Business Commons^™

The Impact Of Ceo Duality On Firm Financial And Market Performance During The Period Of 2008 Through 2010 : A Period Of Financial Crisis, Samuel Eugene Ferrara

Legacy Theses & Dissertations (2009 - 2024)

ABSTRACT

Three Essays On Asset Allocation And Asset Pricing, Chen Cao

Legacy Theses & Dissertations (2009 - 2024)

This dissertation investigates several classical yet unsettled issues in asset allocation and asset pricing.

Consumers’ Misunderstanding Of Health Insurance, George Loewenstein, Joelle Y. Friedman, Barbara Mcgill, Sarah Ahmad, Suzanne Linck, Stacey Sinkula, John Beshears, James J. Choi, Jonathan Kolstad, David Laibson, Brigitte C. Madrian, John A. List, Kevin G. Volpp

Faculty Publications

We report results from two surveys of representative samples of Americans with private health insur-ance. The first examines how well Americans understand, and believe they understand, traditional healthinsurance coverage. The second examines whether those insured under a simplified all-copay insuranceplan will be more likely to engage in cost-reducing behaviors relative to those insured under a traditionalplan with deductibles and coinsurance, and measures consumer preferences between the two plans. Thesurveys provide strong evidence that consumers do not understand traditional plans and would betterunderstand a simplified plan, but weaker evidence that a simplified plan would have strong appeal toconsumers or change their …

Teaching Amidst Transformation: Integrating Global Perspectives On The Financial Crisis Into The Classroom, Shruti Rana

Journal of Business & Technology Law

No abstract provided.

Teaching Note On The Treatment Of Noncontrolling Interests In Financial Analysis, Cost Of Capital And Valuation: A Case Study Of Verizon Communications, Bridget Lyons

WCBT Faculty Publications

A noncontrolling interest (NCI) arises when a firm fully consolidates subsidiaries that are not wholly owned by the parent. The existence of a noncontrolling interest complicates financial analysis and valuation. Failure to appropriately consider the NCI may lead to errors in equity valuation and share price since the NCI impacts equity value and implied share price of the parent firm. Return on equity calculations must be carefully constructed as there are several net income and equity values reported. Finally, the NCI can impact the weighted average cost of capital. Verizon Communications was selected as a case study based on the …

Further Evidence On The Ability Of Fifo And Lifo Earnings To Predict Operating Cash Flows: An Industry Specific Analysis, Brock Murdoch, Bruce Dehning, Paul Krause

Accounting Faculty Articles and Research

The continuing convergence of U.S. GAAP with International Accounting Standards has brought into question the future use of the LIFO inventory method in the U.S. Since the Financial Accounting Standards Board (2010) has stipulated that earnings should aid investors and creditors in their quest to forecast future cash flows to the enterprise, this research examines whether FIFO earnings or LIFO earnings is preferable, for this purpose, as an aid to ex ante operating cash flow itself,over a three-year forecast horizon. We conclude that ex ante operating cash flows are quite useful in forecasting operating cash flows across industries for up …

The Effect Of Long-Term Capital Gains And Dividend Tax Rate On The Performance Of Market Indexes Based On Market Capitalization, Jason Wheaton

Theses

Through recent political history there is a common theme about taxes that is presented often: That small businesses are affected differently than larger companies. Though in political parlance small business is different than a small cap company, studying the effects of taxes on small cap companies can help discern if taxation does affect companies differently based on size. The study of the literature provides a background of critical elements such as Gross Domestic Product (GDP), interest rates and inflation, as well as factors such as fiscal policy and informational uncertainty that have an effect on stock prices. Through regression analysis …

Fair Value Measurements, Nathan Hatch Cannon

2013

This dissertation consists of two empirical studies that investigate fair value measurement issues currently facing the accounting profession--one from the perspective of the auditor, and the other from the perspective of the financial statement user. The results of each study are described below.

This first study examines experienced auditors' descriptions of specific client experiences in which auditing fair value measurements (FVMs) was particularly challenging. Based on a field survey of high-level engagement team personnel from several large firms, we identify a number of key issues currently facing the profession in auditing FVMs. First, when asked about challenges faced in auditing …

An Easy Method To Introduce Mirr Into Introductory Finance Classes, Tom Arnold, Terry D. Nixon

Finance Faculty Publications

In this paper, the modified internal rate of return (MIRR) is demonstrated to be a holding period return calculation that is not dependent on knowing a project's internal rate of return (IRR) nor the process for finding the IRR. Further, the MIRR calculation can be directly connected to the calculation of the profitability index (PI) and the net present value (NPV) if project cash flows are discounted using a firm's weighted average cost of capital. This connection to the PI and NPV allows for an intuitively appealing presentation of the MIRR calculation.

