Finance and Financial Management Commons^™

Option Listing And Information Asymmetry, Jianfeng Hu

Research Collection Lee Kong Chian School Of Business

Option listing increases informed and uninformed trading by 12.4% and 23.9%, respectively, in the US between 2001 and 2010, hence reducing relative information risk. We establish the causal effects using control stocks with similar propensities of listing and a quasi-natural experiment using option listing standards. The benefits are more prominent for stocks with active options trading and opaque stocks. The reduction of information risk is larger for good news than bad news, and the stock price response to earnings surprise weakens after listing. The results suggest that options improve the overall market information environment beyond substitutional effects to stock trading.

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 …

Debt Heterogeneity And Covenants, Yun Lou, Clemens A. Otto

Research Collection School Of Accountancy

Coordination failure among owners of heterogeneous debt types increases distress costs. Covenants reduce expected distress costs by lowering the probability of liquidity shortages, increasing liquidation values, and incentivizing creditor monitoring. We predict and find that new debt contracts include more covenants when borrowers' existing debt structures are more heterogeneous. Our findings suggest that covenants are not only used to address creditor-shareholder conflicts but also to reduce the expected costs of coordination failure among creditors. Further, our results indicate a dynamic component missing from static debt structure models: Debt heterogeneity entails additional covenants (i.e., constraints) when raising future debt.

Ethereum And The Sec: Why Most Distributed Autonomous Organizations Are Subject To The Registration Requirements Of The Securities Act Of 1933 And A Proposal For New Regulation, Tiffany L. Minks

Texas A&M Law Review

In a world full of new technology, the risk of fraud is constantly increasing. In the securities industry, this risk existed long before the use of technology. Congress enacted the Securities Act of 1933 to combat the risk of fraud and misrepresentation in the sale of securities. By requiring full disclosure, investors have the opportunity to make informed decisions prior to investing. However, Distributed Autonomous Organizations (“DAOs”), through the use of blockchains and smart-contracts, engage in the sale of securities without fully disclosing the risks or complying with the registration requirements of the Securities Act of 1933. Compliance with the …

Capm-Based Company (Mis)Valuations, Olivier Dessaint, Jacques Olivier, Clemens A. Otto, David Thesmar

Research Collection Lee Kong Chian School Of Business

There is a discrepancy between CAPM-implied and realized returns. Using the CAPM in capital budgeting -- as recommended in finance textbooks -- should thus have valuation effects. For instance, low beta projects should be valued more by CAPM-using managers than by the market. This paper empirically tests this hypothesis using publicly announced M&A decisions and shows that takeovers of lower beta targets are accompanied by lower cumulative abnormal returns for the bidders. Specifically, our estimates imply an average net loss to bidders corresponding to 12% of the average deal value and exceeding USD 10 billion per year in aggregate.

Are Bond Ratings Informative? Evidence From Regulatory Regime Changes, Louis H. Ederington, Jeremy Goh, Yen Teik Lee, Lisa Yang

Research Collection Lee Kong Chian School Of Business

The recent Dodd-Frank Act (Section 939B) enacted in 2010 repeals credit rating agencies’ (CRAs) exemption from Regulation Fair Disclosure. We test whether CRAs continue to provide new information to the market after the repeal. We find that the significant pre-repeal stock price responses to rating changes disappear after the regime change. Bond price reactions however remain significant. These results are even more significant at the investment-speculative boundary. Our evidence suggests that CRAs serve as a conduit for transmitting private information before the repeal. It also shows that regulatory constraint is a channel by which credit ratings affect cost of financing.

Glossary Of Business Evidence, Paul C. Boyd

MBA Faculty Conference Papers & Journal Articles

No abstract provided.

Industry Tournament Incentives, Zhichuan Li

Business Publications

We empirically assess industry tournament incentives for CEOs, as measured by the compensation gap between a CEO at one firm and the highest-paid CEO among similar (industry, size) firms. We find that firm performance, firm risk, and the riskiness of firm investment and financial policies are positively associated with the external industry pay gap. The industry tournament effects are stronger when industry, firm, and executive characteristics indicate high CEO mobility and a higher probability of the aspirant executive winning.

2018 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 …

Base Erosion And Profit Shifting (Beps) And The Digital Economy: Challenges And Issues, Marianne Ojo, James A. Digabriele

Department of Accounting and Finance Faculty Scholarship and Creative Works

The digital economy, undoubtedly, has contributed to the immense task of clearly identifying, ascertaining, and accounting for sources, rationales, and audit trails relating to tax transactions. This is not only evident owing to difficulties associated with cross-border transaction regulations which govern different jurisdictions as well as the enforcement of such regulations, but also in respect of risks associated with the present global financial environment - all having generated from the rise in automation, increased and improved sophisticated technologies, globalization, and conglomeration. This chapter not only seeks to highlight the extent, contribution, and significance of the digital economy in respect of …

Are Overconfident Ceos Better Leaders? Evidence From Stakeholder Commitments, Kenny Phua, T. Mandy Tham, Chi Shen Wei

Research Collection Lee Kong Chian School Of Business

We find evidence that the leadership of overconfident chief executive officers (CEOs) induces stakeholders to take actions that contribute to the leader's vision. By being intentionally overexposed to the idiosyncratic risk of their firms, overconfident CEOs exhibit a strong belief in their firms’ prospects. This belief attracts suppliers beyond the firm's observable expansionary corporate activities. Overconfident CEOs induce more supplier commitments including greater relationship-specific investment and longer relationship duration. Overconfident CEOs also induce stronger labor commitments as employees exhibit lower turnover rates and greater ownership of company stock in benefit plans.

