Business Commons^™

Ceo Network Centrality And Earnings Management, Huan Qiu

Doctoral Dissertations

This study investigates the relationship between CEO network centrality, choice of earnings management, and the consequences for the period from 1998 to 2016. From our empirical analysis, we find that CEOs with higher network centrality are more likely to use accruals-based earnings management, but less likely to use real earnings management to manage earnings upward in the current year. Although the use of accruals-based earnings management normally results in bad economic consequences for firms, CEO network centrality is associated with better (at least not worse) earnings quality, after controlling the use of accruals-based earnings management. As for longterm economic performance, …

Essays In International Corporate Finance, Patrick M. Stanton

Doctoral Dissertations

International corporate finance has greatly expanded with the increased globalization and led to many new research topics. In this dissertation, I examine two distinct international finance topics; (i) determinants of corporate tax inversion and the effects ex-post; and (ii) determinants of for-profit microfinance institutions and financial and social performance.

In Chapter 1, I study corporate tax inversion which is a reorganization by which a domestic firm changes its tax-domicile from the United States to a foreign country with a lower corporate tax rate. In 2014 alone, U.S. public companies valued at over half a trillion dollars announced their intention to …

Contribution Of 52-Week Low To The Momentum Strategy On 52-Week High, Hyun Chul Cho

Doctoral Dissertations

I examine whether the momentum strategy based on 52-week high price can use 52-week low price as another reference point. I find that the remoteness of current price from 52-week low price plays an incremental role in the momentum profits of the strategy based on 52-week high price. Furthermore, I find that the role depends on the level of the nearness to 52-week high price. I find that the profits of the 52-week high price momentum strategy that also uses remoteness of current price from 52-week low price increase as the level of the nearness to 52-week high price increases. …

Arbitrage Risk, Investor Sentiment And Maximum Daily Returns, Kenneth A. Tah

Doctoral Dissertations

We test the cross-sectional relation between daily maximum return (MAX) and return in the following month for stocks with high and low idiosyncratic volatility. We use portfolio level analysis and firm-level cross-sectional regression to find that the negative and significant relation between MAX and expected stock return (known as the "MAX effect") is a non-January phenomenon observed predominantly on a sample of stocks with high idiosyncratic volatility. We find that the effect of investor sentiment on the MAX effect depends on arbitrage risk. Our findings suggest that arbitrageurs find it difficult to correct the mispricing of stocks with extreme positive …

Anchoring Bias, Idiosyncratic Volatility And The Cross-Section Of Stock Returns, Cedric Tresor Luma Mbanga

Doctoral Dissertations

Ang, Hodrick, Xing and Zhang (2006) document an anomaly in the cross-section of stock returns. They show that high idiosyncratic volatility (IVOL) firms earn lower returns in the following month. Specifically, they find after sorting stocks in quintile portfolios based on the previous month's IVOL that a zero-investment portfolio long the most volatile quintile of stocks and short the least yields about -1% during the subsequent month. The evidence reported in Ang, Hodrick, Xing and Zhang (2006) is primarily puzzling because traditional asset pricing theories suggest that (i) only systematic risk should be priced, (ii) to the extent that markets …

Two Essays On Insider Trading And Option Grants Around The Filing Of Influential Patents, Liu Pan

Doctoral Dissertations

Research documents that insiders, who have access to private information, appear to trade with profits before major corporate events like mergers, bankruptcy, dividend announcements, and future cash flow news (see, e.g., Seyhun, 1990; Seyhun and Bradley, 1997; John and Lang, 1991; Jiang and Zaman, 2010). Another recent stream of studies find that the size and quality of a firm's patent portfolio are positively related to the firm's future stock returns (Hirshleifer, Hsu, and Li, 2012; Pandit, Wasley, and Zach, 2011). However, there is little systematic evidence on whether insiders act opportunistically when they possess private information about the firm's patent …

Two Essays On Insider Trading And Option Grants Around The Filing Of Influential Patents, Liu Pan

Doctoral Dissertations

Research documents that insiders, who have access to private information, appear to trade with profits before major corporate events like mergers, bankruptcy, dividend announcements, and future cash flow news (see, e.g., Seyhun, 1990; Seyhun and Bradley, 1997; John and Lang, 1991; Jiang and Zaman, 2010). Another recent stream of studies find that the size and quality of a firm's patent portfolio are positively related to the firm's future stock returns (Hirshleifer, Hsu, and Li, 2012; Pandit, Wasley, and Zach, 2011). However, there is little systematic evidence on whether insiders act opportunistically when they possess private information about the firm's patent …

