Business Commons^™

Agco Corporation Valuation, Sean Michael Miller

Undergraduate Honors Capstone Projects

This paper will discuss the excellent growth potential that AGCO Corporation faces and the reason that this company's stock is rated as a hold position. AGCO has seen tremendous progress and is in an industry that shows that a growing world population will continue to need food and more efficient ways to create food. However, based on sensitivities of assumptions in the models presented herein and on a current share price that is already close to my assumed fair value I do not issue a buy recommendation.

Earnings Response Coefficients Of Oecd Banks: Tests Extended To Include Bank Risk Factors, Mohamed Ariff, Cheng Fan Fah, Soh Wei Ni

Mohamed Ariff

We investigate two issues: Do share prices of banks in European markets respond to unexpected accounting earnings disclosures? Are share prices as well as unexpected earnings changes correlated with bank-relevant risk factors? Results reveal that bank share prices respond to unexpected earnings changes at the time of accounting reports in the same manner as the shares of the more widely-researched non-bank firms. Apart from finding significant earnings response coefficients in eight countries, we find that credit risk, price risk, exchange rate risk, and solvency risk are significantly correlated with share price changes. Third, three bank risk factors are significantly correlated …

An Epidemiological Approach To Opinion And Price-Volume Dynamics, Dong Hong, Harrison G. Hong, Andrei Ungureanu

Research Collection Lee Kong Chian School Of Business

We develop a simple and tractable model of opinions and price-volume dynamics based on a word-of-mouth communication process widely used in epidemiology. Risk-averse investors have different opinions depending on whether they heard the news from a friend. Opinions initially diverge and then converge over time as news spreads, which leads to price adjustment and trading volume. News released to many leads to an expected difusion rate (the change in the fraction of investors with the news) that declines with time. But news initially released to few leads to an expected diffusion rate that initially increases in time and only then …

Competition In Hong Kong’S Banking Industry, Lai Yee Chu, Yue Cui, Nan Ye, Yuelin Yan

Lingnan Journal of Banking, Finance and Economics

This paper tests the competition structure of Hong Kong’s banking industry using the Panzar-Rosse approach and a panel dataset of the largest 20 banks in Hong Kong from 1998 to 2011. The estimation results showed that the competitive pressures were equal across time and across the different sizes of the banks in Hong Kong’s banking industry. Competitive pressures may heighten in the near future as banks will seek to gain competitive edge and they can do so through mergers and acquisitions. Regulations are also slowly being relaxed after the financial crisis in order to boost the economy and more advances …

Assess The Crisis Management Effort Following The Outbreak Of The Subprime Crisis, Yuchen Luo

Lingnan Journal of Banking, Finance and Economics

In this paper, I employ a linear regression model to examine the effectiveness of four microeconomic variables, namely government debt, GDP growth rate, household consumption growth rate and government spending growth rate, in stimulating economic growth. In order to test the effectiveness of expansionary fiscal policy in different macro-environments, countries were first partitioned into low and high government debt categories. In addition, raw dataset was partitioned into two time periods, respectively, representing normal macroeconomic years and recession years. My results suggest that countercyclical government spending has been an effective stimulation tool but its effect was more significant in countries of …

Can The Euro Rival The United States Dollar And Become The World Currency?, Kar Wai Man, Feissal Thomas Germais Mombo Paraga Apengue, Weixin Zhang, Yiqing Tu, Yuan Yuan

Lingnan Journal of Banking, Finance and Economics

Due to the outstanding performance of the Euro since its advent, the public may wonder whether the Euro would, one day, replace the US dollar (USD) which has all along been a force to be reckoned with all around the world. By tracing the chain of contributions the USD (the United States of America) and the Euro (European Union) have made to the world economy in the past and at present, we hope to arrive at some conclusions. However, the paper will give primacy to predicting the future trends for them separately.

Democracy And Economic Growth: A Perspective Of Cooperation, Menghan Yang, Li Zhang

Lingnan Journal of Banking, Finance and Economics

Does democracy cause higher economic growth? We build a model taking culture and interpersonal cooperation into account and find that democracy increases economic productivity through giving people more equal rights, which allows people to build a larger interpersonal network so that they can reduce investment risk and employ high-productivity (high-risk) methods in production.

