Corporate Finance Commons^™

Auditor Information Spillovers And Company Operating Performance: Evidence From Targeted Auditor Switches, Tyler Kleppe

Graduate Theses and Dissertations

In this study, I examine whether companies realize operational benefits from making “targeted auditor switches” (i.e., engaging a new auditor recently dismissed by a competitor company). While prior work provides evidence consistent with companies perceiving that auditor information spillovers are costly, there is sparse extant evidence as to whether auditors actually do transfer operational information across companies. I find that companies that switch to a competitor’s former auditor realize significant subsequent improvements in operating performance, and I provide evidence that the association between targeted auditor switches and improvements in operating performance varies predictably with several across- and within-market factors. In …

Essays On Corporate Finance And Interstate Risk Sharing, Liu Hong

Graduate Theses and Dissertations

My dissertation consists of two topics: the relation between derivatives and corporate finance, and the relation between bank deregulation and interstate risk sharing.

In the first essay, I study the use of commodity derivatives among U.S. oil and gas producers. Using hand-collected data, I find large variations in hedging intensity and hedging profits. On average, firms generate significantly positive profits, and their profits relate positively to the intensity of hedging. I further decompose the hedge ratio into two components: the pure hedging component and the market timing component. I find that the hedging profits relate strongly and positively to the …

Collaborative Speculation And Overvaluation: Evidence From Social Media, Adam Barrett Booker

Graduate Theses and Dissertations

I use data from StockTwits and Twitter to provide evidence that investor attention on social media in the period before earnings is related to short-term overvaluation, consistent with bullish investors herding around common information. In the 2 to 60 days after earnings, returns for companies in the highest quintile of pre-earnings announcement investor attention are 4.2 percent lower than those of companies in the lowest quintile. I find evidence that the negative post-earnings drift result found in this study is related to investors waiting until after earnings are announced to enact costly arbitrage strategies. I further examine intra- and inter-network …

“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 …

Discussion Of The Potential Of Blockchain In Finance, Andrew Kincaid

Finance Undergraduate Honors Theses

This paper analyzes the current application of blockchain technology to demonstrate its disruptive potential has across different financial industries. This paper analyzes the potential difficulties that blockchain technology must face and overcome to realize this potential. Blockchain is currently in a stage in its development where there has not been enough research done to provide empirical answers to its benefits or added costs; however, there have been many early innovations that have helped propel blockchain forward. Blockchain in corporate finance is primarily used in corporate governance where blockchain has the ability to increase transparency and reduce possible corruption. Blockchain has …

Essays In Leveraged Capital Markets, Kenneth D. Ford

Graduate Theses and Dissertations

The debt capital markets for leveraged borrowers are ripe with information asymmetry, lender specialization, and borrower segmentation. In this dissertation, I explore how these factors manifest themselves and the economic consequences thereof. Essay 1 shows that adverse selection and moral hazard concerns are inherent in underwriting syndicates that differ in size and number of lead underwriters. Using a nested double selection probit model of syndicate choice, I examine the matching of issuers and underwriters and find that matches of issuer quality and underwriter reputation are positive assortative. Further, switching regressions show that yield spreads reflect uncertainty about the intrinsic values …

Valuing Downstream Oil & Gas Companies: The Case Of Phillips 66, Taylor Robertson

Finance Undergraduate Honors Theses

While oil and gas prices remain volatile and often uncertain, they can provide key insight to businesses within the industry. In fact, oil and gas companies are considered to be more linked to oil prices than other day to day operations. In this paper, I will illustrate the relationship oil prices and crack spreads have on downstream oil and gas companies, specifically Phillips 66. Additionally, the Capital Asset Pricing Model and Fama & French 3-factor Model are evaluated to determine the best method to value a downstream oil and gas company. To do this, I will regress all factors against …

Acquisitions: Walmart Vs Amazon, Scott Sims

Finance Undergraduate Honors Theses

The retail industry is in the process of undergoing major change. Historically big box brick and mortar strategies have dominated, but this is changing in the age of impatience and instant gratification. As consumers want items more conveniently, online retail has taken hold with no semblance of anticipated decline. At the forefront of this transformation are two industry giants: Walmart and Amazon. Walmart finds itself on the side of brick and mortar with 11,718 physical retail locations worldwide. Amazon is dominating the online retail space with control of a staggering 44% of all US e-commerce sales in 2017. These equally …

