Business

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  • (2020) Chen, Jie
    Thesis
    This thesis consists of three chapters. It studies, as a broad theme, the effectiveness of several institutional changes on individual decision-making based on experimental evidence. Chapter 1 is self-contained, with results purely based on a laboratory experiment. Chapter 2 and Chapter 3 are based on one field experiment in education. Chapter 2 describes the experimental settings and presents the overall results of the experiment, whereas Chapter 3 extends the analysis and focuses on treatment effects on women and men respectively. Chapter 1 shows how reward or punishment opportunities change contributions in a public goods game with 'privileged' members, where 'privilege' indicates that one's per-unit contribution to the public good produces a higher monetary return than is the case for others in the group. The main finding is that reward opportunities strongly increase group contributions in such groups while punishment opportunities do not. Reward also mitigates contribution decay over successive periods and improves social welfare. Chapter 2 mainly studies how rank incentives (i.e., relative performance information) in a milestone-based online assignment system affect students' academic performance. I find that rank incentives increase the likelihood of a student putting more effort in the online assignment. Rank incentives also have positive effects on low-performing students' exam marks while they have negative effects on high-performing students' exam marks. The positive effects seem driven by increased self-perceived stress, increased effort, and decreased procrastination. The negative effects seem driven by increased self-perceived happiness and re-allocation of effort. Chapter 3 studies how rank incentives and milestone information (i.e., information with reference to achievement milestones corresponding to different amounts of points earned) affect men's and women's academic performance differently. Women with access to the rank incentives experience a 0.19 SDs mark decrease in the first midterm, compared to women without this access. In the absence of relative performance information, men with access to the milestone information experience a 0.26 SDs mark increase in the final exam, compared to men without the access. The negative effects on women seem driven by their increased stress level, whereas men's improved exam performance seem driven by increased effort.

  • (2020) Chen, Zhuo
    Thesis
    This thesis is composed of three stand-alone research studies relating to the recent unconventional monetary policy adopted by the Bank of Japan (BOJ). The first study investigates the impact of the BOJ’s policy on stock prices and corporate activities. The empirical results show that the policy has generated heterogenous effects on stock prices. Firms with disproportionately higher BOJ investment experience significantly positive stock returns both in the short term and the long term. Corresponding to the positive price impact, the cost of equity capital reduces and firm value increases. However, further tests fail to find evidence of any real impact. Firms that benefit from a reduction in cost of equity capital do not increase external financing, corporate investment and employment. The concentrated capital structure in Japan and the biased investment scheme adopted may explain this weak policy impact. The second study examines whether and how excess reduction in free float affects stock liquidity. Using the BOJ’s equity purchase program as a natural experiment to tackle endogeneity problems, the results show that firms that experience a larger reduction in free float exhibit a reduction in stock liquidity. The negative effect of free float reduction on stock liquidity survives a battery of robustness tests. Further analyses of the underlying channels show that the number of common shareholders and institutional shareholders in a firm significantly decrease. These findings are consistent with a lack of free floating shares introducing frictions in the process of liquidity provision. The third study examines whether an increase in exchange traded funds (ETF) ownership via indexed investment impedes or improves price efficiency. Utilizing Japan’s ETF purchase program as the identification strategy, empirical tests show that prices of stocks that experience an increase in ETF ownership become less efficient in that they deviate more from a random walk and exhibit longer delays in responding to market information. An increase in ETF ownership is also associated with an increase in post-earnings announcement drift, a decline in analyst coverage, and a reduction in the coefficient of current returns to future earnings. These results together suggest that an excessive increase in ETF ownership curbs information arbitrage activities and results in less informative security prices.

