• Journal of Korea Trade
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• v.23 no.7
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• pp.147-155
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• 2019

Purpose - As the U.S.-China trade war has become considerably worse, the Chinese government is considering applying non-tariff barriers to trade, especially local contents rule. The main purpose of this research is to check whether it is suitable for Korean investors to invest in the current Chinese capital market. Design/methodology - In order to check the stability of the recent Chinese capital market, we investigated the behavior of foreign equity investment (including Korean equity investment) in the Chinese capital market after China announced the Shanghai-Hong Kong Stock Connect (SH-HK Connect). In this paper, we researched whether international portfolio investment would or would not contribute to an increase the volatility of an emerging market's stock market (Chinese capital market) when foreign investors make investment decisions based on the objective of short-term gains by rushing into countries whose markets are booming and fleeing from countries whose markets are falling. Findings - The empirical results indicate that foreign investors show strong, negative feedback trading behavior with regard to the stock index of the Shanghai Stock Exchange (SSE), and when the performance of foreign investors in the Chinese stock market was fairly good. Also, we found evidence that the behavior of foreign investors significantly decreased volatility in SSE stock returns. Consequently, the SH-HK Connect brought on a win-win effect for both the Chinese capital market and foreign investors. Originality/value - It appeared that the Chinese capital market was very suitable for Korean investors after the China's declaration of the SH-HK Connect. However, the win-win effect was brought on by the Chinese government's aggressive capital control but the capital controls could possibly cause financial turmoil in the Chinese capital market. Therefore, Chinese reform in industrial structure and the financial sector should keep pace with suitable capital control policies.

• International Commerce and Information Review
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• v.2 no.1
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• pp.69-81
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• 2009

In the past, trades with the Latin American markets were not active since the South Korean companies simply considered them substitute markets whenever exports were slow. However, the importance of these markets is highlighted anew thanks to the signing of the Korea-Chile Free Trade Agreement (FTA). Presently, Latin American nations are pursuing FTA with various nations in the world, regardless of the geographic boundaries, in order to vitalize their economy and attract foreign capital. Despite these efforts to liberalize the market, Latin American regions continue to restrict importation by leveraging diverse set of trade regulation policies. This research examines trade regulation policies in the Latin American regions and proposes Korea's countermeasures.

• International Commerce and Information Review
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• v.11 no.2
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• pp.69-81
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• 2009

In the past, trades with the Latin American markets were not active since the South Korean companies simply considered them substitute markets whenever exports were slow. However, the importance of these markets is highlighted anew thanks to the signing of the Korea-Chile Free Trade Agreement (FTA). Presently, Latin American nations are pursuing FTA with various nations in the world, regardless of the geographic boundaries, in order to vitalize their economy and attract foreign capital. Despite these efforts to liberalize the market, Latin American regions continue to restrict importation by leveraging diverse set of trade regulation policies. This research examines trade regulation policies in the Latin American regions and proposes Korea's countermeasures.

• Asia Pacific Journal of Business Review
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• v.4 no.1
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• pp.1-34
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• 2019

This study investigates whether and how a firm's cost of equity capital is influenced by the extent of a firm's real earnings management (REM). Using a large sample of Hong Kong and Chinese firms over the 9-year period 2009-2017, we find that our implied cost of equity estimates are positively associated with both the extent of REM and the extent of accrual-based earnings management (AEM), but the positive association is stronger for REM than for AEM. We also provide evidence suggesting that the effect of AEM and REM on the cost of equity is more pronounced for Hong Kong firms than Chinese firms, and within Chinese firms, it is less pronounced for the state-owned enterprises (SOEs). Collectively, our results suggest that while both REM and AEM exacerbate the quality of earnings used by outside investors, REM does so to a greater extent than AEM, and thus the market demands a higher risk premium for REM activities than for AEM activities and that this cost of capital-increase effect is more prominent in a developed market like Hong Kong and mitigated by state ownership in China because of investors' expectations for a lower level of detriments to firm fundamentals by REM due to government's protection in a less developed market like China.

• The Journal of Asian Finance, Economics and Business
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• v.6 no.3
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• pp.67-79
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• 2019

This study examines the impact of corporate governance on capital structure decisions based on a large panel of Chinese listed firms. Using the system Generalized Method of Moments (GMM) estimator to control for unobserved heterogeneity, endogeneity, and persistency in capital structure decisions, we document that the ownership structure plays a significant role in determining leverage ratios. More specially, we find that managerial ownership has a positive and significant impact on firms' leverage, consistent with the incentive alignment hypothesis. We also find that managerial ownership only affects the leverage decisions of private firms in the post-2005 split share reform period. State ownership negatively influence leverage decisions implying that SOEs may face fewer restrictions in equity issuance and may receive favourable treatments when applying for seasoned equity ¿nancing, thus use less debt. Furthermore, our results show that while foreign ownership negatively influences leverage decisions, legal person shareholding positively influences firms' leverage decisions only for state controlled firms. We also find that the board structure variables (board size and the proportion of independent directors) do not influence firms' capital structure decisions. Our findings suggest that recent ownership reforms have been successful in terms of providing incentive to managers through managerial shareholdings to take risky financial choices.