Managerial Conservatism, Board Independence And Corporate Innovation, Jun Lu, Wei Wang

Business Faculty Publications

Using panel data on U.S. public firms, we document a positive effect of board independence on corporate innovation. This effect is concentrated in firms that are larger in size, in the non-technical industries, facing less product market competition, and using more debt, where managers are more likely to be excessively risk averse. We establish causality of board independence on innovation using a difference-in-difference approach that exploits an exogenous shock to board composition, namely, the mandate of a majority of outside directors on company boards by NYSE and NASDAQ in response to the passage of Sarbanes-Oxley Act in 2002. We further …

2018 Q1 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.

Productivity And The California Global Warming Solutions Act: An Examination Of Cost Of Compliance Utilizing Plant Level Data In The Portland Cement And Manufacturing Industry, Richard Ardito

Doctoral Dissertations and Projects

This dissertation examined the effect of California environmental regulation, AB32 on the Portland Cement Mining and Manufacturing industry which was directly targeted by the legislation. The researcher examined the effect of productivity on the Portland Cement industry operating within California by comparing changes specific labor and fuel use productivity measures to changes in the same measures for organizations operating outside of California. These differences were examined using an independent sample t-test to determine if any changes were statistically significant. The results showed statistically significant increases in productivity for direct labor, total employee labor, and combustible fuel use when analyzed to …

Do Underwriters Compete In Ipo Pricing?, Evgeny Lyandres, Fangjian Fu, Erica X. N. Li

Research Collection Lee Kong Chian School Of Business

We propose and implement a direct test of the hypothesis of oligopolistic competition in the U.S. underwriting market against the alternative of implicit collusion among underwriters. We construct a simple model of interaction between heterogenous underwriters and heterogenous firms and solve it under two alternative assumptions: oligopolistic competition among underwriters and implicit collusion among them. The two solutions lead to different equilibrium relations between the compensation of underwriters of different quality on one hand and the time-varying demand for public incorporation on the other hand. Our empirical results, obtained using 39 years of IPO data, are generally consistent with the …

Thinking Finance - The Comic Book, Dimitrios V. Siskos

Publications

Thinking financially results in the best possible outcome and establishes a secure foundation for the future as an independent man. In contrast, thinking emotionally leads to short-sighted financial decisions and usually, deep regrets. However, thinking financially is not pleasant for the people around us. This comic book presents a guy, whose dream is to become an accountant. When he finally succeeds in this, he realizes that thinking financially may be effective for his boss but it is irritating for everyone else, even for his family.

The Impact Of Sustainability Reporting On Firm Profitability, Lancee L. Whetman

Undergraduate Economic Review

Using a hand-collected representative sample of 95 publicly traded American firms from various sectors in 2015-2016, I examine how corporate sustainability reporting affects the financial performance of firms. I find a positive and significant effect of sustainability reporting on a firm’s return on equity, return on assets, and profit margin in the subsequent year. However, this relationship is found only for firms with low institutional ownership. These results suggest that sustainability reporting would be a worthwhile use of corporate resources for this subset of firms. Further, corporate sustainability reporting is shown to be an effective substitute for monitoring by institutional …

Cracking Shells: The Panama Papers & Looking To The European Union's Anti-Money Laundering Directive As A Framework For Implementing A Multilateral Agreement To Combat The Harmful Effects Of Shell Companies, Nicholas Vail

Texas A&M Law Review

In early 2016, the International Consortium of Investigative Journalists released a report detailing thousands of leaked documents demonstrating how a Panamanian law firm had, for years, helped wealthy clients conceal their financial activities through the use of offshore shell companies. The Panama Papers, as the leaked documents came to be known, directed renewed attention at the use of shell companies. Shell companies are used by the world’s wealthy and powerful to lower their taxes, but are also used by tax evaders, criminal organizations, and terrorists. While much of the renewed attention has been directed at offshore tax havens such as …

The Emerging International Taxation Problems, James G. Yang, Victor N.A. Metallo

Department of Accounting and Finance Faculty Scholarship and Creative Works

The problems of tax evasion and tax avoidance are as old as taxes themselves. Between 2015 and 2016 alone, many U.S. multinational corporations were involved in tax disputes with the European Commission. From a historical perspective, these disputes are unprecedented as they have resulted in tremendous amount of tax penalties. The most notable case was Apple for €13 billion of unpaid tax. This article discusses what tax strategies these corporations used that caused such disputes. It specifically investigates seven corporations: Apple Inc., McDonald’s, Starbucks, Fiat, Amazon, Google, and Ikea, and elaborates on the following tax strategies: high royalties, intercompany transfer …