  • (2020) Zhang, Xueting
    Thesis
    This thesis consists of three stand-alone research projects on corporate ownership structure across countries, insider trading, and passive institutional investors. The first study examines the effect of social trust on corporate ownership structure. Using a large sample of public firms across 42 countries, I find that a culture of trust in a country leads to a more dispersed corporate ownership structure. I also investigate how trust affects the evolution of ownership structure following firms’ IPO and the channels through which trust leads to dispersed ownership. I show that corporate ownership is more likely to become widely held and diffuses at a faster speed in countries with a higher level of social trust. Trust also encourages the selling of block ownership by large shareholders and the use of equity financing by firms. The second study investigates whether fast economic integration but slow legal integration leads to more aggressive insider trading by foreigners in possession of material non-public information about domestic firms. Using a large sample of mergers and acquisitions (M&As) around the world, I find systematically a higher likelihood of insider trading in target firm securities before the announcements of cross-border deals compared to domestic deals. The difference is mainly driven by cross-border deals where the acquirer is from a country with high corruption and low social norms, and where the target is in a country with stricter enforcement of insider trading laws. The third study examines the role of family interest in explaining and influencing individual funds’ voting behaviour. Specifically, I focus on the voting patterns of index funds in the event of corporate M&As. I find that the interest of fund families in the target is significantly positively associated with the likelihood of an affiliated index fund voting for a deal in the bidder merger approval meeting. However, an index fund’s own interest in the target does not explain its voting pattern. A higher level of aggregate bidder ownership held by fund families that have greater active interest in the target is also associated with worse deal performance. Taken together, the evidence suggests that cooperation between active and index funds within fund families potentially weakens the resistance of bidder shareholders to bad mergers.

  • (2021) Ho, Tin Long
    Thesis
    Housing wealth is typically the largest component of retirees’ portfolios. Although economic theory predicts that retirees would benefit from using housing wealth as a source of retirement funding, the take-up of enabling products and approaches is low. This thesis addresses three key areas in the utilization of housing wealth in retirement: (i) identification of the preferred home equity release approach for different types of households; (ii) exploration of means to address behavioral impediments to the utilization of housing wealth through equity release products; (iii) investigation of potential demand for long-term care insurance (LTCI) financed through home equity release. Chapter 3 investigates the preferred home equity release approach for retirement, given available options (i.e., downsizing, reverse mortgages, the government-offered Pension Loans Scheme, and home reversion–type schemes) and reflects the current tax, superannuation, and age pension rules in Australia. We use state-of-the-art economic and actuarial modeling to identify the preferred approach for the use of housing wealth by Australian retirees with different marital status, wealth portfolios, and preferences. Chapter 4 uses an online experimental survey administered to a representative sample of Australian (pre-)retiree homeowners to explore whether information framing to address mental accounting and narrow choice bracketing can enhance the demand for reverse mortgages. The information framing to address mental accounting significantly increases the stated demand for reverse mortgages. Chapter 5 presents the results of an online experimental survey administered to a representative sample of Chinese (pre-)retiree homeowners to investigate the demand for LTCI financed through home equity release. We find that access to home equity release products significantly increases the stated demand for LTCI and that the preferred approach is to use a reverse mortgage. Overall, the findings in this thesis confirm that retirees would benefit from using housing wealth to finance retirement. The results also identify approaches to reduce the gap between theoretical and actual demand for home equity release products. The findings provide evidence that government and private providers can use to address barriers to increasing interest in and take-up of home equity release products and to develop new products to enhance the utilization of housing wealth in retirement.

