance a firm's performance but high attendance by their representatives has an adverse effect. Independence of directors or a board is also positively associated with firm performance. These results largely hold even when the sample is decomposed to count for different ownership structures and director types. (C) 2013 Elsevier B.V. All rights reserved.
Committee Independence and Financial Institution Performance during the 2007-08 Credit Crunch: Evidence from a Multi-country Study
(2011-09-01)
Yeh, Yin-Hua
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Chung, Huimin
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Liu, Chih-Liang
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
Manuscript Type: Empirical Research Question/Issue: Using the data of the 20 largest financial institutions from G8 countries, we explore whether the performance is higher for financial institutions with more independent directors on different committees during the 2007-08 financial crisis. We also examine the moderating effect of a country-level civil law dummy and firm-level excessive risk-taking behaviors on the independence-performance relationships. Research Findings/Insights: The empirical evidence shows that the performance during the crisis period is higher for financial institutions with more independent directors on auditing and risk committees. The influence of committee independence on the performance is particularly stronger for civil law countries. In addition, the independence-performance relationships are more significant in financial institutions with excessive risk-taking behaviors. Theoretical/Academic Implications: Our findings complement existing works to partially resolve the independence-performance relationship controversies by exploring the independence of different committees. The moderating effects of civil law countries and excessive risk-taking firms further address the governance environment's role in the effectiveness of director independence. Practitioner/Policy Implications: Our results provide important policy implications for financial institutions. The regulation authorities should enhance regulation compliance to improve director independence, particularly for auditing and risk committees in banking industry. Independent directors in the banking industry are supposed to put more emphasis on excessive risk-taking behaviors, as the financial institutions profit from risk-bearing earnings.
Comprehensive Disclosure of Compensation and Firm Value: The Case of Policy Reforms in an Emerging Market
(2010-11-01)
Sheu, Her-Jiun
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Chung, Huimin
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Liu, Chih-Liang
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交大名義發表
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資訊管理與財務金融系註：原資管所+財金所
We set out in the present study to examine the market value of comprehensive disclosure of information relating to the compensation paid to directors and executives. Under the theory of self selection, firms with higher levels of board independence will tend to provide comprehensive disclosure of compensation, thereby leading to lower agency conflicts. Since the authorities in Taiwan chose to adopt a policy of gradual enforcement of compensation disclosure, firms are provided with discretion with regard to any greater levels of transparency that they may choose to provide. We therefore exploit this unique natural experimental setting to examine the effects of compensation disclosure on market value. The evidence indicates that the market provides a higher valuation only to those firms which elect to voluntarily disclose comprehensive information on their compensation practices. However, we also find that even where such disclosure is in excess of the minimum mandatory requirements, lower levels of transparency in the overall disclosure of compensation practices are of very little help with regard to the creation of market value.
Corporate governance and equity liquidity: analysis of S&P transparency and disclosure rankings
(2007-07-01)
Chen, Wei-Peng
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Chung, Huimin
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Lee, Chengfew
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Liao, Wei-Li
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管理科學系
This paper sets out to investigate the effects of disclosure, and other corporate governance mechanisms, on equity liquidity, arguing that those companies adopting poor information transparency and disclosure practices will experience serious information asymmetry. Since poor corporate governance leads to greater information asymmetry, liquidity providers will incur relatively higher adverse information risks and will therefore offer higher information asymmetry components in their effective bid-ask spreads. The Transparency and Disclosure (T&D) rankings of the individual stocks on the S&P 500 index are employed to examine whether firms with greater T&D rankings have lower information asymmetry components and lower stock spreads. Our results reveal that the economic costs of equity liquidity, i.e. the effective spread and the quoted half-spread, are greater for those companies with poor information transparency and disclosure practices.
DECIMALIZATION, ETFs AND FUTURES PRICING EFFICIENCY
(2009-02-01)
Chen, Wie-Peng
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Chou, Robin K.