Protecting The Viability Of The Small Donor In Modern Elections, Ben Miller

Arkansas Law Review

Campaign finance reform stands as one of the most important issues in today’s modern elections. From national to municipal contests, the influx of large donations places wealthy individuals—and interests—at odds with the average voter. Over the years, volumes of academic and legislative reforms have been proposed that encompass a wide range of electoral subject matter. From Citizens United to Federal Elections Commission (FEC) control mechanisms, solutions on how to change our campaign finance regulatory regime cover a large and diverse area of law and policy. However, the central theme throughout these reforms is maximizing transparency and curbing the undue influence …

Hedge Fund Performance And Derivative Hedging, Yongjia Li

Graduate Theses and Dissertations

This dissertation is comprised of three essays which focus on hedge fund performance and derivative hedging. The first essay uses ETF returns as proxies for tradable risk factors in hedge fund performance evaluation and identifies contemporaneously relevant risk factors from the entire universe of ETFs. The model provides more informative estimates of alpha and beta coefficients for predicting hedge fund out-of-sample performance compared with other widely used hedge fund factor models. Portfolios of top alpha hedge funds selected by the model generate statistically significant out-of-sample performance that is substantially higher compared with portfolios selected by other models. In addition, the …

Does Assurance Matter? Evidence From U.S. Financial Institutions, Ashley Warwick Douglass

Graduate Theses and Dissertations

In this paper, I explore the determinants and consequences of the level of assurance that a bank selects. Using a sample of small, privately held U.S. (United States) financial institutions (banks), I find that two differing types of banks are more likely to purchase more assurance. First, larger banks that are experiencing growth purchase relatively more assurance than other banks. Second, more complex banks with lower returns on assets, losses, and higher leverage are more likely to purchase an audit than a lower level of assurance. This may indicate the influence of regulators on banks’ assurance purchasing decisions. I also …

Hedging In Energy: The Case Of Linn Energy, Llc, Riley E. Nelson

Finance Undergraduate Honors Theses

This paper is a case study of LINN Energy, LLC over the period of Q1 2013 to Q4 2015. Due to volatility in commodity prices, energy companies choose to hedge their future production using forwards, futures, swaps, and options strategies. I selected LINN Energy as the subject for this study due to the breadth of detailed historical hedging information available through the company’s website. LINN Energy disclosed much more than is required for independent oil and gas companies, making them the perfect case study for this thesis. LINN Energy, LLC is one of the few publicly traded LLC’s and is …

Do Investors Value The Required Stress Tests Of Financial Holding Companies?, Brendan A. Colligan

Finance Undergraduate Honors Theses

This paper explores the value of disclosing stress test results to investors and market participants within the US financial system. Recently the Federal Reserve (“Fed”) expanded its required internal stress testing program, often referred to as the Dodd-Frank Act Stress Test (“DFAST”), to include bank holding companies (“BHCs”) with more than $10 billion in total assets. These BHCs were required to publicly disclose their results for the first time in June of 2015. Large BHCs are subject to another level of stress testing implemented by the Comprehensive Capital Analysis Review (“CCAR”). Large BHCs are defined as having more than $50 …

Financial Performance In Upstream, Downstream, And Integrated Oil Companies In Response To Oil Price Volatility, Jonathan P. Garcia

Finance Undergraduate Honors Theses

This paper investigates the relation between crude oil price volatility and stock returns among oil companies using a three-part methodology, by using the West Texas Intermediate (WTI) as oil price benchmark. I asses the various indicators that set signals for oil price volatility and the interpretation of each (PMI, S&P500, DJIA, and World Crude Oil Output). This research also focuses on the relation between different types of companies in the oil industry (integrated, upstream, and downstream) and how each type of company will be assessed in a particular way to predict abnormal returns, based on market data and statistical analyses …

Correlation Between Shareholder Concentration And Firm Performance With Regard To Midcap Companies, Wynn Lemmons

Finance Undergraduate Honors Theses

The research herein explores the correlation between performance and shareholder concentration. This paper compares the performance of a group of companies with a single shareholder stake of over 10% from the universe of the S&P 400 Midcap Index to the performance of the index itself over a period of eight years (January 1, 2009 to January 1, 2016). When run as a simulated portfolio, the group selected generated a slight amount of positive alpha, but the results were ultimately statistically insignificant.

