Business Commons^™

Revolutionizing Lithium Extraction: Analysis Of Factors Affecting Commercialization Timelines With Insights From The Shale Gas Boom, Bilge Tayyar

CMC Senior Theses

This study draws parallels between Direct Lithium Extraction (DLE) and hydraulic fracturing to highlight the transformative potential of DLE technology in the lithium industry. The comparative analysis supports the hypothesis that DLE might expedite commercialization timelines, similar to the effect hydraulic fracturing has had on traditional shale gas extraction. The study includes a regression analysis to determine the factors affecting the commercialization of conventional lithium brine extraction methods, thereby better understanding the potential changes DLE will create. The regression model, based on data from 11 projects, examines the impact of variables such as temperature range, tax rates, royalty rates, regulatory …

Towards Algorithmic Justice: Human Centered Approaches To Artificial Intelligence Design To Support Fairness And Mitigate Bias In The Financial Services Sector, Jihyun Kim

CMC Senior Theses

Artificial Intelligence (AI) has positively transformed the Financial services sector but also introduced AI biases against protected groups, amplifying existing prejudices against marginalized communities. The financial decisions made by biased algorithms could cause life-changing ramifications in applications such as lending and credit scoring. Human Centered AI (HCAI) is an emerging concept where AI systems seek to augment, not replace human abilities while preserving human control to ensure transparency, equity and privacy. The evolving field of HCAI shares a common ground with and can be enhanced by the Human Centered Design principles in that they both put humans, the user, at …

Bio-Bust: Investigating Biotech Stock Factors Contributing To Abnormal Returns In The Wake Of Silicon Valley Bank's Failure, Spencer Kent

CMC Senior Theses

Following the unprecedented collapse of Silicon Valley Bank (SVB) in March 2023, this study explores abnormal stock price reactions within the biotechnology sector. As the chosen financial institution for countless Silicon Valley-type technology and healthcare firms, SVB's failure had a profound impact on small to mid-sized biotech companies. Analyzing a dataset of 180 biotech firms during a two-day event window over SVB’s collapse, I investigate whether exposure to SVB, or other factors, was the primary contributor to negative abnormal stock price reactions, considering variables such as the percentage of cash held at SVB, whether a firm maintained an active SVB …

Activism Aftershocks: Looking Beyond The Short-Term Stock Surges Caused By Activist Hedge Fund Campaign Announcements, Zara Vakath

CMC Senior Theses

It is well known that firms targeted by activist hedge funds experience positive abnormal stock returns during the campaign announcement window. However, the link between these short-term returns and the impact to long-term target firm performance has not been established. In this study, I find essentially no link between the positive announcement window returns and long-term performance improvements, using a variety of different methods. I examine performance changes over time and also relative to a matched sample of firms that have not been targeted by activist hedge funds. Additionally, I assess the correlation between the magnitude of short-term abnormal stock …

Unions’ Impact On Firms’ Financial Decision Making: A Look At Right-To-Work Laws And Their Impact On Firms’ Leverage Decisions, Rachana Muvvala

CMC Senior Theses

I study the impact of unions on firms’ financial decision making by exploring their capital structure, specifically leverage. I test two opposing hypotheses to understand the relationship between unions and firms’ leverage: (1) the bargaining hypothesis which suggests that firms use higher leverage as a bargaining device with unions, and (2) the crowding-out hypothesis which suggests that firms have lower leverage because unions crowd out their debt capacity due to their perceived riskiness. Focusing on the 2007 to 2022 period, I examine right-to-work (RTW) laws, since they are exogenous shocks that decrease union power in five different states. Then, I …

Market Reaction Test On Banks & Brokers Based On Bitcoin Price History. A Look At National Commercial Banks And Security Broker, Exchanges, And Service Stocks Following The Most Volatile Swings In Bitcoin’S Price., Payton Earl