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 …

Two Essays On Managerial Incentives, Hui Liang

Doctoral Dissertations

Jensen and Meckling (1976) and Jensen (1986) argue that the separation of ownership and control may generate agency problems between managers and shareholders. The equity-based compensation, by tying managerial wealth to firm long-run stock performance, can incentivize managers to be more receptive to undertaking value-increasing financial policies and to improving firm performance therefore can be used as an effective tool to achieve consonance between managers actions and shareholders interest. Over the last two decades, the increased prevalence of equity-based compensation in the form of stock and options, is partially due to an increased acceptance of the alignment effect of equity-based …

Earnings Management Around Mergers And Acquisitions, Eugenie Ann Ardoin Goodwin

Doctoral Dissertations

Earnings management has become a topic of interest when trying to explain anomalies in company stock performance following corporate events such as equity offerings and mergers. If managers are trying to manipulate earnings upward to increase stock value before a merger to achieve a better exchange ratio at acquisition announcement, they may use discretion in accruals to inflate earnings and/or reduce spending in research and development prior to the announcement. Literature results are mixed as to whether firms engage in opportunistic earnings management using discretionary accruals before acquisition announcement and if this manipulation has an impact on stock performance post-announcement. …

External Financing: Market Timing Or Managerial Optimism, Beth Collins Hegab

Doctoral Dissertations

Management of capital structure is an important part of maximizing the firm value. Financial research has proposed many theories that explain aspects of firm behavior when a firm makes financial decisions that change the firm's capital structure. However, none of the theories fully explain why firms with similar fundamental characteristics make different financing choices.

This study focuses on what motivates managers when they are making external financing decisions. It investigated whether the motivation for the decisions about capital structure are driven by market timing or managerial overoptimism. This is done by focusing on equity and debt issues and whether these …

The Association Between Data Intermediaries And Bond Rating Classification Model Prediction Accuracy, Pavani Tallapally

Doctoral Dissertations

Kamstra et al. (2001) developed a bond rating classification model that was based on a similar model developed by Ederington (1985). While both studies use Moody's bond ratings as dependent variables, the studies differ with respect to the independent variable data source, that is, Kamstra et al. (2001) use financial statement data extracted from Moody's Industrial Manual (now known as Mergent) while Ederington (1985) uses financial statement data extracted from Compustat. Given this, and given the divergent results of the two studies, the following question must be addressed: Do different data sources yield models that differ considerably with respect to …

Earnings Management Around Secondary Equity Offerings By Insiders, Hui Di

Doctoral Dissertations

Accruals-based earnings management is becoming a more common practice. Firms have strong incentives to manage earnings around secondary equity offerings by insiders (insider offerings) to raise offer prices. However, the literature on earnings management around insider offerings is limited and provides mixed evidence of earnings management. In this study, I investigate the motivations and the extent of earnings management around insider offerings.

This study examines a sample of 490 secondary equity offerings made by insiders over the period 1989 to 2005. Inconsistent with the managerial opportunism hypothesis, I find negative adjusted discretionary total accruals before insider offerings. While discretionary accruals …

Strategic Alliances By Financial Services Firms, Hua Wang

Doctoral Dissertations

The importance of strategic alliances in the financial services industry is increasing; however, research focusing on strategic alliances is limited. In this dissertation, I intend to enhance the existing literature by examining the effect of strategic alliances on the value of financial services firms and the level of cooperation between partner firms involved in strategic alliances. The specific objectives of the dissertation are to examine the market reaction to strategic alliance announcements, to examine the preand post-announcement long-run abnormal stock performance and operating performance for the participants of strategic alliances, and to examine joint ventures and mergers and acquisitions after …

The Determinants Of Executive Compensation In The Commercial Banking Industry, David A. Romer

Doctoral Dissertations

The primary purpose of this study is to examine the viability of two basic theories of compensation to explain executive compensation in the banking industry. The two executive compensation motivation theories are sales/sales growth maximization and profit/shareholder wealth maximization. Overall, strong support is found for both theories. This research also seeks to significantly expand, compared to previous research, the number of banks investigated. This study succeeds, with over a four-fold increase in the number of banks analyzed, including over 330 banks not previously used in the literature. This investigation is further motivated by the paucity of banking studies on compensation …

