Area of Expertise
- Corporate Governance
- International Finance
Professor Kee-Hong Bae is a professor of finance and Bob Finlayson Chair in International Finance at the Schulich School of Business at York University. He received his B.A. and M.A. from Korea University and Ph.D. degree from the Ohio State University. Before joining York University, he has taught at the City University of Hong Kong, Hong Kong University of Science and Technology, Korea University, and Queen’s University. His research focuses on international finance. Research topics include financial globalization, home bias, and international corporate finance and corporate governance. He has published numerous research articles in top finance/accounting/management journals including Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis, Journal of Business, Accounting Review, and Journal of International Business Studies. Professor Bae serves in the editorial board of several journals including Pacific Basin Finance Journal, and International Review of Finance. He also serves as an editor for the Asia-Pacific Journal of Financial Studies.
2018 Eminent Scholar Award, Korea America Finance Association, San Diego, 2018
2017 Best Paper Award in the 12th International Conference on Asia-Pacific Financial Markets in Seoul, Korea, 2017
2011 Best Paper Award in the 2011 Asian Finance Association International Conference, Macau
2010 Best Paper Award in the Fifth International Conference on Asia-Pacific Financial Markets in Seoul, Korea
2009 Best Paper Award in the Fourth International Conference on Asia-Pacific Financial Markets in Seoul, Korea
2009 Best Paper Award in the Financial Management Association Meeting in Reno
2007 CFA Institute Asian FMA Research Prize
2007 Research Award in the SFM conference in Taipei, Taiwan
2006 Best Paper Award in the First International Conference on Asia-Pacific Markets in Seoul, Korea
2006 Award for Research Excellence, Queen’s University
2005 D.I. McLeod Summer RA grant, Queen’s University.
2003 SK Distinguished Research Award, Korea University.
2003, 2002 Korea Research Foundation.
2002 Best Paper Award in APFA/PACAP/FMA Joint conference in Tokyo, Japan.
2002 Korea University Research Grant
2002 Best Paper Award in APFA/PACAP/FMA Joint conference in Tokyo, Japan.
Bae, K., Bailey, W. and Kang, J. (2021), "Why is Stock Market Concentration Bad for the Economy?", Journal of Financial Economics, 140(2), 436-459.
The stock market should fund promising new firms, thereby breeding competition, innovation, and economic growth. However, using three decades of data from 47 countries, we show that concentrated stock markets dominated by a small number of very successful firms are associated with less efficient capital allocation, sluggish initial public offering and innovation activity, and slower economic growth. These findings are robust to alternative sample periods, econometric specifications, and competing explanatory variables. Our evidence is consistent with the paradox that the capital market of a competitive economy can impede the continuing competitiveness of that economy.
Bae, K., El Ghoul, S., Guedhami, O., Kwok, C. and Zheng, Y. (2019), "Does Corporate Social Responsibility Add Value? Evidence from Capital Structure and Product Markets Interactions", Journal of Banking and Finance, 100, 135-150.Keywords
Research on capital structure and product market interactions shows that high leverage is associated with substantial losses in market share due to unfavorable actions by customers and competitors. We examine whether corporate social responsibility (CSR) affects firms’ interactions with customers and competitors, and whether it can reduce the costs of high leverage. We find that CSR reduces losses in market share when firms are highly leveraged. By reducing adverse behavior by customers and competitors, CSR helps highly leveraged firms keep customers and guard against rivals’ predation. Our results support the stakeholder value maximization view of CSR.
Bae, K., Driss, H. and Roberts, G. (2019), "Does Competition Affect Ratings Quality? Evidence from Canadian Corporate Bonds", Journal of Corporate Finance, 58, 605-623.
This paper investigates the effect of competition among credit rating agencies on ratings quality. Specifically, we study how the ratings quality of a small local rating agency (DBRS) responds to competition from a large global rating agency (S&P) in rating Canadian corporate bonds. We find that DBRS’s ratings become more favorable and less informative about the credit quality of Canadian bonds in response to increased competition from S&P. Our evidence supports the view that reputation concerns are not an effective disciplinary mechanism for small rating agencies facing competitive pressure from their larger peers.