The Relationship Between Sports Sponsorship And Corporate Financial Returns In South Africa, Michael Goldman, Julian Blake, Sonja Fourie

Sport Management

Purpose

Sponsorship is a major contributor to income in the South African sports arena, and is a critical component allowing sports unions to remain financially viable and sustainable. Sports sponsoring companies, however, have long questioned the financial returns generated from these ventures. The purpose of this paper is to understand whether financial returns of companies with sports sponsorship in South Africa are significantly different to those without. This research was conducted on Johannesburg Stock Exchange (JSE) listed companies that sponsored sport consistently between 2000 and 2015 for a period of two years. A quantitative methodology was employed whereby share price, …

Ua25/2 Memoranda, Wku Human Resources

WKU Administration Documents

Memoranda issued by WKU Human Resources to faculty & staff via email.

• Employee Benefits Cost Chart, 1/1/2019
• Salary Increases, Employee Benefits Cost, 1/1/2019

Is The Accruals Anomaly More Persistent In Firms With Weak Internal Controls?, Kanishk Kapur

CMC Senior Theses

In 1996, Sloan identified the accruals anomaly, in which the negative relationship between the accruals component of current earnings and subsequent stock returns can be exploited to generate excess returns. One would expect the accruals anomaly to dissipate and ultimately disappear as investors take advantage of the now-public information. However, nearly two decades later, it persists as one of the most prominent and contentious anomalies; its magnitude of current and future excess returns still remain controversial. The main reason for its persistence is that extreme accrual firms possess characteristics that are unappealing to most investors. These characteristics, which include insufficient …

You Can Run But You Can’T Hide: The Advance Of Shareholder Activism, Kendall Greenberg

CMC Senior Theses

Shareholder activism has exploded in popularity since the turn of the century, due in large part to impressive relative returns generated by its major participants. The result has thus been a surge in assets invested in the category, to in excess of $170 billion today up from less than $3 billion in 2000 (Inglis 2015; Romito 2015). This influx of capital, in absolute dollars and pace of growth, has caused many to wonder whether activists truly create shareholder value and, if so, if the value generated is sustainable. Numerous studies of activist interventions prior to 2009 reveal significant stock price …

The Effect Of Mandatory Adoption Of Ifrs On Transparency For Investors, Crystal Anderson

CMC Senior Theses

This paper examines the effect of the mandatory adoption of the International Financial Reporting Standards (IFRS) on transparency for investors by measuring the increase in earnings management during the post-adoption period of IFRS. One sign of earnings management is current year earnings being only slightly higher than the previous year’s earnings. An increase in earnings management means a decrease in accounting quality and a decrease of transparency for investors. By comparing firms that mandatorily adopted IFRS to similar benchmark firms in terms of strength of legal enforcement, book-to-market ratios, market values and net incomes, I am able to run empirical …

Does The Market Believe White Knights And Hostile Bidders Are Acting In Their Shareholders' Interest?, John M. Griffith, Mohammad Najand, Jiancheng Shen

Finance Faculty Publications

This study examines why white knights suffer significant losses while their rival hostile bidders experience significant abnormal gains. We address two research questions: 1) Does the market believe that white knights and hostile bidders are acting in their shareholders' interest? 2) Does Tobin's q explain why white knights suffer significant losses and hostile bidders experience significant gains upon the announcement of their bids? The results show that hostile bidders are value-maximizing investors and white knights are not acting in their shareholders' interest. Instead, white knights suffered significant reductions in value and historically have not maximized the wealth of investors

2017 Q4 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.

Proxy Access And Optimal Standardization In Corporate Governance: An Empirical Analysis, Reilly S. Steel

Fordham Journal of Corporate & Financial Law

According to the conventional wisdom, “one size does not fit all” in corporate governance. Firms are heterogeneous with respect to their governance needs, implying that the optimal corporate governance structure must also vary from firm to firm. This one-size-does-not-fit-all axiom has featured prominently in arguments against numerous corporate law regulatory initiatives, including the SEC’s failed Rule 14a-11—an attempt to impose mandatory, uniform “proxy access” on all public companies—which the D.C. Circuit struck down for inadequate cost–benefit analysis.

This Article presents an alternative theory as to the role of standardization in corporate governance—in which investors prefer standardized terms—and empirical …

Profitability Ratios In The Early Stages Of A Startup, Erkki K. Laitinen

The Journal of Entrepreneurial Finance

This study develops a mathematical framework to analyze the time series of profitability ratios in the early stages of a startup. It is assumed that the expenditure of the startup grows at a steady rate and generates a proportionally identical flow of revenue in each period. The profitability in terms of the internal rate of return (IRR) and the lag structure of revenue flows are assumed constant over time in describing the adjustment process towards the steady state. The startup is assumed to expense in each period a constant part of periodic expenditure and beginning-of-the-period assets. The adjustment processes of …

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.