Finance and Financial Management Commons^™

Executive Option Mix And Firm Litigation Risk, Andrew Cohen

CMC Senior Theses

Compensating executives with stock options creates incentives for executives and aligns their goals with shareholders. When examining specific components of equity-based compensation, stock options have a larger incentive effect on executives compared to stock awards as options are priced as a function of stock volatility. Since the option incentive effect is more profound than the stock incentive effect, executives may take on more risk. The relationship between firm risk and litigation can be demonstrated by the pricing of directors’ and officers’ liability insurance, which protects them from the costs of litigation. The purpose of this study is to examine the …

The Impact Of Covid-19 Pandemic On Islamic Health Insurance Market Returns: Empirical Evidence From Saudi Arabia, Mohamed Zakaria Fodol, Hakan Aslan

The Indonesian Capital Market Review

This study aims to identify the impact of COVID-19 on the Cooperative Health Insurance (CHI) Market in Saudi Arabia by applying the Event Study Methodology. The announcement of the first positive case of COVID-19 in Saudi Arabia, which the Ministry of Health announced on March 2, 2020, is the health event identified in this study. The daily price of 24 cooperative health insurance companies listed on the Saudi Stock Market (Tadawul) with the market index (TASI) for the same period (June 05, 2018 - March 30, 2020) was collected. The abnormal returns are calculated by using Capital Asset Pricing Model …

Financial Innovation And Restriction Hypothesis In The Banking Industry: Evidence From Asean- 5, Yosman Bustaman, Viverita Viverita, Margaretha Tp Lingga, Antonius P. Siahaan

The Indonesian Capital Market Review

This study investigates the financial innovation impact on bank market power in ASEAN banking from 2008 to 2018. It uses income diversification as a representative of financial innovation. The im- pact of countries’ development of financial innovation on market power is measured by the number of ATM, internet, and cellular phone users. The data panel regression model reveals that diversified banks may enjoy higher market power. This result rejects the banking restriction activity hypothesis, which states that a bank that diversifies its income stream results in increased competition. A higher number of available ATMs and more internet users lowers the …

Assessing The Impact Of Financial Obstacles On Manufacturing Firm's Capacity Utilization: Bayesian Approach, Arab Dahir Hassan, Razim Ozcan

The Indonesian Capital Market Review

This study aims to investigate the relationship between financial obstacles and the capacity utilization of manufacturing firms. This study departs from previous studies in the literature by employing Bayesian linear regression analysis. The results demonstrate that financial constraints have a considerable negative effect on the capacity utilization of manufacturing enterprises, but access to credit lines has a positive effect. The sample consists of 1,494 private manufacturing firms in 31 Europe & Central Asian countries. Financial obstacles were perceived as the major impediment to business operations by 65% of the enterprises in the survey. Furthermore, 52% of enterprises in the sample …

Momentum Crashes And The 52-Week High, Byoung-Hyun Jeon, Suk-Joon Byun

Finance Faculty Research and Publications

Momentum strategies suffer from occasional large drawdowns referred to as momentum crashes when the market rebounds. We find that a surge of investor speculation toward stocks far from their 52-week highs can partially explain the momentum crashes. If a momentum strategy is revised to be neutral on a 52-week high effect, momentum crashes are significantly attenuated and the revised strategy does not exhibit procyclical returns. Furthermore, the revised strategy generates a higher Sharpe ratio in different sub-periods and international stock markets.

Finance Against Law: The Case Of China, Shitong Qiao

Faculty Scholarship

Can there be a highly developed financial market without legal protection for investors and creditors? The influential law and finance literature is built on the assumption that legal protection is essential to the development of an impersonal financial market. This Article investigates how two financial markets of trillions of dollars have developed extralegally in the past two decades despite the risk of regulatory enforcement and contract defaults. Specifically, I examine (1) how Chinese internet companies from Sina to Alibaba have designed contracts to circumvent the Chinese government’s ban on foreign capital in its internet industry and (2) how Chinese entities …

How Do Sustainability Stakeholders Seize Climate Risk Premia In The Private Cleantech Sector, Lingyu Li, Xianrong Zheng

Information Technology & Decision Sciences Faculty Publications

This paper explores the strategies and practices of capturing climate risk premia for venture capital (VC) fund managers and entrepreneurs in the private cleantech sector. It also examines the impact of the feed-in tariffs (FITs) policy on the management of cleantech investments. It is shown that a longer investment period, less investment capital in cleantech investment management strategies, and optimistic climate risk management practices will help investors to better capture climate risk premia. In fact, the FITs policy will give rise to VC fund managers and entrepreneurs having a positive view regarding the prospects of the cleantech sector, motivating them …

