Korean chaebol woes: Prosecutors are investigating the three siblings who control CJ Group to uncover the whereabouts of an estimated 500 billion won ($450 million) in Hidden Assets

2013-05-22 16:06

CJ probe expands

By Kim Jae-won
Prosecutors are Investigating The Three siblings who Control CJ Group to uncover The whereabouts of an estimated 500 billion won ($ 450 million) in Hidden Assets, Sources said Wednesday.  Read more of this post

Billionaire The Ning King Emerges on Indonesian Property

Billionaire The Ning King Emerges on Indonesian Property

Not many finance professionals who cover Indonesia’s biggest property companies have heard of The Ning King, the 82-year-old founder of closely held Indonesian conglomerate Argo Manunggal Group.

The — pronounced Tay — owns half of PT Alam Sutera Realty (ASRI), which developed for almost two decades a town west of Jakarta comprised of 30 residential clusters, each with as many as 500 houses. The company’s shares have doubled since October.

He also owns 64 percent of PT Bekasi Fajar Industrial Estate (BEST), which controls the largest industrial land bank among its publicly traded peers in Indonesia. Bekasi Fajar has partnered with Japanese companies to develop industrial parks and is up 46 percent year-to-date. Read more of this post

A more detailed look at China’s economic performance in 2012 shows it tipped further off balance, relying more than ever on credit-fueled investment, a trend it had tried to rein in

May 22, 2013, 1:58 p.m. ET

China Tilts Back to Big Spending

By TOM ORLIK

BEIJING—A more detailed look at China’s economic performance in 2012 shows it tipped further off balance, relying more than ever on credit-fueled investment, a trend it had tried to rein in. A further tilt toward capital spending flies in the face of Beijing’s goals to shift to a consumption-driven economic model and threatens to add to a mounting debt problem, exacerbate industrial overcapacity that is dragging down profits, and produce more empty “ghost cities”. The share of fixed investment in China’s GDP rose to 46.1% in 2012, up from 45.6% in 2011, according to National Bureau of Statistics data, published by data provider CEIC. China’s headline GDP data have been available for some time, but the detailed breakdown between the shares of investment, consumption and exports has only been published this week. Read more of this post

For Proxy Advisers, Influence Wanes; ISS and Glass Lewis dominate an industry that evolved to bring a critical lens to the management proposals that mutual funds and asset managers traditionally had rubber-stamped in corporate elections

Updated May 22, 2013, 6:42 p.m. ET

For Proxy Advisers, Influence Wanes

By JOANN S. LUBLIN and KIRSTEN GRIND

MI-BW134_ISSPRO_G_20130522180304

The landscape for proxy advisers is getting rockier.

Big firms that sell recommendations on how to vote in corporate elections are losing some of their relevance, as companies more aggressively court key investors ahead of big votes and those investors handle more of the voting analysis themselves.

Consider J.P. Morgan ChaseJPM +1.15% & Co. The two biggest proxy advisers—Institutional Shareholder Services Inc. and Glass, Lewis & Co.—recommended that shareholders support a nonbinding proposal to split the roles of chairman and chief executive held by James Dimon. Read more of this post

From Google to FedEx: The Incredible Vanishing Offshore Subsidiary from publicly disclosed financial filings

Updated May 22, 2013, 7:38 p.m. ET

From Google to FedEx: The Incredible Vanishing Subsidiary

By JESSICA HOLZER

WASHINGTON—Some of the biggest U.S. companies, including Google Inc.GOOG -1.94% and FedEx Corp., FDX -2.47% have quietly removed hundreds of offshore subsidiaries from their publicly disclosed financial filings over the past several years. Software maker Oracle Corp., ORCL -2.79% for instance, disclosed more than 400 subsidiaries in its 2010 annual report. By 2012 the list had been whittled to eight—five of which were located in Ireland. Oracle declined to comment. The vanishing subsidiaries don’t stem from asset sales or corporate restructuring. Companies across industries say they are taking advantage of Securities and Exchange Commission rules that demand disclosure only when subsidiary operations are “significant.”

MK-CD451_OFFSHO_G_20130522170008 Read more of this post

Hedge Funds Trail S&P 500 by 10 Percentage Points, Goldman Says

Hedge Funds Trail S&P 500 by 10 Percentage Points, Goldman Says

Hedge funds’ returns have stayed “lackluster” this year, with the $2.3 trillion industry trailing the gains of the Standard & Poor’s 500 Index by about 10 percentage points, according to Goldman Sachs (GS) Group Inc.

