Finance and Financial Management Commons^™

Soft Strategic Information And Ipo Underpricing, James C. Brau, James Cicon, Grant Mcqueen

Faculty Publications

Using content analysis we measure the impact of soft information, derived from words in IPO registration documents, on IPO pricing efficiency. First, using 2,298 U.S. IPOs from 1996 to 2008, we find that an IPO document’s strategic tone correlates positively with the stock’s first-day return; more frequent usage of positive and/or less frequent usage of negative strategic words lead to more IPO underpricing. Second, we find that an IPO document’s strategic tone is negatively correlated with the stock’s long-run return. Together, these findings imply that investors initially misprice soft information in registration statements, which mispricing is eventually corrected. Additionally, we …

Inefficient Labor Or Inefficient Capital? Corporate Diversification And Productivity Around The World, Todd Mitton

Faculty Publications

I study the relation between corporate diversification and labor productivity in a sample of over 500,000 firms from 46 countries. Across the entire sample, greater diversification is associated with significantly lower labor productivity. The negative relation between diversification and labor productivity is not stronger in countries with more burdensome employment regulation, but it is significantly stronger in countries with better financial development. In addition, the negative relation is stronger in industries with high capital/labor ratios. Overall, the results suggest that the lower productivity in diversified firms is due more to the misallocation of capital than to the inefficient use of …

Risk Allocation Across The Enterprise: Evidence From The Insurance Industry, Michael K. Mcshane, Tao Zhang, Larry A. Cox

Finance Faculty Publications

Financial researchers initially regarded hedging activities as a means to reduce total firm risk, which often is defined in terms of cash flow volatility. More recently, researchers have focused on the strategic allocation of risk. Direct tests of risk allocation have been problematic, however, because hedging data are rarely available and, when available, are specific only to a single operation of the firm, such as bank lending. In this study, we exploit unique data from the insurance industry that allows us to observe hedging proxies for both investment and insurance underwriting risks and test the risk allocation hypothesis developed in …

Creditor Rights And R&D Expenditures, Bruce Seifert, Halit Gonenc

Finance Faculty Publications

Manuscript Type: Empirical

Research Question?Issue: This study examines the impact of creditor rights on R&D intensity (R&D/total assets). We argue that managers in countries with strong creditor rights have more incentives to reduce cash flow risk and therefore limit expenditures on R&D more than managers located in countries with weak creditor rights.

Research Findings/Insights: Using a sample of over 21,000 firms from 41 countries, our research is one of the first to document that strong creditor rights are indeed associated with reduced R&D intensity. This negative relationship is observed in market‐based countries, but not in bank‐based countries. Moreover, the results …

Club Good Influence On Residential Transaction Prices, J. Andrew Hansz, Darren K. Hayunga

Finance Faculty Publications

We examine residential real estate transactions in a market where an additional property right to a club good may have an influence on prices. We find that for single-family property, the market capitalizes approximately 50% of the full value of the extra property right. For condominiums, the amount reduces to approximately 25%. While these amounts are positive, they clearly are significantly lower than full value.

Risk Allocation Across The Enterprise: Evidence From The Insurance Industry, Michael K. Mcshane, Tao Zhang, Larry A. Cox

Finance Faculty Publications

Financial researchers initially regarded hedging activities as a means to reduce total firm risk, which often is defined in terms of cash flow volatility. More recently, researchers have focused on the strategic allocation of risk. Direct tests of risk allocation have been problematic, however, because hedging data are rarely available and, when available, are specific only to a single operation of the firm, such as bank lending. In this study, we exploit unique data from the insurance industry that allows us to observe hedging proxies for both investment and insurance underwriting risks and test the risk allocation hypothesis developed in …

The Impact Of The Anti-Predatory Lending Laws On Mortgage Volume, Hyun Soo Choi

Research Collection Lee Kong Chian School Of Business

In this paper, I test the hypothesis that anti-predatory lending laws inhibited the volume of mortgage lending during the housing-bubble period. I use cross-state variation in the strictness of these laws and their application only to mortgage refinancing as opposed to home purchases to develop a difference-in-difference estimate of the impact of these laws on mortgage volume. Consistent with my hypothesis, I find that states with stricter laws had lower mortgage refinancing volume but exhibited no difference in home purchase mortgage volume. I also test whether by restricting mortgage refinancing, these laws impacted household expenditures and find that the laws …