CMC Senior Theses

This paper examines if there is an inverse correlation between Bitcoin’s most volatile price swings and national commercial banks and security brokers, exchanges and service companies performance. Company performance in the dataset is measured by Cumulative Abnormal Returns during 2021 within a two-day period where Bitcoin has had the most significant uptick and downtick events. Using a market-adjusted model for my regression, it is concluded that Bitcoin’s largest uptick event did indeed have an inversely negative effect on traditional banks and trading securities companies, as the Cumulative Abnormal Returns were negative for my 107 observations and the event was statistically …

Ai-Nvesting: An Empirical Analysis With Sector Categorization And Prompt Complexity Considerations Assessing The Predictive Power Of Chatgpt In Stock Market Forecasting, Ian J. Larson

CMC Senior Theses

Abstract

This paper investigates whether ChatGPT has any predictive power when it comes to the stock market. Since its public release in December 2022, OpenAI’s ChatGPT has become a popular tool for millions of users across the world. With new use cases being found every day, I explore whether the system has any utility at predicting where stock prices will go. Using a 10-year study window, I prompt ChatGPT to give U.S. equity picks on a one-year holding period basis, segregating its picks into 3 different category sizes across 8 directed prompts. I examine the 24 equal weight portfolios of …

Ceo Characteristics That Lead To Extreme Outperformance: A Statistical Analysis Of William Thorndike’S “The Outsiders”, William Turner

CMC Senior Theses

What makes a high-performing CEO? What CEOs should you invest in? These are the questions that the Board of Directors, headhunters, academics, and investors all seek the answer to. This paper explores the answer to this question by examining CEO performance at the extremes. Inspired by the work of William N. Thorndike’s “The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success,” this study expands upon his methodology, employing a statistical approach to analyze a broader dataset of CEOs over the past thirty years. Using a logit model of hyper-outperforming versus hyper-underperforming CEOs, it assesses the …

Listed Private Equity Returns: The Forecasting Power Of Premiums And Discounts, Daniel Krasemann

CMC Senior Theses

In this paper, I assess the ability of premiums and discounts to predict future listed private equity returns. I hypothesize that the premiums and discounts of the net asset value of the listed private equity funds with monthly lags hold forecasting power. I use four distinct listed private equity indices and their respective NAV P/D values for my research. To ensure my analysis is realistic in scope, I incorporate a variety of macroeconomic variables that have been proven to influence listed private equity returns. I structure my time-period analysis around the 2008-09 financial crisis. I generally find that a two-month …

Doing Well While Doing Good? The Cost Of Responsible Investing, Elizabeth Iwicki

CMC Senior Theses

In this paper, I estimate the monthly alpha of highly rated ESG stocks, with the motivation to assess the effects of ESG investors on public equity markets. I hypothesize, consistent with the motivating theory of Heinkel et al. (2001), that the shift in investor preferences toward ESG-friendly investments leads to the underperformance of a broad ESG portfolio relative to a portfolio of comparable stocks. I test my hypothesis using the methodology of Hong and Kacperczyk (2009) and Wallace (2022), where I apply the methods to an ESG portfolio rather than a “sin” portfolio. Consistent with my hypothesis, I find that …

Executive Option Mix And Firm Litigation Risk, Andrew Cohen

CMC Senior Theses

Compensating executives with stock options creates incentives for executives and aligns their goals with shareholders. When examining specific components of equity-based compensation, stock options have a larger incentive effect on executives compared to stock awards as options are priced as a function of stock volatility. Since the option incentive effect is more profound than the stock incentive effect, executives may take on more risk. The relationship between firm risk and litigation can be demonstrated by the pricing of directors’ and officers’ liability insurance, which protects them from the costs of litigation. The purpose of this study is to examine the …

Does Firm Payout Behavior Serve As A Signal For Future Profitability?, Michael Colangelo

CMC Senior Theses

In this paper I explore the potential signaling capability that payout behavior, in the forms of dividends and share repurchases, has on the profitability of a firm. To do so, I analyze the relationship that dividends paid, share repurchases, and total payout have with asset turnover, return on assets, and EBITDA margin across different time structures. Next, I aim to understand if there is a significant differential impact of negative payout growth compared to positive payout growth, on the growth of the same performance measures above. I found that an increase in share repurchases and total payout both lead to …

