Corporate Finance Commons^™

Trusts Versus Corporations: An Empirical Analysis Of Competing Organizational Forms, A. Joseph Warburton

College of Law - Faculty Scholarship

This paper studies the effects of organizational form on managerial behavior and firm performance, from an empirical perspective. Managers of trusts are subject to stricter fiduciary responsibilities than managers of corporations. This paper examines the ramifications empirically, by exploiting data generated by a change in British regulations in the 1990s that allowed mutual funds to organize as either a trust or a corporation. I find evidence that trust law is effective in curtailing opportunistic behavior, as trust managers charge significantly lower fees than their observationally equivalent corporate counterparts. Trust managers also incur lower risk. However, evidence suggests that trust managers …

Financial Crisis, Bank Acquisitions, And Value Creation: The Case Of Bank Mergers For The Past Five Years, Sarina Ar-Loc Ng

Theses Digitization Project

This paper will focus on the bank acquisitions of the United States and Europe. It will specify the most highly regarded cause of the financial crisis and consider what all the components might explain about perception of consumers in the United States and in Europe. This paper also uses a commonly used event study methodology to understand the market reaction in these bank acquisition announcements.

A Common Eurozone Bond, Erik Welin

WCBT Undergraduate Publications

Introduction

The sovereign bond yields of the Eurozone, or more correctly the euro area, have since the introduction of the Euro undergone a bond yield compression. However, as can be seen in table 1, these bond yields started to diverge considerably around mid 2008 following the recent financial crisis and increased sovereign risk. Yields on Greek, Irish, and Portuguese bond have diverged the most from for example German bonds. Based upon this and the ongoing economic integration within the EU and Eurozone, proposals for a common Eurozone bond have been raised. There are many pros and cons with such a …

Esops And Corporate Officers' Compensation., Stoyu Ivanov

Faculty Publications

In the literature two major hypotheses have been developed for Employee Stock Ownership Plans used as a takeover defense, the management entrenchment and shareholder interest hypotheses, with the existing research not finding conclusive evidence for either one. In this paper we provide evidence that the entrenchmenthypothesis is not supported by finding that Employee Stock Ownership Plan firms pay less to their managers than non-Employee Stock Ownership Plan firms. If managers were truly entrenched they would have been able to expropriate wealth from the existing shareholders, which appears not to be the case for Employee Stock Ownership Plan firms.

Western Kentucky University Annual Report 2010: Bridging The Gap

SIFE (Students In Free Enterprise)

No abstract provided.

Real-Time Corporate Tax Audits And Their Impact On Financial Reporting, M. Catherine Cleaveland, Kathryn K. Epps, Cassie F. Bradley

Faculty Articles

The article focuses on the Compliance Assurance Process (CAP) program, a simultaneous auditing process that aims to potentially reduce audit procedures after the corporate tax filing date in the U.S. The process by which the program work is explained, which involves a corporation working an entire tax year with an account coordinator assigned by the Internal Revenue Service (IRS). Benefits of the CAP program include increased corporate tax compliance, while its disadvantages include resistance by a company to participate in a real-time audit program.

Why Does Corporate Governance Matter? Evidence From Seasoned Bond Offerings, Fang Wang

Dissertations and Theses Collection (Open Access)

To examine the importance of corporate governance, I look at how management and investors behave in the event of seasoned bond offerings, controlling for the corporate governance structure of issuing firms. I find that companies with the weakest governance structure aggressively manipulate their earnings upwards during the two years prior to the debt issuances. And when the bond offerings are announced to the market, these same firms experienced positive abnormal returns over a three day event period, indicating that investors of poorly governed firms value a debt financing for the alleged decrease in agency cost.

