Corporate Finance Commons^™

Macro Disagreement And The Cross-Section Of Stock Returns, Frank Weikai Li

Research Collection Lee Kong Chian School Of Business

This paper examines the effects of macro-level disagreement on the cross-section of stock returns. Using forecast dispersion measure from Survey of Professional Forecasters database, I find that when forecast dispersion on macroeconomic factor is high, stocks that have high loadings on that factor earn lower future returns relative to stocks with low loadings and vice versa. This negative relationship between risk premium of macro-factors and macro-level disagreement is robust and exists for a large set of macroeconomic risk factors. These findings are consistent with the model of Hong and Sraer (2015), where high beta stocks are more prone to speculative …

Endogeneity In Ceo Power: A Survey And Experiment, Zhichuan Li

Business Publications

The endogeneity problem has always been one, if not the only, obstacle to understanding the true relationship between different aspects of empirical corporate finance. Variables are typically endogenous, instruments are scarce, and causality relations are complicated. As the first attempt to summarize different econometric methods that are commonly used to address endogeneity concerns in the context of corporate governance, we explore the relation between CEO power and firm performance, as an experiment, to illustrate how these methods can be used to mitigate the endogeneity problem and by how much. After carefully dealing with the endogeneity issues, we find strong evidence …

Essays In Empirical Corporate Finance, Francisco Marcet

Doctor of Business Administration Dissertations

This dissertation presents three essays in empirical corporate finance. In the first two essays, I examine the effect of analyst coverage network on US firms' corporate decisions and stock return comovement in emerging markets. The third essay discusses the importance of performance pay and CEO functional background in explaining firm performance in the short- and long-run. In the first chapter, which is a joint work with Armando Gomes, Radha Gopalan and Mark Leary, we show that sell-side analysts play an important role in propagating corporate financial policy choices, such as leverage and equity issuance decisions across firms. Using exogenous characteristics …

Robustness Of Firm-Specific And Macroeconomic Determinants Of Exploration Investments Implications From Egyptian Oil & Gas Industry, Mohamed Rashwan, Tarek Eldomiaty, Mohamed Bahaa El Din

Business Administration

Purpose – The uncertainty that surrounds oil and gas exploration environments call for an examination at different angles. In terms of robustness, the purpose of this paper is to focus on three performance measurements: the amount of exploration investments, the growth rate of exploration investments, and the value at risk (VaR) of exploration investments.

Design/methodology/approach – The study utilizes the properties of discriminant analysis for deriving Z-score models that can be used for monitoring firms’ performance. A cointegration analysis is utilized as well in order to examine the level of cointegration between predictors of each performance measure. The sample includes …

Shareholder Advocacy In Corporate Elections: Case Studies In Proxy Voting Websites For Retail Investors, Robin Miller

Sustainability and Social Justice

One of the key rights shareholders retain is the right to vote on issues affecting the companies in which they invest. This voting right is seen as one of the primary means of exercising diligent corporate governance (Cole 2003, Fairfax 2009). Only 28 percent of individual investors vote in corporate elections compared with 91 percent of institutional investors. Informed voting decisions at corporate elections can be very information intensive, and theories of rational apathy and the free rider problem may explain a lack of participation from individual investors.

Many shareholders cannot attend annual corporate meetings, so they …

On The Behavior Of Entrepreneurial Factor Supply To The Firm, Nicos Zafiris

The Journal of Entrepreneurial Finance

This paper draws on an existing, but little used, approach to the choices governing the supply of ‘entrepreneurial’, in the sense of ‘residually remunerated’, resources to an enterprise, especially post start up. It focuses in particular on the hybrid ‘own factor demand/supply curve’ to the firm of Bronfenbrenner (1960), but attempts to treat such supply in conjunction with ‘contractual’ employment of resources, thus making use of gearing and portfolio concepts. To achieve this, it is found necessary for the hybrid schedule to be reinterpreted and recast as the locus of the relevant utility maximising choices. A model is presented which …

Reanalyzing The Political Stability Of Britain's Democratization, Nathan R. Burton