Bae, K. and Wang, J. (2015), "Why Do Firms in Customer-Supplier Relationships Hold More Cash", International Review of Finance, 15, 489-520.
A firm is in customer–supplier relationships when its business depends on a small number of major customers/suppliers. In this paper, we provide evidence that relationship‐specific investments undertaken by firms in customer–supplier relationships are associated with high cash holdings in these firms. The evidence is consistent with the prediction of Titman’s stakeholder theory that a firm relying on relationship‐specific investments maintains a high cash reserve as a cushion to sustain its relationship‐specific investments when negative shocks occur. Our findings suggest that relationship‐specific investments are important determinants of the precautionary motive to hold cash.
Bae, K. and Zhang, X. (2015), "The Cost of Stock Market Integration in Emerging Markets", Asia-Pacific Journal of Financial Studies, 44(1), 1-23.
We find that stock markets more integrated towards global markets experienced larger price drops during the 2008 financial crisis. The negative relation between the crisis period return and the degree of stock market integration is evident only in emerging countries. We show that the withdrawal of foreign equity investments during the crisis period does not contribute to the negative relation between the crisis period stock return and the degree of stock market integration. Instead, the negative relation arises because integrated emerging markets experience increased exposure to the negative global shock during a financial crisis. We obtain similar results when the 1997 Asian financial crisis is used as an experimental setting.
Bae, K., Kang, J. and Wang, J. (2015), "Does Increased Competition Affect Credit Ratings? A Reexamination of the Effect of Fitch’s Market Share on Credit Ratings in the Corporate Bond Market", Journal of Financial and Quantitative Analysis, 50(5), 1011-1035.
We examine two competing views regarding the impact of competition among credit rating agencies on rating quality: the view that rating agencies do not sacrifice their reputation by inflating firm ratings, and the view that competition among rating agencies arising from the conflict of interest inherent in an “issuer pay” model creates pressure to inflate ratings. Using Fitch’s market share as a measure of competition among rating agencies and controlling for the endogeneity problem caused by unobservable industry effects, we find no relation between Fitch’s market share and ratings, suggesting that competition does not lead to rating inflation.
Bae, K., Purda, L., Welker, M. and Zhong, L. (2013), "Credit Rating Initiation and Accounting Quality for Emerging Market Firms", Journal of International Business Studies, 44, 216-234.
We examine whether certification by an internationally recognized information intermediary helps emerging-market firms overcome the liability of foreignness in capital markets. Specifically, we ask whether securing a credit rating from Standard & Poor’s (S&P) enables these firms to certify their financial reporting quality. We hypothesize that the unique information demands of lenders motivate firms to provide more conservative financial statements upon securing an S&P rating. We find evidence consistent with this conjecture. Moreover, the rating appears to be part of an international expansion strategy for these firms, and is followed by increased international activity in capital and product markets.
Bae, K., Kim, J. and Ni, Y. (2013), "Is Firm-specific Return Variation a Measure of Information Efficiency?", International Review of Finance, 13, 407-445.
The issue of whether firm‐specific return variation measures the private information reflected in stock returns or trading noise is controversial. Using a firm’s geographic proximity to its investors as a proxy for a firm’s private information, we investigate the relation between firm‐specific return variation and price informativeness. We find that firms located in metropolitan areas experience higher firm‐specific return variation and that holdings and trading by local institutional investors positively affect firm‐specific return variation. These findings suggest that higher firm‐specific return variation is indicative of more informative stock prices.
Bae, K., Ozoguz, A., Tan, H. and Wirjanto, T.S. (2012), "Do Foreigners Facilitate Information Transmission in Emerging Markets?", Journal of Financial Economics, 105(1), 209-227.Keywords
Using the degree of accessibility of foreign investors to emerging stock markets, or investibility, as a proxy for the extent of foreign investments, we assess whether investibility has a significant influence on the diffusion of global market information across stocks in emerging markets. We show that greater investibility reduces price delay to global market information. We also find that returns of highly investible stocks lead those of noninvestible stocks because they incorporate global information more quickly. These results are consistent with the idea that financial liberalization in the form of greater investibility yields informationally more efficient stock prices in emerging markets.