  • (2021) Hastings, Bradley
    Thesis
    Decades of research on organizational change and its leadership has explored the influence of leaders on change outcomes. Yet, despite this accumulated effort, the likelihood of success remains stubbornly low. This dissertation explores: how do leaders improve the likelihood of change success? Prior scholarship has examined this question from two perspectives. Change practice discussion describes change processes, the activities that enable change, with allied suggestions for leader engagement – how to lead change processes. Change leadership discussion studies leader attributes, aiming to identify and generalize those allied with success and, in doing so, provide guidance for leadership development. Addressing the leader-success challenge, scholars have identified two problems: (1) these two discussions lack integration – while it is difficult to talk about change leadership without inherently referring to a change process, the former discussion overlooks the available choices between change processes, and (2) the study of attributes has yielded desired leader behaviors, yet evidence shows that these behaviors do not always manifest in practice. Addressing the first challenge, I commence with a process study of 79 cases of change. This research finds that a dynamic choice between two perspectives of change processes – illustrated as diagnostic and dialogic – significantly improves the likelihood of change success. It also extends an understanding of a leadership practice that facilitates this choice. Integrating these findings, I develop a model that explains how choice connects change leadership to change process knowledge, at the same time as providing a roadmap for leaders to navigate between diagnostic and dialogic processes in practice. Addressing the second challenge, psychologists explain a key limitation of behavioral study is that a large component of people’s behavior is a product of situational cues. To explain this phenomenon, these scholars have explored mindsets, describing how behavioral dispositions result from mental frameworks that stand ‘ready to fire’ based on situational cues. My second study establishes psychology-derived mindsets as relevant for leadership engagement of change processes. It does so by developing a typology of mindset constructs, then conducting an integrative review of mindset knowledge between change leadership and psychology settings. This study matches the fixed and growth mindsets with leadership engagement of diagnostic and dialogic change processes. My third study empirically examines how the fixed and growth mindsets manifest within leaders when change is targeted. It finds that leaders with a growth mindset are likely to choose to oscillate between change processes and achieve change success. Further, I identify that diagnostic change processes can provide situational cues that foster a fixed mindset within leaders, with detrimental effects on outcomes. Integrating these findings from all three studies, this dissertation puts forward a new means for leadership development – mindset activation theory – explaining a means for leaders to take control of their situation-mindset interaction and guide their behaviors in practice. It demonstrates how leaders can increase awareness of and operationalize the situational cues that guide their mindset, facilitating choices between change processes that improve their likelihood of change success.

  • (2021) Wan, Cheng
    Thesis
    This thesis studies several important issues for ageing populations in developing countries facing basic public provisions of health services and pensions and high levels of air pollution. In particular, I investigate the demand for longevity, critical illness insurance (CII), and long-term care insurance (LTCI) in developing countries from both theoretical and empirical perspectives. I also study how PM2.5 (particles less than 2.5 micrometres in diameter) affects multimorbidity, cognition, and disability in activities of daily living (ADL) that are important health indicators for the old. The results provide insights into the design and risk management of retirement insurance products and government policies. First, we conduct an online experimental survey to elicit and analyse preferences for retirement portfolio including longevity, CII, and LTCI products after the COVID-19 pandemic outbreak in urban China. We observe a high variation of insurance demand by individual factors and COVID-19 experience, and their effects can be opposite by health-contingent insurance and life annuity. On average, the most preferred retirement portfolio contains health-contingent insurance that covers half of the expected out-of-pocket (OOP) costs for critical illness and long-term care expenditures, a monthly annuity of 20% of the disposable income. The portfolio that covers half of the OOP cost for long-term care, critical illness, or both, is most effective in increasing annuitisation. Next, we derive the optimal portfolio for retirees in China facing uncertain lifespan, catastrophic medical expenditures, and long-term care costs. An optimal portfolio highly depends on a retiree’s economic background. For a retiree with an average pension, we find that at least 30% of retirement wealth is allocated to CII, while at least 40% is allocated to a life annuity for those with a low pension. The demand for LTCI is less than 15% of retirement savings. State-dependent utility and bundled insurance products can both increase annuity demand for some retirees. Finally, we investigate the long-term impact of exposure to PM2.5 on multimorbidity, cognition, and ADL disability for the middle- and old-aged adults in China. We find different non-linear associations between PM2.5 exposure and the three health outcomes, and we also observe different impacts of past and current exposure to PM2.5 on them. We interpret the risk of PM2.5 exposure by comparing it to the effects of ageing.