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

A recent article in Journal of Economic History by Dasgupta and Ziblatt uses bond yields to analyze the political risk of the 19th century democratization legislation of Britain known as the Reform Acts. Dasgupta and Ziblatt find that the volatility of yields is relatively high during periods of legislation, and model the yields via GAM method, concluding that the political risk associated with the Reform Acts was high. I reproduce the study and comparing those times of 'high' volatility to all periods and find nothing to compare high-volatility periods to, suggesting that it is inconclusive whether the Reform Acts were …

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 …

The Effect Of Ceo Stock-Based Compensation On Pricing Of Future Earnings, Bobae Choi, Jae Bum Kim

Research Collection School Of Accountancy

This paper examines whether CEO stock-based compensation has an effect on the market’s ability to predict future earnings. When stock-based compensation motivates managers to share their private information with shareholders, it will expedite the pricing of future earnings in current stock prices. In contrast, when equity-compensated managers attempt to temporarily manipulate the stock price to maximize their own benefit rather than that of shareholders, the market may not fully anticipate future performance. We find that a CEO’s stock-based compensation strengthens the association between current returns and future earnings, indicating that more information about future earnings is reflected in current stock …

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.

Us Airport Ownership, Efficiency, And Heterogeneity, Levent Kutlu, Patrick Mccarthy

School of Economics and Finance Faculty Publications

All US commercial airports are in the public sector yet not all have the same ownership type. For medium and large hub US airports we use stochastic frontier analysis to analyze the efficiency differences for alternative airport ownership types. We find that while form of ownership may matter for cost efficiency, in general its effect is relatively small. Yet type of public sector ownership does have cost efficiency implications in certain environments. Further, when heterogeneity is not controlled, the results change substantially so that type of ownership matters much more which demonstrates the importance of controlling for cross section heterogeneity.

The Downside Of The Network Ties Between Ceo/Cfos And Auditors Through External Directorships: Evidence From Auditor Selection And Subsequent Audit Quality, Jaeyoon Yu, Byungjin Kwak, Myung Seok Park, Yoonseok Zang

Research Collection School Of Accountancy

This study examines whether the professional ties of Chief Executive Officers/Chief Financial Officers (CEO/CFOs) to auditors through external directorships affect auditor selection and subsequent audit quality. Professional ties to auditors arise when the CEO/CFO of a firm (referred to as the home firm) serves as an outside director of another firm that hires an auditor (a connected auditor). Using a sample of firms with auditor switches over the period 2003-2012, we find that home firms are more likely to appoint connected auditors. Furthermore, utilizing a difference-in-differences approach, we find that home firms appointing connected auditors experience a significant decline in …

Financial Health And Corporate Performance: A Comparison Of Manufacturing Companies In China And India, See Liang Foo, Shaakalya Pathak

Research Collection School Of Accountancy

The People’s Republic of China (China) and India are two leading economies in Asia Pacific. This study examines the relationship between the financial health, as measured by the Altman Z-Score, and corporate performance, as measured by the Return on Equity (ROE), of listed manufacturing companies in these two markets. A linear regression was conducted between these variables to determine the magnitude and direction of their relationships. The trends of Z-Scores over a fourteen-year period are also analysed. The analysis covers the period from 2000 to 2013 (inclusive) and yielded a statistically positive correlation between ROE and the Z-Score for both …

Event-Based Biotechnology Stock Price Movement: Valuing Success And Failure In Biotechnology Product Development, Faris Sumadi

Honors College Theses

Biotechnology investment, in the second quarter of 2015, hauled in a record $2.3 billion worth of venture capital. The 126 deals struck marked the biggest quarterly investment (up 32% from the prior quarter) since reporting started in 1995. With $3.8 billion invested in these pre-IPO ventures by mid-2015, the biotech industry soared past the $6 billion of venture capital cash invested in 2014. These numbers illustrate how early-stage research, with unproven science, has been revived after a decade of VCs shying away. Out of the $2.3 billion raised in Q2, $1.5 billion went to early-stage companies while $733 million went …

Mandatory Financial Reporting And Voluntary Disclosure: The Effect Of Mandatory Ifrs Adoption On Management Forecasts, Xi Li, Holly I. Yang