What Are Analysts Really Good At?, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi. Zach

Research Collection Lee Kong Chian School Of Business

Sell-side analysts employ different benchmarks when defining their stock recommendations. Forexample, a ‘buy’ for some brokers means the stock is expected to outperform its peers in the same sector(“industry benchmarkers”), while for other brokers it means the stock is expected to outperform themarket (“market benchmarkers”), or just some absolute return (“total benchmarkers”). We use thesebenchmarks to analyze the role of stock picking, industry picking and market timing in contributing to theperformance of stock recommendations. We are able to do so given that different benchmarks suggest theuse of different sets of abilities. Analysis of the relation between analysts’ recommendations and theirlong-term …

The Effect Of Mortgage Liberalization On Housing Patterns In Tampa Bay, Jason Richardson

USF Tampa Graduate Theses and Dissertations

This study seeks to determine whether the process of mortgage finance liberalization, manifested in concurrent activities of securitization, deregulation, and neo-liberal policy, have resulted in changes to the tenure of residents in neighborhoods in Tampa Bay. It makes use of existing literature on gentrification and mortgage finance and compares those findings with three sample neighborhoods in and around the city of Tampa. To do so the thesis employs data collected from lenders pursuant to the Home Mortgage Disclosure Act, court records of sales and mortgages filed with the Clerk of the Circuit Court of Hillsborough County, and interviews with stakeholders …

Two Essays On Corporate Restructuring, Dung Anh Pham

USF Tampa Graduate Theses and Dissertations

In the first essay titled "Divestitures and Acquisition Probability", I examine the relationship between a firm's divestiture activities and the likelihood that the firm will become an acquisition target. Using a logit model comparing a sample of target firms matched with a sample of non-target firms from 1986 to 2010, we find that a firm is 27 percent more likely to be acquired within three years of a divestiture activity than if there was no previous divestiture, and the effect is stronger for firms with fewer numbers of segments. Our finding is robust to modifications of control variables, to managerial …

Two Essays On Corporate Governance, Yuwei Wang

USF Tampa Graduate Theses and Dissertations

This dissertation includes two related chapters that investigate corporate governance. In the first chapter, we examine the effectiveness of board monitoring on CEOs. It is widely believed that outsider boards are better monitors. In fact, regulations now require that the board of directors of publicly traded firms be composed of a majority of independent directors (or outsiders). However, this paper documents that an insider-dominated board can monitor the CEO just as well as an outsider board can when the firm's CEO is hired from outside. The results suggest that what matters is not so much as the structure of the …

Small-Firm Uniqueness And Signaling Theory, James C. Brau, J. Troy Carpenter

Faculty Publications

The purpose of this paper is two-fold. First, we develop a theory of small firm uniqueness. Instead of using an exogenous definition of firm size typical of the extant literature, we allow firms

Did Securitization Affect The Cost Of Corporate Debt?, Taylor Nadauld, Michael S. Weisbach

Faculty Publications

This paper investigates whether the securitization of corporate bank loan facilities had an impact on the price of corporate debt. Our results suggest that loan facilities that are subsequently securitized are associated with a 17 basis point lower spread than that of facilities that are not subsequently securitized. We consider facility characteristics that are associated with the likelihood of securitization and estimate the extent to which these characteristics are related to spreads. We document that Term Loan B facilities, facilities of B-rated firms, and facilities originated by banks that originate CLOs are securitized more frequently than other facilities. Spreads on …

Subprime Foreclosures And The 2005 Bankruptcy Reform, Donald P. Morgan, Benjamin Iverson, Matthew Botsch

Faculty Publications

After the bankruptcy abuse reform (BAR) took effect in October 2005, foreclosures on subprime mortgages surged nationwide.

Prior to BAR, overly indebted borrowers could file bankruptcy to free up income to pay their mortgage by discharging unsecured debts; BAR eliminated that option for better-off filers through a means test and other requirements, making it more difficult to save one’s home by filing bankruptcy.

A study of the reform suggests that BAR was associated with more subprime foreclosures; BAR’s effects were greater in states with high bankruptcy exemptions, as theory predicts.