Three Essays On Banking And Corporate Finance, Fang Zhao

Doctoral Dissertations

This dissertation is composed of three essays on banking and corporate finance. The first essay studies the relationship between interest-rate derivative usage and bank lending. Using recent data that cover a full business cycle, this paper documents a direct relationship between interest-rate derivative usage by U.S. banks and growth in their commercial and industrial (C&I) loan portfolios. This positive association holds for interest-rate options contracts, forward contracts, and futures contracts. This result is consistent with the implication of Diamond's model (1984) that predicts that a bank's use of derivatives permits better management of systematic risk exposure, thereby lowering the cost …

Modeling And Simulation Of Value -At -Risk In The Financial Market Area, Xiangyin Zheng

Doctoral Dissertations

Value-at-Risk (VaR) is a statistical approach to measure market risk. It is widely used by banks, securities firms, commodity and energy merchants, and other trading organizations. The main focus of this research is measuring and analyzing market risk by modeling and simulation of Value-at-Risk for portfolios in the financial market area. The objectives are (1) predicting possible future loss for a financial portfolio from VaR measurement, and (2) identifying how the distributions of the risk factors affect the distribution of the portfolio. Results from (1) and (2) provide valuable information for portfolio optimization and risk management.

The model systems chosen …

Can Fundamental Value Predict Stock Returns? An Empirical Assessment Of The Feltham -Ohlson Model, Colin Anthony Pillay

Doctoral Dissertations

In valuation research, two modeling approaches that have become prominent are those based on the Residual Income Model (RIM) and those based on the G. Feltham-James A. Ohlson framework. Ohlson (1995) develops a valuation model which links a firm's fundamental value to the book value of equity, earnings and other relevant information. Feltham and Ohlson (1995) extend the Ohlson (1995) model to incorporate growth and conservative accounting.

This study provides an evaluation of the Feltham-Ohlson (1995) model assuming market inefficiency. Analyst forecast data are obtained from the international I/B/E/S files. Financial information and share prices are obtained from the Compustat …

Testing The Effectiveness Of Deregulation In The Electric Utility Industry: A Market-Based Approach, Manfen Wang

Doctoral Dissertations

In this paper, I investigate one stated purpose of deregulation in the electric utility industry—to make utility operations more responsive to news releases, a proxy for market forces. My premise is that utilities providing electricity to highly deregulated states will be more responsive to market forces than those providing electricity to non-deregulated states. I employ intraday data from April to June 2001, the year after deregulation, and from 1994, the year before deregulation. I also employ the Brown-Forsythe-Modified Levene (BFL) test to determine the volatility differences between days with released news and days without released news. The results of BFL …

Survival Analysis Of Internet Companies: An Application Of The Hazard Model, Khaled Elkhal

Doctoral Dissertations

The purpose of this study is to develop a model that predicts failure and estimates the time of survival of dotcoms using a number of financial and non-financial factors. This model can be used as a warning tool for stockholders, creditors, and consumers to protect themselves from such failures.

I employ the Cox (1972) Proportional Hazards Model in a cross-sectional and time-varying context using financial data over the 1998–2001 period. Results from a cross-sectional analysis reveal that the coefficient estimates for variables CFTL and NSTA are consistently negative and highly significant. This suggests that higher sales and cash flows lower …

Efficiency And Performance Of Real Estate Investment Trusts (Reits): An Empirical Examination, Can Topuz

Doctoral Dissertations

This study has a threefold purpose. Its first objective is to investigate input and output efficiencies in the Real Estate Investment Trust (REIT) industry. Its second objective is to understand the impact of size, property share, loan production, debt ratio, property and geographic diversification, control and governance variables, overall risk, capital risk, growth rate, and management type on a number of efficiency measures, including profit, cost, allocative, technical, pure technical and scale efficiency. The third objective is to assess the impact of structural and regulatory changes in the industry on REITs' productivity, technology, and efficiency changes.

