Business Commons^™

Essays On Mortgage Portfolio Diversification, Timothy Patrick Dombrowski

LSU Doctoral Dissertations

Portfolios of mortgage loans played an important role in the Great Recession and continue to compose a material part of bank assets. The distribution of mortgage portfolio returns, and consequently, the risk of these portfolios, is quite distinct even from other fixed income asset classes. This dissertation contains three essays, each aiming to analyze a specific component of risk in mortgage portfolios and role of geographical diversification in reducing this risk.

The first essay investigates how cross-sectional dependence in the underlying properties flows through to the loan returns, and thus, the risk of the portfolio. In addition to demonstrating this …

Essays On Bank Deposit Flows And Deposit Rates As A Market Disciplining Mechanism, Prateek Sharma

LSU Doctoral Dissertations

Deposits are the single largest source of funding for banks and are thus key to the stability of the banking system. Deposit flows and deposit rates are two mechanisms through which depositors discipline banks from excessive risk taking thus keeping the banking system stable.

In Chapter 1, I examine aggregate deposit inflows, outflows, and the reallocation of deposits in the banking system to further our understanding of banking stability. I find that on average deposit inflows are nearly three times larger and twice more volatile than outflows. Deposit flows vary with business cycles and market conditions, across deposit types, and …

Essays On Empirical Asset Pricing, Mu-Shu Yun

LSU Doctoral Dissertations

This work contains three essays on empirical pricing. In the first essay, I propose to re-examine the evidence on mutual fund managers' illiquidity and volatility timing ability by using a holdings-based approach, which is free from the artificial timing bias occurred in the traditional return-based timing method. Through testing the timing evidence by the holdings approach, I am able to know to what degree the results in the literature are biased by no-information reasons. In the second essay, I investigate mutual fund managers' skills from their reactions to the observable market condition, which is a relatively overlooked dimension in the …

Essays In Corporate Equity Transactions, James David Kelly

LSU Doctoral Dissertations

This dissertation presents two essays dealing with corporate equity transactions. The first essay concerns an equity issuing transaction, the initial public offering (IPO), and specifically lockups, which restrict sales by pre-IPO shareholders. We improve upon the methodology for testing theory related to lockup length through the use of a multinomial logit as well as explore the reasons for and implications of multiple lockup agreements. We find that multiple lockups are associated with dual class equity structures, high book-to-market values, and more secondary shares offered. Offerings that include multiple lockups are more likely to deviate in (weighted average) length from the …

Essay On Anti-Takeover Provisions And Corporate Spin-Offs, Wei Du

LSU Doctoral Dissertations

Despite the prevalent use of anti-takeover provisions (ATPs) based indices as measures of corporate governance quality, the role of ATPs (efficiency vs. entrenchment hypotheses), and their relationship to firm performance are not fully understood. Corporate spin-offs offer a unique opportunity to disentangle entrenchment motives from efficiency motives behind the adoption of ATPs. This setting also provides relatively clean inferences on the relation between ATPs and firm performance. This paper studies the design of ATPs in spun-off firms relative to their parents, the determinants of ATPs, and their relationship to subsequent firm performance. We show that spun-off firms typically are endowed …

Two Essays On Institutional Investors And U.S. Bank Holding Companies, Hui Wang

LSU Doctoral Dissertations

This dissertation studies institutional investment in U.S. bank holding companies (BHCs). The first essay examines institutional investing preferences in U.S. banks and the impact of expansion of bank power on the preferences. Institutional investors prefer BHCs that hold more liquid assets, are better capitalized and larger in size, have better loan quality, lower stock return volatility and less derivative trading. In addition, the expansion of bank power is welcomed by various types of institutional investors, except for long-term institutions. Institutional investors also become less risk-averse when investing in BHCs that have expanded into non-banking business. However, the increased complexity and …

