Guest Editor's Introduction: MDIS 2007

Abstract

It is a great pleasure and privilege for me to be invited to be a guest editor of Emerging Markets Finance and Trade. Papers selected for this issue were collected from the Inter national Conference of Market Development and Investment Strategies (MDIS 2007), sponsored by the College of Business at National Taipei University and Emerging Markets Finance and Trade. I thank Ali Kutan, the editor of the journal, and Dr. Lin, professor in the Department of Business Administration, National Taipei University, for their great contributions to this conference. I am also especially grateful for the invaluable assistance of colleagues at National Taipei University. This issue contains nine papers from MDIS 2007. The first paper was the conference keynote speech. It empirically studies initial public offering (IPO) functions and examines policy effects on Taiwanese stock markets after 2002. According to amended securities regulations, corporations that hope to be publicly traded on Taiwanese capital markets must be listed on the newly established emerging stock market for at least six months. To determine if the policies are effective or not, the authors separate listing channels into six models and apply nonparameter techniques to test the performances of these models. Analyzing 870 IPO sample corporations from 1997 to 2006, empirical evidence shows that the performance of different listing channels is statistically significant. Indirect channels perform better than do direct channels, and the longer it takes corporations to terminate their processes, the better their performance in IPO prices and stock returns. Results indicate that more complicated listing steps can generate better performance in Taiwanese stock markets. The second paper, Goal-Oriented Earnings Management: Evidence from Taiwanese Firms, by Liming Guan, Fengyi Lin, and Wenchang Fang, focuses on the earnings manipulative activities of rounding earnings numbers to achieve key reference points in Taiwan. Its contribution to international research is that the authors use Benford's (1938) law to test the earning behaviors of listed companies and compare these data to those of prior studies on rounding behavior in other countries and regions. We find that Taiwanese firm management often emphasize the first digit of earnings numbers. We also find that key reference points are not limited to the first digit: The second, third, or even fourth digits are sometimes used as reference points to round earnings. Finally, empirical results show that the incentives of rounding earnings numbers are negatively associated with the distance between prerounded earnings and the next reference point. This paper points out that the closer the prerounded earnings are to the reference point, the more likely it is that managers round the earnings. The findings of the study have important implications for banks in implementing lending policies and for external auditors in designing audit procedures. The third paper is by Chih-Lun Huang and Yeong-Jia Goo, who investigate the relation between investor happiness and overconfidence. Sunshine, temperature, former returns, and margin loan change rate are used to proxy happy feelings. Using data from the Taiwan Stock Exchange and principal component analysis, the happy-sentiment index is divided