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Chung, Huimin
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This study investigates the impact of decimalization (penny pricing) on the arbitrage relationship between index exchange-traded funds and E-mini index futures. The empirical results reveal that subsequent to penny pricing, there is a significant fall in the mean ex ante arbitrage profit, especially in the cases with higher transaction costs. Using the ordinary least squares and quantile regressions to control for the influences of change in other market characteristics, it is found that the overall pricing efficiency has deteriorated in the post-decimalization period. These results are consistent with the hypothesis that, due to the lowered market depth and increased execution risks, the introduction of decimalization has in general resulted in weakening the ability and the willingness of arbitrageurs to initiate arbitrage trades, which subsequently leads to a reduction in the general efficiency of the cash/futures pricing system. (C) 2008 Wiley Periodicals, Inc. Jrl Fut Mark 29:157-178, 2009
DEVIATIONS FROM PUT-CALL PARITY AND VOLATILITY PREDICTION: EVIDENCE FROM THE TAIWAN INDEX OPTION MARKET
(2014-12-01)
Chen, Chin-Ho
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Chung, Huimin
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Yuan, Shu-Fang
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This study examines whether deviations from put-call parity are informative about future volatility in the underlying index. Using the difference in implied volatility between call and put options to measure these deviations, we find that deviations from put-call parity predict future volatility. The predictability becomes stronger as option liquidity increases and the liquidity of the underlying index decreases. The results for volatility prediction remain significant even after controlling for implied volatility, information shocks, other information variables on return and volatility used widely in the literature, and short sales constraints. In addition, our results also show that deviations from put-call parity contain information about the future trading volume of options and the underlying index. (c) 2014 Wiley Periodicals, Inc. Jrl Fut Mark 34:1122-1145, 2014
Do firms' earnings management practices affect their equity liquidity?
(2009-09-01)
Chung, Huimin
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Sheu, Her-Jiun
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Wang, Juo-Lien
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管理科學系
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資訊管理與財務金融系註：原資管所+財金所
This study investigates the relationship between earnings management and equity liquidity, positing that as incentives arise for the manipulation of firm performance through earnings management (due partly to conflicts of interest between firm insiders and outsiders), greater earnings management may signal higher adverse selection costs. If earnings manipulation reveals aggressive accounting practices, liquidity providers tend to widen bid-ask spreads to protect themselves. The empirical results indicate that companies with higher earnings management suffer lower equity liquidity. (C) 2009 Elsevier Inc. All rights reserved.
External Financing Needs, Corporate Governance, and Firm Value
(2010-05-01)
Chen, Wei-Peng
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Chung, Huimin
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Hsu, Tsui-Ling
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Wu, Soushan
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交大名義發表
Manuscript Type: Empirical Research Question/Issue: We set out in this study to explore the overall impact of external financing needs on corporate governance and firm value, arguing that external financing needs have extremely important impacts on corporate governance, essentially because external financing can prove to be very costly, largely as a result of asymmetric information. Thus, we suggest that improvements in corporate governance of firms with external financing needs could help to reduce costs of outside equity financing. Research Findings/Insights: Our results reveal that it is in fact firm valuation that has an effect on governance practices, as opposed to the reverse, and that external financing needs appear to strengthen the influence of the quality of corporate governance practices on firm value. Theoretical/Academic Implications: The external forces considered in this study are product market competition, investment opportunities, and external financing needs, with particular emphasis being placed upon the impact of external financing needs, since this relates directly to outside shareholders. Given that poor corporate governance practices signal higher asymmetric information costs, and thus, lead to an increase in the costs of raising external capital, it is important to gain a comprehensive understanding of the impact of external financing needs on firm value and corporate governance. Practitioner/Policy Implications: Our results demonstrate the important implications that corporate governance practices have for those firms with a particularly strong need for external equity, and the fact that external financing needs provide incentives for firms to seek out ways of making improvements to the overall quality of their corporate governance practices.
Funding liquidity and equity liquidity in the subprime crisis period: Evidence from the ETF market
(2012-09-01)
Chiu, Junmao
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Chung, Huimin
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Ho, Keng-Yu
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Wang, George H. K.
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資訊管理與財務金融系註：原資管所+財金所
"Using index and financial exchange-traded funds (ETFs), this study explores the relation between funding liquidity and equity liquidity during the subprime crisis period. Our empirical results show that a higher degree of funding illiquidity leads to an increase in bid-ask spread and a reduction in both market depth and net buying imbalance. Such findings indicate that an increase in funding liquidity can improve equity liquidity, with a stronger effect for the financial ETFs than for the index ETFs. Our study provides a better overall understanding of the effect of the liquidity-supplier funding constraint during the subprime crisis period. (C) 2012 Elsevier B.V. All rights reserved."
