Business Commons^™

Short Covering Trades, Ekkehart Boehmer, Truong X. Duong, Zsuzsa R. Huszar

Research Collection Lee Kong Chian School Of Business

Short sellers are known to have private information about security prices. Empirical evidence of short selling, however, is based on only half of short sellers’ trading activity; specifically, the opening of the position. Using disclosed large short position data from the Japanese stock market, we provide the first detailed evidence of covering trades and find a positive reaction to short covering that only partially reverses. While these results are consistent with substantial transaction costs for closing large short positions, they also reveal that some short sellers are privately informed about positive future events and have timing ability in covering positions.

Pricing Asian Options: Volatility Forecasting As A Source Of Downside Risk, Adam T. Diehl

Undergraduate Economic Review

Asian options are a class of derivative securities whose payoffs average movements in the underlying asset as a means of hedging exposure to unexpected market behavior. We find that despite their volatility smoothing properties, the price of an Asian option is sensitive to the choice of volatility model employed to price them from market data. We estimate the errors induced by two common schemes of forecasting volatility and their potential impact upon trading.

2018 Private Capital Markets Report, Craig R. Everett

Pepperdine Private Capital Markets Report

The Pepperdine private cost of capital survey was originally launched in 2007 and is the first comprehensive and simultaneous investigation of the major private capital market segments. This year’s survey specifically examined the behavior of senior lenders, asset‐based lenders, mezzanine funds, private equity groups, venture capital firms, angel investors, privately‐held businesses, investment bankers, business brokers, limited partners, and business appraisers. The Pepperdine survey investigated, for each private capital market segment, the important benchmarks that must be met in order to qualify for capital, how much capital is typically accessible, what the required returns are for extending capital in today’s economic …

Analysis Of Influences Of Separation Decisions In The Financial Management Career Field, Shauna Young

Theses and Dissertations

The purpose of this research was to analyze influences on separation decisions of active duty Air Force financial management officers. Researchers tested nine variables to determine their separation implications. The tested variables were major command, age, prior enlisted service, spouse, commissioning source, AFIT cost analysis master’s degrees, engagement, crystallization of job alternatives, and exhaustion. Results proved that age, prior enlisted service, having a spouse, and being an Air Force Academy or AFIT graduate correlates to whether a financial management officer will separate from the Air Force. In addition, the engagement level or having a defined list of job alternatives readily …

Base Erosion And Profit Shifting (Beps) And The Digital Economy: Challenges And Issues, Marianne Ojo, James A. Digabriele

Department of Accounting and Finance Faculty Scholarship and Creative Works

The digital economy, undoubtedly, has contributed to the immense task of clearly identifying, ascertaining, and accounting for sources, rationales, and audit trails relating to tax transactions. This is not only evident owing to difficulties associated with cross-border transaction regulations which govern different jurisdictions as well as the enforcement of such regulations, but also in respect of risks associated with the present global financial environment - all having generated from the rise in automation, increased and improved sophisticated technologies, globalization, and conglomeration. This chapter not only seeks to highlight the extent, contribution, and significance of the digital economy in respect of …

Transformational Leadership And Supply Chain Ambidexterity: Mediating Role Of Supply Chain Organizational Learning And Moderating Role Of Uncertainty, Divesh Ojha, Chandan Acharya, Danielle Cooper

Publications and Research

This paper examines the impact of top management transformational leadership on supply chain organizational learning and supply chain ambidexterity. We also evaluate the influence of uncertainty, present in the operating environment, on these relationships. Integrating multiple perspectives of organizational behavior relating to learning and leadership, we develop our research model and evaluate it using survey data. Results from our analysis support the notion that supply chain organizational learning orientations fully mediate the relationship between transformational leadership and supply chain ambidexterity. Also, uncertainty in the operating environment positively moderates the relationship between transformational leadership and supply chain learning.

Toward A Corporate Finance Theory For The Entrepreneurial Firm, James S. Ang

The Journal of Entrepreneurial Finance

Corporate finance for the entrepreneurial firm is fundamentally different from that of the traditional firm. The standard problems and solutions to both investment and financing are reformulated in this paper. The formulation is intended to capture two distinguishing features of entrepreneurial finance: 1) Although new ventures yield negative returns on average, they are in aggregate welfare increasing for the economy, after considering their positive externalities. 2) Due to new ventures’ lack of consistent cash flows, which precludes the use of debt, the debt versus equity financing choice is replaced by the choice between the entrepreneurs’ desire for wealth versus control; …

Cryptocurrency: A New Investment Opportunity?, David Kuo Chuen Lee, Li Guo, Yu Wang