• Journal of Korea Trade
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• v.24 no.6
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• pp.1-18
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• 2020

Purpose - This study investigates whether a listing effect exists in cross-border M&As and whether the effect can be attributed to the uncertainty of the GDP growth rate in the target firm's home country. We apply a joint variable analysis using M&A announcement data from the Korea Exchange (KRX), Shanghai Stock Exchange (SSE), and the Taiwan Stock Exchange (TWSE) from 2004 to 2013. We also conduct an event study using the measure of the uncertainty of the GDP growth rate (based on IMF statistics) in 55 target countries. Design/methodology - We measure the abnormal return (AR) using the market-adjusted model. We test the significance of the AR and the cumulative abnormal return (CAR) using a one-sample t-test. We examine the characteristics of the CARs depending on whether the target company is listed by applying a difference analysis using CAR as a test variable. In addition, we set CAR (-5, +5) as a dependent variable to identify the cause of the listing effect, and test both the financial characteristic variables of the acquirer and the collective characteristic variables of the merger as independent variables in the multiple regression analysis. Findings - First, we find the listing effect of cross-border M&As in the KRX, SSE, and TWSE, which represent the capital markets in Korea, China, and Taiwan, respectively. This listing effect persists during the global financial crisis and has a negative effect on the wealth of acquiring shareholders, especially when the target countries are emerging markets. Second, greater uncertainty regarding the target countries' economic growth in cross-border M&As has a negative effect on the wealth of acquiring firms' shareholders. Third, our empirical analysis demonstrates that the listing effect is attributable to the fact that firms listed in a target country with greater uncertainty of economic growth are more directly and greatly exposed to uncertain capital markets through stock markets, than are unlisted firms. Originality/value - This study is significant in that it presents a new strategic perspective in the study of cross-border M&As by demonstrating empirically that the listing effect is attributable to the uncertainty regarding the economic development of the target firms' home countries.

• International Area Studies Review
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• v.12 no.2
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• pp.79-97
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• 2008

After entering into the WTO in October, 2001, China started opening her bank industry on a full scale and her financial markets from the end of 2006. It is true that the Chinese commercial banks should make efforts to enhance their operational efficiency for adapting the rapid change of financial environments. In this paper, the efficiency of 4 Chinese state-owned commercial banks and 11 share holding commercial banks has been estimated. Our Tobit model to find out the determinants of these banks' efficiency. The results are as follows: The efficiency of these banks kept being improved from 1999 to 2003. With regard to the relationship between the determinants and the bank efficiency, their capital ratios, ownership structures and government subsidies are significant at the 5% level while the return on asset(ROA) is significant at the 10% level. The relationship between the determinants and the efficiency has showed that the size, capital ratios, ROA and ownership structure showed significantly before the entry to WTO, on the other hand, after WTO their capital ratios are the only factor to determine their efficiencies.

• The Journal of Asian Finance, Economics and Business
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• v.4 no.1
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• pp.5-18
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• 2017

Total debt in the People's Republic of China surged to nearly 290% as a ratio to GDP by the second quarter of 2016, mostly on account of non-financial corporate debt. The outpouring of credit to stem the impact of the global financial crisis accentuated industrial overcapacity in traditional sectors, such as steel, cement, and energy, while feeding asset bubbles in the property, equity and bond markets. At the Chinese corporate level, this has translated into weakened fundamentals and a fall in industrial profits, particularly of SOEs. As debtors struggle to service interest payments, non-performing loans (NPLs) have been on the rise. This paper assesses the financial fragility of the Chinese economy by looking at risk factors in the non-financial sector. We apply quantile regressions to a dataset containing all Chinese listed companies in Standard & Poor's IQ Capital database. We find higher sensitivity over time of corporate leverage to some of its key determinants, particularly for firms at the upper margin of the distribution. In particular, profitability increasingly acts as a curb on corporate leverage. At a time of falling profitability across the Chinese non-financial corporate sector, this eases the brake on leverage and may contribute to its continuing increase.

• Korean Business Review
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• v.18 no.2
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• pp.21-43
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• 2005

Since China opened its market to foreign investors, overseas Chinese firms have been the biggest foreign investors. Because of the uncertain market environment, other foreign finns incurred larger liabilities of foreignness than overseas Chinese finns. Some parts of liabilities of foreignness stem from cultural differences and last for quite long time. Therefore better understanding of Chinese culture and guanxi network can give overseas Chinese finns competitive advantages over those from other countries by offering market information and reducing transaction costs. Also better management skills, information about export markets and abundant capital allow them to maintain competitive strengths over local firms. As foreign firms accumulate market knowledge in China, they can reduce liabilities of foreignness. However, it is very difficult for foreigners to understand Chinese cultures and to utilize guanxi network as well as Chinese. It is likely that Overseas Chines firms can have competitive strengths in some industries such as banking, retailing, and foreign trade, where relationship with local contractors and exploitation of worldwide Chines networks can play important roles to make successful business deals.

• Journal of Digital Convergence
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• v.20 no.1
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• pp.41-46
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• 2022

Chinese stock market often rises and falls sharply. The impact of the stock price crash risk has become a hot research field to maintain financial stability. This study starts from the perspective of the proportion of largest shareholders holding shares, and studies whether largest shareholders have more incentive to supervise management and reduce self-interest behavior of management. We use the data of Chinese listed companies from 2009 to 2019 as a sample, and study the relationship between largest shareholders and share price crash risk. Empirical research shows that the higher the proportion of largest shareholders of state-owned enterprise, the company's stock price crash risk can be significantly reduced. This study suggests that the higher the share of the largest shareholder, the lower the opportunistic behavior of managers and that information asymmetry between the company and the shareholders can be alleviated.