Business Commons^™

The Impact Of Augmenting Traditional Instruction With Technology-Based, Experiential Exercise, David R. King, William W. Jennings

Management Faculty Research and Publications

Traditional instruction, under an experiential learning model, is neither the sole nor a sufficient means of learning. Learning systems that engage students as contributors to learning offer opportunities for educators. The availability of technology to support experiential exercises represents one opportunity to augment traditional instruction. In a quasi-experiment, traditional-only instruction was compared with traditional instruction augmented with a technology-based, experiential exercise. The two instructional methods were evaluated based on student learning, intended behavior, and satisfaction. Our findings suggest that augmented instruction significantly increased student learning and satisfaction. The implications for students are clear. However, there are also noteworthy implications for …

The Mutual Find Scandal: A Day Trading Simulation, Matt Becker

Presidential Scholars Theses (1990 – 2006)

The 6.9 trillion dollar mutual fund industry has come under fire due to questionable practices conducted by mutual fund companies. Individual investors trying to diversify with a small amount of money have historically turned to mutual funds. Mutual funds were used as a safe vehicle for investors rather than buying thirty different stocks in order to diversify away unsystematic risk. The perception that mutual fund companies were acting in the best interests of individual investors has been challenged in the past year. Elliot Spitzer, the New York Attorney General, brought to light some illegal and highly questionable activities of mutual …

The Mitigation Of Asymmetric Information Through The Use Of Earnouts, David Robert Beard

LSU Doctoral Dissertations

We examine the use of a contracting method in mergers and acquisitions known as an earnout. In this type of transaction, the bidder agrees to pay the target an initial amount for the acquisition plus future payments contingent on the achievement of performance milestones. Theory suggests that the contingent payment associated with earnouts should reduce adverse selection problems facing both parties in the merger. The purpose of this dissertation is to study the ability of earnouts to mitigate problems associated with asymmetric information and problem of agency. Specifically, we answer the following questions in analyzing these transactions. First, empirical evidence …

Asymptotic And Numerical Solutions For Diffusion Models For Compounded Risk Reserves With Dividend Payments, Sally S. L. Shao, C. L. Chang

Mathematics and Statistics Faculty Publications

We study a family of diffusion models for compounded risk reserves which account for the investment income earned and for the inflation experienced on claim amounts. We are interested in the models in which the dividend payments are paid from the risk reserves. After defining the process of conditional probability in finite time, martingale theory turns the nonlinear stochastic differential equation to a special class of boundary value problems defined by a parabolic equation with a nonsmooth coefficient of the convection term. Based on the behavior of the total income flow, asymptotic and numerical methods are used to solve the …

Re-Examining Venture Capitalist Certification And Insider Selling Decisions During The 1990s., Nicholas S. Koshiw

University Avenue Undergraduate Journal of Economics

This paper addresses the validity of certification and insider selling hypotheses within the context of new issues. Comparisons of venture capital backed and non venture-backed issues with similar offering characteristics show that issuers with venture capital affiliation are more underpriced than non venture-backed IPOs and insider selling results in decreased underpricing. These results contradict the findings of previous venture capital certification studies {Barry (1990), Megginson and Weiss (1991), and Lin and Smith (1997)}, but are consistent with recent work that examines grandstanding {Lee and Wahal (2002)} and insider selling decisions during hot market periods {Ljungqvist and Wilhelm (2003)}.

Campbell Soup Company In 2004 (A), Roger R. Schnorbus

Robins School of Business White Paper Series, 1980-2022

As fiscal 2004[1] began, Doug Conant, the President and CEO of the Campbell Soup Company could take pride in the results of his 3-year transformation plan instituted in fiscal 2001 to revitalize the company. The key initiatives of the plan were to restore revenue and profitability growth and stimulate shareholder wealth.

Conant, who became President and CEO in January of 2001, called the plan, “the single most comprehensive commitment to revitalization ever undertaken in the 132-year history of Campbell Soup Company.”

The financial results achieved in fiscal 2002, the first year of the plan, were a mixed bag. Although net …

Book Review. The Price Of Progress: Public Services, Taxation And The American Corporate State, 1877-1929 By R. Rudy Higgens-Evenson, Ajay K. Mehrotra

Articles by Maurer Faculty

No abstract provided.

