Finance and Financial Management Commons^™

The Impact Of The Security Transaction Taxes On Stock Prices And Stock Liquidity; Evidence From The Nyse, Vedika Agarwal

CMC Senior Theses

Security Transaction taxes have been in place in many countries for many years now. Yet we do not fully know how these taxes effect prices, volumes, bid-ask spreads and volatility and in turn if they are good for the economy or not. This paper is an attempt to understand how security transaction taxes decrease volume of trading, decrease prices of stocks and increase bid-ask spreads. It analyses the effect the STTs implemented by the state and federal government in New York on June 1^st 1905 and December 1^st 1914 respectively, had on the stocks of the New York …

The Impact Of Prior Performance On Leadership Appointment In A Merger Of Equals, David A. Hirsch

CMC Senior Theses

Leadership appointment during mergers has a logical and established precedent when there is a clear target and acquirer. However, in the extraordinary case of Merger Of Equals (MOEs) – where this is relative equal ownership, board representation, earnings contribution etc - this process is much less defined and can often have serious consequences on the merger, both in closing negotiations as well as post-merger performance. Intuition assumes the better performing CEO should and will be appointed. In practice, however, that is often not the case. It is arguable that performance can be defined through objective means (financially & operationally), yet …

The Impact Of Participatory Notes On The Indian Rupee Exchange Rate, Rohan Kothari

CMC Senior Theses

Since 1992, India has grown as a global player in the finance world. In spite of its success, India has not been able to rid itself of potentially harmful practices. One such practice is the issuing of Participatory Notes (PN) to foreign investors, so that they can anonymously purchase securities or derivatives listed on the Indian Stock Exchanges. This instrument came into public view when it accounted for approximately 50% of all foreign portfolio assets in India. Since then, the laws regarding PNs have evolved to become a more transparent version of the old rules. Although PN levels are not …

An Easy Method To Introduce Mirr Into Introductory Finance Classes, Tom Arnold, Terry D. Nixon

Finance Faculty Publications

In this paper, the modified internal rate of return (MIRR) is demonstrated to be a holding period return calculation that is not dependent on knowing a project's internal rate of return (IRR) nor the process for finding the IRR. Further, the MIRR calculation can be directly connected to the calculation of the profitability index (PI) and the net present value (NPV) if project cash flows are discounted using a firm's weighted average cost of capital. This connection to the PI and NPV allows for an intuitively appealing presentation of the MIRR calculation.

Essays On Credit Default Swaps And Debtor-Creditor Relationships, Cihan Uzmanoglu

LSU Doctoral Dissertations

Over the last decade, markets for credit insurance have developed dramatically and credit default swaps (CDS) have become the instrument of choice when it comes to hedging credit risks. The expanded hedging opportunities CDS provide and the allied benefits of better risk-sharing notwithstanding, concerns over the economic role of CDS arise from their ability to engender “empty” creditors – joint holders of the bond and CDS, and the role such creditors play in distress situations. Financially distressed firms often restructure their debt through out-of-court renegotiations with creditors to avoid formal default. In addition to the going concern value of the …

Essays On Institutional Trading Behavior With Conflicts Of Interest And Information Sharing, Hyoseok Hwang

LSU Doctoral Dissertations

This dissertation explores a controversial issue of institutional trading behavior with conflicts of interest and information sharing. Using firms sued for alleged financial misreporting, the first essay examines whether analyst-affiliated institutions reduce the portfolio weights of sued firms prior to their analysts releasing the information through downgrade revisions – trading huddles. Empirical evidence is consistent with this behavior, particularly among the institutions with investment banking operations but without underwriting relationships with sued firms. Institutions with underwriting relationships only reduce portfolio weights significantly when their analysts are the first to provide downgrades during the class period, which is a proxy for …

Forecasting Singapore Economic Growth With Mixed-Frequency Data, A. Tsui, C.Y. Xu, Zhaoyong Zhang