Essays On Mortgage Debt Payment, Meagan Nicole Mccollum

LSU Doctoral Dissertations

In this dissertation, I offer three independent studies that each contribute to the literature on mortgage debt payment. In the first paper, I examine the recent phenomenon of mortgage curtailment (borrowers making voluntary partial prepayments) and link this behavior to consumer deleveraging trends. In the second paper, I use the curtailment measures developed in the first essay to examine heterogeneity in sensitivity to current mortgage leverage in default decisions. Considering the group of borrowers who have previously curtailed mortgage debt, I posit such borrowers should be less sensitive to current leverage than borrowers without past curtailments because previous curtailers have …

Essays On Dividend Equivalent Rights And Ceo Compensation, Zi Jia

LSU Doctoral Dissertations

This dissertation studies a little-known executive compensation device called dividend equivalent rights (DERs). DERs entitle an executive to receive dividends, known as dividend equivalents (DEs), on unearned performance-based stocks and options. In the first essay we do empirical studies on the market reaction of news about DERs and the incentives that DERs can bring. We find that about 22% of S&P500 firms allow for these payments and about 10% actually make such payments. While investors react negatively to announcements of DE payments, DERs can be beneficial to shareholders by inducing a company to disgorge unproductive cash. If a firm allows …

Essays On Corporate Innovation, Lai Van Vo

LSU Doctoral Dissertations

In this dissertation, I explore the underlying mechanisms through which a firm innovates and invests in Research and Development (R&D). It consists of two essays. The initial essay investigates the effects of aggregate stock market liquidity on innovation at both the aggregate and firm levels for publicly traded firms in the U.S., and shows a significant and positive effect at both levels of aggregation. Next, the essay provides two underlying mechanisms through which aggregate stock liquidity enhances innovation. First, high stock market liquidity reduces the cost of raising external capital, making it easier for firms, especially for small firms and …

On The Governance Of Innovation: Institutional Ownership Vs. Stock Price, Huong Thi Thu Le

LSU Doctoral Dissertations

Firms can change their outstanding shares to manage their stock price levels. Those with lower stock prices tend to attract more speculative trading, which causes higher price volatility and may force their managers to excessively focus on short-term earnings at the expense of R&D and other long-term projects. Thus, I hypothesize that keeping high stock price levels allows firms to (i) limit speculative traders’ influences on stock prices and thus mitigate investor short-termism, and (ii) enhance R&D productivity. Indeed, I find that high-priced firms are less likely to cut R&D to reverse an earnings decline, less likely to fire their …

Essays On Mortgage Securitizations, Hong Lee

LSU Doctoral Dissertations

This dissertation studies how the affiliation between different entities in securitization process make different market outcomes, and how this estimation of affiliation effects is susceptible to limitations in securitized residential mortgage data. Three essays constitute the dissertation. The first essay illustrates the limitations and potential bias in the loan-level trustee data. Substantial amounts of loan attributes and risk factors are missing. The patterns of data omissions dramatically vary across different risk factors, sponsors, and trustees, and over the time. Missing of one risk factor is in general positively correlated with missing of the other. Omissions of loan attributes are systematically …

Essays On Credit Default Swaps And Debtor-Creditor Relationships, Cihan Uzmanoglu

LSU Doctoral Dissertations

Over the last decade, markets for credit insurance have developed dramatically and credit default swaps (CDS) have become the instrument of choice when it comes to hedging credit risks. The expanded hedging opportunities CDS provide and the allied benefits of better risk-sharing notwithstanding, concerns over the economic role of CDS arise from their ability to engender “empty” creditors – joint holders of the bond and CDS, and the role such creditors play in distress situations. Financially distressed firms often restructure their debt through out-of-court renegotiations with creditors to avoid formal default. In addition to the going concern value of the …

Essays On Institutional Trading Behavior With Conflicts Of Interest And Information Sharing, Hyoseok Hwang