Why "Democracy" And "Drifter" Firms Can Have Abnormal Returns: The Joint Importance Of Corporate Governance And Abnormal Accruals In Separating Winners From Losers, Koon Boon Kee

Dissertations and Theses Collection (Open Access)

Do managers exercise accounting discretion in an opportunistic or efficient manner? Good governance structures, which mitigate agency costs, are necessary to ensure that the accounting information supplied by management is not opportunistically manipulated. The output of quality accounting information, in turn, serves as an input to better governance structures. Thus, governance and earnings quality (EQ) are inexorably linked through a complementarity relationship. This suggests two previously unexamined relationships. Firstly, the governance effects on performance in the influential paper by Gompers, Ishii and Metrick (2003) is overrated without good EQ, measured by the magnitude of abnormal accruals (AA), as an input. …

Does Corporate Governance Matter, Evidence From Earnings Management Practices In Singapore, Lingxu Hu

Dissertations and Theses Collection (Open Access)

This paper addresses two questions. First, do good corporate governance practices add values to company or does it lead to higher stock returns in Singapore? Second, does poorly governed listed company in SGX tend to manage their earnings by using discretionary accruals? Following the approach of Gompers et al. (2003), we formed two portfolios consisting of well-governed and poorly governed companies. Well governed companies are able to maintain a higher return relative to poorly governed companies. I also look at the firm valuation from the adoption of corporate governance practices. Our result shows a positive relationship between firm valuation and …

Developing High-Growth Businesses In Rural Areas: A Study Of Four U.S. States, William B. Lamb, Hugh Sherman

New England Journal of Entrepreneurship

Those who would establish high-growth businesses (HGBs) in rural settings face significant challenges. We report findings from more than 80 in-depth interviews regarding the obstacles that rural HGBs face and identify approaches for overcoming these obstacles. First, interviews confirm the need for improved access to a full range of financing options to support HGBs across different development stages. Second, HGBs need in-depth, sophisticated technical assistance, which is generally unavailable in rural areas. Finally, cooperation among financial and technical service providers is vital to program success. Based on these findings, a model is proposed for successful development of HGBs in rural …

Raising Venture Capital For The Serious Entrepreneur, Michele K. Masterfano

New England Journal of Entrepreneurship

Berkery, Dermot. Raising Venture Capital for the Serious Entrepreneur. New York: McGraw-Hill, 2008. ISBN 9780071496025

Raising Venture Capital for the Serious Entrepreneur is a fascinating journey through the world of venture finance. It provides an interesting, even absorbing view into the arcane world of how venture capitalists determine what companies they will finance, how they decide on the level of investment,and what they expect in return. It further provides important tips for entrepreneurs as they begin their planning for equity financing and the negotiations with VCs for that financing.

Determinants Of Bank Profits And Net Interest Margins In East Asia And Latin America, Mui Tin Low

Student Works (2010-2019)

This paper identifies the determinants of bank profits and net interest margins using bank level data, macroeconomic indicators and concentration ratio for ten countries in the East Asia and Latin America economies for the period of 2003–2008. A balanced panel of 167 banks operating in Argentina, Brazil, Colombia, Korea, Indonesia, Malaysia, Mexico, Thailand, Peru and Venezuela is used for this study. Of the 167 banks, 78 banks represent East Asia, while the balance 89 banks, Latin America. For purpose of this study, we first examine the determinants of bank profits and net interest margins based on the full sample of …

Corporate Governance And Earnings Management Before Share Repurchase Announcements In Singapore, Jian Ming Chua

Dissertations and Theses Collection (Open Access)

Share repurchase in Singapore was legalized in 1998. It is well known that investors view share repurchase as good news. This study is based on share repurchase announcements from 2006 to 2009. The mean Cumulative Market-Adjusted Returns (CAR) for the period [0, +1] and [-1, +1] are significant at 1.25% and 1.33% respectively. In Singapore, there are positive abnormal returns following share repurchase announcements in support of the ―free cash flow‖ hypothesis. By using the Singapore Corporate Governance Index as a proxy, the weakly governed companies exhibit the strongest, positive and significant CAR of 2.62% for the period [0, +1]. …

Further Examination Of Equity Returns And Seasonal Depression, Steven D. Dolvin, Mark K. Pyles, Qun Wu

Scholarship and Professional Work - Business

Seasonal Affective Disorder (SAD) induces investors to shift resources away from risky investments (such as equity) and towards safer alternatives (such as fixed income) during the Fall, while stimulating the opposite action in the Winter. Existing studies, however, fail to account for the possibility that SAD could further motivate investors to shift exposure among different subsets of equity, rather than simply across broad asset categories. We explore this possibility by examining the impact of SAD on the returns of “safe” and “risky” equity sectors (i.e., industries), as well as on equity at different levels of market capitalization. We find the …

