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Full-Text Articles in Business

Real And Illusory Value Creation By Insurance Companies, David F. Babbel, Craig B. Merrill Jan 2005

Real And Illusory Value Creation By Insurance Companies, David F. Babbel, Craig B. Merrill

Faculty Publications

One of the fundamental tenets of financial economics is that insurance companies, just as other financial and non-financial firms, have a very strong incentive to maximize current shareholder value.1 This seemingly simple observation leads to a wide variety of managerial behavior.2 In this article we will review a simple decomposition of the value of an insurance company. The decomposition illuminates the motivation for a variety of strategies that can be observed in practice. These strategies run the gamut from accounting manipulation through risk transfer schemes to positive net present value (NPV) “project” selection. We will review these in some detail …

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Preferred Habitat For Liquidity In International Short-Term Interest Rates, Vladimir Valeryevich Kotomin Jan 2005

Preferred Habitat For Liquidity In International Short-Term Interest Rates, Vladimir Valeryevich Kotomin

Electronic Theses and Dissertations

U.S. money market securities have been found to exhibit behavior consistent with preferred habitat for liquidity around year-ends (Griffiths and Winters (1997, 2004)). In particular, repurchase agreement and commercial paper yields tend to increase when the security begins to mature across the end of the year, and return to normal levels after the year-end obligations have been paid but before the calendar year-end. The competing hypothesis, window dressing by financial intermediaries around disclosure dates, requires that the increase in yields be sustained until after the turn of the year. This study is aimed at finding whether the behavior of international …

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The Persistence Of Earnings And Corporate Governance In Ipo Firms, Mary F. Calegari, H. A. Maretno Jan 2005

The Persistence Of Earnings And Corporate Governance In Ipo Firms, Mary F. Calegari, H. A. Maretno

Faculty Publications

In this study, we investigate the earnings persistence in IPO firms by examining the two components of earnings: accruals and cash flows. We also analyze the impact of corporate governance on earnings and the two earnings components. In our comparison of the top and bottom quartiles based on the firms' earnings at the IPO year, we find that although the top quartile firms have a significantly positive accrual component in the IPO year, they eventually have the same negative accrual component of earnings as the bottom quartile firms in the second year after the IPO. In contrast, we find that …

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Use Tax Collections, Laura R. Ingraham, K. R. Nunez, L. M. Wright Jan 2005

Use Tax Collections, Laura R. Ingraham, K. R. Nunez, L. M. Wright

Faculty Publications

The article reports on a study which investigated the level of compliance with U.S. state use tax laws and the techniques employed by the states in order to enforce use tax. Most states utilize either of two forms of tax reporting and collection. These are: the introduction of a separate use tax form/return; or the use of a separate line on the state income tax return. It was observed that utilizing a separate line item on the state income tax return might cause a rise in the number of taxpayers.

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Legal Online Marketing Issues: The Opportunities And Challenges, Michael T. Zugelder Jan 2005

Legal Online Marketing Issues: The Opportunities And Challenges, Michael T. Zugelder

Finance Faculty Publications

This chapter will review several emerging issues associated with e-marketing from the perspective of Web sites including intellectual property, information management, and contracting. E-marketers in the years to come should not only consider the growing e-marketing opportunities but also be cognizant of the growing body of law governing marketing online. While the future may be bright and uniformity and fairness may prevail, current domestic and global law facing e-marketers is varied and the potential basis for liability. The law must be considered wherever e-marketers direct their efforts.

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Passive Decisions And Potent Defaults, James J. Choi, David Laibson, Brigitte C. Madrian, Andrew Metrick Jan 2005

Passive Decisions And Potent Defaults, James J. Choi, David Laibson, Brigitte C. Madrian, Andrew Metrick

Faculty Publications

Default options have an enormous impact on household choices. Such effects have now been extensively documented in the literature on 401(k) plans (Madrian and Shea 2001; Choi et al. 2002b, 2004). Defaults have been shown to affect participation, savings rates, rollovers, and asset allocation. For example, Choi et al. (2004) study three firms that use automatic enrollment. When employees at these firms are automatically enrolled in their 401(k) plan, only a tiny fraction opt out, producing participation rates exceeding 85 percent regardless of tenure. But when employees at these firms were not automatically enrolled, participation rates were significantly lower, ranging …