Forecasting Singapore Economic Growth With Mixed-Frequency Data, A. Tsui, C.Y. Xu, Zhaoyong Zhang

Research outputs 2013

In this paper we intend to forecast the economic growth of Singapore by employing mixed frequency data. This study is motivated by the following observations: macroeconomic variables are the important indicators of the economic performance, but they are normally available at low frequencies, e.g. quarterly for GDP and monthly for inflation. In contrast, the financial variables such as stock returns are available at high frequency, and often the asset prices are forward-looking and believed to contain useful information about future economic developments (Stock and Watson 2003). It is therefore an interesting question to raise whether or not one can use …

The Determinants Of Capital Structure: Evidence From Thai Banks, David E. Allen, Napaporn Nilapornkul, Robert Powell

Research outputs 2013

The aim of this study is to examine the determinants of the capital structure of Thai banks. The data spans a ten year period from 1999 – 2008. The differentiation point of this study is that, whereas most studies on capital structure focus predominantly on internal bank variables, this study, in addition to internal variables includes market-based risk variables. A range of market-based default and value at risk variables were considered which were then narrowed down to improve the model. Fixed effects panel data analysis is employed, with both market and book leverage used as dependent variables. The Thai bank …

Fair Value Of Liabilities: The Financial Economics Perspective, David F. Babbel, Jeremy Gold, Craig B. Merrill

Faculty Publications

In this paper we present the fundamental approaches of financial economics to valuation. Three methods are demonstrated by which financial economists account for risk. We illustrate how these methods relate to one another and how they can be applied in the valuation of risky corporate bonds, guaranteed investment contracts (GICs) with and without interest rate contingencies, and whole life insurance. Next, we discuss how these models treat orthogonal risks, such as the kind often covered by insurance contracts. Demand side and supply side diversification are treated, and liquidity risk is then considered. We conclude with a summary of the benefits …

Revenge Of The Steamroller: Abcp As A Window On Risk Choices, Carlos Arteta, Mark Carey, Ricardo Correa, Jason Kotter

Faculty Publications

We empirically examine financial institutions’ motivations to take systematic bad-tail risk in the form of sponsorship of credit-arbitrage asset-backed commercial paper vehicles. A run on debt issued by such vehicles played a key role in causing and propagating the liquidity crisis that began in the summer of 2007. We find evidence consistent with important roles for both ownermanager agency problems and government-induced distortions, especially government control or ownership of banks.

The Impact Of Securitization On The Expansion Of Subprime Credit, Taylor Nadauld, Shane M. Sherlund

Faculty Publications

This paper investigates the relationship between securitization activity and the extension of subprime credit. The analysis is motivated by two sets of compelling empirical facts. First, the origination of subprime mortgages exploded between the years 2003 and 2005. Second, the securitization of subprime loans increased substantially over the same time period, driven primarily by the five largest independent broker/dealer investment banks. We argue that the relative shift in the securitization activity of investment banks was driven by forces exogenous to factors impacting lending decisions in the primary mortgage market and resulted in lower ZIP code denial rates, higher subprime origination …

An Investigation Into The Volatility And Cointegration Of Emerging European Stock Markets, Anna Golab

Theses: Doctorates and Masters

This dissertation examines the interaction between European Emerging markets including cointegration, volatility, correlation and spillover effects. This study is also concerned with the process of the enlargement of the European Union and how this affects the emerging markets of newcomers. The twelve emerging markets studied are Bulgaria, the Czech Republic, Cyprus, Estonia, Hungry, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia, which are all progressing very rapidly in their reforms and domestic economic stability.

The majority of prior studies on stock market comovements and integration have concentrated on mature developed markets or the advanced emerging markets of the Czech Republic, …

Expert: Reasons For Debt Partly Cultural, Aldemaro Romero Jr.

Publications and Research

No abstract provided.

