Corporate Finance Commons^™

When Vertical Is Horizontal: How Vertical Mergers Lead To Increases In “Effective Concentration”, Serge Moresi, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

This article explains the inherent loss of an indirect competitor and reduction in competition when a vertical merger raises input foreclosure concerns. We then calculate a measure of the effective increase in the HHI measure of concentration for the downstream market, and we refer to this “proxy” measure as the “dHHI.” We derive the dHHI measure by comparing the pricing incentives and associated upward pricing pressure (“UPP”) involved in two alternative types of acquisitions: (i) vertical mergers that raise unilateral input foreclosure concerns (and the associated vertical GUPPI measures), and (ii) horizontal acquisitions of partial ownership interests among …

Pricing Climate Change Risk In Corporate Bonds, Elsa Allman

Publications and Research

This paper examines whether corporate bondholders price climate change risk. I find that firms exposed to higher sea level rise (SLR) across U.S. branch locations pay a premium when issuing bonds. Specifically, a one standard deviation increase in a firm’s SLR exposure is associated with a 2% increase of average yield spreads equivalent to 4 basis points. This effect is more pronounced for firms in industries vulnerable to extreme weather conditions, which are less spatially diversified, and issuing bonds with maturities ranging from 5 to 10 years. In addition, I find no evidence that credit rating agencies account for SLR …

Regulatory Impacts On U.S. Financial Institutions, Ngeyan Almutairi

LSU New Orleans Theses and Dissertations

In this paper, I examine data from 2000 to 2019 to assess the impact of banks’ regulations on the U.S. financial institutions’ performance. The first essay examines the impact of the Dodd-Frank Act on the U.S. banking industry. The findings show that the Dodd-Frank Act has a negative impact on banks’ profits, efficiency, solvency and cost of intermediation, the effect is stronger for smaller banks. The act shrinks the advantage of banks that are members of bank holding company compared to standalone banks. Capital requirements are associated with higher profitability, efficiency, and cost of intermediation, while assets liquidity ratio has …

Stock Market Drivers: Corporate Share Repurchases, Parker Wolf

Business and Economics Honors Papers

Such financial tools as share buybacks are coming under scrutiny by many investment experts. Evidence suggests that share repurchases foster a short-term focus in corporate managers who have a share-based compensation. Recent studies and research draw attention to the negative consequences of corporate share repurchases. While share buybacks were originally intended to create financial value for intrinsically undervalued shares, they are increasingly coming under scrutiny for enabling shareholders to increase their value of wealth at the expense of other stakeholders. With increased stock option plans for corporate executives, the association between increase in open market share buyback activity and compensation …

Shattering Glass Ceilings: Where Are All Of The Women In Finance?, Rebecca Schubach

Business and Economics Honors Papers

At a time when women are equally represented in professional fields such as medicine and academia, the finance industry is still facing a lack of gender diversity, most notability at the C-Suite level. Statistics on the paucity of women paint a bleak picture, despite the fact that women are awarded majority of undergraduate and graduate degrees in the United States, a reversal from just one generation ago. This begs the question, what is deterring women from a career in finance? Are compensation discrepancies at play? This paper seeks to examine if being a female truly penalizes a woman in regards …

Guarantees And Capital Infusions In Response To Financial Crises B: U.S. Guarantees During The Global Financial Crisis, June Rhee, Andrew Metrick

Journal of Financial Crises

During 2008-09, the federal government extended multiple guarantee programs in an effort to restore the financial market and contain the panic and crisis in the market. For example, the Treasury provided a temporary guarantee program for the money market funds, the FDIC decided to stand behind certain debts and non-interest-bearing transaction accounts, and the Treasury, the FDIC, and the Federal Reserve agreed to share losses in certain assets belonging to Citigroup. This case reviews these guarantee programs implemented during the global financial crisis by the government and explores the different rationale that shaped certain design features of each program.

Stock Liquidity Of Malaysian Public Listed Firms, Yee Ee Chia

Student Works (2020-2029)

This thesis is motivated by the limited research on the liquidity of Malaysian public listed firms, the growing number of liquidity horseraces, the recent data commercialization by Bursa Malaysia, and liquidity-enhancing policies being spearheaded mainly by stock exchange regulators in emerging markets. By assembling information that covers 1250 public listed non-financial firms over 2000–2015, the thesis conducts three empirical analyses on the determinants of firm liquidity and the effects of higher liquidity on firm valuation, where liquidity is proxied by the “Closing Percent Quoted Spreads” (CPQS). First, the thesis revisits the standard liquidity model and advocates the inclusion of shareholder …

The Impact Of American Economic Aid On Post-World War Ii Germany, Gabriella Barber, Emily T. Carlstrom

Senior Theses

This paper examines the state of Germany immediately after World War II, describing how the American government intervened in West German reconstruction. It analyzes three specific German companies that overcame hardship in the 1940s and 50s and have become powerhouses today. Additionally, an overview of the current German economy shows how the country is positioned as a world leader.

