Innovision Fall 2019

28 | INNOVISION MAGAZINE SABBATICAL What did you study/research on sabbatical? I studied two major topics: 1) Creditor Rights and Investment-Cash Flow Sensitivity and 2) Stock Market Mis-valuation and REITs: Evidence from a Decomposition of the Market-to Book Ratio. What was your study about? First Topic: The incremental effect of better creditor protection on investment-cash flow sensitivity (ICFS) was examined in a cross- country investigation. Strengthening creditor rights may have two competing effects on ICFS. On the one hand, strengthening creditor rights improve market imperfections and reduce ICFS as the wedge between the costs of external and internal funds is lessened. On the other hand, strengthening creditor rights increase ICFS as stronger creditor protection prompts firm managers to protect private interests in an environment of asymmetric information and agency problems. The overall effect of creditor rights on ICFS is determined by a tradeoff between the two competing effects. The results show that the incremental effect of creditor rights lowers the ICFS of firms in developed countries, implying that the firms prefer the benefit of better access to external funds in evaluating the tradeoff. In addition, the results show that the incremental effect of creditor rights on the ICFS of firms in developing countries is largely insignificant; implying that firm managers in developing countries in general are more concerned about protecting private interests and less interested in the better access to external capital associated with strengthening creditor rights. Second Topic: Using a method in existing literature to decompose stock market mis-valuation into short-run firm specific mispricing, short-run sector-wide error, and long-run value-to-book error, this study investigates the characteristics of the mis-valuation components of REITs. It’s found that short-run mis-valuation of REITs is dominated by sector-wide mispricing. The size of firm- specific mis-valuation is relatively small with a mean (median) of only one percent (seven percent) over the 17-year sample period. Long-run value mis-valuation exceeds fifty percent of the annual total mis-valuation and investors persistently overvalue the component. Regarding the factors affecting REIT mis-valuation, it’s found that firm-specific and sector-wide mispricings are not explainable by asymmetric information arguments. Instead, the results suggest that the short-run mis-valuation components of REITs are related to irrational behavior and extrapolation errors of investors. In sharp contrast, the long-run value mis-valuation component is explainable by asymmetric information arguments but unrelated to irrational investor behavior. Is your work getting published anywhere? If so, where? Did you win any awards for it? Yes. “Credit Rights and Investment-Cash Flow Sensitivity” will be published in the Journal of Finance and Accountancy in 2019. Also, “Stock Market Mis-valuation and REITs: Evidence from a Decomposition of the Market-to-Book Ratio” is being published in the Journal of Behavioral Studies in Business also in 2019. Best thing about your sabbatical? Worst thing? The best thing about my sabbatical is that I am my own boss. I really enjoyed having the flexibility of doing research at my own pace without any distractions. Without going to the office, I didn’t have to worry about missing out on my boys’ school events, practices or competitions due to a conflict with my classes or office hours. The worst thing is that I missed teaching. I had a really good batch of Finance students graduating in May 2019. Although students didn’t have me for the last semester, I did attend the commencement in May to surprise them. Did you miss teaching? If yes, what did you miss about it the most? Of course! I enjoy the mentorship aspect of teaching and the bonding with our students. I missed watching my students deliver awesome presentations and research papers for their challenging term project, watching some struggling students finally pass the class by working harder and more efficiently and watching them receive their desired job offer or be accepted to graduate school. As a professor, I am highly motivated by those moments when students take true ownership of their learning. QIAN (SUSAN) SUN Financial Management