I have estimated the …

Financial Performance Of Insurance Companies Following Initial Public Offerings, Kulkanya Napompech

Doctoral Dissertations

The quality of insurance companies is a very significant societal issue. Policyholders pay premiums assuming indemnity of their potential losses. It is essential that an insurer be able to meet its contractual obligations when a loss occurs. An initial public offering provides an infusion of capital and an expansion of resources available to a firm. Thus, the objective of this study is to examine the financial and operating impacts of initial public offerings during 1980–2000 on insurance companies.

Chapter 2 examines changes in operating performance of property/casualty insurance companies following initial public offerings. I find that following initial public offerings, …

Fundamental Approach To Exchange Rate Modeling: Toward An Augmented Theory Of Purchasing Power Parity, Jianzhou Zhu

Doctoral Dissertations

In this dissertation, I test the homogeneity and symmetry conditions of PPP by applying the Johansen multivariate cointegration methodology to quarterly data for six countries. I perform the tests in the framework of both a traditional version and an augmented version of PPP. The results of tests on the traditional version of PPP reveal that in all cases the theoretical PPP-vector [1, 1, −1] is not contained in the cointegrating space. This finding is consistent with that of existing literature and indicates the empirical failure of the homogeneity and symmetry conditions of PPP. However, when the traditional PPP is augmented …

Two Essays On Exchange -Traded Funds, Natalya Vladimir Delcoure

Doctoral Dissertations

The purpose of this study is twofold. The first objective is to conduct an empirical inquiry into the diversification benefits of exchange-traded funds. The second objective is to examine whether exchange-traded funds exhibit superior performance compared to their rival closed-end country fund and traditional index mutual fund. I document that American investors manifest their preference for WEBS as a substitute for closed-end country funds. While I find that WEBS satisfy their objective of following their home indexes better than their rival closed-end country fund, the two-factor model I employ indicates that, despite some diversification benefits, WEBS also maintain certain risk …

The Fundamental And Non-Fundamental Components Of Stock Prices: The Role Of Time-Varying Expected Inflation, Maosen Zhong

Doctoral Dissertations

I derive testable implications of fundamental and non-fundamental components of stock prices. In order to control for the role of time-varying expected inflation and to be able to perform reasonable empirical tests, I use a nominal (rather than a real) interpretation of the present-value model (PVM), whereby nominal interest rates approximate expected inflation. I conjecture that the fundamental and non-fundamental components represent the permanent and temporary components of stock prices, respectively. A series of cointegration analysis over the annual period 1871–1997 confirms my conjecture for the model with time-varying expected inflation. Various fundamental and non-fundamental exclusion tests indicate that both …

A Cross-Sectional Analysis Of The Determinants Of Corporate Share Repurchases, Kenneth M. Washer

Doctoral Dissertations

The objective of this study is to determine which motives play a significant role in determining the extent of a firm's repurchasing activity. For firms repurchasing through the open market, the motives include taking advantage of perceived undervaluation, increasing financial leverage, distributing cash to shareholders, and reducing agency costs. For firms using a tender offer, the motives include taking advantage of perceived undervaluation and having the ability to significantly increase financial leverage. Also, the hypothesis that the perceived undervaluation motive is stronger for smaller firms is tested. Three censored regression models are employed, and each model's explanatory variables represent commonly …

The Impact Of The Louisiana Lottery On Salaries In Education, Melissa Vicknair Melancon

Doctoral Dissertations

The study was undertaken to decide whether lottery revenues impacted teachers' salaries in Louisiana. Economic recession brought on by the collapse of the oil and gas industry, disgruntled taxpayers, and the lure of easy money prompted Louisiana legislators to pass a bill adopting a state lottery. Initially, all funds were earmarked for education. Subsequently, lottery revenues were deposited into the general fund. Yet many thought the lottery would be a significant source of money for education and teachers' salaries.

Logged annual salaries were used in models for university teachers and for elementary and secondary school teachers. Variables were incorporated to …

The Incremental Information Content Of The Cash And Cash Equivalents Definition Of Funds, Hugh Samuel Riner Jr.

Doctoral Dissertations

The purpose of this study was to attempt to determine the incremental information content of the cash and cash equivalents definition of funds. The cash and cash equivalents definition of funds is the mandated definition of funds for use in the preparation of a statement of cash flows. Prior to 1988, firms were able to use alternative definitions of funds; working capital was the most widely-used alternative definition.

In order to determine whether the cash and cash equivalents definition of funds has incremental information content, event analysis methodology was utilized to compare the market reaction to the release of financial …