Does Okun’S Law Still Hold Today?, Michael Jeffrey White, Lai Yee Chu

Lingnan Journal of Banking, Finance and Economics

Arthur Okun claimed that when a country’s unemployment rate fell, the GDP expanded. This paper investigates the claim of Arthur Okun and the effect of unemployment rates and GDP of a country on each other. Data from three countries, namely, USA, Japan, and France, were tested to see if there was a causal link between the two variables. It was found that the proposed law of Arthur Okun did not hold. In the USA, there was a two way causality link but different directions of effect. France and Japan did not have a causal link between the two variables.

Impact Of Change In Exchange Rate On Foreign Direct Investment: Evidence From China, Weifeng Jin, Qing Zang

Lingnan Journal of Banking, Finance and Economics

Based on the monthly data of foreign direct investment (FDI) in China and the index of real effective exchange rate (REER) of RMB during Jan 1997 to Sep 2012, we develop a statistical model in this paper to test the impact of changes in exchange rate in the host country on FDI, with reference to international and domestic research. According to the results of the empirical test, the appreciation of RMB promotes FDI after the reforms in the exchange rate regime in 2005 and this phenomenon is a result from the change in the type of FDI into China in …

Issue Brief: Auditing Your Town's Development Code For Barriers To Sustainable Water Management, New England Environmental Finance Center

Sustainable Communities Capacity Building

This issue brief is intended for town officials who want to understand how development regulations in their community affect local water resources. Municipal development codes – the set of regulations that control the built environment – can have a great influence on the availability of clean and healthy water for drinking, recreation, and commercial uses. This in turn affects the community’s social, environmental, and economic vitality.

Comprehensive plans, zoning codes, and building standards are just a few examples of regulations that intentionally or unintentionally regulate the way water is transported, collected and absorbed. Regulations that produce dispersed development or large …

Issue Brief: Saving By Mitigating, University Of Louisville, New England Environmental Finance Center

Sustainable Communities Capacity Building

Natural disasters can cause loss of life, inflict damage to buildings and infrastructure, and have devastating consequences for a community’s economic, social, and environmental well-being. Hazard mitigation means reducing damages from disasters.

Local governments have the responsibility to protect the health, safety, and welfare of their citizens. Proactive mitigation policies and actions help reduce risk and create safer, more disaster-resilient communities. Mitigation is an investment in your community’s future safety, equity, and sustainability.

Private Debt Syndicates: Governance, Networks, And Syndicate Structure, William R. Mccumber

Graduate Theses and Dissertations

I examine the primary market for syndicated private credit agreements to U.S. firms within the context of contract theory with information asymmetries between contracting parties in a repeated game. Specific governance mechanisms determine a firm's cost of borrowing in syndicated credit agreements. Firms with governance mitigating agency risk between stakeholders, i.e. independent boards, strong shareholder monitoring, and greater CEO pay-performance sensitivity, enjoy lower borrowing costs. The interests of creditors and shareholders diverge with regard to external governance. Lenders charge higher spreads to firms at greater risk of acquisition and reward stronger firms with price concessions when they possess staunch anti-takeover …

Assessing Revenue Managers' Level Of Trust In Information Systems: An Exploratory Study Of Las Vegas Casino Resorts, Landon Taylor Shores

UNLV Theses, Dissertations, Professional Papers, and Capstones

This study examined revenue managers' level of trust in their revenue management system (RMS) at Las Vegas casino resorts. The study utilized an e-mail interview to measure revenue managers' attitudes about their RMS's degree of reliability and dependability, the degree to which they trust their RMS's pricing recommendations, and if a revenue manager's level of trust in technology had any effect on their likelihood of trusting their RMS.

The study invited 11 property and corporate revenue managers from Las Vegas casino resorts to participate in an e-mail interview, with nine revenue managers agreeing to participate. The main findings of the …

Growing The Asset Management Franchise: Evidence From Hedge Fund Firms, William Fung, David Hsieh, Narayan Y. Naik, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

We investigate the growth strategies of hedge fund firms. We find that firms with successful first funds are able to launch follow-on funds that charge higher performance fees, set more onerous redemption terms, and attract greater inflows. While first funds outperform follow-on funds, the superior performance of the former attenuates following the launch of the second fund. Multiple-product firms underperform single-product firms, but harvest greater fee revenues. Consequently, the multiple-product firm has become the dominant business model in the hedge fund industry.