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Can Individual Investors Beat The Market?, Joshua D. Coval, David A. Hirshleifer, Tyler Shumway Jan 2005

Can Individual Investors Beat The Market?, Joshua D. Coval, David A. Hirshleifer, Tyler Shumway

Faculty Publications

We document strong persistence in the performance of trades of individual investors. The correlation of the risk-adjusted performance of an individual across sample periods is about 10 percent. Investors classified in the top performance decile in the first half of our sample subsequently outperform those in the bottom decile by about 8 percent per year. Strategies long in firms purchased by previously successful investors and short in firms purchased by previously unsuccessful investors earn abnormal returns of 5 basis points per day. These returns are not confined to small stocks nor to stocks in which the investors are likely to …

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Smooth Test For Density, Aurobindo Ghosh, Anil K Bera Jan 2005

Smooth Test For Density, Aurobindo Ghosh, Anil K Bera

Research Collection Lee Kong Chian School Of Business

Recently econometricians have shifted their attention from point and interval forecasts to density forecasts because at the heart of market risk measurement is the forecast of the probability density functions of various financial variables. In this paper, we propose a formal test for density forecast evaluation based on Neyman's smooth test procedure. Apart from accepting or rejecting the tested model, this approach provides specific sources (such as the location, scale and shape of the distribution) of rejection, thereby helping in deciding possible modifications of the assumed model. Our applications to S&P 500 returns indicate capturing time-varying volatility and non-gaussianity significantly …

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Early Decisions: A Regulatory Framework, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian Jan 2005

Early Decisions: A Regulatory Framework, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

We describe a regulatory framework that helps consumers who have difficulty sticking to their own long-run plans. Early Decision regulations help long-run preferences prevail by allowing consumers to partially commit to their long-run goals, making it harder for a momentary impulse to reverse past decisions. In the cigarette market, examples of Early Decision regulations include restricting the locations or times at which cigarettes are sold, delaying the receipt of cigarettes following purchase, and allowing a consumer to choose in advance the legal restrictions on her own cigarette purchases. A formal model of Early Decision regulations demonstrates that Early Decisions are …

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The Trading Volume Trend, Investor Sentiment, And Stock Returns, Yung-Chou Lei Jan 2005

The Trading Volume Trend, Investor Sentiment, And Stock Returns, Yung-Chou Lei

LSU Doctoral Dissertations

This dissertation relates the information contained in past trading volume to investor sentiment, and investigates its ability in predicting stock returns. Investor sentiment here refers to the enthusiasm of irrational investors on an asset, relative to that of rational investors. Motivated by Baker and Stein (2004) that an increase in trading volume reflects a rise in investor sentiment, I use the change in trading volume per unit of time, referring it as the trading volume trend, as a measure of investor sentiment on individual stocks. I document a negative and significant cross-sectional relation between the trading volume trend and stock …

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Is Fed Policy Still Relevant For Investors?, C. Mitchell Conover, Gerald R. Jensen, Robert R. Johnson, Jeffrey M. Mercer Jan 2005

Is Fed Policy Still Relevant For Investors?, C. Mitchell Conover, Gerald R. Jensen, Robert R. Johnson, Jeffrey M. Mercer

Finance Faculty Publications

Using 38 years of data, we show that U.S. monetary policy has had, and continues to have, a strong relationship with security returns. Specifically, we find that U.S. stock returns are consistently higher and less volatile during periods when the Federal Reserve is following an expansive monetary policy. Further, firms considered to be more sensitive to changes in monetary conditions, such as small firms and cyclicals, exhibit monetary-policy-related return patterns that are much more pronounced than average. Lastly, the influence of U.S. monetary policy is shown to be a global phenomenon, as international indices have return patterns similar to those …

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Real Exchange Rates Over The Past Two Centuries: How Important Is The Harrod-Balassa-Samuelson Effect?, James R. Lothian, Mark P. Taylor Dec 2004