Research was conducted using literary print sources, scholarly internet databases, and a formal interview with Klaus Becker, Honorary Consul to Germany. He is a German-American businessman who has held roles in several non-political associations, including President of the Charlotte World Trade …

The Quonset Economic Impact, Edinaldo Tebaldi

Economics Faculty Journal Articles

This report provides a data-driven and comprehensive assessment of the economic impact and tax incidence implications of economic activities at the Quonset Business Park.

Basel Iii G: Shadow Banking And Project Finance, Christian M. Mcnamara, Andrew Metrick

Journal of Financial Crises

The Net Stable Funding Ratio (NSFR), a liquidity standard introduced by Basel III, seeks to promote a better match between the liquidity of a bank’s assets and the manner in which the bank funds those assets. The NSFR requires banks to maintain a minimum amount of funding deemed “stable” by the Basel framework based on the liquidity of the banks’ assets and activities over a one-year timeframe. One of the areas seen as most affected by this development may be bank participation in project finance for infrastructure development. Since the global demand for infrastructure development remains robust, the shadow banking …

Basel Iii F: Callable Commercial Paper, Christian M. Mcnamara, Rosalind Bennett, Andrew Metrick

Journal of Financial Crises

One of the Basel Committee on Banking Supervision’s responses to the global financial crisis of 2007-09 was to introduce the Liquidity Coverage Ratio (LCR), a short-term measure that evaluates whether a bank has enough liquidity to meet expected cash outflows during a 30-day stress scenario. One area in which this incentive has already resulted in changed practices is in the market for commercial paper. Banks often provide backup liquidity facilities to the issuers of commercial paper that the issuers can draw upon to repay a maturing issue of commercial paper if they are unable to sell a new issue to …

Basel Iii D: Swiss Finish To Basel Iii, Christian M. Mcnamara, Natalia Tente, Andrew Metrick

Journal of Financial Crises

After the Basel Committee on Banking Supervision (BCBS) introduced the Basel III framework in 2010, individual countries confronted the question of how best to implement the framework given their unique circumstances. Switzerland, with a banking industry that is both heavily concentrated and very large relative to the size of its overall economy, faced a special challenge. It ultimately adopted what is sometimes referred to as the “Swiss Finish” to Basel III—enhanced requirements applicable to Switzerland’s “too-big-to-fail” banks Credit Suisse and UBS that go beyond the base requirements established by the BCBS. Yet the prominent role played by relatively new contingent …

Basel Iii B: Basel Iii Overview, Christian M. Mcnamara, Michael Wedow, Andrew Metrick

Journal of Financial Crises

In the wake of the financial crisis of 2007-09, the Basel Committee on Banking Supervision (BCBS) faced the critical task of diagnosing what went wrong and then updating regulatory standards aimed at preventing it from occurring again. In seeking to strengthen the microprudential regulation associated with the earlier Basel Accords while also adding a macroprudential overlay, Basel III consists of proposals in three main areas intended to address 1) capital reform, 2) liquidity standards, and 3) systemic risk and interconnectedness. This case considers the causes of the 2007-09 financial crisis and what they suggest about weaknesses in the Basel regime …

Jpmorgan Chase London Whale Z: Background & Overview, Arwin G. Zeissler, Rosalind Bennett, Andrew Metrick

Journal of Financial Crises

In December 2011, the Chief Executive Officer and Chief Financial Officer of JPMorgan Chase (JPM) instructed the bank’s Chief Investment Office to reduce the size of its Synthetic Credit Portfolio (SCP) during 2012, so that JPM could decrease its Risk-Weighted Assets as the bank prepared to adopt the impending Basel III bank capital regulations. However, the SCP traders were also told to minimize the trading costs incurred to reduce Risk-Weighted Assets, while still maintaining the opportunity to profit from unexpected corporate bankruptcies. In an attempt to balance these competing objectives, head SCP derivatives trader Bruno Iksil suggested in January 2012 …

Underpricing In The Fintech Industry Compared To Non-Fintech Ipos, Kelsey A. Goss