The Pricing And Performance Of Convertible Preferred Stock Offerings Following Issuance, Vitaly S. Guzhva

Electronic Theses and Dissertations

This dissertation is a comprehensive study of convertible-preferred-stock pricing and performance following issuance. It is the first major academic study that identifies significant abnormal performance of corporate contingent claims following issuance. The research utilizes both option-based contingent claims valuation models and econometric techniques to investigate the sources of superior investment performance of convertible securities as an asset class that has persisted for the past thirty years. Two main issues are examined: potential underpricing of convertible preferred stocks at issuance and their subsequent investment performance. Underpricing is examined based on a robust contingent-claims valuation model. Using two samples of convertible preferred …

Identifying The Potential Advantages And Disadvantages Of Creating A Separate Foundation For Development At The University Of Kentucky, David Shellhorse

MPA/MPP/MPFM Capstone Projects

Statement of Issue

The question of whether or not the University of Kentucky should create a legally independent, institutionally related foundation to receive, hold, invest, and administer the private gift support of the University has been an ongoing debate between UK administrators for many years. This study seeks to identify the potential advantages and disadvantages of creating such a foundation by: (1) conducting a qualitative analysis consisting of personal interviews with officials from the University of Kentucky, the University of Louisville, Western Kentucky University, and Murray State University; and (2) conducting a quantitative regression analysis to determine whether or not …

Estimates Of The Sensitivities Of The Value Of The Firm To Profitability, Growth, And Capital Intensity, Tom W. Miller, Richard E. Mathisen, John P. Mcallister

Faculty Articles

Value-based management systems concentrate on actions that generate value for the shareholders in the wealth creation process (Fisher 1995; Lieber 1996; Walbert 1994). This study focuses explicitly on profitability, growth, and capital intensity as drivers of the value of the firm by extending a free cash flow valuation model for the firm. The extended model is used to provide information about the sensitivities of the value of the firm to changes in the firm's profitability, growth, and capital intensity. These sensitivities are presented in terms of partial derivatives and dollar changes. The partial derivatives show the changes in the value …

Health Insurance, Labor Supply, And Job Mobility: A Critical Review Of The Literature, Jonathan Gruber, Brigitte C. Madrian

Faculty Publications

This paper provides a critical review of the empirical literature on the relationship between health insurance, labor supply, and job mobility. We review over 50 papers on this topic, almost exclusively written in the last 10 years. We reach five conclusions. First, there is clear and unambiguous evidence that health insurance is a central determinant of retirement decisions. Second, there is fairly clear evidence that health insurance is not a major determinant of the labor supply and welfare exit decisions of low income mothers. Third, there is fairly compelling evidence that health insurance is an important factor in the labor …

Risky Loss Distributions And Modeling The Loss Reserve Pay-Out Tail, J. David Cummins, James B. Mcdonald, Craig B. Merrill

Faculty Publications

Although an extensive literature has developed on modeling the loss reserve runoff triangle, the estimation of severity distributions applicable to claims settled in specific cells of the runoff triangle has received little attention in the literature. This paper proposes the use of a very flexible probability density function, the generalized beta of the 2nd kind (GB2) to model severity distributions in the cells of the runoff triangle and illustrates the use of the GB2 based on a sample of nearly 500,000 products liability paid claims. The results show that the GB2 provides a significantly better fit to the severity data …

For Better Or For Worse: Default Effects And 401(K) Savings Behavior, James J. Choi, David Laibson, Brigitte C. Madrian, Andrew Metrick

Faculty Publications

Seemingly minor changes in the way a choice is framed to a decision maker can generate dramatic changes in behavior. Automatic enrollment provides a clear example of such effects. Under automatic enrollment (also called negative election), employees are automatically enrolled in their company’s 401(k) plan unless the employees elect to opt out of the plan. This contrasts with the usual arrangement in which employees must actively choose to participate in their employer’s 401(k).

Microfinance: A Comprehensive Review Of The Existing Literature, James C. Brau, Gary M. Woller

Faculty Publications

Although the word finance is in the term microfinance, and the core elements of microfinance are those of the finance discipline, microfinance has yet to break into the mainstream or entrepreneurial finance literature. The purpose of this article is to introduce the finance academic community to the discipline of microfinance and microfinance institutions (MFIs). We provide a comprehensive review of over 350 articles and address the issues of MFI sustainability, products and services, management practices, clientele targeting, regulation and policy, and impact assessment.

Do Venture Capitalists Add Value To Small Manufacturing Firms? An Empirical Analysis Of Venture And Nonventure Capital-Backed Initial Public Offerings, James C. Brau, Richard A. Brown, Jerome S. Osteryoung

Faculty Publications

We examine a set of small, venture capital (VC)-backed manufacturing firms and compare it to a control sample of nonVC-backed manufacturing firms going public between 1990 and 1996. We use the degree of underpricing, three-year sales growth, three-year cumulative stock return, and three-year survivability as measures of success. First, we test if the presence of VC backing results in significant differences in success between the two samples. Next, we test if certain VC and deal characteristics are discriminators within the VC-backed sample of firms. Despite previous literature, which argues for either inferior or superior VC post-initial public offering (IPO) performance, …

Plan Design And 401(K) Savings Outcomes, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

We assess the impact of 401(k) plan design on four different 401(k) savings outcomes: participation in the 401(k) plan, the distribution of employee contribution rates, asset allocation, and cash distributions. We show that plan design can have an important effect on all of these savings outcomes. This suggests an important role for both employers in determining how to structure their 401(k) plans and government regulators in creating institutions that encourage or discourage particular aspects of 401(k) plan design.