Research Collection School Of Accountancy

This study examines the effect of the mandatory adoption of International Financial Reporting Standards (IFRS) on voluntary disclosure. Using a difference-in-difference analysis, we document a significant increase in the likelihood and frequency of management earnings forecasts following mandatory IFRS adoption, consistent with the notion that IFRS adoption alters firms' disclosure incentives in response to increased capital-market demand. We find the increase to be larger among firms domiciled in code-law countries, suggesting a catching-up effect among firms facing low disclosure incentives pre-adoption. We then propose and test three channels through which IFRS adoption could alter firms' disclosure incentives: improved earnings quality, …

Mandatory Financial Reporting And Voluntary Disclosure: The Effect Of Mandatory Ifrs Adoption On Management Forecasts, Xi Li, Holly I. Yang

Research Collection School Of Accountancy

This study examines the effect of the mandatory adoption of International Financial Reporting Standards (IFRS) on voluntary disclosure. Using a difference-in-difference analysis, we document a significant increase in the likelihood and frequency of management earnings forecasts following mandatory IFRS adoption, consistent with the notion that IFRS adoption alters firms' disclosure incentives in response to increased capital-market demand. We find the increase to be larger among firms domiciled in code-law countries, suggesting a catching-up effect among firms facing low disclosure incentives pre-adoption. We then propose and test three channels through which IFRS adoption could alter firms' disclosure incentives: improved earnings quality, …

Spillover Effects In Mutual Fund Companies, Clemens Sialm, T. Mandy Tham

Research Collection Lee Kong Chian School Of Business

Our paper investigates spillover effects across different business segments of publicly traded financial conglomerates. We find that the investment decisions of mutual fund shareholders do not depend only on the prior performance of the mutual funds; they also depend on the prior performance of the funds’ management companies. Flows into equity and bond mutual funds increase with the prior stock price performance of the funds’ management companies after controlling for fund performance and other fund characteristics. The sensitivity of flows to the management company’s performance is not justified by the subsequent performance of the affiliated funds. The results indicate that …

An Empirical Analysis Of Efficiency And Profitability Ratios In The U.S. Retail Industry, Sergio Ribera Boigues

Morehead State Theses and Dissertations

A Thesis Presented to the Faculty of the College of Business and Technology Morehead State University in Fulfillment of the Requirements for the Course IET 699 - Thesis by Sergio Ribera Boigues on April 28, 2016.

Reducing Customer Waiting Time Of Commercial Banking Industry (A Case Study), Feng Gao

Morehead State Theses and Dissertations

A Thesis Presented to the Faculty of the College of Business and Technology Morehead State University in Partial Fulfillment of the Requirements for the Degree Master of Science by Feng Gao April 26, 2016.

2016 Q2 Private Capital Access Index Report, Craig R. Everett

Pepperdine Private Capital Access Report

The Pepperdine Private Capital Access Index (PCA) is a quarterly indicator produced by the Graziadio School of Business and Management at Pepperdine University, and with the support of Dun & Bradstreet. The index is designed to measure the demand for, activity, and health of the private capital markets. The purpose of the PCA Index is to gauge the demand of small and medium sized businesses for financing needs, the level of accessibility of private capital, and the transparency and efficiency of private financing markets.

Financial Health And Corporate Performance Of Listed Manufacturing Companies In South Korea And Taiwan: A Comparative Study Of The Two Asian Tigers, See Liang Foo, Shaakalya Pathak

Research Collection School Of Accountancy

South Korea and Taiwan are two leading economies in Asia Pacific. This study examines the relationship between the financial health, as measured by the Altman Z-Score, and corporate performance, as measured by the Return on Equity (ROE), of listed manufacturing companies in these two markets. A linear regression was conducted between these variables to determine the magnitude and direction of their relationships. The trends of Z-Scores over a fourteen-year period are also analyzed. The analysis covers the period from 2000 to 2013(inclusive) and yielded a statistically positive correlation between ROE and the Z-Score for both markets. South Korea and Taiwan …