Real Exchange Rates Over The Past Two Centuries: How Important Is The Harrod-Balassa-Samuelson Effect?, James R. Lothian, Mark P. Taylor

CRIF Working Paper series

Using data for 1820-2001 for the US, the UK and France, we test for the presence of real effects on the equilibrium real exchange rate (the Harrod-Balassa-Samuelson, HBS effect) in an explicitly nonlinear framework and allowing for shifts in real exchange rate volatility. A statistically significant HBS effect for sterling-dollar captures its long-run trend and explains some 40% of its variation. For both real exchange rates there is significant evidence of nonlinear mean reversion towards long-run equilibrium and downwards shifts in volatility corresponding closely to the classical gold standard and Bretton Woods periods.

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Front Matter, Journal Of Microfinance Dec 2004

Front Matter, Journal Of Microfinance

Journal of Microfinance / ESR Review

No abstract provided.

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Foreign Exchange Risk Management Practices Of Microfinance Institution, Peter R. Crabb Dec 2004

Foreign Exchange Risk Management Practices Of Microfinance Institution, Peter R. Crabb

Journal of Microfinance / ESR Review

Foreign exchange risk remains a significant problem for microfinance institutions (MFIs). Many sources of potential funding for MFIs remain untapped due to the high risks of currency devaluation faced by these funding sources. Specifically, debt capital is available for MFIs but foreign exchange risk is a potential deterrent. This paper reviews current practices in the management of foreign exchange risk for and by MFIs. The advantages and disadvantages of these practices are discussed and alternative practices proposed.

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Vol. 06 No. 2 Journal Of Microfinance, Journal Of Microfinance Dec 2004

Vol. 06 No. 2 Journal Of Microfinance, Journal Of Microfinance

Journal of Microfinance / ESR Review

No abstract provided.

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Impact Of Microfinance Programs On Children's Education: Do The Gender Of The Borrower And The Delivery Model Matter?, Nathalie Holvoet Dec 2004

Impact Of Microfinance Programs On Children's Education: Do The Gender Of The Borrower And The Delivery Model Matter?, Nathalie Holvoet

Journal of Microfinance / ESR Review

This article highlights the effects particular features of microfinance programs have on childhood education. Using data from a South India household survey, the article examines how microfinance impacts schooling and literacy, how credit enters the household, and who brings it in. Regression results show that, in the case of direct bank-borrower credit delivery, it does not matter whether credit enters the household through the mother or the father. However, large differences occur when mothers obtain credit through women's groups. Analysis indicates that combined financial and social-group intermediation leads to higher educational inputs and outputs, mainly for girls. Individual interviewis with …

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The Experience Of Financial Institutions In The Delivery Of Microcredit In The Philippines, Maria Abigail Carpio Dec 2004

The Experience Of Financial Institutions In The Delivery Of Microcredit In The Philippines, Maria Abigail Carpio

Journal of Microfinance / ESR Review

This paper identifies the characteristic features of the different financial market players involved in the delivery of microcredit in the Philippines and looks into their experiences in addressing the credit demand of the small-borrower market segment, particularly the microenterprise sector. This paper argues that each group of lenders, specifically commercial banks, rural banks, credit-granting NGOs, and an apex financial institution, allocates its funds by establishing its own criteria for assessing the creditworthiness of borrowers and its own mechanisms to avoid borrower default. The delivery of microcredit takes place within an environment where the different financial market players face their own …

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The Transformation Of The Microfinance Sector In India: Experiences, Options, And Future, M. S. Siriaram, Rajesh S. Upadhyayula Dec 2004

The Transformation Of The Microfinance Sector In India: Experiences, Options, And Future, M. S. Siriaram, Rajesh S. Upadhyayula

Journal of Microfinance / ESR Review

This paper discusses the growth and transformation of microfinance organizations (MFO) in India. Issues that have triggered transformation include size, diversity, sustainability, focus, and taxation. Transformation experiences in India are few. To move to the mainstream, non-governmental organizations (NGOs) choose from three popular forms of organizations: non-banking finance companies (NBFCs), banks, and cooperatives. It appears that there is no ideal path for spin-off. Regulatory changes are needed to allow MFOs to graduate to other legal forms as they grow organically. NGOs must be permitted to invest in the equity of MFOs, as is the case in Bolivia and Africa. Norms …