The Determinants And Consequences Of Disclosure Committee Adoption, Lyle Roy Schmardebeck

Graduate Theses and Dissertations

After the passage of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission recommended that companies voluntarily adopt disclosure committees to aid in preparing company disclosures. In this paper, I investigate the determinants and consequences of disclosure committee adoption. I find that companies with material weaknesses in internal controls over financial reporting and less readable 10-K filings are more likely to adopt disclosure committees. In consequences analyses, using a propensity score matched control sample and a difference-in-differences research design, I find that 10-K filings are longer and less readable after disclosure committee adoption. However, consistent with institutional theory, I …

Kinder Morgan’S Master Limited Partnership Reorganization, Brett Doyel

Finance Undergraduate Honors Theses

The main objective of this paper is to investigate the reorganization of Kinder Morgan’s (KMI) master limited partnership (MLP) structure. In October 2014, four publicly traded companies – Kinder Morgan, Inc. (NYSE: KMI), Kinder Morgan Energy Partners, L.P. (NYSE: KMP), Kinder Morgan Management, LLC (NYSE: KMR), and El Paso Pipeline Partners, L.P. (NYSE: EPB) – were merged under the Kinder Morgan, Inc. name. This study analyzes the consolidation of KMI through the use of qualitative and quantitative research. The qualitative research involves the study of the company’s 10-K reports, earnings call transcripts, and energy sector reports. The quantitative research includes …

Inflation Targeting And Dollarization In Bolivia, Hugo Vaca Pereira Rocha

Economics Undergraduate Honors Theses

This thesis attempts to test the effectiveness of the IT regime as a nominal anchor (reference for monetary policy) to the Bolivian Central Bank through the use of the Taylor rule. In order to use the Taylor Rule, it will be necessary to collect data from the monetary aggregates, interest rates (preferably US interest rates since the boliviano is pegged to the US dollar), and Bolivian Central Bank international reserves. Depending upon the results of the coefficients found it would be possible to make some initial conclusions. The reason why this amount of data will be required is that this …

Essays On Moral Hazard, Bank Size, Influence, And Risk At The Federal Home Loan Banks, James Cash Acrey

Graduate Theses and Dissertations

Two chapters of research on the Federal Home Loan Bank advances, bank risk, and influence are presented. Federal Home Loan Bank (FHLB) advances are a growing source of debt financing for US banks. FHLB advances are not priced according to bank credit risk, creating potential for moral hazard. FHLB advances are positively related to contemporary bank risk, but the relation between prior advances and subsequent risk varies between large vs. small banks depending upon the risk measure used. The relation between FHLB advances and various measures of bank risk varies between pre-crisis (2005-07), crisis (2008-09), and post-crisis (2010-12) periods differently …

Private Debt Syndicates: Governance, Networks, And Syndicate Structure, William R. Mccumber

Graduate Theses and Dissertations

I examine the primary market for syndicated private credit agreements to U.S. firms within the context of contract theory with information asymmetries between contracting parties in a repeated game. Specific governance mechanisms determine a firm's cost of borrowing in syndicated credit agreements. Firms with governance mitigating agency risk between stakeholders, i.e. independent boards, strong shareholder monitoring, and greater CEO pay-performance sensitivity, enjoy lower borrowing costs. The interests of creditors and shareholders diverge with regard to external governance. Lenders charge higher spreads to firms at greater risk of acquisition and reward stronger firms with price concessions when they possess staunch anti-takeover …

Three Essays On External Sources Of Corporate Governance, Kevin K. Lee

Graduate Theses and Dissertations

Corporate governance is the system by which corporations are controlled. External sources of governance include regulatory and market mechanisms as well as the interplay of goals between managers, the board, and shareholders. Other external sources can include informal institutions which can shape goals as well as suggested by institutional theory, effectively constrain human behavior. In my first essay, I argue that foreign direct investors can act as agents of change in corporate governance. Investigating changes in ownership and control of Swedish firms, I find that active foreign investors' participation move firms away from a Swedish stakeholder orientation toward an Anglo-American …

Essays On Mergers And Acquisitions And Governance, Rwan Ibrahim Talib El-Khatib

Graduate Theses and Dissertations

There is a recent strand of corporate finance literature that explores the impact of executives and directors' Social connections on firm value, performance, and governance. Those studies document that such Social connections could be beneficial when they enhance the sharing of information and knowledge, but could also be detrimental when associated with CEOs, as they could provide the CEO with a source of influence that makes her more entrenched and powerful.

