Finance and Financial Management Commons^™

State Ownership And Banks Information Rents: Evidence From China, Fengyan Ru, Qi Liang, Wei Wang

Business Faculty Publications

In a lending relationship, a bank with an information advantage regarding its client tends to hold up the borrower and charge higher interest rates. We conjecture that state-owned enterprises (SOEs), with worse information asymmetry, are subject to greater information
rents. State-owned banks place less emphasis on information production and hence extract lower rents compared to profit maximizing private banks. We use the decline of loan interest rates around the borrowers’ equity initial public offerings (IPOs) as the proxy of banks’ information rents. We find SOEs in China experience
larger declines in loan interest rates around their IPOs; the central government-controlled …

Does Corporate Social Responsibility Reduce The Costs Of High Leverage? Evidence From Capital Structure And Product Market Interactions, Kee-Hong Bae, Sadok El Ghoul, Omrane Guedhami, Chuck C.Y. Kwok, Ying Zheng

Finance Department Faculty Journal Articles

Research on capital structure and product market interactions shows that high leverage is associated with substantial losses in market share due to unfavorable actions by customers and competitors. We examine whether corporate social responsibility (CSR) affects firms’ interactions with customers and competitors, and whether it can reduce the costs of high leverage. We find that CSR reduces losses in market share when firms are highly leveraged. By reducing adverse behavior by customers and competitors, CSR helps highly leveraged firms keep customers and guard against rivals’ predation. Our results support the stakeholder value maximization view of CSR.

The Cost Of Secrecy Isn't Worth It For The Lds Church, Nathan B. Oman

Popular Media

No abstract provided.

Vega, Capital Ratios, And Real Estate Lending, Muna Alsheikh

Doctor of Business Administration Dissertations

The 2007 financial crisis revealed how excessive bank risk threatens financial system stability. This paper studies two aspects of the risk-taking incentives of banks– CEO compensation and capital. The vega of a bank executive’s equity compensation measures how compensation changes relative to the banks’ stock volatility. If CEO compensation vega is high, I expect the CEO to take more risk in areas where he exercises control. Conversely, if regulators demand that banks invest their own capital to encourage conservative behavior, then I expect risk-taking to be lower. This paper confirms that higher vega and lower capital ratios are associated with …

Developing Financial Literacy Skills For A Secondary Transition Program For Students With Learning Differences, Rose Marie Borillo, Becki Cohill, Susan Macdermott

San Marcos, Fall 2019

Under the Individuals with Disabilities Education Act (IDEA), schools are required to provide transition planning for students with disabilities and mental illness by age 16 (Eismann et al, 2017). Occupational therapists have been underutilized in secondary transition planning, despite their expertise in targeting functional abilities, comprehension, and health using activity analysis to promote skill attainment and achieve independence (Mankey 2012; Eismann et al, 2017).

At the Winston School, there was no formal transition program aside from the individual college counseling provided by a staff member. A coordinated transition program was indicated to prepare students for life after high school to …

Review: Personal Finance (Saylor Foundation), Aaron Henrichsen

Open Textbooks & Reviews

Review of the textbook Personal Finance originally posted on Open Textbook Library (https://open.umn.edu/opentextbooks/textbooks/personal-finance).

Predicting Market Trends: Effects Of Gdp And Pmi On Changes In Stock Closing Prices, Charley Renna

Student Scholar Symposium Abstracts and Posters

In an effort to learn more about the impact of certain economic variables on the stock market, I chose to analyze the impact that the Purchasing Managers’ Index and U.S. Gross Domestic Product have on three major stock indices: S&P 500, Dow Jones Industrial Average, and Nasdaq 100. The PMI is an index of the direction of economic trends in the manufacturing and services sector. Released on the first business day of every month, it consists of a diffusion index that summarizes whether market conditions are expanding, staying the same, or contracting. An index level greater than 50 percent suggests …

Microfinance Institutions’ Criteria On Small Business Financing In Cameroon, Serge Messomo Elle

The Journal of Entrepreneurial Finance

This study uses MFIs as a unit of analysis to examine the factors of human, financial and social capital that increase the financing of microenterprises’ identification of opportunities and exploitation in Cameroon .To attain this objective, a questionnaire was used to collect data from 207 MFIs and analyzed using descriptive and multiple linear regression models. The results revealed that when it concerns the financing of opportunity identification, only human capital variables of Prior knowledge and Business training increase the financing of microenterprises by MFIs in Cameroon. Regarding the opportunity exploitation on the contrary, accumulated business knowledge, business skills and customer …