Honors Undergraduate Theses

In this thesis, I investigate the amount of underpricing in FinTech companies compared to non-FinTech companies. Both data sets contain thirty companies spanning from 1993 to 2018. Each FinTech company is matched to a non-FinTech company by year and comparatively similar revenue. Prior research explores underpricing on different industries, but it hasn’t yet explored underpricing in the FinTech segment. The variables considered in this paper are offer price, close price, shares offered, number of banks involved, fees per share, and money left on the table. I find some evidence that the average amount of underpricing in both dollars and by …

Ireland And Iceland In Crisis C: Iceland’S Landsbanki Icesave, Arwin G. Zeissler, Thomas Piontek, Andrew Metrick

Journal of Financial Crises

At year-end 2005, almost all of the total assets of Iceland’s banking system were concentrated in just three banks (Glitnir, Kaupthing, and Landsbanki). These banks were criticized by certain financial analysts in early 2006 for being overly dependent on wholesale funding, much of it short-term, that could easily disappear if creditors’ confidence in these banks faltered for any reason. Landsbanki, followed later by Kaupthing and then Glitnir, responded to this criticism and replaced part of their wholesale funding by using online accounts to gather deposits from individuals across Europe. In Landsbanki’s case, these new deposits were marketed under the name …

Political Connections And The Value Of Cash Holdings, Yuanto Kusnadi

Research Collection School Of Accountancy

This study examines how political connections influence the value of cash holdings in an international setting. The main finding reveals that political connections are not associated with the value of cash holdings in the overall sample. However, further analysis demonstrates that political connections are negatively associated with the value of cash holdings for firms inemerging markets and in countries with high levels of corruption. Moreover, the negative valuation of cash holdings is driven by firms that are connected through large shareholders. Overall, the findings provide new insights into the value relevance of cash holdings, especially for politically connected firms.

Jpmorgan Chase London Whale H: Cross-Border Regulation, Arwin G. Zeissler, Andrew Metrick

Journal of Financial Crises

As a global financial service provider, JPMorgan Chase (JPM) is supervised by banking regulatory agencies in different countries. Bruno Iksil, the derivatives trader primarily responsible for the $6 billion trading loss in 2012, was based in JPM’s London office. This office was regulated both by the Office of the Comptroller of the Currency (OCC) of the United States (US) and by the Financial Services Authority (FSA), which served as the sole regulator of all financial services in the United Kingdom (UK). Banking regulators in the US and the UK have entered into agreements with one another to define basic parameters …

Jpmorgan Chase London Whale D: Risk-Management Practices, Arwin G. Zeissler, Andrew Metrick

Journal of Financial Crises

JPMorgan Chase (JPM) prided itself on having the best risk-management practices in the financial industry, having survived the 2007-09 financial crisis in better shape than many competitors. Chief Executive Officer Jamie Dimon often spoke of the bank’s “fortress balance sheet.” A keen focus on risk management is vital to JPM’s longevity, as is the case with all highly leveraged financial institutions. However, the JPM Task Force that investigated the $6 billion 2012 London Whale trading loss concluded that risk-management practices at the bank’s Chief Investment Office (CIO), the unit in which the loss occurred, were given less scrutiny by senior …

Jpmorgan Chase London Whale C: Risk Limits, Metrics, And Models, Arwin G. Zeissler, Andrew Metrick

Journal of Financial Crises

Value at Risk (VaR) is one of the most commonly used ways to measure and monitor market risk. At JPMorgan Chase (JPM), very large derivative positions established by Bruno Iksil in the Synthetic Credit Portfolio (SCP) caused the bank’s Chief Investment Office (CIO) to exceed its VaR limit for four days in a row in January 2012. In response, the CIO changed to a new VaR model on January 30, which appeared to immediately reduce VaR by half. However, JPM soon discovered that this new VaR model had not been properly implemented and the bank went back to using the …

Marginal Cost Of Risk-Based Capital And Risk-Taking, Tao Chen, Jing Rong Goh, Shinichi Kamiya, Pingyi Lou

Research Collection School Of Economics

We explore the impact of capital adequacy requirements on financial institutions' risk-taking behavior from a novel perspective. Specifically, we show that an important feature of the risk-based capital (RBC) system a built-in diversification benefit in aggregating risk categories induces moral hazard. We find that insurers that face lower marginal RBC costs of fixed-income (FI) investment tend to purchase riskier Fl securities. This relationship holds even when lower marginal RBC costs result from increased risk in other risk categories, which is an unintended consequence of the RBC's square root rule. Using Hurricanes Katrina and Sandy as exogenous shocks to the RBC …

