Business Commons^™

2012 Q4 Market Pulse Report, John K. Paglia

Pepperdine Market Pulse Report

The quarterly IBBA and M&A Source Market Pulse Survey was created to gain an accurate understanding of the market conditions for businesses being sold in Main Street (values $0-$2MM) and the lower middle market (values $2MM -$50MM). The national survey was conducted with the intent of providing a valuable resource to business owners and their advisors. The IBBA and M&A Source present the Market Pulse Survey with the support of the Pepperdine Private Capital Markets Project and the Graziado School of Business and Management at Pepperdine University.

Low Volatility Etfs, Steven D. Dolvin

All Chapters

A recent trend is the development of low volatility funds, including both ETFs and mutual. These funds invest in a subset of a specified index, selecting only those stocks with low price volatility (which may be identified by a low beta). There is not sufficient history to gauge the performance of such funds, but two issues are worth noting. First, given the impact of volatility on compounded returns (i.e., geometric averages are lower than arithmetic averages), low volatility funds should have an advantage, particularly in otherwise volatile markets. Second, value funds may outperform over long periods (albeit not every period), …

Do Financial Advisors Have Consumers' Best Interests? Not Always, But Trust Is Key, Say Experts, Singapore Management University

Perspectives@SMU

In a world of volatile markets and complex financial products, getting financial advice from professional financial planners and advisers might seem like a good idea for those for those trying to meet their financial goals. However, finding good, impartial and suitable advice might be akin to finding a needle in the proverbial haystack.

Policy Options For Microlender Funding In Arkansas, Harvard Law School Mississippi Delta Project

Delta Directions: Publications

Very small businesses, otherwise known as “microenterprises,” play vital roles in the local, state, and national economies. As engines of employment, entrepreneurship, and innovation, microenterprises can be highly successful vehicles for inclusive and robust economic growth. However, many such businesses are constrained by lack of access to credit. Microenterprise owners and entrepreneurs may lack the credit or operating history needed to obtain a traditional small business loan at a commercially viable rate of interest, or the loan amount requested may be too small for a traditional lender to consider. Undoubtedly, a great many entrepreneurial opportunities are lost for lack of …

Mississippi Kids Count: Financial Literacy Education In Mississippi, Terrance Garrett, Mark Holden

Delta Directions: Publications

This report concerns child financial literacy education in Mississippi. Lack of financial literacy can be viewed as a root cause of many of the problems that individuals and families face in Mississippi, particularly in the state’s poor and rural areas, including the proliferation of both subprime mortgages and payday lending. As this report discusses, one of the best ways to develop financially literate and capable citizens is to educate children in the basics of personal finance. Individuals that lack basic financial knowledge and skills are at a disadvantage in navigating the modern economy and are vulnerable to being taken advantage …

The Archway Investment Fund Semi Annual Report, Fall 2012, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Intraday Price Discovery In Emerging Equity Market: Analysis Of Set50 Index, Set 50 Index Futures And Thaidex Set50 (Tdex), Chiraphol New Chiyachantana, Julaluck Choochuay, Tanakorn Likitapiwat

Research Collection Lee Kong Chian School Of Business

This study employs Vector Error Correction Model (VECM), information share and conditional information share methods to investigate price discovery in SET50 Index (cash index), SET50 Index Futures (futures index) and ThaiDex SET50 (exchange traded fund). Our findings indicate that there exists a long run relationship among three markets and a multi-market trading of derivatives markets and its underlying asset helps improve price efficiency. With respect to the degree of price formation process, SET50 Index Futures contributes most in price discovery process, followed by SET50 Index and ThaiDex SET50.

Going Overboard? On Busy Directors And Firm Value, George D. Cashman, Stuart L. Gillan, Chulhee Jun

Finance Faculty Research and Publications

Abstract

The literature disagrees on the link between so-called busy boards (where many independent directors hold multiple board seats) and firm performance. Some argue that busyness certifies a director’s ability and that such directors are value enhancing. Others argue that “over-boarded” directors are ineffective and detract from firm value. We find evidence that (1) the disparate results in prior work stem from differences in both sample composition and empirical design, (2) on balance the results suggest a negative association between board busyness and firm performance, and (3) the inclusion of firm fixed effects dramatically affects the conclusions drawn from, and …

Convenience In The Mutual Fund Industry, George D. Cashman

Finance Faculty Research and Publications

Abstract

I examine the role of convenience in the mutual fund industry. I find that investors pay more for relatively convenient funds, and that the flows to convenient funds are less responsive to performance. These findings suggest that investors do not evaluate mutual funds independently, but rather that investors select a primary fund, likely based on beliefs about managerial ability, and then select funds which are relatively convenient to this primary fund.