An Empirical Analysis Of Internal Control Weaknesses Under Sas No. 78: An Examination Of State Audit Reports, Edmund J. Boyle, Steven M. Cooper, Marshall A. Geiger

Accounting Faculty Publications

While there has been a considerable amount of research regarding internal control over the past several years, scant empirical research has examined SAS No. 78's integrated five-component depiction of internal control in a government setting. In particular, to our knowledge, no study has assessed the types or frequency of weaknesses under the SAS No. 78 framework using actual internal control system findings. In this study, we examine 32 state department and agency internal control reports to assess how well the theoretical framework captures actual system weaknesses, and to determine the relative distribution of weaknesses across components of the framework.

Our …

Do Out-Of-State Buyers Pay More For Real Estate? An Examination Of Anchoring-Induced Bias And Search Costs, Val E. Lambson, Grant R. Mcqueen, Barrett A. Slade

Faculty Publications

We explore the questions of whether and why out-of-state buyers pay more for real estate than their in-state counterparts. Theoretically, we develop a model capable of explaining a premium if out-of-state buyers have high search costs, upwardly biased beliefs about prices or an unusually short time horizon to purchase. Empirically, we find that out-of-state buyers pay a statistically significant and economically meaningful premium for apartment complexes in the Phoenix area. We also find some evidence consistent with the premium being driven by high search costs, biased beliefs (anchoring) and haste associated with out-of-state buyers.

Employee Stock Purchase Plans, Gary V. Engelhardt, Brigitte C. Madrian

Faculty Publications

Employee stock purchase plans (ESPPs) are designed to promote employee stock ownership broadly within the firm and provide another tax-deferred vehicle for individual capital accumulation in addition to traditional pensions, 401(k)s, and stock options. We outline the individual and corporate tax treatment of ESPPs and the circumstances under which ESPPs will be preferred to cash compensation from a purely tax perspective. We then examine empirically ESPP participation using administrative data from 1997-2001 for a large health services company that employs approximately 30,000 people. The picture that emerges from the analysis of these data suggests that there is substantial non-participation in …

The Effect Of Transaction Size On Off-The-Run Treasury Prices, David F. Babbel, Craig B. Merrill, Mark F. Meyer, Meiring De Villiers

Faculty Publications

A price pressure effect is implied by segmentation in the market for a security. An empirical property of a segmented market is that the price of the security is sensitive to supply and demand conditions for that specific security, absent changes in risk and absent any new information. This paper examines intra-day trading data from the inter-dealer broker market for U.S. Treasury securities and finds that there is a price pressure effect in the off-the-run Treasury market. Thus, securities that would appear to be very close substitutes, i.e., on-the-run and off-the-run Treasury bonds, behave as if there is some degree …

The Interrelations Between Investor Beliefs, Information And Market Liquidity, Stephanie Yates Rauterkus

LSU Doctoral Dissertations

I use two datasets to test the relation between trading volume, the heterogeneity of beliefs and the heterogeneity of belief revisions. The first dataset allows me to construct two groups that proxy for ‘holders’ and ‘non-holders’ of a traded asset. This construct allows me to test the relation between changes in trading volume and changes in the dispersion of beliefs both within and across these two groups. I examine changes in within- and across-group dispersion separately and simultaneously. The second dataset allows me to examine belief revisions more closely by analyzing only those prior and posterior beliefs surrounding an information …

Divergent Opinions And The Performance Of Value Stocks, John A. Doukas, Chansog Francis Kim, Christos Pantzalis

Finance Faculty Publications

Divergence of opinions among investors, manifested in the dispersion of analysts' earnings forecasts, may play an important role in asset pricing. This article reports tests of whether disagreement can explain the cross-sectional return difference between value and growth (or "glamour") stocks in the U.S. market over the 1983-2001 period. Consistent with the theoretical proposition that stocks subject to greater investor disagreement earn higher returns, the tests found value stocks to be exposed to greater investor disagreement than growth stocks. This finding suggests that the return advantage of value strategies is a reward for the greater disagreement about their future growth …

