Finance and Financial Management Commons^™

The Impact Of The Repeal Of The Stock-For-Debt Exception On Corporate Bankruptcy Restructurings, William D. Terando, Wayne H. Shaw

Scholarship and Professional Work - Business

This paper investigates the effect repeal of the stock-for-debt exception on corporate bankruptcy restructurings. This exception permitted corporations to exclude cancellation of indebtedness income from gross income provided they exchanged their own common equity for debt while in Chapter 11. Consistent with claims made by Easton (1994), it is found that the change in tax law imposed significant explicit tax costs on bankruptcy filers. Despite these costs, it is found that many of these firms altered their debt restructure method to preserve net operating losses and reduce their cost of equity. Almost half of the sample firms issued significant levels …

Prior Debt And The Cost Of Going Public, Steven D. Dolvin, Merk K. Pyles

Scholarship and Professional Work - Business

Previous studies find that firms with prior debt, particularly publicly rated, have lower information asymmetry and experience a lower opportunity cost of going public, as measured by underpricing. Subsequent research suggests that underpricing may be an inaccurate measure of indirect issuance costs. Thus, we replicate and extend existing studies to examine whether previously issued debt reduces the true opportunity cost of issuance. We find that private debt issues have little effect; however, firms with public debt (particularly rated) have both significantly lower levels of underpricing and lower issuance opportunity costs, as well as narrower filing ranges and smaller price revisions, …

Seasonal Affective Disorder And The Pricing Of Ipos, Steven D. Dolvin, Mark K. Pyles

Scholarship and Professional Work - Business

Purpose - It has been found that stock market returns vary seasonally with the amount of daylight, and they attribute this effect to seasonal affective disorder (SAD), which is a psychological condition that causes depression and heightened risk aversion during the fall and winter months. The goal of this study is to examine whether this effect also manifests itself in the pricing of initial public offerings (IPOs).

Design/methodology/approach - The authors conduct an empirical analysis on IPO data

collected over the period 1986-2000. Specifically, we examine potential pricing differences between IPO that go public during the fall and winter months, …

“Off The Rack” Versus “Savile Row” The Value Of Custom Tailoring For Equity Investors, Steven D. Dolvin, Brent W. Ambrose, John Gonas

Scholarship and Professional Work - Business

Equity asset managers within professional investment advisory firms will often manage both discretionary fee-based accounts as well as open-ended mutual funds - using comparable domestic equity investment disciplines. When retail and institutional investors choose between these products, their decision often hinges on performance and portfolio customization. After reconciling each product’s gross performance for calculation methodology, management and trading costs, and systematic risk measures, we find that concurrently-managed (where the same personnel manage a separately managed account and an open-ended mutual fund over the same time period using identical investment disciplines) small-cap separately managed accounts outperform small-cap actively-managed open-ended mutual funds …

Valuation And Classification Of Company Issued Cash And Share-Puts, William D. Terando, Wayne Shaw, David Smith

Scholarship and Professional Work - Business

This paper examines whether investors’ valuations of cash and share-put warrants are influenced by their potential differential effect on firm solvency. It is motivated by the enactment of SFAS 150, which requires that all contingent put warrant obligations be classified as balance sheet liabilities regardless of put type. Consistent with the critics of SFAS150, we show that market participants differentially value cash and share-puts based on their solvency characteristics beyond the firm’s recorded assets and liabilities. Our results add to existing capital structure literature by suggesting that complex financial instruments (such as cash and share-puts) be reported separately from each …