Bae, K., Baek, J.S., Kang, J.K. and Liu, W.L. (2012), "Do Controlling Shareholders’ Expropriation Incentives Imply a Link between Corporate Governance and Firm Value? Theory and Evidence", Journal of Financial Economics, 105(2), 412-435.Keywords
We develop and test a model that investigates how controlling shareholders’ expropriation incentives affect firm values during crisis and subsequent recovery periods. Consistent with the prediction of our model, we find that, during the 1997 Asian financial crisis, Asian firms with weaker corporate governance experience a larger drop in their share values but, during the post-crisis recovery period, such firms experience a larger rebound in their share values. We also find consistent evidence for Latin American firms during the 2001 Argentine economic crisis. Our results support the view that controlling shareholders’ expropriation incentives imply a link between corporate governance and firm value.
Bae, K. and Wang, W. (2012), "What’s in a “China” Name? A Test of Investor Attention Hypothesis", Financial Management, 41(2), 429-455.
We study whether a firm’s name affects investor attention and firm valuation. Some Chinese firms listed on US stock exchanges have the word “China” included in their company names (“China‐name stocks”), while others do not (“non‐China‐name stocks”). During the 2007 China stock market boom, we find that China‐name stocks significantly outperform non‐China‐name stocks. This is not due to differences in firm characteristics, risk, or liquidity. The “China‐name effect” is largely consistent with the investor attention hypothesis that price pressure caused by increased investor attention on China‐name stocks during the boom period drives up China‐name stocks more than non‐China‐name stocks.
Bae, K., Kim, S. and Kim, W. (2012), "Family Control and Expropriation at Not-for-Profit Organizations: Evidence from Korean Private Universities", Corporate Governance: An International Review, 20, 388-404.
Manuscript Type: Empirical. Research Question/Issue: We study an agency problem in private universities – the conﬂict between controlling familiesand other stakeholders. We investigate whether universities over which controlling families have disproportionatelysigniﬁcant power relative to the amount of funds they contribute, that is, universities with high expropriation risk, areassociated with lower outside donations and poor quality. Research Findings/Insights: Using a sample of Korean private universities, we ﬁnd that measures of family control inexcess of monetary contributions are negatively related to the level of outside donation and measures of university quality.We also ﬁnd that universities at which the controlling family exerts disproportionate control are more likely to face disputesbetween the controlling family and other stakeholders. Finally, we show that our results are not driven by reverse causality. Theoretical/Academic Implications: While the existing literature on not-for-proﬁt organizations focuses on the conﬂictbetween professional managers and other stakeholders, we study the conﬂict between controlling families and otherstakeholders. We investigate a situation in which the controlling family expropriates other stakeholders, a topic missingfrom the existing not-for-proﬁt literature. Practitioner/Policy Implications: This study offers insights to policymakers interested in creating private universities in anemerging market setting. The relevance of our results is not limited to Korea. According to Altbach, family control of privateuniversities is prevalent in a number of countries, including Mexico, Thailand, Taiwan, Japan, Korea, the Philippines,Argentina, India, and China.
Bae, K., Ding, Y. and Wang, X. (Forthcoming), "Relative Industry Valuation and Cross-border Listings", Journal of Banking and Finance.
Using a sample of firms from 40 countries cross-listed in the U.S. during the 1982–2018 period, we find that the discrepancy between a firm’s home industry valuation and its corresponding U.S. indus- try valuation—the relative industry valuation—is an important factor in the listing decision and valuation after listing. International firms whose home market industries are undervalued relative to the corre- sponding U.S. industries are more likely to cross-list. They also enjoy permanent valuation gains after listing. These firms issue more equity, invest more, and realize higher growth rates.
Bae, K., Driss, H. and Roberts, G. (Forthcoming), "Do Credit Rating Agencies Inflate Their Ratings? A Review", Journal of Financial Transformation.