Hedge funds gained 5.4 percent on average through May 10, compared with a 15.4 percent rise for the S&P 500 (SPX) and a 14.8 percent increase for the typical mutual fund, a team of Goldman Sachs analysts led by Amanda Sneider and David Kostin wrote in a report released today.

Hedge-fund managers have been hurt in 2013 by their bearish wagers on stocks, with “popular” shorts such as Johnson & Johnson (JNJ) and Gilead Sciences Inc. rising more than the broader equity market, Goldman Sachs said. Fewer than 5 percent of the hedge funds tracked by New York-based Goldman Sachs are beating the S&P 500 or a typical mutual fund that buys stocks of the biggest U.S. companies. Read more of this post

Oil-tanker owners will struggle to retain crews and maintain ships after losing the most money in four decade

Oil-Tanker Crews Seen Quitting on 40-Year High in Losses

Oil-tanker owners will struggle to retain crews and maintain ships after losing the most money in four decades, according to the industry’s biggest trade group.

The problems won’t ease any time soon because some vessel rates may take as long as four years to rebound, said Katharina Stanzel, the managing director of the International Association of Independent Tanker Owners, or Intertanko. Its members operate more than half of the world’s tankers by capacity.

Owners lost about $27 billion since 2009 and rates for the largest vessels may only recover by 2017, according to Intertanko. Daily rates for the biggest carriers slid 68 percent over the past year because of a glut of capacity, figures from London-based Clarkson Plc (CKN), the largest shipbroker, show. Read more of this post

U.S. Bank Capital at Risk When Bond Gains Evaporate, Fitch Says

U.S. Bank Capital at Risk When Bond Gains Evaporate, Fitch Says

About $25 billion in unrealized bond gains are at risk from rising interest rates that may erode capital levels at some of the largest banks by 1 percentage point or more, according to Fitch Ratings.

Four years of price appreciation and growth in the bond portfolios of the 15 largest banks have left them with unrealized gains approaching a two-decade high, Fitch said today in an e-mailed statement. The gains may be erased by rising interest rates in a manner that could be worse than the last cycle when gains topped out in 2002, according to the ratings firm. Read more of this post

Canada’s Bond-Dumping Frenzy Escalates as Pensions Unload

Canada’s Bond-Dumping Frenzy Escalates as Pensions Unload

Canada’s biggest pension-fund manager will “significantly” cut its C$64 billion ($62.3 billion) allocation to bonds as the fixed-income market’s foothold among its most loyal base of investors grows less certain.

Caisse de Depot et Placement du Quebec Chief Executive Officer Michael Sabia said he’s scaling back fixed-income investments that account for 36 percent of its C$176 billion of assets under management, joining the Canadian units of HSBC Global Asset Management and Sun Life Global Investments Inc., which combined oversee about C$20 billion of assets. Canadian government bond yields have fallen to almost record lows, draining income for pension funds that have traditionally relied on fixed-income to fund decades-long pension liabilities. Read more of this post

Oil Pipelines to Drive Canada Economy Like 1880s Railroad

Oil Pipelines to Drive Canada Economy Like 1880s Railroad

Oil pipelines, under attack from environmentalists, are essential to Canada’s economic growth just as railroads were in the 1880s, Enbridge Inc. (ENB) Chief Executive Officer Al Monaco said.

“Pipelines are very similar to railroads,” Monaco said yesterday at the Bloomberg Canada Economic Summit in Toronto. “When you really get down to it, Canada is an export-driven resource economy. This is our foundation.”

Pipelines already carry 15 percent of Canadian exports in the form of crude, mostly to U.S. markets. Plans by Enbridge and TransCanada Corp. (TRP) to spend more than a combined C$50 billion ($49 billion) to expand networks to the Pacific and Atlantic coasts, are opposed by environmental groups such as ForestEthics. The nation’s oil trade rose 7 percent to about C$73 billion last year, according to Statistics Canada, and is set to grow faster than the total economy. Read more of this post

HSH Nordbank, the world’s largest shipping lender, Says Shipping Crisis May Worsen Through 2014

HSH Nordbank Says Shipping Crisis May Worsen Through 2014

HSH Nordbank AG, the world’s largest shipping lender, said the crisis buffeting the industry may worsen through 2014 as clients contend with a drop in demand and the arrival of a new generation of container vessels.