Research Collection Lee Kong Chian School Of Business

Bitcoin was the first cryptocurrency to use blockchain and has been the market leader since the first bitcoin was mined in 2009. After the birth of Bitcoin with the genesis block, more than 1,000 altcoins and crypto-tokens have been created, with at least 919 trading actively on unregulated or registered exchanges. This entire class of cryptocurrencies and tokens has been classified by some tax authorities as having the same status as commodities. If cryptocurrency is viewed in the same class as commodities, how different is it in terms of its risk and return structure? This article sets out to help …

Are Overconfident Ceos Better Leaders? Evidence From Stakeholder Commitments, Kenny Phua, T. Mandy Tham, Chi Shen Wei

Research Collection Lee Kong Chian School Of Business

We find evidence that the leadership of overconfident chief executive officers (CEOs) induces stakeholders to take actions that contribute to the leader's vision. By being intentionally overexposed to the idiosyncratic risk of their firms, overconfident CEOs exhibit a strong belief in their firms’ prospects. This belief attracts suppliers beyond the firm's observable expansionary corporate activities. Overconfident CEOs induce more supplier commitments including greater relationship-specific investment and longer relationship duration. Overconfident CEOs also induce stronger labor commitments as employees exhibit lower turnover rates and greater ownership of company stock in benefit plans.

Resilience Of The Us Securities Industry To The Global Financial Crisis, Dariusz Wójcik, Theodor Florian Cojoianu

Research Collection College of Integrative Studies

The global financial crisis was underpinned by the securitization of subprime mortgages led by US investment banks, and its outbreak was marked by the bankruptcy of Lehman Brothers on 15 September 2008. This paper investigates the resilience of the US securities industry to this shock and its evolution between 2008 and 2016, with focus on employment, location, remuneration, sell-side versus buy-side dynamics, and gender. Results show that the US securities industry has suffered significant losses in terms of employment and its recovery has been slow. Under the pressures of depressed demand, new regulation and cost cutting, the industry has gone …

Managerial Conservatism, Board Independence And Corporate Innovation, Jun Lu, Wei Wang

Business Faculty Publications

Using panel data on U.S. public firms, we document a positive effect of board independence on corporate innovation. This effect is concentrated in firms that are larger in size, in the non-technical industries, facing less product market competition, and using more debt, where managers are more likely to be excessively risk averse. We establish causality of board independence on innovation using a difference-in-difference approach that exploits an exogenous shock to board composition, namely, the mandate of a majority of outside directors on company boards by NYSE and NASDAQ in response to the passage of Sarbanes-Oxley Act in 2002. We further …

Quarterly Meeting Minutes, Wku Board Of Regents

Board of Regents Documents

Action items:

• Graduate Certificate in Scientific Data
• Sabbatical Leave Requests
• Emeritus Appointment
• Honorary Doctorate
• Naming Designated Rooms / Areas
• Barbara Burch Resolution of Appreciation
• Rick Stansbury Contract Addendum
• 2016-17 & 2017-18 Financial Statements & Budget
• Timothy Caboni's report re: regional campuses, construction, cell phones, position cuts, budget cuts
• Phillip Bale's remarks
• Budget Stabilization Plan
• WKU Budget Restructering Plan: Recommendations to President Caboni

Quarterly Meeting Agenda & Packet, Wku Board Of Regents

Board of Regents Documents

Action items:

• Graduate Certificate in Scientific Data
• Sabbatical Leave Requests
• Emeritus Appointment
• Naming Designated Rooms / Areas
• Barbara Burch Resolution of Appreciation
• Rick Stansbury Contract Addendum
• Auditor's Report & Financial Statements
• WKYU-TV & WKYU-FM Audits
• 2017-18 Operating Budget Revisions
• Personnel Actions
• 2nd Quarter Revenue & Expenditures
• Budget Stabilization Plan

Do Private Firms Benefit From Trading In The Private Securities Market?, Robert Loveland, Eric Fricke, Sinan Goktan

The Journal of Entrepreneurial Finance

The trading of private securities has recently gained greater visibility and importance with the advent of organized, private security exchanges. This paper uses data on IPO firms that list on the SharesPost private securities exchange platform to examine the potential benefits of a listing. Specifically, we test whether a listing reduces IPO underpricing or enables liquidity provision to firm employees. Controlling for endogeneity, we find no evidence that a pre-IPO listing on SharesPost lessens IPO underpricing. However, we also find that SharesPost-listed companies are able to pay their employees less in cash and more in stock and stock options than …

Fiscal Policy, Consumption Risk, And Stock Returns: Evidence From Us States, Zhi Da, Mitch Warachka, Hayong Yun

Business Faculty Articles and Research

We find that consumption risk is lower in states that implement countercyclical fiscal policies. Moreover, firms with an investor base that is concentrated in countercyclical states have lower stock returns, along with firms that relocate their headquarters to a countercyclical state. Therefore, countercyclical fiscal policies lower the consumption risk of investors and, consequently, their required equity return premium. This conclusion is confirmed by smaller declines in market participation during recessions in countercyclical states. Overall, the location of a firm’s investor base enables state-level fiscal policy to influence stock returns.

