Corporate Finance Commons^™

Earnings Management Surrounding Seasoned Bond Offerings: Do Managers Mislead Ratings Agencies And The Bond Market, Gary L. Gaton, Chiraphol New Chiyachantana, Choong Tze Chua, Jeremy Goh

Research Collection Lee Kong Chian School Of Business

We study earnings management (EM) efforts surrounding seasoned bond offerings using discretionary current accruals. We find that issuers tend to inflate earnings performance prior to an offering. In order for EM efforts to effectively mislead ratings agencies and the bond market, they must lead to inflated bond ratings and decreased offering yields. Regression results indicate the opposite; aggressive EM efforts are associated with lower initial ratings and higher offering yields. We also find a statistically lower proportion of subsequent downgrades for firms with the most aggressive EM efforts, which is inconsistent with these firms’ inflated initial ratings. While some firms …

Internal Controls And Conditional Conservatism, Beng Wee Goh, Dan Li

Research Collection School Of Accountancy

This study examines the relation between internal controls and conditional conservatism (“conservatism”), also referred to as timely loss recognition. Using a sample of firms that disclose material weaknesses (MWs) in internal controls under the Sarbanes-Oxley Act (SOX), we find a positive relation between internal control quality and conservatism. Specifically, firms with MWs exhibit lower conservatism than firms without such weaknesses. Further, firms that disclose MWs and subsequently remediate these weaknesses exhibit greater conservatism than firms that continue to have MWs. Overall, these results are consistent with strong internal controls acting as a mechanism that facilitates conservatism. Our study contributes to …

The Economic Impact Of Baseball Stadiums On Their Surrounding Development, Adam Davidson

Renée Crown University Honors Thesis Projects - All

The following paper examines the economic impact that Major League Baseball stadiums have on their surrounding developments and the funding methods used to build those stadiums. It includes a comparison of four examples: Oriole Park at Camden Yards, Busch Stadium, AT&T Park, and Fenway Park. The paper also takes both a qualitative and quantitative analysis of the results promised prior to construction and the various impact reports completed after the stadiums have been completed. The paper analyzes the use of public money for private use and the impact that the stadiums have on new sports centered developments as well as …

How Important Are Earnings Announcements As An Information Source?, Sudipta Basu, Truong Xuan Duong, Stanimir Markov, Eng Joo Tan

Research Collection Lee Kong Chian School Of Business

In a competitive information market, a single information source can only dominate other sources individually, not collectively. We explore whether earnings announcements constitute such a dominant source using Ball and Shivakumar's (2008) [How much new information is there in earnings?, Journal of Accounting Research, 2008, 46(5), pp. 975–1016] R ² metric: the proportion of the variation in annual returns explained by the four quarterly earnings announcement returns. We find that the earnings announcement days' R ² is 11% – higher than the corresponding R ² of days with dividend announcements, management forecasts, preannouncements, and 10-K and 10-Q filings and …

The Corporate Social Responsibility Debate, Zachary Cheers

Senior Honors Theses

The purpose of this study is to evaluate the arguments concerning corporate social responsibility (CSR). The two sides of the debate are stakeholder theory and shareholder theory. Proponents of stakeholder theory support providing for the discretionary expectations of society. On the other hand, advocates of shareholder theory maintain that businesses should simply obey the law and maximize shareholder wealth. Although CSR is enthusiastically espoused by many social progressives, it is not a panacea for society’s ills. The conclusion of this study is that corporations should focus on legally maximizing shareholder wealth based on ethical principles. CSR should only be pursued …

Stock Exchanges In The Middle East: Risky Business Or Smart Investing?, Jed A. Haddad

Honors Projects in Finance

The goal of any investor is to obtain the highest possible return for his or her money. However for years, the debate has continued; stocks, bonds, mutual funds; which of these financial instruments will produce the greatest gain to give the investor the highest profit? Historically, stocks have been known to provide investors with high returns. With the world becoming increasingly globalized, international markets have proven to offer investors more options to help diversify their portfolios. The Middle East has been known as a region of recent economic growth and stability. Three prominent examples of such are Kuwait, Israel, and …

Equity Incentives And Earnings Management: Evidence From The Banking Industry, Qiang Cheng, Terry Warfield, Minlei Ye

Research Collection School Of Accountancy

We examine the relationship between equity incentives and earnings management in the banking industry. By focusing on this regulated industry and using industry-specific earnings management proxies, we provide evidence on the impact of regulation on earnings management arising from chief executive officers' equity incentives. We find that bank managers with high equity incentives are more likely to manage earnings, but only when capital ratios are closer to the minimums required by regulators. This finding indicates that, in the banking industry, potential regulatory intervention induces, rather than mitigates, earnings management arising from equity incentives.