Understanding Employee Engagement: A Mixed-Methods Study, Joren M. Scharn

Theses & Dissertations

For over 4 decades businesses around the world have been conducting employee satisfaction surveys at regular intervals and this surfaced a strong positive relationship between employee satisfaction, customer satisfaction, and overall company performance. In recent years however, academics and researchers have reopened the debate on whether employee or job satisfaction metrics are in fact reliable indicators of productivity, suggesting that employee engagement has a far stronger correlation to productivity. This study addresses two interrelated problems that are associated with a practice that is common in working environments all over the world. According to literature, it is generally accepted that (a) …

An Ai Approach To Measuring Financial Risk, Lining Yu, Wolfgang Karl Hardle, Lukas Borke, Thijs Benschop

Sim Kee Boon Institute for Financial Economics

AI artificial intelligence brings about new quantitative techniques to assess the state of an economy. Here, we describe a new measure for systemic risk: the Financial Risk Meter (FRM). This measure is based on the penalization parameter (λ" role="presentation" style="box-sizing: border-box; display: inline; font-style: normal; font-weight: normal; line-height: normal; font-size: 18px; text-indent: 0px; text-align: left; text-transform: none; letter-spacing: normal; word-spacing: normal; overflow-wrap: normal; white-space: nowrap; float: none; direction: ltr; max-width: none; max-height: none; min-width: 0px; min-height: 0px; border: 0px; padding: 0px; margin: 0px; position: relative;">λλ) of a linear quantile lasso regression. The FRM is calculated by taking the average …

Essays In Financial Economics, Kamilla Kasymova

Theses and Dissertations

This dissertation consists of three essays concerning financial economics.

In the first essay, I focus on the role of the life insurance in the financial markets and the factors that drive the development of life insurance industry. The essay examines the causality of the banking sector development on the development of the life insurance market measured by the total premiums received by life insurers using panel estimation for about 90 countries over the period 1996-2010. I employ the dynamic System Generalized Method of Moments estimation technique to resolve the endogeneity problem between the development of the life insurance and the …

Deep Reinforcement Learning Pairs Trading, Andrew Brim

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

This research applies a deep reinforcement learning technique, Deep Q-network, to a stock market pairs trading strategy for profit. Artificial intelligent methods have long since been applied to optimize trading strategies. This work trains and tests a DQN to trade co-integrated stock market prices, in a pairs trading strategy. The results demonstrate the DQN is able to consistently produce positive returns when executing a pairs trading strategy.

A Learning Curve Of The Market: Chasing Alpha Of Socially Responsible Firms, Zhichuan Li, Jun Wang, Dylan Minor, Chongyu Dang

Business Publications

This paper explores stock market reactions to corporate social performance. We find that a value-weighted portfolio based on the list of “100 Best CSR companies in the world”, published by Reputation Institute, yields statistically significant annual abnormal returns of 1.63% and 1.26%, by controlling for Carhart four factors and Fama-French five factors, respectively (2.39% and 1.84% respectively for an equal-weighted portfolio). Moreover, such abnormal returns decrease as time goes, especially after the inaugural publication of the CSR lists in 2013. The paper also indicates that companies with better social performance are more likely to have positive earnings surprises, and that …

The Unexpected Activeness Of Passive Investors: A Worldwide Analysis Of Etfs, Si Cheng, Massimo Massa, Hong Zhang

Research Collection Lee Kong Chian School Of Business

The global ETF industry provides more complicated investment vehicles than low-cost index trackers. Instead, we find that the real investments of ETFs may deviate from their benchmarks to leverage informational advantages (which leads to a surprising stock-selection ability) and to help affiliated OEFs through cross-trading. These effects are more prevalent in ETFs domiciled in Europe. Moreover, ETF flows seem to respond to additional risk. These results have important normative implications for consumer protection and financial stability. (JEL G20)

An Analysis Of The Local Control Funding Formula (Lcff) As An Instrument Of Recognition And Distribution Justice, Maeve Mulholland

Doctoral Dissertations

The 2013 Local Control Funding Formula (LCFF) is the first substantive finance reform measure in California specifically designed to provide additional funding to targeted student groups. The present study adopts Nancy Fraser’s (1995) theory of distribution and recognition justice to examine the allocation of resources under the new formula. Critical quantitative methodology is employed to investigate if students identified as being in poverty, English Learners (ELs), and African-American students, benefit under the LCFF. Pre- and post-LCFF comparisons of district level per pupil dollar allocations from LCFF, Other State, Federal, and Local resources are conducted. The findings show that post-2013, funding …

Do Real Estate Agents Have Information Advantages In Housing Markets?, Sumit Agarwal, Jia He, Tien Foo Sing, Changcheng Song

Research Collection Lee Kong Chian School Of Business

We use a large housing transaction data set in Singapore to study whether real estate agents use information advantages to buy houses at bargain prices. Agents bought their own houses at prices that are 2.54% lower than comparable houses bought by other buyers. Consistent with information asymmetries, agent buyers have more information advantages in less informative environments, and agent buyers are more likely to buy houses from agent sellers. Agent discounts are from both “cherry picking” and bargaining power, and bargaining power contributes more to the agent discounts. Agents’ advantage consists in their information of available houses and previous purchase …

Technological Innovation And The Gics: A Discussion Of Classification Needs In A Disrupted World, Madison Leann Moats

Chancellor’s Honors Program Projects

No abstract provided.