E-Commerce’S Impact On Big-Box Retailers, Brian Bates

Honors Theses

The history of retail has been an evolutionary process of new innovations and transformations. Previous changes include: the development of catalogue based retail, and the recent innovation of super stores, known as big-box retailers. It is possible that we are dawning upon a new revolution of the retail environment as electronic commerce (e-commerce) continues to grow. This paper will analyze the impact of e-commerce on retail markets, specifically big-box stores (warehouse style retailers with over 750 million in sales). Using financial and real estate data from Bloomberg^TM, and e-commerce data from eMarketerTM and the US Census Bureau two …

Essays In Corporate Finance, Bingqiao Li

Dissertations and Theses Collection (Open Access)

Based on a constructed index measuring the corporate governance quality of public firms, this paper focus on the role of corporate governance and its association with the performance of Singapore Exchange listed firms. We investigate the following three aspects centred on the topic of firm corporate governance in Singapore.

First, we examine the performance of the Chinese firms listed on the Singapore Exchange (S-Chips) and the role of their corporate governance. S-Chips indeed underperform local firms in terms of Tobin’s Q within both univariate and multivariable frameworks, as well as base on size matched and Propensity Score Matching samples. Higher …

Takeover Defenses In The Era Of Shareholder Activism, Sa-Pyung Sean Shin

Research Collection School Of Accountancy

This paper examines the interplay between takeover defenses and shareholder activism. Using a comprehensive sample of shareholder activism events between 2006 and 2014, I find a differential impact of takeover defense measures on the likelihood of being targeted for activism; a dual-class structure or a staggered board deters activism, whereas firms with a poison pill in place are more likely to become targets. Activists are more likely to demand removal of takeover defense measures and/or sale of the target firm if the firm has a staggered board or a poison pill in place, suggesting that when takeover defenses block the …

Social Capital, Informal Governance, And Post-Ipo Firm Performance: A Study Of Chinese Entrepreneurial Firms, Jerry X. Cao, Yuan Ding, Hua Zhang

Research Collection Lee Kong Chian School Of Business

Social capital can serve as informal governance in weak investor-protection regimes. Using hand-collected data on entrepreneurs' political connections and firm ownership, we construct several original measures of social capital and examine their effect on the performance of entrepreneurial firms in China after their initial public offerings. Political connections or a high percentage of external investors tend to enhance firm performance, but intragroup related-party transactions commonly lead to performance decline. These forms of social capital have a strong influence on the performance of Chinese firms, whereas formal governance variables such as board size or board independence have little effect. Although social …

Change Of Direction: Haolu "Lulu" Wang Traded Finance For The Lens Of Filmmaking, Claire Sykes

Colby Magazine

After only two years with an investment bank in Hong Kong, her first job straight out of Colby with a degree in government and economics, the Chinese-born-and-raised Wang left and took off for Florence, Italy, to become a filmmaker. Before the eight-week, hands-on introductory course there had ended, she realized “this was something I could do for the rest of my life,” she said in an interview via Skype.

Sustainability And Business Performance, Cedric L. Char

Honors Thesis

With climate change becoming more and more of an ominous reality, the concept of sustainability is gaining more and more traction, throughout both consumers and businesses. Companies that have implemented “green” initiatives have found that there are various potential benefits that can be derived from these sustainable practices. This study aims to quantify those benefits and examine how sustainable businesses perform in comparison to their non-sustainable counterparts. Using Newsweek’s Green Rankings, and several statistical tests, it was found that there are no statistically significant differences between sustainable firms and non-sustainable firms, showing that while sustainability may not yield any short-term …

2016 Private Capital Markets Report, Craig R. Everett

Pepperdine Private Capital Markets Report

The Pepperdine private cost of capital survey was originally launched in 2007 and is the first comprehensive and simultaneous investigation of the major private capital market segments. This year’s survey specifically examined the behavior of senior lenders, asset‐based lenders, mezzanine funds, private equity groups, venture capital firms, angel investors, privately‐held businesses, investment bankers, business brokers, limited partners, and business appraisers. The Pepperdine survey investigated, for each private capital market segment, the important benchmarks that must be met in order to qualify for capital, how much capital is typically accessible, what the required returns are for extending capital in today’s economic …