Corporate Finance Commons^™

A Return To The Cash Conversion Cycle And Corporate Returns, Madyson Mcpherson

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

A little over twenty years ago, Jose, Lancaster, and Stevens (1996) wrote a paper examining the relationship between profitability and ongoing liquidity management for firms over a twenty-year period, from 1974 to 1993. They test the relationship between the cash conversion cycle, ongoing liquidity management, and other methods of profitability using a regression analysis (Jose, Lancaster, and Stevens, 1996). This paper aims to do the same but with a selection of firms over a different twenty-year period, from 1993 to 2013. We implement Jose et al.’s methodology with updated data to see if contemporary data yields similar results: aggressive working …

Choosing The Precision Of Performance Metrics, Alan D. Crane, Andrew Koch, Chi Shen Wei

Research Collection Lee Kong Chian School Of Business

There is a standard trade-off in contracts between the provision of incentives and insurance. We hypothesize that this trade-off influences the precision with which firm performance is measured. We find that firm outcomes are measured less precisely when chance plays a large role in these outcomes. Further, this precision is determined through the choice of shares outstanding. This has several novel implications. Nominal stock prices can remain constant over time, and firms with unpredictable cash flows should have more shares and lower stock price levels, all else equal. We find evidence consistent with these implications.

Executive Compensation And Cash Contributions To Defined Benefit Pension Plans, Qiang Cheng, Laura Swenson

Research Collection School Of Accountancy

Pension contribution has a significant impact on firm valuation, employee benefit, and the financial situation of the Pension Benefit Guaranty Corporation (PBGC). Using a comprehensive dataset of defined benefit pension (DB) plan contributions, we investigate economic and accounting determinants of pension contributions. We argue that a firm’s pension contribution decision reflects the trade-off between the benefit – reducing the pension liability, and the cost – reducing cash flows from operations and cash available for other purposes. With respect to economic determinants, we find that firms contribute more when funding status is low and when profitability, cash flows from operations and …

Allocation Of Decision Rights Between The Parent Company And Its Subsidiaries, Yuanyuan Liu, Ting Luo, Heng Yue

Research Collection School Of Accountancy

This article examines the determinants of allocation of decision rights between the parent company and its subsidiaries, and the economic consequence of suboptimal power structure. Based on China’s unique double disclosure for the parent company and the whole group, we construct a decentralization index to measure how decision rights are allocated within the group companies. We find a more decentralized (centralized) power structure for the groups with more uncertain (certain) external environment and with poorer (better) internal information quality. We also show that the groups with suboptimal power structure have weaker future performance.

Shareholder Protection And Agency Costs: An Experimental Analysis, Jacob Lariviere, Matthew J. Mcmahon, William Neilson

Economics & Finance Faculty Publications

Two competing principal–agent models explain why firms pay dividends. The substitute model proposes that corporate insiders pay dividends to signal and build trust with outside shareholders who lack legal protection. The outcome model, in contrast, surmises that when shareholders have legal protection, they demand dividends from insiders to prevent them from expropriating corporate funds. Either way, dividends represent an agency cost paid to align the interests of shareholders and insiders. Expropriations by insiders and reduced investment by shareholders are also agency costs, but they are difficult to identify with archival data. Using a laboratory experiment, we identify the impact of …

Cross-Country Evidence On The Role Of Independent Media In Constraining Corporate Tax Aggressiveness, Kiridaran Kanagaretnam, Jimmy Lee, Chee Yeow Lim, Gerald J. Lobo

Research Collection School Of Accountancy

Using an international sample of firms from 32 countries, we study the relation between media independence and corporate tax aggressiveness. We measure media independence by the extent of private ownership and competition in the media industry. Using an indicator variable for tax aggressiveness when the firm’s corporate tax avoidance measure is within the top quartile of each country-industry combination, we find strong evidence that media independence is associated with a lower likelihood of tax aggressiveness, after controlling for other institutional determinants, including home-country tax system characteristics. We also find that the effect of media independence is more pronounced when the …

Real Estate Risk, Corporate Investment And Financing Choice, Xiaoying Deng, Seow Eng Ong, Meijun Qian

