Corporate Finance Commons^™

Validating Valuation: How Statistical Learning Can Cabin Expert Discretion In Valuation Disputes, Andrew C. Baker, Jonah B. Gelbach, Eric L. Talley

Faculty Scholarship

This article challenges conventional methods used in financial valuation across transactional and litigation domains. We show that conventional valuation methods allow for considerable discretion, making it possible for each side’s experts to submit dramatically varying valuations simply by choosing among facially reasonable values of parameters that must be selected to carry out conventional valuations. We use large-scale empirical simulations powered by real-world data to demonstrate the scope of such discretion. We next consider several alternatives based on data-driven machine learning approaches, and show that they offer both approximately unbiased estimates of valuation and substantially reduced variability in valuation results. Consequently, …

Financial Leverage And Firm Performance: An Empirical Review And Analysis, Iqbal Md. M Islam

Journal of Global Business Insights

This paper examines the dual impact of financial leverage on corporate performance by analyzing empirical data across developed and developing nations, industries, and different periods. Leverage can enhance profitability through tax benefits and improved efficiency, but it also maximizes financial risk, making its effects highly context dependent. Theoretical frameworks such as the Trade-off Theory, Modigliani-Miller Theorem, Agency Theory, and Pecking Order Theory offer diverse perspectives on how debt influences firm outcomes. Empirical findings reveal mixed results; moderate leverage may lower capital costs and boost performance, whereas unnecessary debt can lead to financial distress. Disparities emerge between developed and developing economies. …

Too Many Mergers? The Golden Parachute As A Driver Of M&A Activity In The 21st Century, Jeffrey N. Gordon

Faculty Scholarship

This Article argues that the corporate governance regime in the United States has produced a level of mergers and acquisition activity greater than the social optimum because of the current version of the “golden parachute,” a super-bonus payoff to a target CEO. In the late nineteenth through the twentieth century, M&A activity was characterized by “waves” that reflected adaptations to changing external environment, whether the efficient production frontier, regulatory constraints, or capital market developments. Economically-motivated parties saw the opportunities in changing the boundaries of the firm; successful first-movers spawned imitators, hence a wave, which eventually subsided, often alongside deteriorating capital …

Sex & Startups, Jens Frankenreiter, Talia B. Gillis, Eric L. Talley

Faculty Scholarship

Private law offers a unique solution to the problem of long-term fiscal commitment. When Congress enacts a spending program that will take many years to reach fruition, there is a risk of a subsequent Congress or President cutting off funding in the interim. There is no escape from the problem within appropriations law itself. One solution, however, is to entrust private sector allies as vessels of long-term commitment. As a matter of political economy, that solution draws on policy-feedback theory. As a matter of law, the solution rests on a mechanism that Congress already uses but has not recognized its …

The Effect Of Accounting Conservatism On Measures Of Financial Constraints, Taewoo Kim, Brandon Byunghwan Lee, Bo Meng, Daniel Paik

Accounting Faculty Publications

This study examines the relationship between accounting conservatism and measures of financial status. We find that, in general, a higher level of accounting conservatism is associated with a lower level of financial constraints – thereby making external funds less costly. The results also show that for a firm with a higher bid-ask spread or a higher likelihood of bankruptcy, this negative relationship between conservative financial reporting and financial constraints is intensified. In other words, a higher level of accounting conservatism is likely to make external funds less costly especially for those firms with a higher level of bid-ask spread or …

Colgate-Palmolive Customer Development Finance Internship: A Collection Of Journals Entries & Testimonials Of Professional Development, Braden Byrum

Finance Undergraduate Honors Theses

This is a collection of journal entries and testimonials to professional development that I received from my internship with Colgate-Palmolive on the Walmart team. Over the span of three months it serves as a reflection on my purpose and inflictions throughout my day to day during my internship. The skills developed during this experience are monumental in professional development but also expand into my personal life. These themes are relevant to the life ahead of me and this collection will serve as an endorsement to that.

Analysis Of Key Factors That Impact Large Cap Us Firms’ Financial And Market Performance At Different Phases During The 2007- 8 Financial Crisis, Ken Lobo

Doctoral Dissertations (DBA)

The financial crisis of 2007-8 provides an opportunity to investigate which factors have a significant impact on firms at different stages of the crisis. This paper considers this shock event along these lines: impact of leverage on a firm can vary depending on timing of the crisis; firm are challenged to invest as the crisis recedes; revenue growth can enhance and sometimes impede returns; choosing to hold cash or not when a firm make the trade-off with investment and both the timing and decision are important; investors, managers and shareholders perceive these actions and events differently. Large cap US firms …

Cleaning Corporate Governance, Jens Frankenreiter, Cathy Hwang, Yaron Nili, Eric L. Talley

Faculty Scholarship

Although empirical scholarship dominates the field of law and finance, much of it shares a common vulnerability: an abiding faith in the accuracy and integrity of a small, specialized collection of corporate governance data. In this paper, we unveil a novel collection of three decades’ worth of corporate charters for thousands of public companies, which shows that this faith is misplaced.

