Finance and Financial Management Commons^™

Two Essays On Politics In Corporate Finance, Xiaojing Yuan

USF Tampa Graduate Theses and Dissertations

I examine how political geography affects firms' cost of debt. Policy risk, measured by proximity to political power reflected in firms' position in the country's political map, is negatively related to corporate bond ratings and positively related to firms' cost of debt. I find firms' policy risk can be mitigated by engaging in corporate political strategies like making campaign contributions or lobbying. Consistent with the view that such political strategies effectively protect firms against uncertainty about future policies, I find policy risk has less of an impact on the cost of debt of firms that support more powerful and well-connected …

Two Essays On Mergers And Acquisitions, Dongnyoung Kim

USF Tampa Graduate Theses and Dissertations

In the first essay, we examine the link between CEOs political ideology - conservatism - and their firms' investment decisions. We focus on the effect of CEO conservatism on M&A decisions. Our evidence indicates that politically conservative CEOs are less likely to engage in M&A activities. When they do undertake acquisitions, their firms are more likely to use cash as the method of payment, and the target firms are more likely to be public firms and to be from the same industry. Conditional on the merger, CEO conservatism appears to have a significantly positive impact on long-run firm valuation. However, …

Capital Structure Deviation And Speed Of Adjustment, Tarun Mukherjee, Wei Wang

Business Faculty Publications

As a firm deviates from its target leverage, marginal bankruptcy costs change at a faster speed than marginal tax shield. This renders the speed of adjustment (SOA) of capital structure an increasing function of the starting deviation from the target. Adopting a bootstrapping-based estimation, we confirm the existence of such heterogeneity in SOA that is statistically significant and economically nontrivial. Typically, if Firm A is one standard deviation (about 17%) and Firm B is two standard deviations away from their leverage targets, then B’s SOA is 41% greater than that of A, and the half life of B’s leverage deviation …

The Asymmetric Impacts Of Good And Bad News On Opinion Divergence: Evidence From Revisions To The S&P 500 Index, Jin Yu, Haigang Zhou

Business Faculty Publications

Motivated by the ambiguity theory of Epstein and Schneider (2003, 2008), we hypothesize that investors' beliefs on the prospects of firms converge upon the arrival of bad news, but do not converge - or even further diverge - on the arrival of good news. We expect firms with high divergence in opinions to experience lower stock returns around the announcements of bad news but not for good news. Using revisions to the S&P 500 index between 1962 and 2008 as information events, we find overwhelming support for the hypothesis. The results are robust to controlling for alternative hypotheses of price …

The Effect Of Long-Term Capital Gains And Dividend Tax Rate On The Performance Of Market Indexes Based On Market Capitalization, Jason Wheaton

Theses

Through recent political history there is a common theme about taxes that is presented often: That small businesses are affected differently than larger companies. Though in political parlance small business is different than a small cap company, studying the effects of taxes on small cap companies can help discern if taxation does affect companies differently based on size. The study of the literature provides a background of critical elements such as Gross Domestic Product (GDP), interest rates and inflation, as well as factors such as fiscal policy and informational uncertainty that have an effect on stock prices. Through regression analysis …

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 …

Financial Literacy, Financial Education And Economic Outcomes, Justine S. Hastings, Brigitte C. Madrian, William L. Skimmyhorn

Faculty Publications

In this article we review the literature on financial literacy, financial education, and consumer financial outcomes. We consider how financial literacy is measured in the current literature, and examine how well the existing literature addresses whether financial education improves financial literacy or personal financial outcomes. We discuss the extent to which a competitive market provides incentives for firms to educate consumers or offer products that facilitate informed choice. We review the literature on alternative policies to improve financial outcomes, and compare the evidence to evidence on the efficacy and cost of financial education. Finally, we discuss directions for future research.

Reits And Stock Market Cointegration, Jessie E. Felix

Open Access Theses & Dissertations

Real Estate is popular among investors looking for attractive total returns, predictable price movements, and low correlations to the general equity markets. The financial crisis of 2007 led by real estate mortgage defaults led to a universal bear market, and a credit freeze which impacted REITs ability to raise capital. REITs long viewed perception as a distinct asset class was questioned as a result. Research analyzing REITs long run trends find evidence of an existing long run relationship between REITs, and the S&P. This paper employs the same cointegration framework of prior studies using a longer sample period, and favors …

The Aftermarket Performance Of Initial Public Offerings, Chiyachantana N. Chiraphol, Theerawat Pinta, Nareerat Taechapiroontong, Anantaporn Wongkham

Research Collection Lee Kong Chian School Of Business

This paper examines the aftermarket performance of initial public offerings (IPOs) and explores the underpricing of IPOs in an Asian emerging equity market using a comprehensive sample of IPOs. Our findings suggest that there exist a significant underpricing. Specifically, new issues have been offered at an average market-adjusted discount of about 20%. The magnitude of IPO underpricing is significantly larger for large firms, older firms and firms with small offering size.

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 …

2012 Q4 Market Pulse Report, John K. Paglia

Pepperdine Market Pulse Report

The quarterly IBBA and M&A Source Market Pulse Survey was created to gain an accurate understanding of the market conditions for businesses being sold in Main Street (values $0-$2MM) and the lower middle market (values $2MM -$50MM). The national survey was conducted with the intent of providing a valuable resource to business owners and their advisors. The IBBA and M&A Source present the Market Pulse Survey with the support of the Pepperdine Private Capital Markets Project and the Graziado School of Business and Management at Pepperdine University.

