This study compares retail investors’ daytime and overnight firm-specific sentiments. The sentiment measures are textually extracted from China’s most popular platform for retail investors. We find that both daytime and overnight sentiments positively predict short-term daily returns, especially for posts with stronger influence or wider dissemination. However, whereas the positive predictability of overnight sentiment reverses in the long run, the positive predictability of daytime sentiment persists for up to 6 months. Consistent with clientele heterogeneity, only daytime sentiment can predict earnings surprises, implying that it contains fundamental information, but overnight sentiment is dominated by irrational moods. A hedging portfolio based on the daytime (overnight) sentiment generates an annualized Fama-French 5-factor alpha of 30.19
Motivated by the characteristics of R D and its co-movement with the rising prevalence of zero-leverage firms over the past four decades, we investigate the effects of US R D tax incentive and import tariff policies on zero-leverage behaviour. We find that the number of R D-intensive firms has increased since the introduction of the R D tax credit in 1981, and that zero-leverage firms are disproportionately concentrated among R D firms. Both the increase in R D investment and the rising sensitivity of leverage decisions to R D contribute to this pattern. In addition, intensified market competition driven by tariff reductions significantly increases the likelihood of zero leverage among R D firms, but not among non-R D firms. Overall, our findings suggest that R D tax incentives and trade liberalisation policies have played important roles in shaping the long-term trend of zero-leverage behaviour in the United States.
How researchers measure real earnings management (REM) shapes inferences about opportunistic operating behavior. An abnormal operating decision may reflect reporting-motivated manipulation, a rational response to economic fundamentals, or model error, creating a fundamental construct-validity problem. We review major reduced-form REM approaches and replicate and re-estimate prior R D- and SG A-based evidence, extending it to compare alternative earnings-benchmark definitions and evaluate REM proxies across incentive alignment, intertemporal persistence, and future operating performance. Operating/core-earnings benchmarks show stronger incentive alignment primarily for SG A-related REM, while R D evidence is more sensitive to benchmark and proxy choice. Standard and total Tobin’s Q do not systematically improve expected R D and SG A models relative to classic Q. Abnormal R D and SG A cut-intensity measures exhibit relatively strong incentive alignment, particularly for SG A, but greater persistence and mixed future-performance validity. We further develop an identification-oriented framework for structural REM research. Overall, no single REM proxy dominates across validity dimensions; measurement choice should reflect the research objective, construct-validity criterion, and available identifying variation.
This study examines how a merger counterparty’s earnings management relates to a firm’s choice of financial advisor and how these choices affect subsequent deal outcomes. We find that acquirers are more likely to hire advisors when targets exhibit higher levels of earnings management, and this relationship is stronger for informed advisors with prior relationships with the targets. In contrast, the association is weaker for the targets’ advisor decision, suggesting that information concerns are more pronounced for acquirers. We further show that informed advisors help acquirers secure more favorable deal outcomes, including lower acquisition premiums and better post-merger performance. These effects are especially evident when informed advisors work with top-tier advisors or operate within multi-advisor teams, reflecting acquirers’ strategic efforts to structure advisory teams to enhance information access, strengthen negotiations, and reduce bias. Overall, the findings suggest that informed advisors help mitigate deal-specific information risks associated with earnings management.
This research uses intraday trading data of listed firms on the Taiwan Stock Exchange to examine the prevalence of price manipulation. The empirical results exhibit significant seasonal effects in intraday returns that are consistent with performance inflation. The seasonality in return reversals is stronger at the turn of the year than at other quarters, suggesting performance inflation is more abundant at the end of the year than at other times. High-risk stocks exhibit more pronounced year-end performance inflation compared with other stocks. Equity mutual funds engaging in substantial window dressing demonstrate conspicuous portfolio return reversals. Session-ending and session-beginning order imbalances by foreign investors and investment trusts closely correlate to the magnitude of return reversals. Lastly, investment trusts display the most pronounced year-end performance inflation compared to other investors, while individual investors may lack the incentive or ability to artificially boost their portfolios.