We make three principal contributions to the literature. First, we label our corpus for a variety of firm- and state-level governance features. Doing so reveals significant infirmities within the most well-known corporate governance datasets, including an error rate exceeding …

Executive Compensation Incentives Impact On The Tone And Readability Of Financial Reports, Xiaoyan Mi

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

Financial disclosures do not only influence the future reaction of customers, they also imply the financial strategies of the managers of corporations. Through analysis, we find a strong causal relationship between tone and readability of financial disclosures and incentive methods of managers. Controlling executives’ pay-performance sensitivity (delta) and other variables, executives with higher sensitivity of executives’ wealth to stock volatility (vega) (Coles, Daniel, Naveen, 2004) tend to announce reports with more negative tone and low readability.

Much Ado About Audit Opinions, Themin Suwardy

Research Collection School Of Accountancy

In a commentary, SMU Associate Professor of Accounting (Practice) and Dean of Postgraduate Professional Programmes Themin Suwardy opined that with a better understanding of the various types of modified audit opinions, investors can react appropriately to the news of companies failing to get a clean opinion. He added that investors should ask tougher questions about key audit matters at annual general meetings in order to get a more rounded and informed picture of a company’s financial and operating status.

Stock Buyback Announcements: An Examination Of Abnormal Returns In Stock Price & Credit Default Swaps For S&P100 Companies, Alan L. Delfavero

Doctoral Dissertations (DBA)

This event study examines the short-run effect of stock buyback announcements on stock price and credit default swaps (CDS) exclusively for mega capitalization S&P 100 companies. The research sample consists of 53 S&P 100 companies and includes 133 buyback announcement events occurring between September 2011 and May 2018. The study utilizes the market model to estimate expected returns and to compute abnormal returns (AR) for equity and abnormal change (AC) in CDS. Based on an initial analysis, it’s determined that there is a statistically significant AR and cumulative abnormal return (CAR) for stock price, and a significant AC in CDS, …

Using Data Analytics To Raise Productivity And Profitability: 4 Key Steps For Smes, Gary Pan, Poh Sun Seow

Research Collection School Of Accountancy

It is widely believed that effective data analysis may create newbusiness opportunities as technological advancement may offercompanies greater ability to predict what their customers want.

Appraisal Arbitrage And Shareholder Value, Scott Callahan, Darius Palia, Eric L. Talley

Faculty Scholarship

Post-merger appraisal rights have been the focus of heated controversy within mergers and acquisitions circles in recent years. Traditionally perceived as an arcane and cabalistic proceeding, the appraisal action has recently come to occupy center stage through the ascendancy of appraisal arbitrage — whereby investors purchase target-company shares shortly after an announcement principally to pursue appraisal. Such strategies became more feasible and profitable a decade ago, on the heels of two seemingly technocratic reforms in Delaware: (i) the statutory codification of pre-judgment interest, pegging a presumptive rate at five percent above the federal discount rate; and (ii) the Transkaryotic opinion, …

The Flow Of Funds In Asean, Philip C. Zerrillo

Research Collection Lee Kong Chian School Of Business

In his novel, Memoirs of a Geisha, Arthur Golden wrote, “Water can carve its way even through stone. And when trapped, water makes a new path.” Something similar seems to be happening with the flow of funds in ASEAN.

Credit Risk And Corporate Governance, Olivier Mugisho Mudekereza

Theses and Dissertations

Is the executive’s compensation structure influenced by the credit rating assigned to his company? I analyze a panel of U.S. public firms using the random-effects and fixed-effects estimations. Compared to firms with lower credit risk, I find that firms facing higher probability of default provide more incentives for their CEOs.