In the first essay, I use four common measures of network centrality to compute the position of the CEO within the Social network of all executives and directors of …

The Opaqueness Of Fair Value Assets And Systematic Risk In The Banking Industry, Jody Wayne Bland

Inquiry: The University of Arkansas Undergraduate Research Journal

Opacity has economy-wide implications. A lack of information, whether from non-disclosure or complexity of business, creates uncertainty that even the most sophisticated of investors must face. In this paper, I analyze the relationship between opacity and the systematic risk of bank holding companies. Specifically, I find that investments in opaque assets required to be reported at fair value significantly affect the levels of financial institutions’ systematic risk. Furthermore, I provide evidence that firm investments in opaque assets contribute to systematic risk to an even greater degree during times of financial crisis.

Procrastination Does Pay Sometimes: How The Delay In Implementing Basel Ii Reduced The Effect Of The Subprime Financial Crisis, Raymond Bart Simmons

Inquiry: The University of Arkansas Undergraduate Research Journal

Basel II, a major international regulatory capital revision, was supposed to have been implemented in the U.S. by 2004, but delays pushed it back more than five years. Basel II could have lowered minimum capital standards and made the largest banks even more vulnerable to the subprime financial crisis and economic downturn had it been adopted before its onset in 2007. Consequently, the procrastination in implementing Basel II made the banking industry more stable as it entered the financial crisis. In this study, the assets of the 11 largest bank holding companies at year-end 2006 were separated into broad asset …

Semi-Strong Form Market Hypothesis: Evidence From Cnbc's Jim Cramer's Mad Money Stock Recommendations, Elizabeth Dodson

Inquiry: The University of Arkansas Undergraduate Research Journal

Mad Money has become one of the most popular shows on CNBC. The host, Jim Cramer, has an outlandish style and personality that viewers find intoxicating. Cramer's goal for the show is to make people money. Does he succeed? This paper finds that investors can expect to gain above-average, risk adjusted returns by following Cramer's stock recommendations and trading accordingly. These findings challenge the semi-strong form market hypothesis. According to this hypothesis investors should not recognize gains trading on public information since it states that the market has already adjusted prices for that information. It also contributes to current literature …

Does The Adoption Of "Economic Value Added" Improve Corporate Performance?, Matthew Louis Bell

Inquiry: The University of Arkansas Undergraduate Research Journal

Determining how to properly measure corporate performance is one of the most important problems in contemporary corporate finance. Without a sound mechanism to evaluate managerial performance, a corporation's management has no adequate standard to be judged by. This can destroy the firm's value very quickly through poor managerial decisions. For this reason, managers need to be evaluated and compensated based on a performance measure that truly demonstrates the changes in a company's value. The interests of executives and shareholders do not always coincide, as can be seen through many of the current corporate scandals. Thus, it is almost universally argued …

Lobbying Activity In The Standards Setting Process: Fasb Statement On Financial Accounting Standards No. 106, "Employers' Accounting For Postretirement Benefits Other Than Pensions", Christine Schalow

Graduate Theses and Dissertations

The purpose of this study is to explain and classify the behavior of corporate managers in the accounting standards setting process as it related to Statement of Financial Accounting Standards No. 106. Evidence from this study provides readers a better understanding of participation of corporate managers in the accounting standards setting process. To accomplish the objective, this study surveyed corporate representatives who responded to the Financial Accounting Standards Board's, February 1989, exposure draft, "Employers' Accounting for Postretirement Benefits Other Than Pensions," (OPEB). A sample of corporations whose representatives did not respond to the OPEB exposure draft, although the corporations did …

An Empirical Study Of Selected Causes And Effects Of Semirigid Prices In The Petroleum Refining Industry With Emphasis On The Period 1963 Through 1972, Robert Eugene Feller

Graduate Theses and Dissertations

The premise of this study is that certain policies within and without the petroleum industry have interacted to produce semirigid industry prices. One effect of this price rigidity is the inflexibility that is passed on to costs whenever the traditional joint-cost-accounting allocation (based on relative market value) is used in conjunction with these prices.

In studying the problem, activities and policies which combined to cause artificial price restraints in the petroleum-refining industry from 1963 to 1972 were reviewed. The accounting and economic implications and the effect on refinery investment of the resulting semirigid prices were investigated.

Published wholesale gasoline prices …