  • (2022) Feng, Yang
    Thesis
    The stochastic optimal decision-making problem concerns the process of dynamically deciding actions to optimize pre-specified criteria based on specific stochastic models. It is, however, common that a decision-maker is unable to obtain complete information to formulate fully reliable models and faces the issue of model uncertainty. Existing empirical studies have shown that ignoring model uncertainty leads to improper decisions and causes losses in the financial market. Thus, it is important to incorporate model uncertainty into decision-making. To our best knowledge, no existing works on dividend optimization have taken model uncertainty into consideration. This thesis is an early attempt to fill such a gap in the actuarial literature. This thesis studies three popular optimization problems in the framework of model uncertainty, which involve different models with multiple control variables and various assumptions. It consists of three projects. The first project investigates an optimal risk exposure-dividend control problem under a diffusion model with model uncertainty. Due to the concerns about model uncertainty, the ambiguity averse insurer aims at finding the robust strategies such that a penalized reward function is maximized in the worst-case scenario. The problem is formulated as a zero-sum stochastic differential game between the insurer and the market. Explicit expressions for the value functions are obtained and the optimal dividend strategies are identified as barrier strategies. The second project incorporates model uncertainty into a dividend optimization problem of a singular type under the classical risk model with general assumptions on the claim size distribution. Using the standard stochastic control techniques, we characterize the value function as the smallest viscosity supersolution to the existing Hamilton-Jacobi-Bellman equation and show that the optimal strategies are of band type. The third project extends the second project by incorporating fixed and proportional transaction costs on dividend payments. The problem is an impulse control problem and the optimal dividend strategies are shown to be n-level lump sum strategies. Numerical studies are provided for each project and the economic implications of model uncertainty on insurer’s decision-making are discussed. It is shown that the insurer who is more averse to ambiguity tends to be more conservative in the optimal strategies.

  • (2021) Tian, Wei
    Thesis
    In Chapter 1, we provide conditions for the synthetic control estimator to be asymptotically unbiased when the outcome is nonlinear, and propose a flexible and data-driven method to choose the synthetic control weights. In the empirical application, we illustrate the method by estimating the impact of the 2019 anti-extradition law amendments bill protests on Hong Kong's economy, and find that the year-long protests reduced real GDP per capita in Hong Kong by 11.27% in the first quarter of 2020, which was larger in magnitude than the economic decline during the 1997 Asian financial crisis or the 2008 global financial crisis. In Chapter 2, we generalise the conventional synthetic control method to a multiple-outcome framework, where the time dimension is supplemented with the extra dimension of related outcomes. As a result, the synthetic control method can now be used even if only a small number of pretreatment periods are available or if we worry about structural breaks over a longer time span. We show that the bound on the bias of the multiple-outcome synthetic control estimator is of a smaller stochastic order than that of the single-outcome synthetic control estimator, provided that the unit of interest can be closely approximated by the synthetic control in terms of the observed predictors and the multiple related outcomes before the treatment. In the empirical application, we illustrate our method by estimating the effects of non-pharmaceutical interventions on various outcomes in Sweden in the first 3 quarters of 2020. Our results suggest that if Sweden had implemented stricter NPIs like the other European countries by March, then (1) there would have been about 70% fewer cumulative COVID-19 infection cases and deaths by July, and 20% fewer weekly deaths from all causes in early May; (2) temporary absence from work would increase by 76% and total hours worked would decrease by 12% among the employed in the second quarter, but the impact would vanish in the third quarter, and there would be no discernable effect on the employment rate throughout; (3) the volume of retail sales would shrink by 5%-13% from March to May, while the other economic outcomes including GDP, import, export, industrial production, and CPI would not be affected. In Chapter 3, we propose a method based on the interactive fixed effects model to estimate treatment effects at the individual level, which allows both the treatment assignment and the potential outcomes to be correlated with the unobserved individual characteristics. This method is suitable for panel datasets where multiple related outcomes are observed for a large number of individuals over a small number of time periods. To illustrate our method, we provide an example of estimating the effect of health insurance coverage on individual usage of hospital emergency departments using the Oregon Health Insurance Experiment data.