Government Ownership And Corporate Performance : A Comparative Analysis Of Malaysian And Singaporean Listed Companies., Nazrul Hisyam Ab Razak

Student Works (2010-2019)

This study investigates whether government involvement in companies in the Malaysian and Singaporean business environments leads to better performance. The motivation to undertake this study –to compare the performance of GLCs with Non-GLCs – came from the idea that managers probably perform differently in the presence (or absence) of government involvement because of the different control mechanisms and incentives in place within these companies. Consequently, this study aims to determine whether government ownership of companies in Malaysia and Singapore leads to better company performance. The significance of this study is to examine how Malaysian GLCs can learn from a developed …

Exploring The Feasibility Of Converting The Mardi Gras Hotel And Casino Into A Casino Boutique Hotel, Patrick Brennan

UNLV Theses, Dissertations, Professional Papers, and Capstones

Introduction:

The topic of my Professional Paper will be the feasibility study of renovating the Mardi Gras Hotel and Casino in Las Vegas, Nevada. Currently the Mardi Gras is operating as a Best Western and is looking to expand into the boutique hotel market. With the maturation of the Las Vegas hotel market, it is vital to think forward in new methods of design and marketing to attract the next generation of convention attendees and visiting tourist.

Purpose:

The purpose of this study is to determine the feasibility of converting the Mardi Gras hotel and casino into a destination casino …

Do Management Eps Forecasts Allow Returns To Reflect Future Earnings? Implications For The Continuation Of Management’S Quarterly Earnings Guidance, Jong-Hag Choi, Linda Myers, Yoonseok Zang, Dave Ziebart

Research Collection School Of Accountancy

Using 18,253 firm-year observations from 1998 through 2003, we build on literature suggesting that more informative disclosures allow returns to better reflect future earnings, and test whether management earnings per share forecasts and their characteristics influence the future earnings response coefficient (FERC). We find that FERCs are greater for forecasting firms and when forecasts are more frequent or precise. We suggest that more frequent and more precise forecasts assist investors in better predicting future earnings. Importantly, we find that quarterly and short-term forecasts incrementally increase the association between returns and future earnings beyond annual and long-term forecasts; thus, even short-term, …

Consistent Earnings Growth And The Credibility Of Management Forecasts, Adam S. Koch, Jong Chool Park

Accounting Faculty Publications

This paper examines the relation between a series of past earnings increases and the credibility of voluntary management earnings forecasts. We demonstrate that both analyst forecast revisions and stock price reactions around management earnings forecasts that contain good news are more pronounced when the firm has posted a string of recent earnings increases. These results are consistent with our primary hypothesis that voluntary management earnings forecasts are more believable when they are made by firms with a history of consistent growth in earnings. This effect is more pronounced when firms are not widely followed by analysts. Additional analysis suggests that …

When Are Analyst Recommendation Changes Influential?, Roger Loh, Rene M. Stulz

Research Collection Lee Kong Chian School Of Business

The existing literature measures the contribution of analyst recommendation changes using average stock-price reactions. With such an approach, recommendation changes can have a significant impact even if no recommendation has a visible stock-price impact. Instead, we call a recommendation change influential only if it affects the stock price of the affected firm visibly. We show that only 12% of recommendation changes are influential. Recommendation changes are more likely to be influential if they are from leader, star, previously influential analysts, issued away from consensus, accompanied by earnings forecasts, and issued on growth, small, high institutional ownership, or high forecast dispersion …

Goodwill Non-Impairments, Dennis Chambers, Catherine Finger

Faculty Articles

The article discusses the use of goodwill non-impairment by companies to manage their earnings. The effect of Statement of Financial Accounting Standards (SFAS) 142 on goodwill-related earnings management is described. A table shows the results of related the working papers "Earnings Management By Avoiding or Reducing Goodwill Impairments," by Dennis Chambers, "Evidence on the Use of Unverifiable Estimates in Required Goodwill Impairment," by Karthik Ramanna and Ross L. Watts, and "Has Goodwill Accounting Gone Bad?," by Kevin K. Li and Richard G. Sloan.

