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Finance and Financial Management Commons™
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Articles 1 - 11 of 11
Full-Text Articles in Finance and Financial Management
The Macroeconomic News Cycle And Uncertainty Resolution, Arjun Chatrath, Rohan Christie-David, William T. Moore
The Macroeconomic News Cycle And Uncertainty Resolution, Arjun Chatrath, Rohan Christie-David, William T. Moore
Faculty Publications
We examine the behavior of return volatility and trading at 5-minute intervals in the treasury bond futures market in the context of the monthly macroeconomic news cycle. We advance and confirm the hypothesis that volatility and trading activity are higher in the first half of the month. The data indicate that these patterns arise from at least two sources: (1) a higher level of uncertainty regarding the value of news in announcements in the first half of the month, and (2) improvement in efficiency of macroeconomic forecasts from the first to the second half of the month.
The Dynamics Of Market Entry: The Effects Of Mergers And Acquisitions On Entry In The Banking Industry, Allen N. Berger, Seth D. Bonime, Lawrence G. Goldberg, Lawrence J. White
The Dynamics Of Market Entry: The Effects Of Mergers And Acquisitions On Entry In The Banking Industry, Allen N. Berger, Seth D. Bonime, Lawrence G. Goldberg, Lawrence J. White
Faculty Publications
We study the dynamics of market entry following mergers and acquisitions (M&As) using banking industry data. The findings suggest that M&As are associated with statistically and economically significant increases in the probability of entry. The data suggest that M&As affect the proportion of the markets with entry by about 10-20%. These findings also suggest that entry may be part of an "external" effect of M&As that helps supply credit to some relationship-dependent small business borrowers. Our results are robust to the use of alternative econometric methods, changes in specifications of the exogenous variables, and alteration of the data samples.
The Value Of Open Market Repurchases Of Closed-End Fund Shares, Gary E. Porter, Rodney L. Roenfeldt, Neil W. Sicherman
The Value Of Open Market Repurchases Of Closed-End Fund Shares, Gary E. Porter, Rodney L. Roenfeldt, Neil W. Sicherman
Faculty Publications
The authors illustrate the value to shareholders when closed-end funds repurchase shares at a discount from net asset value. Repurchases increase share price even when there is no asymmetric information concerning the value of the underlying assets and the percentage discount remains unchanged following the repurchase. Expected gains to shareholders are derived from capturing the discount on the assets associated with the shares repurchased. In an analysis of 27 open market repurchase announcements by closed-end funds, the regression coefficient estimate that measures the association between the actual excess return and the expected increase in share price is essentially 1.0.
Race, Redlining, And Automobile Insurance Prices, Scott E. Harrington, Gregory R. Niehaus
Race, Redlining, And Automobile Insurance Prices, Scott E. Harrington, Gregory R. Niehaus
Faculty Publications
Following Becker's (1993) suggestion that tests for discrimination should attempt to infer whether profits differ for products sold to minorities and nonminorities, this article tests the hypothesis that racial discrimination affects market prices of auto insurance in Missouri. Compared with tests for discrimination in lending markets, our results are less susceptible to bias from omitted variables.Controlling for available demographic and coverage- related factors, we do not find that loss ratios at the zip-code level are negatively related to percent minority population. This finding is inconsistent with the hypothesis that racial discrimination increases premiums relative to expected claim costs for minorities.
The Coexistence Of Multiple Distribution Systems For Financial Services: The Case Of Property-Liability Insurance, Allen N. Berger, J. David Cummins, Mary A. Weiss
The Coexistence Of Multiple Distribution Systems For Financial Services: The Case Of Property-Liability Insurance, Allen N. Berger, J. David Cummins, Mary A. Weiss
Faculty Publications
Property-liability insurance is distributed through a direct-writer system, where agents represent one insurer, and an independent- agency system, where agents represent several insurers. Independent-agency insurers have higher costs than direct writers. The market- imperfections hypothesis attributes the coexistence of the two types of insurers to impediments to competition, while the product-quality hypothesis holds that independent-agency insurers provide higher-quality services. We measure cost efficiency and profit efficiency for property-liability insurers and find strong support for the product-quality hypothesis, implying that independent-agency insurers produce higher-quality outputs and are compensated by higher revenues.
On The Information Content Of Calls Of Convertible Securities, Anthony K. Byrd, William T. Moore
On The Information Content Of Calls Of Convertible Securities, Anthony K. Byrd, William T. Moore
Faculty Publications
Negative stock price reactions to conversion-forcing calls of convertible bonds and preferred stocks are reexamined, and most of the sample firms are shown to exhibit full price recovery by the end of the conversion period. In addition, analysts' earnings forecasts, both short-term and long-term, are found to be revised upward following call announcements for convertible bonds and preferred stocks. The combined findings cast doubt on the established belief that such capital structure decisions signal negative information about firm value.
Relationship Lending And Lines Of Credit In Small Firm Finance, Allen N. Berger, Gregory F. Udell
Relationship Lending And Lines Of Credit In Small Firm Finance, Allen N. Berger, Gregory F. Udell
Faculty Publications
This article examines the role of relationship lending in small firm finance. It examines price and nonprice terms of bank lines of credit (L/Cs) extended to small firms. The focus on LICs allows the examination of a type of loan contract in which the hank- borrower relationship is likely to be an important mechanism for solving the asymmetric information problems associated with financing small enterprises. We find that borrowers with longer banking relationships pay lower interest rates and are less likely to pledge collateral.These results are consistent with theoretical arguments that relationship lending generates valuable information about borrower quality.
Some Evidence On The Empirical Significance Of Credit Rationing, Allen N. Berger, Gregory F. Udell
Some Evidence On The Empirical Significance Of Credit Rationing, Allen N. Berger, Gregory F. Udell
Faculty Publications
This paper examines the credit rationing debate using detailed contract information on over one million commercial bank loans from 1977 to 1988. While commercial loan rates are "Sticky," consistent with rationing, this stickiness varies with loan contract terms in ways that are not predicted by equilibrium credit rationing theory. In addition, the proportion of new loans issued under commitment does not increase significantly when credit markets are tight, despite the fact that borrowers without commitments can be rationed whereas commitment borrowers are contractually insulated from rationing. Overall, the data suggest that equilibrium rationing is not a significant macroeconomic phenomenon.
Liquidity Costs And Stock Price Response To Convertible Security Calls, Michael A. Mazzeo, William T. Moore
Liquidity Costs And Stock Price Response To Convertible Security Calls, Michael A. Mazzeo, William T. Moore
Faculty Publications
Firms' announcements to call in-the-money convertible securities for redemption essentially force their conversion into common stock, and such announcements are generally met with significant reductions in the calling firms' equity values. An explanation based on liquidity costs is advanced and tested. The explanation implies that investors who choose to sell their shares early in the conversion period bear liquidity costs by selling at reduced prices. Consistent with the explanation, the average share price decline is short-lived, lasting most of the conversion period. Thus, a component of the call announcement effect appears to be due to liquidity costs.
Interdependence Of Market Risk Measures, Philip L. Cooley, Rodney L. Roenfeldt, Naval K. Modani
Interdependence Of Market Risk Measures, Philip L. Cooley, Rodney L. Roenfeldt, Naval K. Modani
Faculty Publications
No abstract provided.
On The Net Present Value Rule For Educational Investments, Elchanan Cohn
On The Net Present Value Rule For Educational Investments, Elchanan Cohn
Faculty Publications
Focuses on the net present value rule for educational investments. Profitability of investment in education; Omission of direct educational costs from the benefit-cost calculations; Standards on the applicability of the net present value rule.