Has the introduction of S&P 500 ETF options LED to improvements in price discovery of SPDRs?
(2012-07-01)
Chen, Wei-Peng
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Chung, Huimin
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This study sets out to investigate trading in Standard and Poor's Depository Receipt Trust Series I (SPDR) options and the impact on the price-discovery process of SPDRs. The empirical results reveal a significant rise in liquidity within the SPDR market following the introduction of SPDR options. Furthermore, the results also show that the introduction of SPDR options has led to a significant improvement in the information share of SPDRs, and that the contribution of SPDRs to price discovery has become very close to that of E-mini index futures. These findings imply that developments in the derivatives market can lead to improvements in market quality, including the level of liquidity and price discovery of the underlying securities. (C) 2011 Wiley Periodicals, Inc. Jrl Fut Mark 32:683711, 2012
INTRADAY LIQUIDITY PROVISION BY TRADER TYPES IN A LIMIT ORDER MARKET: EVIDENCE FROM TAIWAN INDEX FUTURES
(2014-02-01)
Chiu, Junmao
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Chung, Huimin
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Wang, George H. K.
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This study examines the dynamic liquidity provision process by institutional and individual traders in the Taiwan index futures market, which is a pure limit order market. The empirical analysis obtains several interesting empirical results. We find that trader type affects liquidity provision in a number of interesting ways. First, although institutional traders use more limit orders than market orders, foreign institution (individual) traders use a relatively higher percentage of market (limit) orders in the early trading session and then switch to more limit (market) orders for the remainder of the day until close to the end of the trading day. Second, net limit order submissions by both institutional and individual traders are positively related to one-period lagged transitory volatility and negatively related to informational volatility. Third, net limit order submissions by institutional traders are positively related to one-period lagged spread. Finally, both the state of limit order book and order size significantly influence all types of traders' strategy on submission of limit order versus market order during the intraday trading session. (c) 2012 Wiley Periodicals, Inc. Jrl Fut Mark 34:145-172, 2014
Investor sentiment and evaporating liquidity during the financial crisis
(2018-05-01)
Chiu, Junmao
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Chung, Huimin
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Ho, Keng-Yu
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Wu, Chih-Chiang
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資訊管理與財務金融系註：原資管所+財金所
This study examines how investor sentiment affected equity liquidity and trading behavior during the financial crisis of 2007-2008. Using intraday data on equity index and financial ETFs, we show significant asymmetric response to investor sentiment on quoted spread, market depth, asymmetric depth, and net buying pressure. We also document that funding constraints can further increase the asymmetric impact of investor sentiment on liquidity and trading behavior. Our results can be explained by the psychological bias of negativity and help investors and risk management practitioners comprehensively understand why and how the evaporation of liquidity accelerates during the financial crisis.
Legal institutions and fragile financial markets
(2019-05-01)
Chiu, Junmao
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Chung, Huimin
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This study investigates equity liquidity variation with a funding constraint across 38 countries and examines whether the effectiveness of a country's legal institutions is systematically related to cross-country differences in fragile equity liquidity. Our results show that firms from countries with more extensive disclosure requirements tend to have lower liquidity shocks due to funding constraints, leading to higher firm value. This effect is stronger for ex-ante disclosures, especially for countries with a high level of openness and market volatility. Our empirical results are robust to the 2SLS regression model, the random effect regression model, the alternative measure of fragile equity liquidity, and the alternative measure of disclosure and enforcement variables. Our study provides a better understanding of the effect of information environments amidst periods of funding constraint. (C) 2019 Elsevier Ltd. All rights reserved.
Modeling Jump and Continuous Components in the Volatility of Oil Futures
(2009)
Tseng, Tseng-Chan
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Chung, Huimin
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Huang, Chin-Sheng
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交大名義發表
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National Chiao Tung University
In this study, we use the 'heterogeneous autoregressive' (HAR) model and replace all squared returns with a squared range to estimate realized range-based volatility (RRV) forecasts for oil futures prices. Our findings demonstrate that the HAR-RRV models, involving volatility measures with a realized range-based estimator, successfully capture the long-term memory behavior of volatility in oil futures contracts. We find that realized range-based bi-power variation (RBV), which is also immune to jumps, is a better regressor for future volatility prediction, significantly outperforming the AR model. Similar to the findings for financial markets, we also find that the jump components of RRV have little predictive power for oil futures contracts.