Reits And Stock Market Cointegration, Jessie E. Felix

Open Access Theses & Dissertations

Real Estate is popular among investors looking for attractive total returns, predictable price movements, and low correlations to the general equity markets. The financial crisis of 2007 led by real estate mortgage defaults led to a universal bear market, and a credit freeze which impacted REITs ability to raise capital. REITs long viewed perception as a distinct asset class was questioned as a result. Research analyzing REITs long run trends find evidence of an existing long run relationship between REITs, and the S&P. This paper employs the same cointegration framework of prior studies using a longer sample period, and favors …

Investigations Into The Underpricing Of Seasoned Equity Offerings And The Cost Of Equity, Anh Duc Ngo

Open Access Theses & Dissertations

This dissertation consists of three separate but related essays investigating new determinants of the underpricing of seasoned equity offering (SEOs). It also examines new mechanisms and channels that affect the pricing of SEOs. The first essay examines the impacts of earnings smoothing on SEO underpricing. It aims to investigate whether earnings smoothing can add value to firms by reducing the degree of SEO underpricing. The findings show that smoothing earnings performance resulting from discretionary accruals is negatively related to SEO underpricing and improve earnings informativeness. This essay contributes specifically to the current literature on earnings smoothing by demonstrating that high …

Insider Trading Restrictions And Top Executive Compensation, David J. Denis, Jin Xu

Purdue CIBER Working Papers

The use of equity incentives is significantly greater in countries with stronger insider trading restrictions, and these higher incentives are associated with higher total pay. These findings are robust to alternative definitions of insider trading restrictions and enforcement, and to panel regressions with country fixed effects. We also find significant increases in top executive pay and the use of equity-based incentives in the period immediately following the initial enforcement of insider trading laws. We conclude that insider trading laws are one channel through which cross-country differences in pay practices can be explained.

Three Essays On Local Government Debt, Robert Greer

Theses and Dissertations--Public Policy and Administration

The local government tax-exempt debt market is a growing, and complex, sector of public finance. As local governments turn to debt financing the factors that contribute to interest costs of that debt have become important considerations for local government officials and politicians. Governance at the local level involves a network of overlapping governments some of which share a tax base. This system of overlapping governments that share a tax base are subject to externalities that arise from taxation, expenditures, and debt. These externalities are usually analyzed in terms of tax or expenditure reactions, but there are implications for local government …

Legislating Stock Prices, Lauren Cohen, Karl B. Diether, Christopher Malloy

Faculty Publications

We demonstrate that legislation has a simple, yet previously undetected, impact on stock prices. Exploiting the voting record of legislators whose constituents are the affected industries, we show that the votes of these “interested” legislators capture important information seemingly ignored by the market. A long-short portfolio based on these legislators' views earns abnormal returns of over 90 basis points per month following the passage of legislation. Industries that we classify as beneficiaries of legislation experience significantly more positive earnings surprises and positive analyst revisions in the months following passage of the bill, as well as significantly higher future sales and …

The Impact Of The Security Transaction Taxes On Stock Prices And Stock Liquidity; Evidence From The Nyse, Vedika Agarwal

CMC Senior Theses

Security Transaction taxes have been in place in many countries for many years now. Yet we do not fully know how these taxes effect prices, volumes, bid-ask spreads and volatility and in turn if they are good for the economy or not. This paper is an attempt to understand how security transaction taxes decrease volume of trading, decrease prices of stocks and increase bid-ask spreads. It analyses the effect the STTs implemented by the state and federal government in New York on June 1^st 1905 and December 1^st 1914 respectively, had on the stocks of the New York …

The Impact Of Participatory Notes On The Indian Rupee Exchange Rate, Rohan Kothari

CMC Senior Theses

Since 1992, India has grown as a global player in the finance world. In spite of its success, India has not been able to rid itself of potentially harmful practices. One such practice is the issuing of Participatory Notes (PN) to foreign investors, so that they can anonymously purchase securities or derivatives listed on the Indian Stock Exchanges. This instrument came into public view when it accounted for approximately 50% of all foreign portfolio assets in India. Since then, the laws regarding PNs have evolved to become a more transparent version of the old rules. Although PN levels are not …

The Impact Of Prior Performance On Leadership Appointment In A Merger Of Equals, David A. Hirsch