Research Collection Lee Kong Chian School Of Business

This paper empirically examines how real estate risk impacts corporate investment and financing decisions. Using a panel of United States firms from 1985 to 2013, we document that real estate risk is negatively associated with firms’ long-term investments and long-term external financing in equity and debt. The results are robust to different risk measurements and in particular salient during the financial crisis period when the endogeneity between risk and investment is less of a concern. The effect on firm leverage, however, depends on risk measures. Overall, in contrast to previously documented positive effects of the real estate value, real estate …

Essays In Corporate Finance, Nurul Alam Rafi

LSU Doctoral Dissertations

This dissertation contains two essays in corporate Finance. The first essay is on accelerated share repurchases (ASRs) and the second essay is on corporate inversions.

In my first essay, I investigate the use of stock buybacks, specifically accelerated share repurchases, to meet or beat the analysts’ forecasts of EPS. I find that when the companies want to repurchase their stocks in an effort to meet or beat the EPS expectations, they are more likely to choose accelerated share repurchases (ASRs) rather than open market repurchases (OMRs). Interestingly, upon announcements, these EPS motivated ASRs experience strongest market reaction among all the …

The Impact We Can Make Through Investment: Securing Financial Freedom By Serving Others, Miles A. Flett

Honors Projects

Wage disparity is a major political issue in the United States, but it has far more to do with the health of the economy as a whole. Statistically speaking, it is very difficult for women to participate equally in an economy where they are systematically marginalized. This hurts businesses, it hurts global markets and it damages overall GDP. Statistical data drawn primarily from the Bureau of Labor Statistics underline the differences that women face from various standpoints. Race is a primary influencer, but across the board all women make significantly less than men of the same background for the same …

The Competitive Landscape Of High-Frequency Trading Firms, Ekkehart Boehmer, Dan Li, Gideon Saar

Research Collection Lee Kong Chian School Of Business

We examine product differentiation in the high-frequency trading (HFT) industry, where the “products” are secretive proprietary trading strategies. We demonstrate how principal component analysis can be used to detect underlying strategies that are common to multiple HFT firms, and show that there are three product categories with distinct attributes. We study how HFT competition in each product category impacts the market environment, presenting evidence that indicates how it influences the short-horizon volatility of stocks as well as the viability of trading venues.

U.S. Firms On Foreign (Tax) Holidays, Travis K. Chow, Jeffrey L. Hoopes, Edward L. Maydew

Research Collection School Of Accountancy

We undertake the first large-sample analysis of foreign tax holiday participation by U.S. firms. Tax holidays are temporary reductions of tax granted by governments, usually contingent on the firm making new operational investments in the country. We predict and find that firms are more likely to participate in foreign tax holidays if they are highly capital-intensive and have highly profitable foreign operations, and less likely to participate in foreign tax holidays if they are capital constrained and if the firm is headed by a short-term focused CEO. While foreign tax holidays reduce taxes on foreign income, we also find that …

Shareholder Litigation And Corporate Disclosure: Evidence From Derivative Lawsuits, Thomas Bourveau, Yun Lou, Rencheng Wang

Research Collection School Of Accountancy

Using the staggered adoption of universal demand (UD) laws in the United States, we study the effect of shareholder litigation risk on corporate disclosure. We find that disclosure significantly increases after UD laws make it more difficult to file derivative lawsuits. Specifically, firms issue more earnings forecasts and voluntary 8-K filings, and increase the length of management discussion and analysis (MD&A) in their 10-K filings. We further assess the direct and indirect channels through which UD laws affect firms' disclosure policies. We find that the effect of UD laws on corporate disclosure is driven by firms facing relatively higher ex …

The Wall Street Gap: A Theoretical Analysis Of Company Valuation Discrepancy, Peter Twomey

Undergraduate Economic Review

Examination of prior research suggests that affiliated sell-side analysts are subject to conflicts of interest that cause them to issue optimistically biased stock recommendations for investment banking clients. Using a sample of public technology companies, I find that analysts have a theoretical discrepancy of up to 26% when valuing companies using a discounted cash flow model, and a 19-22% theoretical discrepancy when using comparable company analysis. I showcase how conventional valuation methodologies can allow sell-side analysts significant leeway that can be used to further unethical agendas and draw conclusions around the usefulness of regulatory intervention in the financial services industry.