2011 Private Capital Markets Report, John K. Paglia

Pepperdine Private Capital Markets Report

The Pepperdine private cost of capital survey was originally launched in 2007 and is the first comprehensive and simultaneous investigation of the major private capital market segments. This year’s survey specifically examined the behavior of senior lenders, asset‐based lenders, mezzanine funds, private equity groups, venture capital firms, angel investors, privately‐held businesses, investment bankers, business brokers, limited partners, and business appraisers. The Pepperdine survey investigated, for each private capital market segment, the important benchmarks that must be met in order to qualify for capital, how much capital is typically accessible, what the required returns are for extending capital in today’s economic …

Don’T Burst The Bubble: An Analysis Of The First-Time Homebuyer Credit And Its Use As An Economic Policy Tool, Sarah J. Webber

Accounting Faculty Publications

In 2008, faced with a looming real estate crisis, Congress hastily acted to stabilize the economy by offering a first-time homebuyer credit. This tax credit was trumpeted as a solution to the excess inventory of homes for sale and to stop the free-fall in home values. The credit, however, failed to deliver on its promises. By analyzing the first-time homebuyer credit, its creation, its implementation and its economic impact, this Article concludes that, when compared to alternative policy solutions, Congress erred in using the tax code to implement a first-time homebuyer credit.

Corporate Parents, Initial Legitimacy, And Resource Acquisition In Small And Medium Firms: An Empirical Examination, Gregory Murphy, Neil M. Tocher

New England Journal of Entrepreneurship

Small and medium enterprises (SMEs) commonly struggle to acquire needed financial, human, and technological resources. The above being stated, recent scholarly research argues that SMEs that are able to successfully navigate the legitimacy threshold are better able to gather the resources they need to survive and grow. This article provides an empirical test of that claim by examining whether the presence of a corporate parent positively influences SME resource acquisition. Results of the study show that SMEs with corporate parents, when compared to like-sized independent SMEs, have higher credit scores, have more complete management teams, use more computers, and are …

The Opaqueness Of Fair Value Assets And Systematic Risk In The Banking Industry, Jody Wayne Bland

Inquiry: The University of Arkansas Undergraduate Research Journal

Opacity has economy-wide implications. A lack of information, whether from non-disclosure or complexity of business, creates uncertainty that even the most sophisticated of investors must face. In this paper, I analyze the relationship between opacity and the systematic risk of bank holding companies. Specifically, I find that investments in opaque assets required to be reported at fair value significantly affect the levels of financial institutions’ systematic risk. Furthermore, I provide evidence that firm investments in opaque assets contribute to systematic risk to an even greater degree during times of financial crisis.

The Sec Staff's "Cybersecurity Disclosure" Guidance: Will It Help Investors Or Cyber-Thieves More?, Sarah Jane Hughes, Roland L. Trope

Articles by Maurer Faculty

No abstract provided.

What Influences The Changes In Reit Ceo Compensation? Evidence From Panel Data, John M. Griffith, Mohammad Najand, H. Shelton Weeks

Finance Faculty Publications

This study examines what influences the changes in REIT CEO compensation using the following performance measures: average three-year total returns to shareholders, market value added, Tobin's q, and change in funds from operations. The impact of managerial power on the change in compensation is also examined. The empirical evidence indicates that firm performance and size do not influence the change in CEO salary, while risk, tenure, title, ownership, and age have significant impacts. Bonuses are not influenced by risk, size, or CEO power; however, they are influenced by performance. Option awards are affected by performance and CEO power.

The Importance Of Being Known: Relationship Banking And Credit Limits, Atreya Chakraborty

Accounting and Finance Faculty Publication Series

This paper measures the importance of bank-firm relationships in obtaining higher credit “limits.” We use data from a relatively unused section of the National Survey of Small Business Finance (NSSBF, 1993) on credit limits, credit sources, and contract terms for firms with lines of credit from multiple banks. This lets us isolate the credit limit that each bank provides the same firm, eliminating the need to control for often immeasurable, unreliable, or firm-specific “soft” information. For a median Line of Credit (LOC) of $250,000, we find that a bank with a five-year information advantage provides a LOC limit that is …