The Effect Of Changes In Us Money Supply On S&P 500 Returns During The Global Financial Crisis And Covid-19 Recession, Connor Cryan

CMC Senior Theses

The goal of this paper is to perform a comparative analysis between the United States Federal Reserve’s response to the 2008 Global Financial Crisis and the COVID-19 recession, and determine how each response affected the United States stock market. I have found that during the 2008 Global Financial Crisis, money supply increases did not have a substantial impact on the US stock market, while factors such as market volatility and unemployment rate had highly significant negative effects on stock returns. During the COVID-19 recession, money supply changes did have an impact on stock returns, and had a positive relationship with …

Securing The Overnight Rates: A Study Of Alternative Reference Rates In Illiquid Overnight Tri-Party Repo Markets, Michael Murphy

CMC Senior Theses

Since 2011, the London Interbank Offer Rate (LIBOR) has been on the way out for practitioners and researchers alike due to its manipulation in key bank quotes during the Great Financial Crisis (GFC). This paper intends to examine key rates being introduced as LIBOR substitutes, such as SOFR, BSBY, and Ameribor. Specific to its concern, the paper will back test these rates during times of illiquidity in both their respective markets and the broader financial markets to determine which rates will be able to sustain an abnormal drop in transaction volumes. Furthermore, this paper will try to determine whether a …

An Analysis Of Impacts Of Covid-19 On Salary Cap Allocation And Performance In The National Football League, Abai Houser

CMC Senior Theses

Professional sports are one of the most successful industries in the world. The live spectacle and in-person nature make sporting events a unique and individual experience. COVID-19 shifted how athletic events were operated, financed, and viewed, thereby changing leagues as well. The National Football League was one of the last sports to start its season during 2019 and 2020, setting the stage as the only league to not isolate its players in a safe operating space. This paper studies the effects of COVID-19 on the salary cap management of teams after the pandemic. The findings suggest that financial metrics analyzed …

Media Merger Madness: An Event Study Analyzing Acquiror Returns In Media & Entertainment, Samuel Johnson

CMC Senior Theses

Utilizing an event study methodology, this paper studies the effect that mergers and acquisitions (M&A) announcements have on media acquirors’ stock returns. This study also examines the effect that various characteristics of the target and acquiror have on acquirors’ returns. These characteristics include: location of the acquired company, year of the acquisition, industry of the acquired company, price of the acquired company, size of the acquiror, and serial acquiror status of the acquiror. My findings are consistent with previous literature that find that, in a short-term event window surrounding the announcement of a merger or acquisition, acquirors experience returns that …

Round After Round: Understanding Dry Powder As A Determinant Of Spread In Leveraged Loans, Raizel Yu

CMC Senior Theses

Given the rise in private equity companies’ dry powder reserves, as well as the increased prevalence of covenant-lite loans pointing to a change in the overall dynamic of leveraged loan dealmaking, this paper aims to determine whether dry powder is a significant determinant of leveraged loan spreads. This paper uses a sample of loan level contract variables, borrower characteristics, and macroeconomic conditions from DealScan, Compustat, Pitchbook, and the Federal Reserve Economic Data. My findings are consistent with the hypothesis that availability of funds, measured in dry powder, is a good determinant of spread. As leveraged loans are a necessary component …

How Punxsutawney Phil’S Predictions Affect The Stock Market: A Groundhog Day Analysis, Jessica Cuna Zamora

CMC Senior Theses

With its roots dating back to 1887, Groundhog Day has cemented itself as a beloved American holiday where people gather to see if Punxsutawney Phil will predict 6 more weeks of winter, or an early arrival of spring. Utilizing the data and methodology framework from Shanaev, Savva, and Fedorova (2021) to test if Groundhog Day predictions have any effect on S&P 500 returns, this paper revisits and revises the analysis in attempt to replicate and improve the original findings with a dummy-variable regression while controlling for other calendar anomalies. Additionally, this study expands the original analysis by including two new …