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Realizing Mission Objectives: A Promising Approach To Measuring The Social Performance Of Microfinance Institutions, Katarzyna Pawlak, Michal Matul Dec 2004

Realizing Mission Objectives: A Promising Approach To Measuring The Social Performance Of Microfinance Institutions, Katarzyna Pawlak, Michal Matul

Journal of Microfinance / ESR Review

This paper proposes a new approach for measuring the social performance of microfinance institutions. The key to developing sustainable social performance measurement (SPM) systems and practices is to consider their design from the perspective of the organizational mission. The fact that the SPM system is built on the organizational mission ensures its cost-effectiveness and facilitates its institutionalization. It not only stimulates an MFI to verify the fulfilment of its social mission and to innovate in the search for optimal solutions to address development needs in a given intervention context, but it also can improve its financial condition through client segmentation …

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Microleasing: The Grameen Bank Experience, Asif Dowla Dec 2004

Microleasing: The Grameen Bank Experience, Asif Dowla

Journal of Microfinance / ESR Review

Grameen Bank was the first microfinance institution (MFI) to introduce microleasing on a large scale. This paper provides a preliminary evaluation of Grameen's leasing program. Instead of providing a full-fledged impact assessment study, we examine the terms and conditions of the leasing program and evaluate its success in terms of outreach, repayment rate, and asset ownership.Analysis of program level data shows that the program is successful in terms of outreach and repayment performance. Through the program, poor men and women have become owners of power tillers, power looms, shallow machines, cellular phones, and even computers. The success of leasing suggests …

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Scoring Arrears At A Microlender In Bolivia, Mark Schreiner Dec 2004

Scoring Arrears At A Microlender In Bolivia, Mark Schreiner

Journal of Microfinance / ESR Review

Can scoring models help microlenders in poor countries as much as they have helped credit-card lenders in rich countries? This paper presents a scorecard that predicts the probability that loans from a microlender in Bolivia will have arrears of 15 days or more. Although arrears in microfinance depend on many factors difficult to include in scorecards, the paper shows that inexpensive, simple-to-collect data does have some predictive power. In micro-finance, scoring will not replace loan officers, but it can flag high-risk cases and act as a cross-check on loan officers' judgment.

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Inside Unlv, Erin O'Donnell, Carol C. Harter, Diane Russell, Jennifer Vaughan Dec 2004

Inside Unlv, Erin O'Donnell, Carol C. Harter, Diane Russell, Jennifer Vaughan

Inside UNLV

No abstract provided.

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Investing When Volatility Fluctuates, Leping Wang Dec 2004

Investing When Volatility Fluctuates, Leping Wang

Research Collection Lee Kong Chian School Of Business

No abstract provided.

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Penny Pricing And The Components Of Spread And Depth Changes, David K. Ding, K.H. Chuang, C. Chearoenwong Dec 2004

Penny Pricing And The Components Of Spread And Depth Changes, David K. Ding, K.H. Chuang, C. Chearoenwong

Research Collection Lee Kong Chian School Of Business

Recent studies show that decimal pricing led to significant reductions in the spread and depth on the NYSE. In this paper, we examine how the observed changes in the spread and depth can be attributed to different factors. We show that stocks with higher proportions of one-tick spreads and odd-sixteenth quotes, and more frequent trading before decimalization experienced larger declines in the spread and depth afterwards. We interpret this result as evidence of reduced binding constraints and increased price competition under decimal pricing. We also find that decimal pricing led to nontrivial changes in select stock attributes, and that these …

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Using The Wacc To Value Real Options, Tom Arnold, Timothy Falcon Crack Nov 2004

Using The Wacc To Value Real Options, Tom Arnold, Timothy Falcon Crack

Finance Faculty Publications

We present a real option valuation using the weighted average cost of capital (WACC). This is an alternative to risk-neutral real option valuation. Using the WACC involves a marginal increase in mathematical complexity, but it is easy to implement in a spreadsheet, and it is easy to present to management. Our analysis reveals, however, that because the real option valuation is immune to choices of admissible discount rates (as per Arnold and Crack 2003a), the critical issue is correct estimation of volatility, not choice of discount rate. We also point out that the natural and conservative tendency to overestimate risk …

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International Joint Ventures And Political Risk, Sundaram Janakiramanan, Lamba Asjeet S. Nov 2004

International Joint Ventures And Political Risk, Sundaram Janakiramanan, Lamba Asjeet S.