HSH Nordbank, which holds 27 billion euros ($35 billion) of shipping loans in its portfolio, has taken provisions to prepare for the worst-case scenario, HSH Chief Executive Officer Constantin von Oesterreich told journalists in Hamburg, the bank’s home city, last night. Read more of this post

The New Buyers of ETFs: According to Morningstar, hundreds of mutual funds now own passive ETFs

The New Buyers of ETFs

Stan Luxenberg

Fri, 2013-05-17 09:21

Many actively managed mutual funds are now in the market for ETFs for their low costs of ownership and ease of trading. But should shareholders be annoyed? During the past decade, ETFs have spread relentlessly, appealing to pensions, retail investors, and financial advisors. But lately a new group has begun buying: actively managed mutual funds. According to Morningstar, hundreds of mutual funds now own passive ETFs. More than 100 mutual funds hold SDPR S&P 500 (SPY), while more than 70 portfolios use iShares iBoxx High Yield Corporate (HYG). Mutual Funds with ETF stakes include Columbia Dividend Income (LBSAX), Monetta (MONTX) and Vanguard Windsor II (VWNFX). ETF provider SPDR says that 21 of the 25 largest fund companies hold at least some ETFs.

new-buyers-etfs-table Read more of this post

To Spark Buyers for Electric Cars, Drop the Price to Nearly $0

Updated May 22, 2013, 3:34 a.m. ET

To Spark Buyers for Electric Cars, Drop the Price to Nearly $0

By JOSEPH B. WHITE

This car deal sounds too good to be true: Drive a car, almost free. To entice drivers to try electric-powered cars, auto makers are lowering the price of entry to the zero-emission lifestyle. A new round of discount leases on mainstream-brand plug-in cars such as theNissan 7201.TO -1.38% Leaf or Fiat F.MI +0.93% 500e, combined with federal, state and local electric-vehicle incentives, could make a battery-electric car an extraordinarily economical way to get around for drivers. There are two big caveats: Drivers need to live in states offering tax incentives and can’t drive very far in a single day.

PJ-BO412_EYESRO_G_20130521230902 Read more of this post

China’s Toxic Rice Bowl; 44% of rice samples collected locally contained dangerously high levels of cadmium, a heavy metal that causes cancer, kidney failure and other diseases

May 22, 2013, 12:47 p.m. ET

China’s Toxic Rice Bowl

Elections are the only antidote for cadmium rice and other horrors.

The Guangzhou Food and Drug Administration says that 44% of rice samples collected locally contained dangerously high levels of cadmium, a heavy metal that causes cancer, kidney failure and other diseases. Local residents are rightly worried—and furious. So are Chinese across the country: Rice is the staple food for most of the population, so widespread cadmium exposure is another wake-up call that unaccountable government causes public health disasters.

Cases of cadmium in rice and other crops are not new. In February, a Guangdong newspaper reported that the state-owned Shenzhen Cereals Group distributed a large shipment of cadmium-tainted rice from Hunan in 2009. The company denied the report. But researchers at Nanjing Agricultural University found that 10% of China’s rice crop is contaminated with the metal. The full extent of soil pollution is deemed a state secret, and activists who expose polluters are regularly imprisoned. Read more of this post

Richemont Departure Signals Fashion Is an Accessory

Richemont Departure Signals Fashion Is an Accessory

For luxury-goods maker Richemont (CFR), clothing and bags are going out of fashion.

While Richemont last week reported a 30 percent gain in annual profit as shoppers spent more on its Cartier jewelry and IWC watches, leather goods and fashion brands such as Lancel and Chloe have struggled. Earnings at Richemont’s so-called soft luxury unit fell by more than half in the last fiscal year.

Chairman Johann Rupert last week said Richemont (CFR) should have been quicker to get rid of brands that disappoint. Then yesterday, the Geneva-based company announced the departure of Marty Wikstrom, the head of the fashion and accessories business — which accounts for less than a fifth of the company’s 10 billion euros ($12.9 billion) in revenue. Read more of this post

Hong Kong Police Probe Mercantile Exchange at SFC Request, which said it found “serious” suspected financial irregularities at the shuttered commodities market.

Hong Kong Police Probe Mercantile Exchange at SFC Request

Police began probing the Hong Kong Mercantile Exchange Ltd. at the request of the Securities and Futures Commission, which said it found “serious” suspected financial irregularities at the shuttered commodities market.