Regulatory Repercussions In Finance, Jennifer L. Brodmann

LSU New Orleans Theses and Dissertations

This dissertation examines the impact of regulation and public policies on firm performance. Chapter 1, entitled “Political Contributions, Insider Trading, and CEO Compensation”, determines why CEOs from politically-connected firms receive higher pay compared to their non-politically connected peers. We investigate whether insider trading can explain high CEO pay. Using hand-collected firm-level lobbying data, we examine whether politically-connected CEOs engage in insider trading after sponsored bills are introduced and passed in the U.S. legislative bodies. Our results show that politically-connected CEOs commit insider trading, which yields higher compensation packages. In addition, we also find that lobbying benefits firm performance. Politically-connected firms …

Technological Diversity In Finance, Blake K. Rayfield

LSU New Orleans Theses and Dissertations

The dissertation consists of two chapters on measuring firms technological profile. Patent data can be grouped into two primary generations. The first generation lead by the work of Schmookler (1966), Scherer (1982), and Griliches (1984), and the second generation led by Trajtenberg, Jaffe, and Henderson (1997) and Kogan et al. (2016). When combined, both generations data spans from nearly 1926-2010 and has made a meaningful impact on innovation research. In the first chapter, I propose a third generation of patent data. The third generation of patent data has two distinct contributions. First, it extends patent-firm ownership information beyond 2010 to …

Credit Supply, Price And Financial Stability In Markets And Institutions, Austin J. Dejan

LSU New Orleans Theses and Dissertations

In Chapter 1, the staggered nature of the adoption of interstate bank branching deregulation in the United States is utilized as an exogeneous shock to investigate the managerial incentives involved in corporate socially responsible (CSR) activities. Using Kinder, Lydenberg, and Domini Research & Analytics, Inc. for our CSR measures, we find a significant negative relation between the extent of deregulation and CSR practices, which implies that deregulation-led rising competition in product market makes the non-financial firms more concerned about protecting interests of shareholders than other stakeholders. Specifically, firms with low pricing power tend to significantly reduce their CSR activities. Our …

The Impact Of Governance Mechanism On Performance And Survival Of Entrepreneurial Firms, Noura S. Metawa

LSU New Orleans Theses and Dissertations

The dissertation consists of two essays.

The first essay studies governance structures and their effectiveness for start-up companies and their survival. We utilize data from the Kauffman Survey, which tracks a sample of firms from their inceptions through their first eight years of existence. We hypothesize and find evidence that a startup's governance system affects its survivability as well as its performance. We show that controlling for the firm size and the industry, cross-sectional variations in the performance of the start-up firms can be explained by governance variables; the presence of one or more independent board member on the board, …

2018 Q2 Private Capital Access Index Report, Craig R. Everett

Pepperdine Private Capital Access Report

The Pepperdine Private Capital Access Index (PCA) is a quarterly indicator produced by the Pepperdine Graziadio Business School, in partnership with Dun & Bradstreet. The index is designed to measure the demand for, activity, and health of the private capital markets. The purpose of the PCA Index is to gauge the demand of small and medium sized businesses for financing needs, the level of accessibility of private capital, and the transparency and efficiency of private financing markets.

Marriott International, Inc: A Financial Analysis, Lai Wei

Dissertations, Theses, and Projects

Marriott International, Inc: A Financial Analysis

Avis Budget Group: A Financial Analysis, Tralonie Perkins

Dissertations, Theses, and Projects

This paper presents a financial analysis behind Avis Budget Group, Inc. (CAR), a leading global provider of vehicle rental and car sharing services, operating three of the most recognized brands in the industry: Avis, Budget and Zipcar. Utilizing both qualitative and quantitative analysis, this report encompasses comprehensive data regarding the industry in which CAR competes, the company’s recent financial results, and forecasts of its future growth with five-year pro forma financial statements used to build a valuation model.