Research outputs 2013

In this paper we intend to forecast the economic growth of Singapore by employing mixed frequency data. This study is motivated by the following observations: macroeconomic variables are the important indicators of the economic performance, but they are normally available at low frequencies, e.g. quarterly for GDP and monthly for inflation. In contrast, the financial variables such as stock returns are available at high frequency, and often the asset prices are forward-looking and believed to contain useful information about future economic developments (Stock and Watson 2003). It is therefore an interesting question to raise whether or not one can use …

The Determinants Of Capital Structure: Evidence From Thai Banks, David E. Allen, Napaporn Nilapornkul, Robert Powell

Research outputs 2013

The aim of this study is to examine the determinants of the capital structure of Thai banks. The data spans a ten year period from 1999 – 2008. The differentiation point of this study is that, whereas most studies on capital structure focus predominantly on internal bank variables, this study, in addition to internal variables includes market-based risk variables. A range of market-based default and value at risk variables were considered which were then narrowed down to improve the model. Fixed effects panel data analysis is employed, with both market and book leverage used as dependent variables. The Thai bank …

Fair Value Of Liabilities: The Financial Economics Perspective, David F. Babbel, Jeremy Gold, Craig B. Merrill

Faculty Publications

In this paper we present the fundamental approaches of financial economics to valuation. Three methods are demonstrated by which financial economists account for risk. We illustrate how these methods relate to one another and how they can be applied in the valuation of risky corporate bonds, guaranteed investment contracts (GICs) with and without interest rate contingencies, and whole life insurance. Next, we discuss how these models treat orthogonal risks, such as the kind often covered by insurance contracts. Demand side and supply side diversification are treated, and liquidity risk is then considered. We conclude with a summary of the benefits …

Revenge Of The Steamroller: Abcp As A Window On Risk Choices, Carlos Arteta, Mark Carey, Ricardo Correa, Jason Kotter

Faculty Publications

We empirically examine financial institutions’ motivations to take systematic bad-tail risk in the form of sponsorship of credit-arbitrage asset-backed commercial paper vehicles. A run on debt issued by such vehicles played a key role in causing and propagating the liquidity crisis that began in the summer of 2007. We find evidence consistent with important roles for both ownermanager agency problems and government-induced distortions, especially government control or ownership of banks.

The Impact Of Securitization On The Expansion Of Subprime Credit, Taylor Nadauld, Shane M. Sherlund

Faculty Publications

This paper investigates the relationship between securitization activity and the extension of subprime credit. The analysis is motivated by two sets of compelling empirical facts. First, the origination of subprime mortgages exploded between the years 2003 and 2005. Second, the securitization of subprime loans increased substantially over the same time period, driven primarily by the five largest independent broker/dealer investment banks. We argue that the relative shift in the securitization activity of investment banks was driven by forces exogenous to factors impacting lending decisions in the primary mortgage market and resulted in lower ZIP code denial rates, higher subprime origination …

An Investigation Into The Volatility And Cointegration Of Emerging European Stock Markets, Anna Golab

Theses: Doctorates and Masters

This dissertation examines the interaction between European Emerging markets including cointegration, volatility, correlation and spillover effects. This study is also concerned with the process of the enlargement of the European Union and how this affects the emerging markets of newcomers. The twelve emerging markets studied are Bulgaria, the Czech Republic, Cyprus, Estonia, Hungry, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia, which are all progressing very rapidly in their reforms and domestic economic stability.

The majority of prior studies on stock market comovements and integration have concentrated on mature developed markets or the advanced emerging markets of the Czech Republic, …

Expert: Reasons For Debt Partly Cultural, Aldemaro Romero Jr.

Publications and Research

No abstract provided.

Insider Trading Restrictions And Top Executive Compensation, David J. Denis, Jin Xu

Purdue CIBER Working Papers

The use of equity incentives is significantly greater in countries with stronger insider trading restrictions, and these higher incentives are associated with higher total pay. These findings are robust to alternative definitions of insider trading restrictions and enforcement, and to panel regressions with country fixed effects. We also find significant increases in top executive pay and the use of equity-based incentives in the period immediately following the initial enforcement of insider trading laws. We conclude that insider trading laws are one channel through which cross-country differences in pay practices can be explained.