2018 Q1 Private Capital Access Index Report, Craig R. Everett

Pepperdine Private Capital Access Report

The Pepperdine Private Capital Access Index (PCA) is a quarterly indicator produced by the Graziadio School of Business and Management at Pepperdine University, and with the support of Dun & Bradstreet. The index is designed to measure the demand for, activity, and health of the private capital markets. The purpose of the PCA Index is to gauge the demand of small and medium sized businesses for financing needs, the level of accessibility of private capital, and the transparency and efficiency of private financing markets.

Export Competitiveness Of Central And Eastern Europe Since The Enlargement Of The Eu, John Gilbert, Eva Muchová

Economics and Finance Faculty Publications

We use constant market share (CMS) analysis to decompose changes in the export shares of the Central and Eastern European (CEE) economies in the period since the 5th enlargement of the European Union (EU) and measure changes in export competitiveness. We find that the CEE transition economies have generally increased their world export competitiveness, but gains in market share have been tempered by a poor match between both the commodity and regional export profiles of most of the CEE economies and the changes in the world import profile, and by generally slow adaptation of the region to changes in the …

Microfinance And The Decision To Invest In Children’S Education, P.V. Viswanath

Faculty Working Papers and Articles

Although one of the primary objectives of microfinance has been the reduction of poverty through the provision of credit for income-generating purposes, evidence of its impact on poverty has been mixed. Even if there is no direct impact of microfinance, there may be an indirect positive impact through the effect of microcredit availability on families’ decisions to invest in their children’s education. In this paper, I describe a study undertaken to gauge the impact of microcredit availability on education expenditures for children of clients of a South Indian microfinance institution. I first look at some determinants of the demand for …

Risk-Adjusted Inside Debt, Frank Li, Shannon Lin, Shuna Lin, Alan Tucker

Business Publications

Compensation theory holds that executive aggression is related to both the level and riskiness of “inside debt” - promises from firms to pay their executives fixed sums of cash in the future, including pensions and deferred compensation. However, previous researchers have only examined the level of inside debt. We provide an inside debt metric that is conceptually superior to previously used metrics, as it incorporates the riskiness of inside debt. For the entire sample, our metric offers modest improvement in fit over past metrics, where the dependent variable is future equity return volatility. Furthermore, the relation between future volatility and …

Corporate Litigation And Debt, Matteo P. Arena

Finance Faculty Research and Publications

This study examines the effect of litigation risk and litigation costs on firms’ credit ratings and debt financing. The results show that litigation affects a firm's creditworthiness and debt costs in two stages. Before a lawsuit filing, firms at higher risk of litigation have lower credit ratings, are more likely to be rated speculative grade, pay higher yields on loans and bonds, and are less likely to rely on debt financing. At the time of the lawsuit resolution, settlement costs have an additional effect on firm credit quality. Companies facing larger settlement disbursements in relation to their available cash experience …

What Factors Determine Thesubsidiary Mode Of Overseas R&D By Developing-Country Mnes? Empirical Evidence From Chinese Subsidiaries Abroad, Yanyu Wang, Wei Xie, Jizhen Li, Chenxi Liu

PhD Student’s Publications Collection

This study examines the determinants of the subsidiary modes of overseas research anddevelopment (R&D) by Chinese multinational enterprises (MNEs). Based on resource-based view and absorptive capabilities, we propose that financial resources and technologi-cal resources have different effects on the selection of overseas R&D subsidiary modes,which are competence-exploiting mode or competence-creating mode. This is supportedby the empirical results in this paper using data from a survey of 40 Chinese overseasR&D subsidiaries. The results demonstrate that the parent firms with richer financialresources and more R&D expenses prefer the competence-exploiting mode, while the par-ent firms with more R&D personnel favor the competence-creating mode. …

Do Alpha Males Deliver Alpha? Facial Structure And Hedge Funds, Yan Lu, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

Facial structure as encapsulated by facial width-to-height ratio (fWHR) maps onto masculine behaviors in males and may positively relate to testosterone. We find that high-fWHR hedge fund managers underperform low-fWHR hedge fund managers by 5.83% per year after adjusting for risk. Moreover, funds operated by high-fWHR managers exhibit higher operational risk, suffer from a greater asset-liability mismatch, and are more likely to fail. We trace the underperformance to high-fWHR managers’ preference for lottery-like stocks and reluctance to sell loser stocks. The results are robust to adjustments for sample selection, marital status, sensation seeking, and manager race, and suggest that investors …

Productivity And The California Global Warming Solutions Act: An Examination Of Cost Of Compliance Utilizing Plant Level Data In The Portland Cement And Manufacturing Industry, Richard Ardito