Relative Corporate Social Performance And Cost Of Equity Capital: International Evidence, Benjamin Lynch, Martha O'Hagan-Luff

Articles

This research examines the relationship between firms' corporate social performance (CSP) and the implied cost of equity capital using a sample of 25,938 firm-year observation from 49 countries during the period from 2002 to 2021. Using estimates of the firms' ex ante cost of equity capital, we examine its relationship with industry-relative measures of the firms' CSP, its environmental and social pillars and sub-pillars. We find that increased overall CSP reduces a firm's cost of equity capital up until a point, beyond which the marginal benefits of further CSP investment decrease. We find that the social pillar is the main …

Factor Substitution Possibilities, Labor Share Dynamics, And Inequality In An Age Of Intangibles, Adnan Velic

Articles

We examine the economy-wide degree of substitutability between intangible capital and other factor inputs in production using a large sample of advanced countries. In this context, we turn to studying the implications of intangible and tangible capital growth for labor income share dynamics. Compared to tangible capital, we find that intangible capital more strongly complements skilled labor. The analysis further indicates relative fungibility between tangible capital and a composite of intangible capital and skilled labor, in line with the rising prominence of knowledge-intensive tasks and AI-driven online platforms. The intrinsic nature of intangibles and their asymmetric effects across skilled and …

The Value Of Economic Freedom In Cross-Border Mergers, Vivek Pandey, Tanja Steigner, Ninon K. Sutton

Accounting, Finance, Information Systems, and Business-Law Faculty Publications and Presentations

This study examines the impact of economic freedom in mergers and acquisitions (M&A) using a global sample of 6159 takeovers involving acquirers from 56 different countries and foreign targets from 130 countries. The results reveal that acquirers with an economic freedom advantage over their targets experience higher short-run and long-run abnormal returns after controlling for other important country and merger characteristics. At the same time, the level of economic freedom in the target country relative to the bidder country positively impacts target shareholders’ announcement wealth effects and merger premiums. The results are robust to various control variables, industry, year and …

The Impact Of More Able Managers On Corporate Trade Credit, Hui Liang James, Thanh Ngo, Hongxia Wang

Accounting, Finance, Information Systems, and Business-Law Faculty Publications and Presentations

We investigate how high-ability managers affect trade credit policies of U.S. publicly traded companies from 2003 to 2016. Consistent with the prediction of an “Imbalance of power” in the supply chain, we find that firms with more able managers implement more favorable trade credit policies with both upstream and downstream business partners (i.e., fewer trade credit days in receivables, more trade credit days in payables, and lower net trade credit days), indicating that managerial ability is an important determinant of corporate trade credit. Our cross-sectional analyses provide further support for the bargaining power view of trade credit. The results are …

Covenant Violation And Operational Efficiency, Hui Liang James, Hongxia Wang, Zhimin Wang

Accounting, Finance, Information Systems, and Business-Law Faculty Publications and Presentations

We examine the impact of covenant violation on corporate operational efficiency. Using an aggregate measure of operational efficiency developed by Demerjian et al. (Management Science, 58, 2012, 1229–1248), we provide strong empirical evidence that covenant violations hinder firms from achieving operational efficiency. Our finding is robust to alternative definitions of operational efficiency and various model specifications to address potential endogeneity issues. Further analyses show that lower operational efficiency is attributable to covenant-violating firms' under-investments in capital and labour. In addition, the negative effect of covenant violation on operational efficiency is not universally the same, and is less evident in violating …

Money Creation And Bank Clearing, Nadav Orian Peer

Fordham Journal of Corporate & Financial Law

Like many other countries, the U.S. money supply consists primarily of deposits created by private commercial banks. How we understand bank money creation matters enormously. We are currently witnessing a debate between two competing understandings. On the one hand, a long-standing conventional view argues that bank money creation originates in individual market transactions. Based on this understanding, the conventional view narrowly limits the scope of banking regulation to market failure correction. On the other hand, authors in a new legal literature emphasize the public aspects of bank money creation, characterizing it as a “public franchise,” a “public-private partnership,” and part …

Exploring Financial Data Protection And Civil Liberties In An Evolved Digital Age, Amanda Lindner

Fordham Journal of Corporate & Financial Law

There is no comprehensive financial privacy law that can protect consumers from a company’s collection sharing and selling of consumer data. The most recent federal financial privacy law, the Gramm-Leach-Bliley Act (“GLBA”), was enacted by Congress over 20 years ago. Vast technological and financial changes have occurred since 1999, and financial privacy law is due for an upgrade.