Two Essays On Ceo Inside Debt Compensation, Nilakshi Borah

Doctoral Dissertations

In the first chapter, I examine the effect CEO inside debt holdings on firm cash holdings, as measured by the ratio of cash and marketable securities to net assets using a sample of EXECUCOMP firms over the period of 2006 to 2008. Following prior literature on CEO inside debt holdings (Cassell et al., 2012), I use the following two measures as proxies for CEO inside debt compensation: (1) the CEO to firm debt/equity ratio, which is calculated as the CEO's debt/equity ratio scaled by the firm's debt to equity ratio and 2) an indicator variable equal to one when the …

Forecasting Government Bond Risk Premia Using Technical Indicators, Jeremy Goh, Fuwei Jiang, Jun Tu, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

While economic variables have been used extensively to forecast bond risk premia, little attention has been paid to technical indicators which are widely used by practitioners. In this paper, we study the predictive ability of a variety of technical indicators vis-a-vis the economic variables. We find that technical indicators have significant in both in- and out-of-sample forecasting power. Moreover, we find that using information from both technical indicators and economic variables increases the forecasting performance substantially. We also find that the economic value of bond risk premia forecasts from our methodology is comparable to that of equity risk premium forecasts.

Mexico Consensus Economic Forecast, Volume 16, Number 2, Thomas M. Fullerton Jr., Adam G. Walke

Departmental Papers (E & F)

No abstract provided.

Exogenous Or Endogenous Money Supply: Evidence From Australia, Zatul Badarudin, Ahmed Khalid, Mohamed Ariff

Ahmed Khalid

This paper investigates the nature of money supply in Australia over two separate monetary policy regimes: monetary and inflation targeting. The post-Keynesian theory on endogenous money was tested with the aim of investigating whether endogenous money supply, if it did exist, followed the accomodationist, structuralist or liquidity preference viewpoints. Data used are quarterly series from 1977 to 2007 and we used vector error-correction model for long-run and short-run causality tests. We found that money supply is endogenous in Australia even when the central bank targeted monetary aggregates during the period 1977 to 1993.

Effect Of Deposit Money Banks' Credit On The Performance Of Micro, Small And Medium Enterprises In Nigeria, G. O. Evbuomwan, V. O. Okoruwa, A. E. Ikpi

Economic and Financial Review

This paper set out to empirically evaluate the effect of deposit money banks' credit on the performance of MSMEs in Nigeria, with the aid of a vector autoregression and error correction mechanism (ECM) technique. Results of the empirical investigation confirmed credit had a positive effect on GDP of MSMEs in Nigeria as the coefficient of CAM (credit to MSMEs) was positive (1.0569) and significant at 1.0 per cent level. It was, therefore, recommended that every effort should be made to improve access to credit by MSMEs, so that they could play their potential roles of employment generation and wealth creation …

Competing Life Insurance Purchasing Strategies: Whole Life Versus Buy Term Invest The Differences, Jordon Hastings

Honors Theses

Financial experts have been conflicted for decades in regards to the most effective strategy for purchasing life insurance. Specifically, is buying an expensive whole life insurance policy the most appropriate solution, or is purchasing cheap term insurance and investing the rest of the money in a side fund more effective? These strategies were compared side by side across a variety of scenarios with varying account allocations, time horizons and tax treatments. Based on our results, buying term and investing the difference is the most appropriate solution across the majority of the scenarios that were tested. This was due mainly to …

To Chae Or Not To Chae, Raymond S. Schmidgall Ph.D., Cpa, James W. Damitio Ph.D. Cma

Hospitality Review

Many certifications are available in many professions. They represent a level of achievement and provide a dimension of professionalism to a resume. This article reveals the results of research covering the degree the extent of certification of members of the Hospitality Financial & Technology Professionals. Further, obstacles and assists in taking the examination to become a Certified Hospitality Accountant Executive (CHAE) were determined. Thirty-seven percent of the respondents have earned their CHAE. The biggest obstacle to taking the exam according to 60% of the respondents who have not earned the CHAE was lack of time to prepare. The biggest assist …

Parallels Between The U.S. And Asian Property Markets, Singapore Management University

Perspectives@SMU

U.S. home prices are on an upswing. What does this mean for the Asian property market?