Analysis Of Acquirer Stock Performance In Mergers And Acquisitions In Alberta's Oil And Gas Industry, Harrison A. Zivot

CMC Senior Theses

This paper develops a framework that analyzes how mergers and acquisitions in Alberta’s oil and gas industry affect stock prices. In this experiment, a multivariate regression is applied to several industry-specific variables to determine if they have impacts on the abnormal stock returns of acquirers. The results show that abnormal returns 5 days prior to the public announcement of the transaction are, in fact, driven by several industry-specific variables. However, the returns immediately after the M & A announcements are similar to previous research done in other industries. Acquirers’ gains 2 days after the announcement are essentially unaffected by the …

The Impact Of Macroeconomic Uncertainty On Firms Changes In Financial Leverage, Atreya Chakraborty

Accounting and Finance Faculty Publication Series

We investigate the relationship between a firm’s measures of corporate gov- ernance, macroeconomic uncertainty and changes in leverage. Recent research highlights the role of governance in financing decisions. Previous research also indicates that macroeconomic uncertainty affects a firm’s ability to borrow. In this paper we investigate how both these channels of influence affects firms’ financing decisions. Our findings show that macroeconomic uncertainty has an important role to play, both by itself and in interaction with a measure of corporate governance.

Effectively Hedging The Interest Rate Risk Of Wide Floating Rate Coupon Spreads, Thomas Schröder, Kwamie Dunbar

WCBT Working Papers

Bond issuers frequently immunize/hedge their interest rate exposure by means of interest rate swaps (IRS). The receiving leg matches all bond cash-flows, while the pay leg requires floating rate coupon payments of form LIBOR + a spread. The goal of hedging against interest rate risk is only achieved in full if the present value of this spread is zero. Using market data we show that under a traditional IRS hedging strategy an investor could still experience significant cash flow losses given a 1% shift in the underlying benchmark yield curve.

We consider the instantaneous interest-rate risk of a bond portfolio …

Backdated Stock Options Ownership Impact On The Corporation, Management, & Shareholders, Karen Cascini, Alan Delfavero

WCBT Faculty Publications

In the post-Sarbanes-Oxley Act (SOx) world, there has been an unprecedented crackdown on fraudulent activity occurring within corporate America. During recent years, many companies have granted stock options to their executives and employees as part of compensation packages. While the issuance of stock options as a component of compensation is considered to be a legal practice, corruption has taken this corporate resource to unlawful heights. Recently, numerous corporations have been in the news for potentially backdating stock options. Accordingly, the purpose of this paper is to distinguish between legal and illegal aspects of backdating stock options, and to examine the …

Intra-Industry Effects Of Takeovers: A Study Of The Operating Performance Of Rival Firms, Rupendra Paliwal

WCBT Faculty Publications

This paper investigates whether the managers of industry rivals act to mitigate their agency exposure and improve operating performance when one of the firms in the industry is subject to a takeover attempt. The results indicate that rival firms in general decrease free cashflows, improve operating performance, reduce capital expenditures, and increase leverage in response to a control threat within the industry. In particular, rival firms with potentially higher agency costs i.e., fewer investment opportunities and high cash or high free cashflows exhibit a higher reduction in cash levels and free cashflows subsequent to a control threat in their industry. …

The Extreme Risk Problem For Monetary Policies Of The Euro-Candidates Countries, Hubert Gabrisch, Lucjan T. Orlowski

WCBT Working Papers

We argue that monetary policies in euro-candidate countries should also aim at mitigating excessive instability of the key target and instrument variables of monetary policy during turbulent market periods. Our empirical tests show a significant degree of leptokurtosis, thus prevalence of tail-risks, in the conditional volatility series of such variables in the euro-candidate countries. Their central banks will be well-advised to use both standard and unorthodox (discretionary) tools of monetary policy to mitigate such extreme risks while steering their economies out of the crisis and through the euroconvergence process. Such policies provide flexibility that is not embedded in the Taylor-type …