LSU Doctoral Dissertations

This dissertation explores a controversial issue of institutional trading behavior with conflicts of interest and information sharing. Using firms sued for alleged financial misreporting, the first essay examines whether analyst-affiliated institutions reduce the portfolio weights of sued firms prior to their analysts releasing the information through downgrade revisions – trading huddles. Empirical evidence is consistent with this behavior, particularly among the institutions with investment banking operations but without underwriting relationships with sued firms. Institutions with underwriting relationships only reduce portfolio weights significantly when their analysts are the first to provide downgrades during the class period, which is a proxy for …

Two Essays On Information In Trading, Yanhao Fang

LSU Doctoral Dissertations

This dissertation comprises of two essays. The first essay, ‘Index Price Discovery in the Cash Market’, employs Hasbrouck’s (2003) information share method to analyze the flow of information in equity markets. In particular I compare trading in Index ETFs with that of their underlying securities. Surprisingly, ETFs seem to play a significant role in the price discovery process, rather than serving as passive indexing/hedging vehicles. Using TAQ data I reconstruct the second-by-second intraday price series for the S&P 500 using its component stocks. Results show that the ETF contributes almost half of the price formation of S&P 500 in the …

Aggregate Analyst Forecast Errors, Price Delay, And Business Cycle, Ping-Wen Sun

LSU Doctoral Dissertations

This dissertation consists of two essays. The first essay, “Stock market liquidity, aggregate analyst forecast errors, and the economy,” is motivated by Næs, Skjeltorp, and Ødegaard (2011), who suggest that stock market liquidity is a good leading indicator of the economy. To further understand the mechanism in the economic forecastability of stock market liquidity, we hypothesize that analyst earnings forecast errors have a systematic component, which is predictable and related to changes in the economy, and that smart investors exploit analyst forecast errors, which leads to the economic forecastability of stock market liquidity. Consistent with our hypothesis, we find that …

Essays On Alternative Weighting Schemes For Active Equity Indexes, Wenguang Lin

LSU Doctoral Dissertations

By definition, cap-weighted indexes place the largest (smallest) weights on the most overvalued (undervalued) securities. Fundamental indexation has recently been proposed as a passive, low-cost strategy that outperforms classical cap-weighted indexes. This dissertation focuses on new alternative weighting schemes based on fundamental indexation and analyzes underlying forces that drive their outperformance. The first essay proposes an alternative weighting strategy based on enterprise-value multiple (EM). Over the period 1972–2013, the EM-weighted index (Details of the weighting scheme can be referred to appendix) has the lowest tracking error and the highest information ratio when compared with six fundamental-weighted indexes based on book-equity …

Three Essays On Real Estate Finance, Shuang Zhu

LSU Doctoral Dissertations

This dissertation focuses on the mortgage default behavior and the valuation of distressed properties. Three essays are included. The first essay uses New Orleans foreclosure data, where each property has three appraisals, to investigate the factors affecting appraisal bias and accuracy, and to estimate the magnitude of appraisal accuracy for distressed properties. Our main finding is that the relation between the client and the appraiser affects valuation bias. Customer employed appraisers tend to give client friendly valuation than their court appointed counterpart. Experienced and licensed appraisers render less biased valuations; while appraisers specializing in lenders tend to give lender friendly …

Essays On Foreign Currency Risk Management, Sungjae Francis Kim

LSU Doctoral Dissertations

This dissertation studies on-balance-sheet and off-balance-sheet foreign currency risk management of corporate firms and commercial banks. It is comprised of two essays. The first essay investigates what determines firms’ foreign currency spot net asset positions, derivatives hedging and synthetic hedging positions. We build a model that anticipates a firm’s market timing in currency markets and credit markets according to the exchange-rate return and interest rate differential. Using a unique set of data containing complete foreign currency spot and derivatives positions of Korean exporting firms, we empirically find that currency position-squaring firms have significantly higher firm value. We also find evidence …

Essays On The Effect Of Financial Institution’S Dual Holdings Of Debt And Equity Securities, Jiun-Lin Chen