The Stock Market Impact Of Bond Rating Changes, Michael Leonard

Honors Projects in Mathematics

This paper examines the impact of a downgrade of a company’s credit rating on its stock price in the days surrounding the downgrade. If we consider this downgrade new information, then a negative impact on the company’s stock price would be expected. However, if we assume that rating agencies use information that investors have already accounted for, then there would be no impact. There could also be an impact, at least temporarily, due to the fact that a ratings downgrade is bad news, even if the reasons for the downgrade have already been priced in. To perform this analysis I …

The Impact Of New Product Announcements On Quick Service Restaurant Companies’ Stock Returns, Tim Drechsler-Martell

Honors Projects in Finance

This study seeks to answer two main questions: 1) Do product announcements impact quick service restaurant stock returns? 2) Do economic conditions impact the degree which product announcements impact quick service restaurant stock returns? 159 total product announcements were collected for 6 quick service companies: McDonald’s Corp., YUM! Brands Inc., The Wendy’s Co., AFC Enterprises Inc., Jack in the Box Inc., and Sonic Corp. 84 of these announcements were from 2005-2007 (Labeled “Pre-Recession”), and 75 were from 2009-2011 (Labeled “Post-Recession”). Using historical stock price data, an analysis of the overall trends of the mean-adjusted excess returns was conducted to determine …

Relationship Between Interest Rate And Bank Common Stock Return: Evidence From The Top 10 United States Banks And Financial Sector Index, Hieu Trung Tran

Honors Projects in Finance

This research paper investigates the effect of changes in long-term interest rates on the returns of the top 10 US banks included in the Financial Sector Index. There are three main parts of this paper.

The first part uses the Augmented Dickey-Fuller (ADF) test to test the “Random Walk” of banks’ common stock returns. Based on the test’s results, returns of banks’ common stock do not solely follow the “Random Walk”.

In the second part, the Two-Factor Arbitrage Pricing Theory is employed to test the effect of changes in long-term interest rate on the return of banks’ common stocks. The …

Private Student Loan Asset Backed Securities: A Default Curve Analysis, Nicholas Gentile

Honors Projects in Finance

Business and mainstream media devote significant attention to the student lending industry and its possible threat to the economy. While the private loan component of student lending may not be largest part of this one trillion dollar industry, it is likely to be the space where evidence supporting the media’s concerns are found. This paper examines the variation in cumulative default rates for private student loan asset backed securities issued between 2001 and 2007, revealing the dynamics of these opaque financial instruments. The study analyzes internal pool data and external economic data, uncovering the primary factors that shape the respective …

Initial Public Offerings In The Microfinance Industry: Does A Mission Drift Occur?, Sarah Segill

Honors Projects in Finance

This thesis analyzes whether or not there is a mission drift when microfinance organizations become publicly traded entities. One of the most debated criticisms of microfinance institutions (MFIs) today involves becoming for-profit organizations in attempt to raise more capital. Donor funding is limited for non-profit organizations and does not give an MFI much room to grow to serve a maximal number of people. The entry of for-profit microfinance institutions has a great deal of possibility in terms of generating scale, efficiency and innovation. Yet these for-profit institutions can easily lose track of their social mission to serve the poor and …

The Cost Of Culture The Impact Of National Culture On The Pass-Through Of Commodity Shocks, Christine Gerrity

Honors Projects in Finance

This study analyzes the impact of national culture on the pass-through of commodity price shocks to retail goods. In particular, this study explores the commodities of coffee, cotton and steel. Through the use of regression analysis, this study looks to determine the relationship between two key predictive variables: risk tolerance of a country and commodity shocks within a company’s associated commodity market, and their impact on the value of companies within that country. Additional factors are explored at the firm financial level and the firm country level. The purpose of this study is to examine if consumers of one country …

Inward Fdi In The United States And Its Policy Context, Lucyna G. Kornecki Ph.D.

Accounting, Economics, Finance, and Information Sciences - Daytona Beach

Inward foreign direct investment (IFDI) represents an integral part of the United States (U.S.)economy, with its stock growing from US$ 83 billion in 1980 to US$ 3.5 trillion in 2011. The United States, which had earlier been primarily a home for multinational enterprises (MNEs) rather than a host for affiliates of foreign MNEs, has become a preferred host country for FDI since the 1980s. Foreign MNEs have contributed robust flows of FDI into diverse industries of the U.S. economy, and total FDI inflows reached US$ 227 billion in 2011, equivalent to 15% of global inflows, the single largest share of …

Maintaining Your Loyal Customers During Hard Times: An Observation From The Gaming Industry, Myongjee Yoo, Miranda Kitterlin

Hospitality Review

The Las Vegas gaming arena was one of the most severely affected consumeroriented industries to be impacted by the recent economic recession. The purpose of this study was to investigate the impact of relational benefits on customers’ behavioral loyalty in the Las Vegas gaming industry. This study particularly took a comparative approach and examined the relational impact during the economic recession and after the economic recession. Secondary data was obtained and regression analysis was performed to test the study hypothesis. The findings of this study revealed the economic recession impact on the Las Vegas gaming industry, as well as valuable …