As a result, loopholes exist where companies can share financial data without being subject to laws or regulations. Additionally, federal financial privacy related laws provide little to no recourse for consumers to self-remediate with litigation, also known as a private right of …

Without Reservation: Ensuring Uniform Treatment In Bankruptcy While Keeping In Mind The Interests Of Native American Individuals And Tribes, Connor D. Hicks

Fordham Journal of Corporate & Financial Law

The Bankruptcy Code (“Code”) exists as a mechanism for good faith debtors to discharge debts and seek a “fresh start” in life and finance. 11 U.S.C. § 106(a) ensures that not only are all debtors treated uniformly, but that all creditors, including governmental creditors which may otherwise enjoy immunity from suit, are equally subject to the jurisdiction of Bankruptcy courts and bound to the provisions of the Code.

However, a recent circuit split has demonstrated one niche yet significant instance in which a debtor may not receive the same treatment as their counterparts. While § 106 contains an express waiver …

From Tether To Terra: The Current Stablecoin Ecosystem And The Failure Of Regulators, Mary E. Burke

Fordham Journal of Corporate & Financial Law

The Tether controversy and Terra crash have placed stablecoins in the regulatory spotlight. Stablecoins are often portrayed as posing systemic risks to financial markets, with some pundits labelling them “the villain of the finance world.” Global regulatory bodies, namely the International Monetary Fund (IMF) and the Bank of International Settlement (BIS), and political leaders, including the Biden Administration, have all called for stablecoin regulation. These officials allege that stablecoins’ structure, combined with their exponential growth, pose a unique risk to global markets. Before the May 2022 Terra crash, government reports superficially treated stablecoins by exclusively focusing on asset-backed coins. Post …

Outsourcing Interruptions And The Emergence Of Reshoring, Enrico Castillo Santos

Walden Dissertations and Doctoral Studies

Over the last 25 years, offshore outsourcing has been accepted as a standard business practice, primarily for the cost advantage of operating in lower costs offshore locations. Lately, the trend is reversing; business leaders are moving their manufacturing operations back home despite the near-term negative impact of the reversal decision. This qualitative multiple case study aimed to understand the factors that influenced manufacturing business leaders of U.S.-based companies to reverse previously made offshoring decisions and reshored at a high reversal rate. In this study, I applied the conceptual framework proposed by Fratocchi et al. (2016). Data were collected from five …

Comparing The Performance Of Initial Coin Offerings To Crowdfunded Equity Ventures, Elijah Joseph Turan

Walden Dissertations and Doctoral Studies

Uncertainty in markets increases the likelihood of market failure due to volatility and suboptimal functioning. While initial coin offerings (ICOs) and crowdfunded equity (CFE) offerings may improve functioning in growing markets, there is a lack of knowledge and understanding pertaining to the relative efficiency and behavior of ICO markets compared to CFE markets, potentially perpetuating and thwarting the various communities they are intended to serve. The purpose of this correlational study was to compare a group of ICOs with a group of CFE offerings to identify predictive factors of funding outcomes related to both capital offering types. Efficient market hypothesis …

Dollars That Devalue Are Unconstitutional, Christopher Guzelian

St. Mary's Law Journal

This Article demonstrates the United States dollar has been unconstitutional since at least the Civil War. Congresses and central bankers often weaken its value. In a previous article, the Author demonstrated that the largely valueless dollar causes human poverty and environmental damage. If Congress restores the dollar’s constitutionality by returning to a silver dollar coin standard of adequate value (at least 371.25 grains of fine silver per dollar), human economies and the environment will become more sustainable.

The Impact Of Private Equity Investment On The Market Performance Of Listed Companies On The A-Share Market In China, Mengyu Zhan, Sorasart Sukcharoensin

DLSU Business & Economics Review

This study aims to analyze all the Chinese Initial Public Offerings (IPOs) during 2010–2014 and follow their performance for five years. The study particularly tests the competing hypotheses on the role of Chinese private equity. The sample includes 916 firms that operate continuously for five years after IPOs to provide additional evidence on long-term performance. The results using the BHARs method indicate that private equity-backed IPOs tend to have significantly higher initial returns than non-PE-backed ones during three years of listing, supporting the screening and monitoring effect hypothesis in China’s capital market. After three years, the market performance of PE-backed …