“Because I Care I Risk”: How Ceo Free Market Orientation Affects The Extent And Type Of Income Smoothing, Mirzokhidjon S. Abdurakhmonov

Graduate Theses and Dissertations

The executive political ideology literature suffers from a lack of conceptual clarity because social and economic issues are conflated. This has created an inconsistency in empirical findings with the theoretical predictions of the political ideology construct. In this dissertation, I identify a distinct economic component, free market orientation, based on support for economic individualism, competition, and property rights to reconcile these inconsistencies. Specifically, I argue that these indicators of free market orientation will have a unique impact on the way executives run their organizations. I develop a novel scale that measures CEO economic values that I term free market orientation …

Hedge Funds In The Periphery: An Analysis Of Structures Influencing Fund Behavior In The Icelandic And Cypriot Financial Crises, Jameson K. Mah

Undergraduate Economic Review

Hedge funds are often viewed from a positive or negative lens in the public and academic forum. However, both of these perspectives neglect structuralist factors. This paper analyzes the effect of these antecedent economic, political, and legal structures. I argue that these structures are at the root of hedge fund behavior, particularly during financial crises. The financial crises of two peripheral countries, Iceland and Cyprus, are used as case studies to illustrate how hedge fund involvement diverges as a result of structural factors.

The Lehman Brothers Bankruptcy H: The Global Contagion, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

When Lehman Brothers filed for bankruptcy on September 15, 2008, it was the largest such filing in U.S. history and a huge shock to the world’s financial markets, which were already stressed from the deflated housing bubble and questions about subprime mortgages. Lehman was the fourth-largest U.S. investment bank with assets of $639 billion and its operations spread across the globe. Lehman’s clients and counterparties began to disclose millions of dollars of potential losses as they accounted for their exposures. But the impact of Lehman’s demise was felt well beyond its counterparties. Concern regarding its real estate assets, its large …

The Lehman Brothers Bankruptcy C: Managing The Balance Sheet Through The Use Of Repo 105, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

The Lehman Brothers court-appointed bankruptcy examiner produced a 2,200-page report detailing possible claims that the estate might pursue. The most surprising revelation of the report was that during its last year Lehman had relied heavily on an unusual financing transaction—Repo 105. The examiner concluded that Lehman’s aggressive use of Repo 105 transactions enabled it to remove up to $50 billion of assets from its balance sheet at quarter-end and to manipulate its leverage ratio so that it could report more favorable results. This case considers in-depth Lehman’s questionable use of Repo 105 transactions and its impact.

Venezuela Undermines Gold Miner Crystallex's Attempts To Recover On Its Icsid Award, Sam Wesson

Loyola of Los Angeles International and Comparative Law Review

No abstract provided.

What Drives Merger Waves? A Study Of The Seven Historical Merger Waves In The U.S., Katherine Ching

Scripps Senior Theses

Historically, merger and acquisition (or M&A) activity has occurred in cyclical patterns, forming what are known as “merger waves.” To date, there have been a total of seven waves. Though it is widely acknowledged that merger waves exist, there is no consensus on what drives these waves. Through both qualitative and quantitative analysis, this paper aims to determine the causes of merger waves and looks at those causes through two different lenses: the neoclassical view, which states that economic shocks cause merger waves, and the behavioral view, which states that increases in merger activity are due to managerial behavior and …

An Examination Of The Stock Market's Effect On Economic Inequality, Nicholas Golina

Williams Honors College, Honors Research Projects

The economic literature on economic inequality has shown that it can negatively impact aggregate demand because it indicates a higher concentration of wealth in the hands of the top 10% as opposed to the poor and middle class, who are more likely to consume. The literature has identified many factors that can lead to increasing inequality. The stock market could be one of those factors since it can either create an upward redistributive effect towards the top 10% or redistributive effect towards the middle class. This paper tested the effect of the stock market on inequality. This study contributes to …

Leveraged Buyouts: The Predictive Power Of Target Firm Characteristics, Yutao (James) Jiang

CMC Senior Theses

This paper utilizes a hazard model to predict the probability of leveraged buyout transactions for public firms. Rather than testing specific hypotheses, this paper incorporates all plausible predictors identified in existing literature to better delineate the effects of different characteristics. Largely confirming past results, I find that LBO transactions are more likely to occur for companies with more stable cash flows, less market visibility, lower market valuation, lower ownership concentration and lower costs of financial distress. By including LBO transactions from 1980 to September 2018, I find preliminary evidence that since the financial crisis of 2008 – 2009, private equity …

Essays On Capital Structure Of Nations, Giovanni Perez

LSU New Orleans Theses and Dissertations

No abstract provided.