Bubbles Through The Years: An Examination Of Unique And Analogous Characteristics Among Financial Manias From The South Sea Bubble To The Great Financial Crisis, Matthew Hines

CMC Senior Theses

Throughout history, financial bubbles have been shrouded in fear and misunderstanding, with hope, greed, and hearsay fueling inane degrees of risk-taking amongst financial powerhouses and the common retail investor alike. While many studies have been conducted to delve into the unique attributes, causes, effects, and consequences of almost every crisis since adequate data could be recorded and preserved, it is not common for the varying types of crises to be directly compared in their core attributes and price movements. This paper conducts such an examination, with a look into ten different crises across the equity, real estate, and oil markets …

Intellectual Capital's Impact On Corporate Performance During The Age Of Digitalization And The Covid-19 Pandemic, Chance Sears

CMC Senior Theses

The purpose of this paper is to examine the relationship between intellectual capital and firms’ financial and market performance during the peak levels of digitalization, focusing on the COVID-19 Pandemic. Utilizing the recently validated Value Added Intellectual Coefficient (VAIC), alongside its necessary controls, I conduct an empirical analysis on North American firms over the period of 2010-2020 using fixed effects and pooled ordinary least squares analysis. Findings from the empirical analysis provide evidence that intellectual capital is a driving factor in enhancing firms’ financial and market performance. Additionally, results indicate that the COVID-19 pandemic increased the impact of intellectual capital …

Zoom In, Class Out: An Event Study On Publicly Traded Ed Tech Firm Valuations During Covid-19, Matiss Ozols

CMC Senior Theses

This paper examines how publicly traded Ed Tech firms reacted to negative announcements regarding COVID-19. Using an event study method, I document how an international portfolio of Ed Tech firms react across multiple event windows. The results show that Ed Tech firms reacted positively to the announcement of the first US death and negatively to the World Health Organization’s declaration that COVID-19 was a pandemic. Additionally, differences in geographical location did not impact cumulative abnormal returns across event windows. Finally, firm-specific characteristics such as volatility and financial leverage had little or no significance on stock returns.

How Good Are Equity Analysts? Investigating The Impact Of Analyst Recommendations On Portfolio Performance, Maxwell Dawson

CMC Senior Theses

This paper lies at the convergence of the portfolio optimization literature and the equity research industry. I attempt to quantify the benefit provided to an investor by equity analysts from an asset allocation perspective, and hypothesize that no significant benefit exists because of the incentive misalignments facing analysts as well as the inherent difficulty of valuing stocks. Using a Bayesian regression framework with prior beliefs for alpha generated based on equity analysts’ recommendations, I find no significant difference in out-of-sample performance between portfolios which take analyst recommendations into account and portfolios which do not.

Don’T Get Screwed: What Factors Determine The Inclusion Of J. Crew Blockers?, Michael Sill

CMC Senior Theses

A “J. Crew Maneuver” is a type of collateral-stripping event that transfers the value of a nearly insolvent company from the lender to the borrower. This concept matters to lenders because it exposes them to significant downside risk through the loss of hundreds of millions of pledged collateral. While credit analysts and debt lawyers have commented on the importance of preserving creditor value ex ante through lender-protective clauses embedded within debt documents, this paper breaks ground on empirically studying the determinants of these protective clauses known as “J. Crew Blockers”. I hypothesize that private equity backing, a contractionary credit environment, …

Spac Success Factors: Determinants Of Post-Acquisition Share Price Growth, Cade Moffatt

CMC Senior Theses

This paper examines characteristics of Special Purpose Acquisition Companies (SPACs) as determinants of post-acquisition success. I collected data on all SPACs which merged with a target firm between 2016 and the start of 2021. The data set controls for a host of variables including the contractual design of the SPAC, management team characteristics, founder compensation structure, key underwriter data, and performance metrics measured throughout the SPAC’s lifecycle. Using a multivariable regression, I find new and robust insights into the SPAC market. Contrary to current literature, I conclude that the misaligned incentives caused by the initial at-risk capital supplied by founders …