LSU Doctoral Dissertations

This dissertation analyzes the effects on the stock markets when institutional investors hold their client firms’ stocks. The first essay examines the trading impact around earnings announcements and the second essay studies the effect on stock liquidity. In the first essay, we find that relationship institutions (that have lent/underwritten and hold shares of clients) support their clients when these client firms have negative earnings shocks. Their support not only mitigates the negative abnormal return around earnings announcements but also reduces the post-earnings-announcement-drift, thus, earnings momentum profits. In the second essay, we find that client firms held by relationship institutions suffer …

Two Essays On Analyst Bias And Management Entrenchment, Bahar Ulupinar

LSU Doctoral Dissertations

This dissertation examines the interactions of corporate governance on analyst behavior. Analyst bias is well documented in the previous literature. However, the relationship between managerial entrenchment and analyst bias has not been explored. In my first essay, I hypothesize that while analysts strike a balance between personal reputation and revenue generation for their employers, entrenched managers of covered firms are more likely to induce analysts’ collaboration using management access and underwriting businesses. My hypothesis suggests that managerial entrenchment is a potential source of analyst bias. Consistent with my hypothesis, using the G-Index as a proxy for managerial entrenchment, I show …

Essays On Management Quality, Ipo Characteristics And The Success Of Business Combinations, Haksoon Kim

LSU Doctoral Dissertations

A Special Purpose Acquisition Company (SPAC) is a blank check company with no business operation but management quality. It raises money through unit IPO and put proceeds in a trust account for future business combination. In the post IPO market, the market price would reflect the value of trust account and management quality of profitably acquiring a firm with business operation. Thus, SPACs provide a unique setting to examine the pricing of management quality. Compared with regular IPO firms, SPAC management has more industry experience and the market put a higher value for SPACs with better management experience. SPACs with …

Three Essays On The Interest Rate Forward-Futures Differential 1. Empirical Investigation Of The Size And The Nature Of The Eurodollar Futures-Foward Differential 2. Decomposition Of The Interest Rate Forward-Futures Price Differential 3. How Much Premium Is There For Interest Rate Futures?, Andrei Shynkevich

LSU Doctoral Dissertations

This dissertation analyzes a series of issues that surround both the theoretical modeling and the empirical estimation of the forward-futures differential, commonly known as the convexity adjustment. Opposite to theoretical implication, I find that the magnitude of the forward-futures rate differential is much smaller than what was expected, and that its sign is negative on many occasions. Neither asynchronicity bias, nor the unconventional feature of the Eurodollar futures pricing can explain the observed phenomena. The term structure interpolation error and the two business day lag between the fixing (settlement) date and the transaction (value) date to which the implied forward …

Essay 1: Does Ownership Structure Matter? Essay 2: Asset Sale In Mutual Fund Industry, Fan Chen

LSU Doctoral Dissertations

The dissertation studies two aspects of the U.S. registered investment companies. The first essay analyzes the ownership and organizational structure aspect while the second essay investigates the restructure events of those investment companies. We find sellers from mutual fund asset sales are mainly financial conglomerates. Funds under management of those conglomerates experience poor performance during the period prior to asset sales. On the other hand, acquirers are generally highly focused mutual fund companies. Funds acquired by these focused entities experience improvement in both fund performance and operational efficiency. From the analysis of organizational structure, funds managed by focused mutual fund …

Three Essays In Options Pricing: 1. Volatilities Implied By Price Changes In The S&P 500 Options And Future Contracts 2. Price Changes In The S&P Options And Futures Contracts: A Regression Analysis 3. Hedging Price Changes In The S&P 500 Options And Futures Contracts: The Effect Of Different Measures Of Implied Volatility, Jitka Hilliard

LSU Doctoral Dissertations

In this work, I develop a new volatility measure; the volatility implied by price changes in option contracts and their underlyings. I refer to this as implied price change volatility. First, I examine the time series behavior of implied price change volatility and investigate possible moneyness and maturity effects. I compare these characteristics to those of the usual implied volatility measure and the historical volatility of the S&P 500 index. Then, I investigate the performance of the implied price change volatility in a regression setup and in hedging applications. I compare the performance of hedges using daily updated implied price …