Critique Of Microcredit As A Development Model, Grace Levin

Pursuit - The Journal of Undergraduate Research at The University of Tennessee

The field of microcredit (otherwise known as microfinance, microlending, or microcapital) has expanded rapidly since the 1980s as an economic means of lifting people out of poverty. Generally, microcredit has been accepted as an effective method for empowering both individuals and communities. In recent years, however, critics have brought to light some of the problems associated with microlending, such as the complex socioeconomic factors that can cause loan programs to fail. These problems stem from the basic tenet of microfinance: the need for lending programs to be managed locally in order to understand the needs of a community and assess …

Financial Services Innovation: Local Strategy, Management, And Change – A Field Investigation, Ann-Catherine Nave

Pursuit - The Journal of Undergraduate Research at The University of Tennessee

This study examines the innovation sources and processes of regional financial services firms through inductive field research. Innovation in these firms, and presumably other financial services firms and other smaller organizations, originate primarily out of three sources, the drive for efficiency, the external environment, and strategic, ambidextrous management. Successfully innovative firms balance the short-term need for efficiency improvements with the long-term desire to grow primarily through visionary, yet adaptive, leadership.

Two Essays On Investment, Yao Zheng

LSU New Orleans Theses and Dissertations

This dissertation consists of two essays: one looks at the time-varying relationship between earnings and price momentum, and the other looks at how liquidity and transparency affect the pricing differential between Chinese A-and Hong Kong H-share.

The first essay presented in Chapter I investigates the time varying relationship between earnings momentum and price momentum. Using a Markov-switching framework, allowing for variation between high volatility and low volatility states, I find that price momentum is significantly more influenced by earnings momentum in the high volatility state. Further for price momentum I find that loser firms display a higher degree of differential …

Using Pairs Of Criteria To Obtain Superior Stock Portfolio Performance, Abdullah Aai Yousuf

Explorations – The Journal of Undergraduate Research, Scholarship and Creativity at Wright State

This paper discusses the use of pair of financial criteria to obtain the superior stock portfolio performance. Several Portfolios are created with different number of securities over different time horizons, using pair of financial criteria and Price momentum strategy. Our results give support for the use of pairs of criteria in selecting and managing equity portfolio. The synergy effect of combining a financial ratio with the price momentum obtains both statistical and economical superior performance results; especially the pair of Earnings to Price ratio along with Price Momentum strategy with smaller of number of securities in short run.

Low Volatility Etfs, Steven D. Dolvin

All Chapters

A recent trend is the development of low volatility funds, including both ETFs and mutual. These funds invest in a subset of a specified index, selecting only those stocks with low price volatility (which may be identified by a low beta). There is not sufficient history to gauge the performance of such funds, but two issues are worth noting. First, given the impact of volatility on compounded returns (i.e., geometric averages are lower than arithmetic averages), low volatility funds should have an advantage, particularly in otherwise volatile markets. Second, value funds may outperform over long periods (albeit not every period), …

Do Financial Advisors Have Consumers' Best Interests? Not Always, But Trust Is Key, Say Experts, Singapore Management University

Perspectives@SMU

In a world of volatile markets and complex financial products, getting financial advice from professional financial planners and advisers might seem like a good idea for those for those trying to meet their financial goals. However, finding good, impartial and suitable advice might be akin to finding a needle in the proverbial haystack.

Special Purpose Acquisition Companies

Fordham Business Student Research Journal

Special purpose acquisition companies (SPACs) are blank-check companies that raise funds from investors through a public offering of shares and warrants (known as a Unit IPO) for the purpose of buying a private firm. SPACs have no assets or business plan and their only intent is to acquire an operational business. Because of limited data (SPACs have only gained popularity in the past decade), there has been very little research into the nature of firms that are targeted for SPAC acquisitions, with most research focusing on short-term performance statistics. A SPAC transaction effectively takes an existing private business and makes …

Do Shareholders Penalize Bank Boards And Management For The Financial Crisis?

Fordham Business Student Research Journal

The 2007-2008 financial crisis was a pervasive shock that profoundly impacted the financial services industry. Often described as the worst economic crisis since the Great Depression, this event provides a unique opportunity to examine the consequences experienced by members of boards of directors and top management at bank holding companies for what shareholders may perceive as failures in oversight and excessive risk-taking. This study examines whether shareholders penalized top management at banks and provides some new evidence of the crisis’s impact on management careers. Using the 36 largest American bank holding corporations by assets as a sample, we examine director …

Underwriting Syndicates In Bric Countries: Determinants Of Syndicate Size And Member Selection

Fordham Business Student Research Journal

The process of startup firms raising capital through equity markets by issuing shares to the public is a strong sign of financial growth and innovation. Going public requires the issuing firm to share information with potential investors and requires financial institutions to underwrite the effort, typically through a syndicate. The underwriting syndicate is a coalition of competing banks that serve as intermediaries between the firm and the investors. In emerging nations, this process is compounded by the differences in the maturity of the financial markets and the economic environment. The growth and significance of capital markets in the BRIC (Brazil, …