Highlights

► I find that investors pay a significant premium to invest in convenient mutual funds. ► I find that the flows to convenient funds are indifferent to …

The Effectiveness Of Trading Halts And Investor Trading Performance, Nareerat Taechapiroontong, Charlie Charoenwong, Chiyachantana N. Chiraphol, Radchda Lurang

Research Collection Lee Kong Chian School Of Business

This paper examines the effectiveness of trading halts and the trading performance of different types of investors or traders during halts in an Asian emerging equity market. We use trade-by-trade data flagged by types of traders between January 1999 and December 2007. The results suggest that trading halts improve the efficiency of the market by reducing the information asymmetry and stabilizing the market. Trading halts serve as devices to facilitate a price discovery process by giving investors opportunity to adjust their trading interests and reaction to the material information. Our findings show that return and volatility tend to revert to …

Do Banks Monitor Corporate Decisions? Evidence From Bank Financing Of Mergers & Acquisitions, Sheng Huang, Anand Srinivasan, Ruichang Lu

Research Collection Lee Kong Chian School Of Business

We examine whether banks, in providing financing for the deals, monitor firms mergers and acquisitions to the extent that will benefit acquirers shareholders. Inconsistent with the conventional theoretical argument, we do not find that bank- financed deals are associated with better stock or accounting performance than bond- financed deals or deals paid with internal cash. There is strong evidence instead that banks tighten up the loan contract terms in financing the deals, such as cutting short the loan maturity and imposing higher collateral requirement and more covenant restrictions. However, bank-financed deals are more likely to be terminated when they experience …

Knowledge-Driven Autonomous Commodity Trading Advisor, Yee Pin Lim, Shih-Fen Cheng

Research Collection School Of Computing and Information Systems

The myth that financial trading is an art has been mostly destroyed in the recent decade due to the proliferation of algorithmic trading. In equity markets, algorithmic trading has already bypass human traders in terms of traded volume. This trend seems to be irreversible, and other asset classes are also quickly becoming dominated by the machine traders. However, for asset that requires deeper understanding of physicality, like the trading of commodities, human traders still have significant edge over machines. The primary advantage of human traders in such market is the qualitative expert knowledge that requires traders to consider not just …

Do Banks Monitor Corporate Decisions? Evidence From Bank Financing Of Mergers & Acquisitions, Sheng Huang, Anand Srinivasan, Ruichang Lu

Research Collection Lee Kong Chian School Of Business

We examine whether banks, in providing nancing for the deals, monitor rms mergers and acquisitions to the extent that will bene t acquirers shareholders. Incon- sistent with the conventional theoretical argument, we do not nd that bank- nanced deals are associated with better stock or accounting performance than bond- nanced deals or deals paid with internal cash. There is strong evidence instead that banks tighten up the loan contract terms in nancing the deals, such as cutting short the loan maturity and imposing higher collateral requirement and more covenant restrictions. However, bank- nanced deals are more likely to be terminated …

Student Loan Debt, Steven D. Dolvin

All Chapters

Obviously real estate was the focus of the recent credit (or subprime) crisis. However, many investors believe that student loan debt, which is also bundled and sold (i.e., collateralized), is the next "crisis" area. Student debt has risen substantially, as has the percentage of borrowers in delinquency. See these two articles: Wall Street Journal and New York Times.

Insider Trading, Steven D. Dolvin

All Chapters

Insider trading (i.e., trading on material nonpublic information) is illegal. However, corporate executives are allowed to trade stock in the firms they manage. This is difficult to reconcile since these executives, in all likelihood, have such information. A recent study by the Wall Street Journal found that executives trading ahead of corporate earnings announcements earned substantially higher returns (or avoided substantially lower losses). See article here.