  • (2020) Khan, Mahreen
    Thesis
    Emotional intelligence (EI) exploded in popularity due to widespread claims that it is more important for success than cognitive ability. Whilst this claim is not totally accurate, subsequent research demonstrated that EI is indeed predictive of success in a variety of domains including physical health, mental health, job performance and relationship quality. However, although there is a large volume of research on outcomes of EI, relatively little is known about how EI changes with temporal-related factors. Accordingly, I used random-effects meta-analyses to determine how EI changes with age (k = 270; N = 84,101) and job experience (k = 110; N = 18,388). I used a cross-temporal meta-analysis to determine how EI changes across generations (k = 71; 17,694). For each meta-analysis, an extensive search was conducted to obtain relevant effect sizes from both published and unpublished literature. Overall, the results demonstrated that these relationships are largely dependent on how EI was conceptualised. Specifically, when EI was operationalised as a set of abilities (ability EI), there was a moderate positive relationship with age in children. In adults, ability EI was unrelated to both age and job experience. When EI was operationalised as self-perceptions of abilities (self-perceived EI), there was a small positive relationship with age, but not job experience. When EI was defined as personality (mixed model EI), there was a small positive relationship with age, and a moderate positive relationship with job experience. Occupational characteristics moderated the relationship between mixed model EI and job experience, whereby the relationship was stronger in occupations characterised by higher levels of interpersonal orientation and adjustment. Findings further demonstrated that there are generational changes in mixed model EI, as facets of mixed model EI have declined over time. In conclusion, these body of findings provide evidence that, depending on EI stream, EI changes with age, job experience and across generations. I consider how these findings have implications for understanding the nature of EI, its development and for identifying populations suitable for EI-related training interventions.

  • (2020) Hong, Na Ry
    Thesis
    In this thesis, I examine the economic choices of people with disabilities. The thesis consists of four essays, each looking at different aspects of human capital or welfare outcomes for the disabled population in Australia. I use repeated cross sections of the Australian Bureau of Statistics (ABS) Survey of Disability, Ageing and Carers (SDAC) data for all of the four essays. The first essay explores the choice of relative occupational groups between disabled and non-disabled workers. I employ a multinomial logit model, using five SDAC cross sectional surveys from 1993 to 2012. I find that for men, the average marginal effects are relatively stable in magnitude over time, indicating that being disabled is positively associated with being a labourer and being in sales while negatively associated with being a manager or a technician. The largest effects tend to be for labourers (2 to 6 percentage points) and for managers (-2 to -6 percentage points). For women, the magnitude of the effects tends to be smaller although the signs are broadly like those for males. The only statistically significant effects for females appear for labourers where being disabled is positively associated with estimates in the range 1 to 3 percentage points. The second essay analyses the effect of reading and writing assistance on take-up of the Disability Support Pension (DSP). I employ age at onset of the disability as an instrumental variable to account for potential selection problems present in receiving the assistance. Using SDAC data (2003, 2009, 2015), a recursive bivariate probit estimation is carried out to allow for the supposed correlation representing common unobservables that capture the selection effects. I find that reading and writing assistance substantially increases the probability of receiving the DSP. The goal of the third essay is to see whether the implementation of the Disability Standards for Education in 2005 has resulted in improvement in educational outcomes for disabled students. I use a difference-in-differences (DD) method, using three waves of the data (2003 as pre-policy, 2009 and 2015 as post-policy). While there is no significant effect in school enrolment, a significant negative effect is observed for enrolment and completion of bachelor or above degrees relative to Year 11 or below. Overall, I find no significant effect of the policy on educational outcomes and that any observed increase in enrolment or completion is due to a general increase over time. The fourth essay investigates the wage differential observed between the disabled and non-disabled Australians. I use the Blinder-Oaxaca decomposition method to examine the wage gap each separately for men and women. Using the 2012 data, I employ the Heckman selection process to account for any potential selection into the labour market. I find a significant negative effect of mental health on employment and earnings for the disabled population. I also find that the proportion of the wage gap between disabled and non-disabled workers that is not explained by productivity-related characteristics is very large.