For a state with an average home equity exemption, the …

Frog In The Pan: Continuous Information And Momentum, Zhi Da, G. Gurun, Mitchell Craig Warachka

Research Collection Lee Kong Chian School Of Business

We develop and test a frog-in-the-pan hypothesis that predicts investors are less attentive to information arriving continuously in small amounts than to information with the same cumulative stock price implications arriving in large amounts at discrete timepoints. Intuitively, we hypothesize that a series of gradual frequent changes attracts less attention than infrequent dramatic changes. Consistent with our frog-in-the-pan hypothesis, we find strong evidence that continuous information induces stronger and more persistent return continuation. Over a six-month holding period, momentum decreases monotonically from 8.86% for stocks with continuous information during their formation period to 2.91% for stocks with discrete information. Higher …

An Institutional Perspective And The Role Of The State For Chinese Ofdi, Bing Ren, Hao Liang, Ying Zheng

Research Collection Lee Kong Chian School Of Business

Napoleon called China a ‘sleeping dragon’, but recent economic developments as China enters the twenty-first century show that the dragon is awakening. China has maintained strong economic growth since 1979 and sustained a GDP increase of more than 9 percent over the years. The total volume of economic output increased from 2.8 percent in 1970 to 7.23 percent in 2008, ranking China as the third largest economy in the world (United Nation Statistics Division Statistical Databases). China launched its ‘Go Global’ policy in 1999 to encourage highperforming Chinese firms to invest abroad and upgrade their global competence. Since then, outward …

Size And Return: A New Perspective, Fangjian Fu, Wei Yang

Research Collection Lee Kong Chian School Of Business

We document robust empirical evidence that, after controlling for idiosyncratic volatility, large stocks earn significantly higher returns than small stocks. Our empirical results indicate that idiosyncratic volatility is positively related to return, but negatively related to size. Hence, failure to control for idiosyncratic volatility generates a downward omitted variable bias and leads to the widely documented negative relation between size and return. We explain the two contrasting size-return relations, with and without the control for idiosyncratic volatility, in a parsimonious equilibrium model that incorporates three empirical regularities: some individual investors are under-diversified; small stocks have higher idiosyncratic volatilities than large …

Financial Reforms And Corporate Finance In Emerging Markets: An Analysis Of Dividend Policy Among Public Listed Firms In Pakistan, Mohammed Nishat, Wali Ullah

Business Review

This paper analyzes the dividend behavior of 535 Pakistani listed companies during 1988 to 2005 using the Probit regression model. The findings validate the theoretical prediction for positive and significant impact of last year dividend on the current year dividend decision. More profitable and liquid firms have a higher probability to declare the dividends. Furthermore, firm size, ownership, equity and tax are positively related to the dividend declaration decision. The firms' dividend behavior differs significantly across Industries. The secondary market development has a significant effect on dividend decision and financial liberalization has been associated with shift of firms from debt …

Individual Retirement Savings Behaviour : Evidence From Malaysia, Nurasyikin Jamaludin

Theses: Doctorates and Masters

This thesis investigates factors that influence individuals‟ investment choice decisions within the context of retirement savings in Malaysia. The focus is on individuals‟ likelihood of investing part of their retirement savings in approved unit trusts (also known as mutual funds). In addition, individuals‟ choice of fund and mutual fund selection criteria are also explored. This thesis utilised questionnaire-based surveys to solicit responses from members of the Employees Provident Fund (EPF), as well as from unit trust consultants. Data collected from 440 EPF members and 561 unit trust consultants were analysed using statistical procedures of SPSS version 18.0 (also known as …

Dispersed Ownership: The Theories, The Evidence, And The Enduring Tension Between "Lumpers" And "Splitters", John C. Coffee Jr.

Faculty Scholarship

This article argues that dispersed ownership resulted less from inexorable forces and more from private ordering. Neither legal nor political conditions mandated or prevented the appearance of dispersed ownership. Rather, entrepreneurs, investment bankers, and investors — all seeking to maximize value — sometimes saw reasons why selling control into the public market would maximize value for them. But when and why? That is the article's focus. It argues that law played less of a role than specialized intermediaries — investment banks, securities exchanges, and other agents — who found it to be in their self-interest to foster dispersed ownership and …