Analyst Non-Gaap Reporting: When Do Equity Analysts Adjust Gaap Earnings – An Application Of Text Based Firm Complexity, Patrick Chen

CMC Senior Theses

Equity analysts adjust GAAP earnings to report non-GAAP figures that they believe better represent a firm’s current and future performance. The importance of such non-GAAP(street) figures has been determined and accepted by the literature, but the process in which analysts arrive at such figures is less understood. I apply a newly defined measure of firm complexity using text based analysis of firm annual reports and investigate its effect. When complexity increases, it becomes harder to individuate different components of a system. When that system is a firm, complexity then increases the difficulty in determining an accurate measure of performance. The …

Diversifying Investment Portfolios With Collectible Sneakers: Expected Returns And Benefits Of Diversification, Samuel Soo

CMC Senior Theses

This thesis seeks to identify if collectible sneakers can provide diversification benefits to an investor’s portfolio. Using data from a global collectible sneaker marketplace, StockX, I constructed an index to compare it with other traditional assets, including the S&P 500 index and 5-year US Treasury Bills. By calculating key metrics including expected returns, volatility, and correlation, I analyzed the risk-return characteristics of the collectible sneaker asset class compared to other traditional asset classes. From the data analysis I performed, I found that collectible sneakers did not outperform returns significantly compared to traditional asset classes, but had low correlations, which provides …

Corporate Social Responsibility And Corporate Financial Performance: An Examination Into Fortune 500 And Djsi Firms Within Consumer-Facing Industries, Samantha Lee

CMC Senior Theses

This paper examines the relationship between a firm’s Corporate Social Responsibility (CSR) and its Corporate Financial Performance (CFP) in nine consumer-facing industries classified by the Fortune 500. Unlike prior research on the matter, the firms investigated in this study consist only of firms on both the Fortune 500 for the year 2018 and the Dow Jones Sustainability Index (DJSI) between the years 2005-2018 in order to define a clear measurement of CSR. In order to gauge investor and market sentiment, CFP is measured primarily by the firm’s stock performance in comparison to the S&P 500 as a basis. The results …

“It’S Gonna Be Yuge”: The Impact Of Chinese Imports On United States Manufacturing Firm Valuations, Charles Mangum

CMC Senior Theses

Throughout the years there has been literature regarding the impacts of Chinese manufacturing on the United States economy. Much of the focus has been centered on macro-economic effects and not firm level impacts. Using trade exposure and data from publically traded manufacturing firms I provide an analysis of the potential effects of increased trade exposure in a highly competitive market. My research aims to measure the impacts of Chinese imports on United States manufacturing companies with low technological barriers to entry. When comparing trade exposure to firm level data I conclude that there is a negative correlation between investment levels …

Are Female Executives Receiving Adequate Capital Financing? An Analysis Of Gender Disparity On Venture Capital Funding, Lina Aluzri

CMC Senior Theses

This paper examines the inequalities that exist between male and female CEO’s and other top executives by analyzing the effect of gender diversity when it comes to venture capital funding and firm performance. Building off of previous research, I focus on three major areas. First, I utilize data from 2016 to 2018 found in PitchBook and Wharton Research Data Services (WRDS). Second, I explore the effect of firm performance prior to funding on the amount of capital received. Third, I narrow down the analysis of firms to 364 companies that were once venture capital backed and have successfully exited with …

A Choice Model For Correspondent Banking Relationships, Tanisha Sheth

CMC Senior Theses

Employing a granular hand-collected dataset, this paper studies the formation of local financial networks as a consequence of one of the largest bank failures during the Great Depression. The collapse of the National Bank of Kentucky caused ripples throughout the interbank network as 233 banks were faced with the decision to form new connections to reallocate reserves. Tracing over 1600 institutional linkages between 1929 and 1934, I evaluate the decision-making process of commercial banks under a nested logit framework. I find that peer effects and other regional metrics, contrary to national connectivity measures, act as principal determinants in network formation. …