CMC Senior Theses

Leadership appointment during mergers has a logical and established precedent when there is a clear target and acquirer. However, in the extraordinary case of Merger Of Equals (MOEs) – where this is relative equal ownership, board representation, earnings contribution etc - this process is much less defined and can often have serious consequences on the merger, both in closing negotiations as well as post-merger performance. Intuition assumes the better performing CEO should and will be appointed. In practice, however, that is often not the case. It is arguable that performance can be defined through objective means (financially & operationally), yet …

Sb Ipos And Ipo Anomalies: An Empirical Analysis Of The Small Firm Uniqueness Hypothesis, James C. Brau, J. Troy Carpenter

Faculty Publications

The purpose of this paper is to provide a direct test of the small-firm uniqueness hypothesis advanced by Ang (1991). We do this by using the SB-IPO program of the SEC as our instrument to define a small firm. Having identified small firms, we test the three IPO anomalies to see if small firms differ from large firms along these dimensions. We find that SB IPOs experience the three anomalies; however, they do so in disparate ways than mainline IPOs do. In sum, we provide support for the small firm uniqueness hypothesis.

Financial Literacy, Financial Education And Economic Outcomes, Justine S. Hastings, Brigitte C. Madrian, William L. Skimmyhorn

Faculty Publications

In this article we review the literature on financial literacy, financial education, and consumer financial outcomes. We consider how financial literacy is measured in the current literature, and examine how well the existing literature addresses whether financial education improves financial literacy or personal financial outcomes. We discuss the extent to which a competitive market provides incentives for firms to educate consumers or offer products that facilitate informed choice. We review the literature on alternative policies to improve financial outcomes, and compare the evidence to evidence on the efficacy and cost of financial education. Finally, we discuss directions for future research.

What Goes Up Must Come Down? Experimental Evidence On Intuitive Forecasting, John Beshears, James J. Choi, Andreas Fuster, David Laibson, Brigitte C. Madrian

Faculty Publications

Do laboratory subjects correctly perceive the dynamics of a mean-reverting time series? In our experiment, subjects receive historical data and make forecasts at different horizons. The time series process that we use features short-run momentum and long-run partial mean reversion. Half of the subjects see a version of this process in which the momentum and partial mean reversion unfold over 10 periods (‘fast’), while the other subjects see a version with dynamics that unfold over 50 periods (‘slow’). Typical subjects recognize most of the mean reversion of the fast process and none of the mean reversion of the slow process.

Hello, Is Anybody There? Corporate Accessibility For Minority Shareholders As A Signal Of Agency Problems In China, Xiaofeng Zhao

Lingnan Theses

My thesis examines whether corporate accessibility for minority shareholders, defined as the ease with which minority shareholders are able to contact corporate insiders, can be a signal of the severity of a firm’s agency problems. Using Chinese public listed firms as the testing group, I find that accessible firms are associated with less serious agency problems than is the case for non-accessible firms. Specifically, accessible firms tend to be associated with lower agency costs, lower cost of equity, higher firm valuation, and better operating performance. I also find that accessibility can signal agency problems in firms with different ownership and …

The Role Of Credit Ratings On Capital Structure And Its Speed Of Adjustment In Bank-Oriented And Market-Oriented Economies, Michal Wojewodzki

Lingnan Theses

This study investigates both the direct and indirect roles of credit ratings (CR) on the capital structures of 1,513 firms operating in 19 countries with different financial orientations and levels of economic development over the 20-year period (1991-2010).

Until recently, it has been common place to classify countries into capital market-based oriented (MB) and bank-based oriented (BB) in terms of their financial systems’ orientation (Antoniou et al. 2008). Traditionally, in MB economies (Australia, Canada, Hong Kong, South Korea, Mexico, the Netherlands, Sweden, Switzerland, Thailand, the U.K., and the U.S.) having a CR helps firms issue equity or bonds. In contrast, …

Ipos And The Slow Death Of Section 5, Donald C. Langevoort, Robert B. Thompson

Georgetown Law Faculty Publications and Other Works

Since its enactment, Section 5 of the Securities Act of 1933 has restricted sales-based communications with investors, but that effort is nearly dead even with respect to the most sensitive of offerings, the IPO. Our paper traces that devolution, which began almost as soon as the ’33 Act came into existence, though the SEC’s 2005 deregulatory reforms and Congress’ intervention in the JOBS Act of 2012. We show how much of this related to an embrace of “book-building” as the industry’s preferred method of price discovery, which requires private two-way communications between underwriters and potential sophisticated investors. But book-building (and …