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Complexity Of Information And Trading Behavior: The Case Of Dividend Increase Announcements, Ali M. Fatemi, Sanjay Deshmukh, Iraj Fooladi
Complexity Of Information And Trading Behavior: The Case Of Dividend Increase Announcements, Ali M. Fatemi, Sanjay Deshmukh, Iraj Fooladi
Ali M Fatemi
We examine the intraday trading response of participants in the common stock market and in the preferred stock market to announcements of dividend increases on common stock. We find that participants in the preferred stock market respond more slowly to the announcement than those in the common stock market. Our results are consistent with the implications of Heiner’s model of behavior under uncertainty, which suggest that investors who face a more complicated environment respond more slowly to new information. Participants in the preferred stock market face a more complicated environment because they have to determine the source of financing of …
Corporate Risk Management: Costs And Benefits, Ali M. Fatemi, Carl Luft
Corporate Risk Management: Costs And Benefits, Ali M. Fatemi, Carl Luft
Ali M Fatemi
This paper establishes a framework within which the costs and the benefits of corporate risk management decisions can be analyzed. The most important conclusion is that risk management strategies should be pursued to enhance shareholder value. Although systematic hedging of all variation in the net cashflows may be in the best interest of the management, such behavior is inconsistent with maximizing firm and shareholder value. The extant empirical evidence cited is supportive of the notion that the strongest motive for risk management behavior is the avoidance of financial distress. However, there are offsetting costs to consider as well. The existence …