Financial Services Consolidation And Performance In New York State Savings And Loan Associations, 2000-2011, Mine Aysen Doyran

Publications and Research

The market structure-performance relationship has been tested for US banking in industrial organization studies. Two divergent hypotheses with regard to this relationship are the Structure-Conduct-Performance (SCP) Paradigm and Efficient Structure Hypothesis (ESH). This paper presents the test results of both hypotheses with respect to the New York State S&L associations using the time-series and cross sectional (firm-level) data for the most recent period 2000-2010. The results of PEGLS regression indicate that performances of S&Ls vary with respect to operating cost, credit risk and capitalization. Neither market share nor concentration, however, plays a significant role in explaining profitability. The results partially …

Nonprofit Funding Agencies’ Review Of Grant Recipients, Siobain Mcilvain

Honors Theses - Providence Campus

Nonprofits need to be just as responsible as public corporations. Nonprofit funding agencies have the responsibility for evaluating the organizations they fund to make sure that they are operating with high integrity, maintaining strong internal controls, remaining financially stable, and overall being good stewards of the funds received. This paper will explain the criteria that a funding agency should follow in order to affect this process, as well as how a recipient nonprofit will benefit from following the criteria.

Fiscal Cliff, Steven D. Dolvin

All Chapters

There has been much discussion surrounding the impending "fiscal cliff." So, what exactly is this? Well, it is a combination of items that effectively equate to about $600 billion in potential spending cuts and tax increases. This represents about 4% of US GDP. So, failing to address these issues would likely result in a deep, prolonged recession. Read a good summary here, American Action Forum.

Index Etfs -- Not Created Equal, Steven D. Dolvin

All Chapters

You might expect that all "Large Cap" ETFs are the same, as they would likely track the S&P500 index. However, in an effort to reduce costs, many ETF providers (such as Vanguard) are replacing the standard index with others that charge lower licensing fees. This allows the providers to either reduce the expenses they charge or increase operating margins. As providers make this switch, it could also impact the underlying holdings to the extent that differences occur across the indexes. See article here, Wall Street Journal.

Diseconomies Of Scale In The Hedge Fund Industry, Melvyn Teo

Research Collection BNP Paribas Hedge Fund Centre

How does fund size impact fund performance in the hedge fund industry? We find unsurprisingly that fund size crimps both raw and risk-adjusted fund returns for the average hedge fund. An increase in fund assets under management from US$20m to US$1bn decreases fund alpha by 2.04 percent per year. However, significant variation exists across funds when funds are grouped by investment strategy and region. Equity long/short, event driven, and macro funds are susceptible to capacity constraints while fixed income and managed futures funds are largely immune to such concerns. Our finding that capacity issues impact macro fund performance raises fresh …

How Skilled Are Hedge Funds? Evidence From Their Daily Trades, Russell Jame

Research Collection BNP Paribas Hedge Fund Centre

We examine the trading skill of hedge funds using transaction-level data. After accounting for trading commissions, we find no evidence that the trades of the average hedge fund outperform across holding periods ranging from one month to one year. However, bootstrap simulations indicate that the trading skill of the top 10% of hedge funds cannot be explained by luck. Similarly, we find that the performance of top hedge funds persists and much of this persistence stems from intra-quarter trading skill. Skilled hedge funds tend to be short-term contrarians and their profits are largely concentrated in smaller, more illiquid stocks. Our …

Does Compensation Structure Alleviate Personal Ceo Risks?, Richard Lord, Yoshie Saito

Department of Accounting and Finance Faculty Scholarship and Creative Works

Are CEO compensation packages designed to alleviate some of the personal risks that they bear? We employ a unified framework to test the relationship between the four major components of executive pay; salary, bonuses, option grants and restricted stock grants, and four factors that increase CEOs' personal risks; the real value of their pay, the riskiness of firm equity, the value of their equity portfolios, and the delta of these equity holdings. We show that personal risks that CEOs face have significant effects on the design of their compensation contracts. Our results suggest that the portion of salary compensation decreases …

Communicating In Markets: Is It Worthy To Be Wordy?, Singapore Management University