Liquidity And Speculative Trading: Evidence From Stock Price Adjustments To Quarterly Earnings Announcements, Hsiao-Fen Yang

LSU Doctoral Dissertations

This dissertation studies whether stock price reactions to quarterly earnings announcements depend on stock liquidity. Baker and Stein (2004) and Scheinkman and Xiong (2003) develop models showing that liquidity can be affected by investor sentiment or speculative trading. With short-sale constraints, liquid stocks have more trading from optimistic, overconfident investors and tend to be overvalued. In this study, we hypothesize that if a liquid stock is overpriced due to intensive speculative trading, the overpricing should be corrected partially or fully after quarterly earnings announcements which convey the information about the fundamental value of stocks and synchronize investors' adjustment to mispricing. …

Managerial Ability And The Valuation Of Executive Stock Options, Tung-Hsiao Yang

LSU Doctoral Dissertations

The executive compensation literature argues that executives generally value stock options at less than market value because of suboptimal ownership and risk aversion. Implicit in this finding is the assumption that executives are, like shareholders, price takers. That is, they have no ability to influence the outcomes of the firm’s investments. Clearly, executives do have the ability to influence these outcomes, because that is the purpose of granting them the options. In this paper, we develop a model in which managers can exert effort and alter the distribution of the returns from the firm’s investments. We find that when executives …

Three Essays On Corporate Acquisitions, Bidders' Liquidity, And Monitoring, Huihua Li

LSU Doctoral Dissertations

This dissertation consists of three essays on corporate acquisitions, bidders’ liquidity and monitoring. In the first essay, “Acquisitions and Bidders’ Liquidity: Evidence from Successful and Unsuccessful Takeovers”, I examine the impact of corporate acquisitions on bidders’ liquidity. I find that liquidity improves for bidders that complete the takeovers but remains unchanged or decreases for unsuccessful bidders. Takeovers of public firms result in similar liquidity improvements as do takeovers of private firms. Takeovers that use stock as the method of payment have significantly more improvement in liquidity than takeovers that use cash as the payment method. These results suggest that changes …

Spatial Diversification, Dividend Policy, And Credit Scoring In Real Estate, Darren Keith Hayunga

LSU Doctoral Dissertations

Built on the foundation of economic principles, real estate offers many pursuits of academic discovery within the realm of finance. This dissertation examines three areas of real estate finance. In the first chapter, I use the unique real estate characteristics of heterogeneity, immobility, and localized markets to examine the spatial aspects of large-scale commercial real estate portfolios. The results demonstrate a clear need for portfolio managers to diversify properties based upon distances between properties. The second chapter examines another large-scale real estate portfolio, the real estate investment trust, which is held by investors seeking dividend income. Despite the importance of …

The Trading Volume Trend, Investor Sentiment, And Stock Returns, Yung-Chou Lei

LSU Doctoral Dissertations

This dissertation relates the information contained in past trading volume to investor sentiment, and investigates its ability in predicting stock returns. Investor sentiment here refers to the enthusiasm of irrational investors on an asset, relative to that of rational investors. Motivated by Baker and Stein (2004) that an increase in trading volume reflects a rise in investor sentiment, I use the change in trading volume per unit of time, referring it as the trading volume trend, as a measure of investor sentiment on individual stocks. I document a negative and significant cross-sectional relation between the trading volume trend and stock …

Ceo Succession Processes And Agency Costs, Zeynep Ayca Altintig

LSU Doctoral Dissertations

In the 'passing the baton' succession process, the incumbent CEO/Chairman relinquishes the CEO title, but retains the Chairman title to facilitate monitoring the new CEO during a probationary period. The new CEO eventually wins the Chairman title if he is successful during the probationary period. We argue that this type of succession process can lead to managerial conformism and conservatism because reputation concerns give the retiring CEO incentives to pressure the new CEO to continue existing policies and to avoid making major changes that could substantially improve performance or increase firm value. Consistent with this hypothesis, we find no changes …