The financial regulator started its own investigation on May 15 and then referred the matter to Hong Kong Police’s Commercial Crime Bureau, according to a statement published on the SFC’s website yesterday. Read more of this post

Death in Parched Farm Field Reveals Growing India Water Tragedy

Death in Parched Farm Field Reveals Growing India Water Tragedy

Sachin Ingale slipped out of his family’s two-room, white-painted mud hut about 4 p.m. and walked into their farm field where the 22-year-old took a deep swig of pesticide from a plastic bottle. He died later that evening.

Four months later, the mercury is pushing 50 degrees Celsius (122 degrees Fahrenheit) in his village in India’s Maharashtra state. Inside the family hut, a picture of a serene Buddha decorates a wall above a cracked concrete floor.

Elder brother Satish Ingale is sitting on a plastic chair in a white singlet as he explains the pesticide killed Sachin, but it’s the loss of water rights to heavy industry, the worst drought in four decades and the rise in debt that follows that’s causing farmers to take their own lives. Read more of this post

In complex world, investing should be simple

LARRY SWEDROE / 

MONEYWATCH/ May 21, 2013, 7:00 AM

In complex world, investing should be simple

(MoneyWatch) Many investors have ventured into the land of alternative investments, including such alternatives as REITs, commodities, private equity and hedge funds. However, a recent paper by the chief investment officer of a pension system says these investors may want to think twice.

Robert Maynard, chief investment officer of the Public Employee Retirement System of Idaho and author of the article “Conventional Investing in a Complex World” (Journal of Investing, Spring 2013), cautions investors who are thinking about abandoning traditional investment plans. He advocates “policies that are simple, transparent, and focused rather than the increasingly popular alternative tactics, such as illiquid instruments and vehicles, leverage, and complex, opaque investment strategies.”

As we have shown here on a regular basis, hedge funds have had a hard time keeping up with the risk-adjusted returns on safe bond investments (let alone with the returns of publicly available stocks). And private equity has underperformed publicly available small value stocks. This is in addition to the greater risks of such investments, plus their lack of transparency and liquidity. Read more of this post

Duke’s Campbell Harvey et al: Most claimed research findings are false; a newly discovered factor needs to clear a much higher hurdle, with a t-ratio greater than 3.0

…and the Cross-Section of Expected Returns

Campbell R. Harvey Duke University – Fuqua School of Business; National Bureau of Economic Research (NBER)

Yan Liu Duke University

Heqing Zhu Duke University – Fuqua School of Business

May 4, 2013

Abstract: 
Hundreds of papers and hundreds of factors attempt to explain the cross-section of expected returns. Given this extensive data mining, it does not make any economic or statistical sense to use the usual significance criteria for a newly discovered factor, e.g., a t-ratio greater than 2.0. However, what hurdle should be used for current research? Our paper introduces a multiple testing framework and provides a time series of historical significance cutoffs from the first empirical tests in 1967 to today. We also project forward 20 years assuming the rate of factor production remains similar to the experience of the last few years. We argue that today a newly discovered factor needs to clear a much higher hurdle, with a t-ratio greater than 3.0. Echoing a recent disturbing conclusion in the medical literature, we argue that most claimed research findings are false. Our key results are summarized:

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The Constant: Companies that Matter

The Constant: Companies that Matter

Paul Kedrosky University of California, San Diego (UCSD); Ewing Marion Kauffman Foundation

May 2013

Abstract: 
There are few constants in entrepreneurship — perhaps none. That is why when something appears to be even semi-stable across meaningful periods, it is usually worth further investigation.

This short paper investigates just such an apparent constant. Specifically, it is often claimed that there only are fifteen to twenty information technology companies created per year in the United States that turn out to “matter,” where matter is defined as the company (relatively) promptly going from founding to $100 million in revenues. Further, and of real consequence to cities and regional economies, is that most such companies founded in any given year are thought to be in California. This paper tries to find out if the preceding is true.