In this paper, we review the academic evidence on the roles and quality of credit ratings and structure our review around questions that are of interest to academics, professionals, and regulators alike. We review the evidence on how ratings affect market prices and corporate policies and discuss how incentive problems arising from the unique structure of the credit rating industry can adversely affect ratings quality. In particular, our discussion focuses on the issues of conflicts of interest, competition, and ratings shopping and their implications for ratings inflation. Our review identifies opportunities for future research on credit ratings.
Bae, K., El Ghoul, S., Guedhami, O. and Zheng, X. (Forthcoming), "Board Reforms and Dividend Policy: International Evidence", Journal of Financial and Quantitative Analysis.
We study the impact of board reforms implemented in 40 countries worldwide on corporate dividend policy. Using a difference-in-differences analysis, we find that firms pay higher dividends following the reforms. The increase in dividend payouts is more pronounced for firms with weak board governance in the pre-reform period and those in countries with strong external governance mechanisms. Our findings corroborate the dividend outcome model, which postulates that board reforms strengthen the monitoring role of the board and empower outside shareholders to force management to disgorge dividends.
Bae, K., El Ghoul, S., Guedhami, O. and Gong, Z. (Forthcoming), "Does CSR Matter in Times of Crisis? Evidence from the COVID-19 Pandemic", Journal of Corporate Finance, 67.
The debate over how firm stakeholder engagement is tied to preserving shareholder wealth has received growing attention in recent years, especially in the wake of the COVID-19 crisis. Against this backdrop, we examine the relation between corporate social responsibility (CSR) and stock market returns during the COVID-19 pandemic-induced market crash and the post-crash recovery. Using a sample of 1750 U.S. firms and two major sources of CSR ratings, we find no evidence that CSR affected stock returns during the crash period. This result is robust to various sensitivity tests. In additional cross-sectional analysis, we find some supporting evidence, albeit weak, that the relation between CSR and stock returns during the pandemic-related crisis is more positive when CSR is congruent with a firm’s institutional environment. We also find that Business Roundtable companies, which committed to protecting stakeholder interests prior to the pandemic, do not outperform during the pandemic crisis. We conclude that pre-crisis CSR is not effective at shielding shareholder wealth from the adverse effects of a crisis, suggesting a potential disconnect between firms’ CSR orientation (ratings) and actual actions. Our evidence suggests that investors can distinguish between genuine CSR and firms engaging in cheap talk.
Courses TaughtYork University: Empirical Methodology in Finance, International Financial Management, Corporate Finance
Queen’s University: Empirical Methodology in Finance, Derivative Securities
The University of New South Wales: Emerging Financial Markets
Korea University: Investment, Derivative Securities, International Finance, Empirical Methodology in Finance, Emerging Financial Markets, Corporate Governance Program for Directors
Hong Kong University of Science and Technology: Derivative Securities, Risk Management
City University of Hong Kong: Principles of Finance, Financial Management for Engineers, Derivatives and Risk Management, Financial Trading Workshop, Financial Research Techniques, and Multinational Financial Management
Project Title Role Award Amount Year Awarded Granting Agency Project TitleDo hedge funds have information advantages: evidence from hedge fund stock holdings RolePrincipal Investigator Award Amount$23,023.00 Year Awarded2010-2012 Granting AgencySocial Sciences and Humanities Research Council - Standard Research Grants Project TitleIs firm-specific volatiltiy a measure of informational efficiency RolePrincipal Investigator Award Amount$86,000.00 Year Awarded2007-2010 Granting AgencySocial Sciences and Humanities Research Council - Research Grants - Management, Business and Finance Project TitleA cross-country study of the local analysts and foreign analysts RolePrincipal Investigator Award Amount$54,484.00 Year Awarded2007-2009 Granting AgencySocial Sciences and Humanities Research Council - Standard Research Grants Project Title RolePrincipal Investigator Award Amount$ Year Awarded1999-2001, 2001-2003 Granting AgencyHong Kong Research Grant Council - Competitive Earmarked Research Grant