Perspectives@SMU

In the midst of on-going discussions around complex financial concepts, it is perhaps time to step back and look at the importance of communication, said David G Fernandez, head of JP Morgan’s Emerging Asia Research team, at the Sim Kee Boon Institute for Financial Economics (SKBI) Annual Conference. He notes the importance for policy makers to communicate with market participants in light of the increase in volatility and tail risks in financial markets

Sony Corporation: Reinventing Itself To Rediscover The Technological Edge, Chatterji Dheeman, Hayes Schildwachter, Jeffrey S. Harrison

Robins Case Network

Sony is a global conglomerate with a wide variety of businesses in its portfolio, but a heavy emphasis on electronics and related products. Due to a number of setbacks such as the earthquake in Japan and a weak global economy, the firm has experienced sales declines and negative earnings in recent years. In early 2012 the company announced a major restructuring and new strategy to regain its edge. However, Sony has an uphill battle.

Investors Do Respond To Poor Mutual Fund Performance: Evidence From Inflows And Outflows, George D. Cashman, Daniel N. Deli, Federico Nardari, Sriram V. Villupuram

Finance Faculty Research and Publications

Abstract

We examine the relation between mutual fund performance and gross flows for a large sample of actively managed U.S. mutual funds. Unlike previous studies that have only examined periods of generally increasing net flows, our sample includes periods of both increasing and decreasing net flows. We find that outflows are related to performance, with investors withdrawing money from poor performers. We also find that outflows and inflows respond asymmetrically to performance, outflows increase more aggressively following poor performance, and inflows increase more aggressively following good performance. Additionally, we find a symmetric performance net flow relation.

The Odd Quarter Research Report, Third Quarter, Volume 1, Issue 2, Bryant University, Archway Investment Fund

Archway Investment Fund

No abstract provided.

Grades Matter In Performance: Morningstar Stewardship Grades And Mutual Fund Performance, Aurobindo Ghosh, Jeremy Goh, Wee Seng Ng

Research Collection Lee Kong Chian School Of Business

Investors in mutual funds have the unenviable task of disentangling two mutually confounding effects. First, to fathom the future performance of the funds based on current evidence, and second, to assess how well the mutual fund managers will steward their investments under uncertain economic conditions. We corroborate the dependence of weighted risk-adjusted returns (viz. the Star Ratings) on corporate governance score (viz. Stewardship Grade) accounting for fund specific characteristics. We document Stewardship scores Granger cause Star Rating. We propose an objective data-driven corporate governance score based on the components of Stewardship Grade. Both the static and dynamic fixed-effects models show …

Algorithmic Trading And Changes In Firms Equity Capital, Ekkehart Boehmer, Kingsley Fong, Julie Wu

Research Collection Lee Kong Chian School Of Business

We use a large sample from 2001 to 2009 that incorporates intraday transactions data from 39 exchanges and an average of 12,800 different common stocks to assess the effect of algorithmic trading (AT) on firms’ capital raising activities. Greater AT reduces net equity issues over the next year, but this is only partly driven by AT’s effect on proceeds from new securities issues. Our findings suggest that the main driver of this relationship is AT’s effect on share repurchases.

2012 University Of Maine System Financial Report, University Of Maine System

General University of Maine Publications

University of Maine System (“the System” or UMS) management has prepared the following unaudited Management’s Discussion and Analysis (MD&A) to provide users with a narrative and analysis of the System’s financial position based on currently known facts, decisions, and conditions. This discussion includes an analysis of the financial condition and results of activities of the System for the fiscal years ended June 30, 2012 and prior years. As this presentation includes highly summarized information, it should be read in conjunction with the accompanying basic financial statements and related notes.

The Impact Of Switching To International Financial Reporting Standards On United States Businesses, Ashley Harper, Linda Leatherbury, Ana Machuca, Jodee Phillips

Faculty Publications and Presentations

There has been controversy brewing among accounting professionals regarding the impact of switching to International Financial Reporting Standards (IFRS) on United States corporations as deemed to converge in the near future (Deming, 2005). The viewpoint presented in this paper is that the United States should conform to the international standards primarily because a single set of standards creates uniformity and comparability for stakeholders regardless of their geographic location. This paper addresses the potential advantages and disadvantages of moving to a global set of standards as well as how the Financial Accounting Standards Board (FASB) will need to work with the …