Short Interests In Real Estate Investment Trusts, Deqing Diane Li, Kenneth Yung

Finance Faculty Publications

We examine short interests in equity real estate investment trusts (REITs) between 1994 and 2001. Our results show that only high levels (the 90th percentile) of short interest are associated with significant negative REIT returns as the bearish content of short interest may have been mitigated by the favorable risk characteristics of real estate securities. In addition, the significant negative relationship between short interest and REIT returns applies only to REITs with poor performance. The result implies that the bearish sentiment of short interest could aslo be mitigated by good REIT managers in a real estate market that is informationally …

Building A Better World, Pierre Landell-Mills

Human Rights & Human Welfare

A review of:

The Global New Deal: Economic and Social Rights in World Politics by William Felice. Lanham, MD: Rowman & Littlefield, 2002. 204pp.

Market Reaction To The Expiration Of Ipo Lockup Provisions, James C. Brau, David A. Carter, Stephen E. Christophe, Kimberly G. Key

Faculty Publications

Initial public offering (IPO) lockup agreements prevent insider sale of shares for specified periods of time (often 180 days). This study investigates share price reactions at and around the time the lockup agreements expire. Results indicate statistically significant negative abnormal returns in the event window surrounding the expiration date. The results are consistent with informational asymmetries and decreasing incentive alignment between insiders and general shareholders. In addition, multivariate analysis identifies several variables that help explain these abnormal returns.

Privatizing Telecoms And Residual State Influence On Financial Performance, Burkhard N. Schrage, Paul M. Vaaler

Research Collection Lee Kong Chian School Of Business

We test competing theoretical perspectives explaining likely shareholder returns from material investment decisions announced by privatizing telecommunications firms (telecoms) with varying levels of residual state ownership. A principal-agent perspective suggests that decrease in residual state ownership in privatizing telecoms leads to more positive shareholder returns. Over time, this effect increases. An alternative credible privatization perspective suggests that retention of substantial (though not controlling) residual state ownership leads to more positive shareholder returns, but only in the short run. Over time this ownership effect fades quickly. We examine empirical support for these competing perspectives with an event study analyzing cumulative abnormal …

Price Rounding And Bid-Ask Spreads Before And After The Decimalization, Yan He, Chunchi Wu

Research Collection Lee Kong Chian School Of Business

We investigate price rounding before and after the pilot decimalization on the NYSE. We find that although rounding exists in transaction, bid, and ask prices in both the pre- and postdecimalization periods, it becomes less salient after the decimalization. The cross-sectional relationship between rounding and trading variables is similar before and after the decimalization, and so is the relationship between execution costs and rounding when trading variables are held constant. More importantly, the quoted and effective bid–ask spreads decrease after decimal trading, and this decrease can be ascribed to the decrease in rounding frequency after controlling for the changes in …

Initial Public Offerings: An Analysis Of Theory And Practice, James C. Brau, Stanley E. Fawcett

Faculty Publications

We survey 336 CFOs to compare practice to theory in the areas of IPO motivation, timing, underwriter selection, underpricing, signaling, and the decision to remain private. We find the primary motivation for going public is for acquisition purposes. CFOs base IPO timing on overall market conditions, are well-informed regarding expected underpricing, and feel underpricing compensates investors for taking risk. The most important positive signal is past historical earnings, followed by underwriter certification. CFOs have divergent opinions about the IPO process depending on firm-specific characteristics. Finally, we find the main reason for remaining private is to preserve decision-making control and ownership.

Asset Pricing Theory And The Valuation Of Canadian Paintings, Douglas J. Hodgson, Keith Vorkink

Faculty Publications

The valuation of Canadian paintings is analysed empirically. Using a sample of auction prices for major Canadian painters for the period 1968–2001, we run hedonic regressions to analyse the influence of various factors, including painter identity, on auction prices, as well as to construct a market price index. This index is used in a second-stage analysis in which we analyse the properties of Canadian art viewed as an investment asset. We apply standard asset pricing theory, as incorporated in the capital asset pricing model (CAPM), to the analysis of price movements in the market for Canadian paintings.

Whence Garch? A Preference-Based Explanation For Conditional Volatility, Grant Mcqueen, Keith Vorkink

Faculty Publications

We develop a preference-based equilibriumasset pricing model that explains low frequency conditional volatility. Similar to Barberis, Huang, and Santos (2001), agents in our model care about wealth changes, experience loss aversion, and keep a mental scorecard that a¤ects their level of risk aversion. A new feature of our model is that when perturbed by unexpected returns, investors become temporarily more sensitive to news. Gradually, investors become accustomed to the new level of wealth, restoring prior levels of risk aversion and news sensitivity. The state-dependent sensitivity to news creates the type of volatility clustering found in low frequency stock returns. We …