Chief Financial Officer Demographic Characteristics And Fraudulent Financial Reporting In China, Jinghui Sun, Pamela Kent, Baolei Qi, Jiwei Wang

Research Collection School Of Accountancy

We investigate whether management's cognitions, values and perceptions are associated with fraud for 18 863 firm-years for Chinese listed firms from 2000 to 2014. Demographic characteristics of the chief financial officer (CFO) are used as proxies for management's cognitions, values and perceptions. We find that fraudulent financial reporting is higher when CFOs are younger, male, and have lower education backgrounds. An analysis of inflated earnings, fictitious assets, material omissions and other material misstatements provide similar results, with the exception that CFOs with higher education levels are associated with more inflated earnings. Accounting and Finance

Long-Term Index Fund Ownership And Stock Returns, Ekkehart Boehmer, Wanshan Song, Ashish Tiwari, Zhe Zhang

Research Collection Lee Kong Chian School Of Business

We examine the implications of stock ownership by index funds for shareholder value. Consistent with recent findings that stock ownership by passive funds contributes to improved governance, we document a strong positive relation between the duration of passive fund holdings and subsequent stock performance. This positive relation is more pronounced for firms with recent poor performance, and for smaller firms and firms with higher allocation weights in passive funds’ portfolios. Our results support the view that index funds, although passive in their investment decisions, successfully contribute to long-term value creation by actively engaging with firms on matters of governance.

How Social Media Communications Can Mitigate Negative Impacts Of Corporate Social Irresponsibility On Corporate Financial Performance?, Saad A. Alhoqail, Hyun Young Cho, Kristopher Floyd

Business Faculty Articles and Research

Previous research on corporate social responsibility (CSR) has focused on corporate reputation (CR) and corporate financial performance (CFP), showing a high correlation between both. While most researchers primarily focus on CSR, our research examines the other side of the coin; corporate social irresponsibility (CSI) and provides findings that counter previous thought. We contribute to the existing literature by showing that CSI has a non-significant impact on corporate financial performance, as measured by market value, while concurrently being negatively correlated to corporate reputation. Further, we show social media, as measured by the Social Media Sustainability Index (SMSI), a measure studied infrequently …

Chasing Private Information, Marcin Kacperczyk, Emiliano Sebastian Pagnotta

Research Collection Lee Kong Chian School Of Business

Using over 5,000 trades unequivocally based on nonpublic information about firm fundamentals, we find that asymmetric information proxies display abnormal values on days with informed trading. Volatility and volume are abnormally high, whereas illiquidity is low, in equity and option markets. Daily returns reflect the sign of private signals, but bid-ask spreads are lower when informed investors trade. Market makers' learning under event uncertainty and limit orders help explain these findings. The cross-section of information duration indicates that traders select days with high uninformed volume. Evidence from the U.S. SEC Whistleblower Reward Program and the FINRA involvement addresses selection concerns.

Center Of Volume Mass: Does Options Trading Predict Stock Returns?, Gennaro Bernile, Fei Gao, Jianfeng Hu

Research Collection Lee Kong Chian School Of Business

We examine whether the distribution of trades along the set of strike prices of option contracts on the same stock contains information about underlying price discovery. We show that option traders' demand for delta exposure drives the volume-weighted average strike-spot price ratio (VWKS). In turn, we find that VWKS predicts underlying returns and anticipates the flow of fundamental information about the stock. The return predictability is greater but not limited to stocks with higher information asymmetries and arbitrage costs, and becomes stronger ahead of value relevant news. Overall, options trading appears to play an important informational role for underlying markets.