Research Collection Lee Kong Chian School Of Business

In recent years, a number of researchers have examined the existence and source of shareholder wealth effects around announcements of international joint ventures. The results of these studies are mixed with no clear answers as to when and why investors attach value to firms using joint ventures to enter overseas markets. In this context, we examine the shareholder wealth effects for 92 international joint venture announcements made by Australian firms during June 1988 - December 1997. We find that, on average, shareholders of firms announcing joint ventures realize an abnormal return of +1.65% over the two-day announcement period of days …

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Style Effects In The Cross-Section Of Stock Returns, Melvyn Teo, Sung-Jun Woo Nov 2004

Style Effects In The Cross-Section Of Stock Returns, Melvyn Teo, Sung-Jun Woo

Research Collection Lee Kong Chian School Of Business

Using CRSP stock and mutual fund data, we find strong evidence for reversals at the style level (e.g., large value, small growth, etc.). There are significant excess and risk-adjusted returns for stocks in styles characterized by the worst past returns and net inflows. We also find evidence for momentum and positive feedback trading at the style level. These value and momentum effects are driven neither by fundamental risk nor by stock-level reversals and momentum. Taken together, the results are consistent with the style-level positive feedback trading model of Barberis and Shleifer (2003).

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The Impact Of Regulation Fair Disclosure On Information Asymmetry And Trading: An Intraday Analysis, Chiraphol N. Chiyachantana, Christine X. Jiang, Nareerat Taechapiroontong, Robert A. Wood Nov 2004

The Impact Of Regulation Fair Disclosure On Information Asymmetry And Trading: An Intraday Analysis, Chiraphol N. Chiyachantana, Christine X. Jiang, Nareerat Taechapiroontong, Robert A. Wood

Research Collection Lee Kong Chian School Of Business

This study examines the impact of Regulation Fair Disclosure (FD) on liquidity, information asymmetry, and institutional and retail investors trading behavior. Our main findings suggest three conclusions. First, Regulation FD has been effective in improving liquidity and in decreasing the level of information asymmetry. Second, retail trading activity increases dramatically after earnings announcements but there is a significant decline in institutional trading surrounding earnings announcements, particularly in the pre‐announcement period. Last, the decline in information asymmetry around earnings announcements is closely associated with a lower participation rate in the pre‐announcement period and more active trading of retail investors after earnings …

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2004-2005 Revised Operating Budget: Southern University And A & M College, Southern University System. Office Of Finance & Administration. Oct 2004

2004-2005 Revised Operating Budget: Southern University And A & M College, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The 2004-2005 Operating Budget for the Southern University and A & M College Campus. Revised 10/2004.

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The Dynamics Of Market Entry: The Effects Of Mergers And Acquisitions On Entry In The Banking Industry, Allen N. Berger, Seth D. Bonime, Lawrence G. Goldberg, Lawrence J. White Oct 2004

The Dynamics Of Market Entry: The Effects Of Mergers And Acquisitions On Entry In The Banking Industry, Allen N. Berger, Seth D. Bonime, Lawrence G. Goldberg, Lawrence J. White

Faculty Publications

We study the dynamics of market entry following mergers and acquisitions (M&As) using banking industry data. The findings suggest that M&As are associated with statistically and economically significant increases in the probability of entry. The data suggest that M&As affect the proportion of the markets with entry by about 10-20%. These findings also suggest that entry may be part of an "external" effect of M&As that helps supply credit to some relationship-dependent small business borrowers. Our results are robust to the use of alternative econometric methods, changes in specifications of the exogenous variables, and alteration of the data samples.

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