Doctoral Dissertations and Projects

This dissertation examined the effect of California environmental regulation, AB32 on the Portland Cement Mining and Manufacturing industry which was directly targeted by the legislation. The researcher examined the effect of productivity on the Portland Cement industry operating within California by comparing changes specific labor and fuel use productivity measures to changes in the same measures for organizations operating outside of California. These differences were examined using an independent sample t-test to determine if any changes were statistically significant. The results showed statistically significant increases in productivity for direct labor, total employee labor, and combustible fuel use when analyzed to …

Do Underwriters Compete In Ipo Pricing?, Evgeny Lyandres, Fangjian Fu, Erica X. N. Li

Research Collection Lee Kong Chian School Of Business

We propose and implement a direct test of the hypothesis of oligopolistic competition in the U.S. underwriting market against the alternative of implicit collusion among underwriters. We construct a simple model of interaction between heterogenous underwriters and heterogenous firms and solve it under two alternative assumptions: oligopolistic competition among underwriters and implicit collusion among them. The two solutions lead to different equilibrium relations between the compensation of underwriters of different quality on one hand and the time-varying demand for public incorporation on the other hand. Our empirical results, obtained using 39 years of IPO data, are generally consistent with the …

Finance & Budget Committee Agenda & Packet, Wku Board Of Regents

Board of Regents Documents

Action and information items:

• Auditor's Report & Financial Statements
• WKYU-TV & WKYU-FM Audits
• 2017-18 Operating Budget Revisions
• Personnel Actions
• 2nd Quarter Revenue & Expenditures Statement
• Quarterly Internal Audit
• Outstanding Student Accounts & Collection Procedures
• Resource Allocation, Management & Planning (RAMP) Budget Model

Discounting And Digit Ratio: Low 2d:4d Predicts Patience For A Sample Of Females, Diego Aycinena, Lucas Rentschler

Economics and Finance Faculty Publications

Inter-temporal trade-offs are ubiquitous in human decision making. We study the relationship between preferences over such trade-offs and the ratio of the second digit to that of the forth (2D:4D), a marker for pre-natal exposure to sex hormones. Specifically, we study whether 2D:4D affects discounting. Our sample consists of 419 female participants of a Guatemalan conditional cash transfer program who take part in an experiment. Their choices in the convex time budget (CTB) experimental task allow us to make inferences regarding their patience (discounting), while controlling for present-biasedness and preference for smoothing consumption (utility curvature). We find that women with …

Thinking Finance - The Comic Book, Dimitrios V. Siskos

Publications

Thinking financially results in the best possible outcome and establishes a secure foundation for the future as an independent man. In contrast, thinking emotionally leads to short-sighted financial decisions and usually, deep regrets. However, thinking financially is not pleasant for the people around us. This comic book presents a guy, whose dream is to become an accountant. When he finally succeeds in this, he realizes that thinking financially may be effective for his boss but it is irritating for everyone else, even for his family.

Taking The Stress Out Of Money, Kayt E. Frisch

Faculty Work Comprehensive List

"Here’s a secret: budgeting doesn’t have to be anxiety-inducing. In fact, it shouldn’t be, at least not according to Jesse Mecham in his new book You Need A Budget."

Posting about ­­­­­­­­family finanaces from In All Things - an online journal for critical reflection on faith, culture, art, and every ordinary-yet-graced square inch of God’s creation.

https://inallthings.org/taking-the-stress-out-of-money/

The Impact Of Sustainability Reporting On Firm Profitability, Lancee L. Whetman

Undergraduate Economic Review

Using a hand-collected representative sample of 95 publicly traded American firms from various sectors in 2015-2016, I examine how corporate sustainability reporting affects the financial performance of firms. I find a positive and significant effect of sustainability reporting on a firm’s return on equity, return on assets, and profit margin in the subsequent year. However, this relationship is found only for firms with low institutional ownership. These results suggest that sustainability reporting would be a worthwhile use of corporate resources for this subset of firms. Further, corporate sustainability reporting is shown to be an effective substitute for monitoring by institutional …

Cracking Shells: The Panama Papers & Looking To The European Union's Anti-Money Laundering Directive As A Framework For Implementing A Multilateral Agreement To Combat The Harmful Effects Of Shell Companies, Nicholas Vail

Texas A&M Law Review

In early 2016, the International Consortium of Investigative Journalists released a report detailing thousands of leaked documents demonstrating how a Panamanian law firm had, for years, helped wealthy clients conceal their financial activities through the use of offshore shell companies. The Panama Papers, as the leaked documents came to be known, directed renewed attention at the use of shell companies. Shell companies are used by the world’s wealthy and powerful to lower their taxes, but are also used by tax evaders, criminal organizations, and terrorists. While much of the renewed attention has been directed at offshore tax havens such as …