What Determines Venture Capital Investment Decisions? Evidence From The Emerging Vc Market In Egypt, Elsayeda A. Ismail, Mona I. Medhat

The Journal of Entrepreneurial Finance

The decision of a venture capitalist to commit capital in a new risky business is a complex decision. Investors need to consider a number of important criteria simultaneously. Based on the postulates of signaling theory and the investment criteria outlined in the extant literature, we propose a theoretical framework to describe the relationship between a new venture’s characteristics and the funding decision. The proposed framework is tested using actual data of a unique sample of 200 new Egyptian technological startups. The startups were tracked from establishment until applying to a venture capitalist and a decision was made either to accept …

Regulations And Brain Drain: Evidence From Wall Street Star Analysts’ Career Choices, Yuyan Guan, Congcong Li, Hai Lu, Franco Wong

Research Collection School Of Accountancy

The Global Settlement, along with related regulations in the early 2000s, prohibits the use of investment banking revenue to fund equity research and compensate equity analysts. We find that all-star analysts from investment banks are more likely to exit the profession or move to the buy side after the regulations. The departed star analysts’ earnings revisions and stock recommendations are more informative than those of the remaining analysts who followed the same companies. To the extent that star analysts are superior to their nonstar counterparts in terms of research ability and ability to inform the market, the exit of star …

Optimal Design And Ownership Structures Of Innovative Retail Payment Systems, Zhiling Guo, Dan Ma

Research Collection School Of Computing and Information Systems

In response to the Fintech trend, an ongoing debate in the banking industry is how to design the new-generation interbank retail payment and settlement system. We propose a two-stage analytical model that takes into account the value-risk tradeoff in the new payment system design, as well as banks’ participation incentives and adoption timing decisions. We find that, as the system base value increases, banks tend to synchronize their investment and adoption decisions. When the system base value is low and banks are heterogeneous, bank association ownership maximizes social welfare. When both the system base value and bank heterogeneity are moderate, …

Quantum Consensus, Jorden Seet, Paul Griffin

Research Collection School Of Computing and Information Systems

In this paper, we propose a novel consensus mechanism utilizing the quantum properties of qubits. This move from classical computing to quantum computing is shown to theoretically enhance the scalability and speed of distributed consensus as well as improve security and be a potential solution for the problem of blockchain interoperability. Using this method may circumvent the common problem known as the Blockchain Trilemma, enhancing scalability and speed without sacrificing de-centralization or byzantine fault tolerance. Consensus speed and scalability is shown by removing the need for multicast responses and exploiting quantum properties to ensure that only a single multicast is …

Using Behavior Economic Nudges To Facilitate Client Follow-Through In Financial Coaching, Charlene Hurst

Electronic Theses and Dissertations

While benevolence-based programs have been a large part of meeting immediate financial needs of the poor, they lack the relational aspect needed to facilitate long-term behavior change. Recently many social service organizations have adopted financial coaching as a promising replacement for benevolence programming. The field of coaching has dealt with its own challenges. Most coaching practitioners surveyed in 2016 and 2019 acknowledged lack of client follow-through as their number one challenge. Behavior economics offered nudges as a solution. Nudges are cues placed within the physical environment to prod clients toward behavior change. A quantitative field study was conducted to evaluate …

Vix Futures Term Structure And The Expectations Hypothesis, Ivan Oscar Asensio

Finance

Tests of the expectations hypothesis reveal that the slope of the VIX futures term structure predicts the direction but not the magnitude of the evolution of the short-end of the curve, but predicts neither the direction nor the magnitude of short-term changes in the long-end of the curve. Relative value seeking spread trades, constructed to exploit such violations, deliver excess returns with annualized Sharpe ratios equal or greater than those of volatility-writing strategies deployed by VIX ETN’s for a majority of the 32 spread trade combinations tested. I demonstrate that profits from beta-neutral variations of the spread trades, which are …

Investment In A Smaller World: The Implications Of Air Travel For Investors And Firms, Zhi Da, Umit G. Gurun, Bin Li, Mitch Warachka

Business Faculty Articles and Research

A large literature reports that proximity influences investment. We extend the measurement of proximity beyond distance and report that air travel reduces local investment bias. This result is confirmed using the initiation of connecting flights through recently opened air hubs because investment at destinations served by these connecting flights increases after, not before, their initiation. Air travel also broadens the investor base of firms and lowers their cost of equity by approximately 1%. Overall, air travel improves the diversification of investor portfolios and lowers the cost of equity for firms.

Behavioral Agent-Based Framework For Interacting Financial Markets, Heba M. Ezzat Dr.

Business Administration

Purpose – This paper aims at developing a behavioral agent-based model for interacting financial markets. Additionally, the effect of imposing Tobin taxes on market dynamics is explored. Design/methodology/approach – The agent-based approach is followed to capture the highly complex, dynamic nature of financial markets. The model represents the interaction between two different financial markets located in two countries. The artificial markets are populated with heterogeneous, boundedly rational agents. There are two types of agents populating the markets; market makers and traders. Each time step, traders decide on which market to participate in and which trading strategy to follow. Traders can …