The Response Of Commercial Banks To Credit Stimuli, Denise Williams Streeter

Theses and Dissertations in Business Administration

This dissertation calls upon the theory of financial intermediation (Diamond and Dybvig, 1983) and the credit channel theory of monetary policy effectiveness (Bernanke and Gertler, 1995) to show how commercial banks responded to the trillions of dollars of innovations to stimulate the credit markets during the 2008 global financial crisis. Specifically, loan-level data is used to conduct univariate, regression, and event-study analyses to address the research question of, "Did United States- and European Union-based commercial banks respond to credit stimuli with increased commercial lending during the stimulus period of October 1, 2007 through September 30, 2011 when compared to the …

Planning Prompts As A Means Of Increasing Preventive Screening Rates, Katherine L. Milkman, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

In the U.S., 18,800 lives could be saved annually if those advised to obtain colorectal screenings based on national guidelines complied (Zauber et al., 2012). Subtle suggestions embedded in a decision-making environment can change people's choices (Thaler and Sunstein, 2008). Past research has shown that prompting people to form plans about where and when they will complete an intended behavior increases engagement in activities ranging from voting to vaccination (Gollwitzer and Sheeran, 2006; Milkman et al., 2011; Nickerson and Rogers, 2010). When plans are formed, they link intended behaviors with a concrete future moment and course of action, creating cues …

Simplification And Saving, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

The daunting complexity of important financial decisions can lead to procrastination. Weevaluate a low-cost intervention that substantially simplifies the retirement savings planparticipation decision. Individuals received an opportunity to enroll in a retirement savingsplan at a pre-selected contribution rate and asset allocation, allowing them to collapsea multidimensional problem into a binary choice between the status quo and the pre-selected alternative. The intervention increases plan enrollment rates by 10–20 percentagepoints. We find that a similar intervention can be used to increase contribution rates amongemployees who are already participating in a savings plan.

Three Essays On Local Government Debt, Robert Greer

Theses and Dissertations--Public Policy and Administration

The local government tax-exempt debt market is a growing, and complex, sector of public finance. As local governments turn to debt financing the factors that contribute to interest costs of that debt have become important considerations for local government officials and politicians. Governance at the local level involves a network of overlapping governments some of which share a tax base. This system of overlapping governments that share a tax base are subject to externalities that arise from taxation, expenditures, and debt. These externalities are usually analyzed in terms of tax or expenditure reactions, but there are implications for local government …

Legislating Stock Prices, Lauren Cohen, Karl B. Diether, Christopher Malloy

Faculty Publications

We demonstrate that legislation has a simple, yet previously undetected, impact on stock prices. Exploiting the voting record of legislators whose constituents are the affected industries, we show that the votes of these “interested” legislators capture important information seemingly ignored by the market. A long-short portfolio based on these legislators' views earns abnormal returns of over 90 basis points per month following the passage of legislation. Industries that we classify as beneficiaries of legislation experience significantly more positive earnings surprises and positive analyst revisions in the months following passage of the bill, as well as significantly higher future sales and …

Teaching Note On The Treatment Of Noncontrolling Interests In Financial Analysis, Cost Of Capital And Valuation: A Case Study Of Verizon Communications, Bridget Lyons

WCBT Faculty Publications

A noncontrolling interest (NCI) arises when a firm fully consolidates subsidiaries that are not wholly owned by the parent. The existence of a noncontrolling interest complicates financial analysis and valuation. Failure to appropriately consider the NCI may lead to errors in equity valuation and share price since the NCI impacts equity value and implied share price of the parent firm. Return on equity calculations must be carefully constructed as there are several net income and equity values reported. Finally, the NCI can impact the weighted average cost of capital. Verizon Communications was selected as a case study based on the …