The Corporate Immune System: Governance from the Inside Out

The Corporate Immune System: Governance from the Inside Out

Omari Scott Simmons Wake Forest University School of Law

April 29, 2013
University of Illinois Law Review, Forthcoming
Wake Forest Univ. Legal Studies Paper

Abstract: 
The “Corporate Immune System” (CIS) is an outgrowth of an evolutionary trend reflecting firms’ adaptation to challenges including growing corporate complexity, threats to corporate value, and political compromise. Similar to biological immune systems, corporations have adopted a range of internal mechanisms to ward off threats. The CIS performs an internal regulatory function that lowers monitoring costs for government regulators through internal mechanisms such as a monitoring board, compliance and risk management systems, compensation, and an enhanced chief legal officer (CLO) role. It complements external corporate governance strategies: shareholder empowerment, markets, litigation, gatekeepers, and top-­down public regulation. Today’s corporate boards are much more informed, organized, skilled, and accountable than their historical antecedents. Although far from perfect, they continue to evolve and improve. The CIS, recognizing the potential of collaborative inside‐out reforms in the corporate arena is, on balance, a promising development. But this trend also raises concerns that merit further discussion.

Corporate Governance Reforms Around the World and Cross-Border Acquisitions

Corporate Governance Reforms Around the World and Cross-Border Acquisitions

E. Han Kim University of Michigan – Stephen M. Ross School of Business

Yao Lu Tsinghua University – School of Economics & Management

May 15, 2013

Abstract: 
This paper provides comprehensive, detailed documentation of major corporate governance reforms (CGRs) undertaken by 26 advanced and emerging economies. Have these reforms impacted corporate investment decisions by altering investor protection (IP)? To answer this question, we estimate the CGRs’ impacts on foreign acquirers’ tendency to pick better performing firms in emerging markets. We argue the cherry picking is partly due to emerging countries’ weaker IP than acquirer countries’, predicting a positive relation between the degree of cherry picking and the gap in the strength of IP. If the CGRs strengthen IP, the gap will decrease (increase) following a CGR in a target’s (acquirer’s) country, moderating (intensifying) the cherry picking tendency. This is what we find when we estimate difference-in-differences in cherry picking before and after a CGR. These results not only demonstrate the CGRs’ impacts, but also imply the IP gap between capital exporting and importing countries distorts firm-level allocation of foreign capital inflows and reduces the benefits of globalization.

Meeting or Missing Earnings Benchmarks: The Role of CEO Integrity

Meeting or Missing Earnings Benchmarks: The Role of CEO Integrity

Yuping Jia Frankfurt School of Finance and Management

April/May 2013
Journal of Business Finance & Accounting, Vol. 40, Issue 3-4, pp. 373-398, 2013

Abstract: 
This paper examines the role of CEO integrity in determining whether a company’s earnings benchmarks will be met, beaten or missed. Prior literature provides evidence that managers have incentives for meeting or beating earnings benchmarks and are rewarded by the market for doing so (Lopez and Rees, 2002; and Skinner and Sloan, 2002). Managers also have incentives to miss their earnings targets for the benefit of a lower strike price on subsequent option grants (McAnally et al., 2008). A CEO’s involvement in backdating is taken here as a measure of his or her integrity. This paper shows that CEO integrity significantly influences whether benchmarks are met or beaten. In other words, backdating CEOs are more likely to meet or narrowly beat all three earnings benchmarks examined in the paper: positive earnings, last year’s earnings and analysts’ forecasts. At the same time, they are also less likely to narrowly miss a zero‐earnings benchmark. The results presented in this paper further validate the use of benchmark meeting/beating as a measure of earnings manipulation.

Social Media and Firm Equity Value

Social Media and Firm Equity Value

Xueming Luo University of Texas at Arlington

Jie Zhang University of Texas at Arlington; University of Rochester – Simon School of Business

Wenjing Duan George Washington University – School of Business

May 3, 2013
Luo, Xueming, J. Zhang, and W. Duan (2013), “Social Media and Firm Equity Value,” Information Systems Research, Forthcoming

Abstract:
Companies have increasingly advocated social media technologies to transform businesses and improve organizational performance. This study scrutinizes the predictive relationships between social media and firm equity value, the relative effects of social media metrics compared with conventional online behavioral metrics, and the dynamics of these relationships. The results derived from vector autoregressive models suggest that social media-based metrics (web blogs and consumer ratings) are significant leading indicators of firm equity value. Interestingly, conventional online behavioral metrics (Google searches and web traffic) are found to have a significant yet substantially weaker predictive relationship with firm equity value than social media metrics. We also find that social media has a faster predictive value, i.e., shorter “wear-in” time, than conventional online media. These findings are robust to a consistent set of volume-based measures (total blog posts, rating volume, total page views, and search intensity). Collectively, this study proffers new insights for senior executives with respect to firm equity valuations and the transformative power of social media.

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