Essays In Corporate Responsibility And Finance, Mert Demir

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters:

Chapter 1: The Effects of Corporate Social Performance and Social Norms on Market Valuation of Nonfinancial Disclosures Using a novel measure of the quality of corporate social responsibility (CSR) disclosures by global companies, this paper analyzes how CSR report quality affects firm value when mediating roles of social pressure and CSR performance are considered. I find that firms operating in socially controversial industries enjoy higher valuations when they issue high-quality CSR reports. I also find that for firms with poor CSR performance, higher-quality CSR disclosure is associated with a decline in firm value, while …

Gender Matters: Perceptions Of Corporate Leadership, Kylie A. Braegelmann

Electronic Theses and Dissertations

Women remain conspicuously underrepresented at the highest levels of corporate management; thus, it seems, gender matters. Gender bias in financial markets would imply an inefficient market, which necessarily constrains economic performance and social welfare more generally. To measure gender bias, I examine the cumulative abnormal returns around CEO announcements from 1992 through 2016 using a modified event study methodology. Existing event studies in this field are inconclusive as to whether or not such a bias exists. Therefore, this research contributes to the literature by extending the data, using a larger event window, and studying bias over time and firm size. …

A Case Study In The Use And Potential Misuse Of Non-Gaap Financial Measures, Benoit Boyer, Ralph Lim, Bridget M. Lyons

WCBT Faculty Publications

Firms reporting under US GAAP are allowed to supplement financial information with non-GAAP measures. We examined 6 Firms in the chemical industry and looked at what information was presented (Dow, Du Pont, Monsanto, FMC, PPG, Praxair). We use the 2014 Annual Report so that we would have comparable data for all companies. For 2 firms we looked at numbers presented in Cap IQ and in Bloomberg and compared them to the numbers presented by the company (Dow and Du Pont). The numbers reported by the firms and the analysts differed greatly.

Behavioral Finance: Its History And Its Future, Robert Christopher Hammond

Selected Honors Theses

The field of behavioral finance has attempted to explain a litany of biases, heuristics, and

inefficiencies present in financial markets since its creation in the 1980’s. This paper is structured as a comprehensive literature review of behavioral finance, and includes both the seminal works as well as more recent papers. The various subtopics of behavioral finance will also be analyzed, which include loss aversion, corporate finance, and momentum/contrarian investing. Finally, this paper will draw unique conclusions across behavioral finance and hypothesize about what topics within behavioral finance are likely to yield the most interesting research in the near future.

Wealth Effect Of Mergers & Acquisitions In Emerging Market: A Case Of Pakistan’S Banking Sector, Sana Tauseef, Mohammad Nishat

Business Review

This study investigates the short-term market response associated with the announcement of seven merger and acquisition deals in the banking sector of Pakistan during the period 2003 to 2008 using the event study methodology. The results indicate statistically significant investor reactions around the merger announcements. For individual target and bidder banks, the cumulative abnormal returns (CARs) range from significant positive to significant negative. The combined mean CAR for the bidder group is significant positive and for target group, the mean CAR is significant negative. The mean CAR for the combined banks in the domestic mergers is also positive but is …

Financial Reforms And Corporate Finance In Emerging Markets: An Analysis Of Dividend Policy Among Public Listed Firms In Pakistan, Mohammed Nishat, Wali Ullah

Business Review

This paper analyzes the dividend behavior of 535 Pakistani listed companies during 1988 to 2005 using the Probit regression model. The findings validate the theoretical prediction for positive and significant impact of last year dividend on the current year dividend decision. More profitable and liquid firms have a higher probability to declare the dividends. Furthermore, firm size, ownership, equity and tax are positively related to the dividend declaration decision. The firms' dividend behavior differs significantly across Industries. The secondary market development has a significant effect on dividend decision and financial liberalization has been associated with shift of firms from debt …

Goodwill Non-Impairments, Dennis Chambers, Catherine Finger

Faculty Articles

The article discusses the use of goodwill non-impairment by companies to manage their earnings. The effect of Statement of Financial Accounting Standards (SFAS) 142 on goodwill-related earnings management is described. A table shows the results of related the working papers "Earnings Management By Avoiding or Reducing Goodwill Impairments," by Dennis Chambers, "Evidence on the Use of Unverifiable Estimates in Required Goodwill Impairment," by Karthik Ramanna and Ross L. Watts, and "Has Goodwill Accounting Gone Bad?," by Kevin K. Li and Richard G. Sloan.

Corporate Financial Policy And The Value Of Cash, Michael Faulkender, Rong Wang

Research Collection Lee Kong Chian School Of Business

We examine the cross-sectional variation in the marginal value of corporate cash holdings that arises from differences in corporate financial policy. We begin by providing semi-quantitative predictions for the value of an extra dollar of cash depending upon the likely use of that dollar, and derive a set of intuitive hypotheses to test empirically. By examining the variation in excess stock returns over the fiscal year, we find that the marginal value of cash declines with larger cash holdings, higher leverage, better access to capital markets, and as firms choose greater cash distribution via dividends rather than repurchases.

After The Revolution In Corporate Law, Roberta Romano

Journal of Legal Education

No abstract provided.