Finance and Financial Management Commons^™

People Orientation And Thing Orientation In Business Majors: Implications For Assessing The Impacts Of Cross-Functional Business Program Curricula, Todd J. Hostager, David A. Christopher, Kristy J. Lauver, Christopher Knowles

International Journal for Business Education

Background/Introduction/Purpose:  Prior research documented significant differences in people orientation and thing orientation (PTO) based on type of major and sex.  This study examines a set of measures for helping business programs to assess whether they are producing graduates equipped to consider both people and things when making decisions, regardless of their major or sex.

Methods/Design:  Students in a strategic management capstone course spent a single 75-minute session responding to a brief new venture pitch by identifying what types of additional information they would need to decide whether to invest in the business.  Three Likert-scaled options gauged the extent to participant …

Dynamic Modelling Of Shocks To Credit Spread Risk In Banking Book: Evidence From European Sovereign Markets, Yaman O. Erzurumlu, Alper Kirik, Tunc Oygur

Faculty Publications – Finance, Insurance, and Law

This research examines the relationship between credit spread risk in the banking book (CSRBB) and bond market behavior across various maturities in twelve European nations. We address the challenges banks encounter in modeling CSRBB in isolation, as directed by the European Banking Authority’s (EBA) revised guidelines, which mandate the distinct management of CSRBB and interest rate risk in the banking book (IRRBB). Utilizing IRF and VAR models, the analysis demonstrates that credit spread shocks have divergent effects on sovereign bond I-Spreads and 5-year Credit Default Swap spreads across different tenors and countries. The results also indicate that shock absorption and …

Data Utilization In Facilities’ Performance Management Decision- Making At U.S. Four-Year Public Institutions: A Cross-Sectional Exploratory Study, Tanaporn Supanichrattana

Theses and Dissertations

The growing complexity of higher education finance, aging infrastructure, and rising accountability expectations has intensified demands on facilities organizations to manage institutional assets strategically. As colleges and universities face sustained fiscal constraints and expanding operational pressures, the ability of facilities leaders to use data to inform performance management has become increasingly critical. Despite this importance, limited empirical research has examined how facilities leaders integrate data into decision-making within public higher education contexts.

The quantitative study employed a cross-sectional, exploratory survey design to investigate data utilization practices among facilities leaders at U.S. public four-year institutions. Guided by the Data–Information–Knowledge–Wisdom hierarchy and …

Forgive Me Not? Racial And Institutional Disparities In The Paycheck Protection Program Loan Forgiveness, Vladimir Kotomin, Wyatt Frere, Ruby Morr

Faculty Publications – Finance, Insurance, and Law

Existing research establishes that minority borrowers, particularly Black small business owners, faced significant challenges in accessing funds from the Paycheck Protection Program (PPP), especially in its early stages. We find that institutional and racial disparities persist during the PPP loan forgiveness stage. Controlling for various loan- and borrower-level characteristics, we demonstrate that relationship lenders – community banks, credit unions, and farm credit institutions – are associated with higher rates of PPP loan forgiveness. In contrast, automated lenders – fintechs and fintech banks – exhibit the lowest forgiveness rates. Black borrowers experience the poorest outcomes, except for loans issued by non-depository …

Secured Or Unsecured: That Is All Matters - Practical Implications Of New Reference Rates, Tunc Oygur, Alper Kirik, Yaman O. Erzurumlu

Faculty Publications – Finance, Insurance, and Law

EUR and USD overnight risk-free rates (RFRs) have undergone a period of change, with EONIA being replaced with ESTR and Fed Funds Rate (FFR) being replaced with SOFR. We conduct a comparative analysis of the representative power of EONIA vs. ESTR and FFR vs. SOFR regarding market confidence and guidance on market expectations. Our results imply a significant difference between the US and the Eurozone. ESTR-EONIA displays similar characteristics, whereas FFR-SOFR displays different characteristics. SOFR is a superior market indicator to its predecessor and more effectively reflects market confidence than the FFR. However, none of the four RFRs displays forecasting …

Debiasing Recency: Evidence From Individual Investor Stock Sales, Vladimir Kotomin, Abhishek Varma

Faculty Publications – Finance, Insurance, and Law

In the first large-sample study of recency bias mitigation, we show that individual investors dispose of relatively longer-held stocks in December tax-loss sales compared to other months. We argue that before engaging in December tax-loss sales, investors review all or most of their losing positions instead of focusing on the most recently acquired stocks. Thus, reviewing relevant information mitigates recency bias in a large, diverse sample of investors. This behavior is consistent across investor, stock, and portfolio characteristics; it is found even in accounts with only long-term capital losses.

Risk-Based Deposit Insurance, Deposit Rates And Bank Failures: Evidence From Russia, Lucy Chernykh, Vladimir Kotomin

Faculty Publications – Finance, Insurance, and Law

Using the Russian banking system as a laboratory, we study the effect of a switch from fixed-rate deposit insurance to a risk-based system with premia tied to insured deposit rates offered by a bank. After the switch, increases in bank risk lead to reduced reliance on insured deposits, private banks without excessive capital stop raising insured deposit rates to fund loan growth, and the cost of insured deposits becomes a predictor of bank failures (beyond the CAMEL variables). Offering insured deposit rates notably above the market becomes a last resort to banks. The results suggest that risk-based deposit insurance schemes …

Do Large Losses Loom Larger Than Gains? Salience, Holding Periods, And The Disposition Effect, Vladimir Kotomin, Abhishek Varma

Faculty Publications – Finance, Insurance, and Law

Individual investors are more likely to sell stocks with nominal gains and losses that are large relative to their brokerage portfolio value. The salience of nominal gains and losses affects stock sales in both taxable and tax-deferred accounts and across investor groups, but the effect of nominal losses is weaker for stocks with high valuation uncertainty. The effect has a time dimension: at short holding periods, individuals are more likely to sell stocks with large nominal losses than gains of the same size, mitigating the disposition effect. Investors may be compelled to revisit their beliefs after incurring large losses quickly.

The Clientele Effect Around The Turn Of The Year: Evidence From The Bond Markets, Vladimir Kotomin

Faculty Publications – Finance, Insurance, and Law

Studying the returns of US Treasury, corporate, and municipal (muni) bonds at the index level over 2004-2020, I find a strong turn-of-the-year effect – low December returns and high January returns – in the high-yield muni index. The investment-grade muni index exhibits a similar but weaker effect. High-yield munis is the only class whose December returns are negatively correlated with year-to-date yield changes. Dominance of highly tax-sensitive households who engage in tax-loss selling, combined with opaqueness, low liquidity, and a small role of ETFs in munis make it difficult to arbitrage away the December price decreases. The investment-grade and high-yield …

A Tale Of Two Smips: Equity And Fixed Income, Thomas S. Howe, Vladimir Kotomin, Min-Yu (Stella) Liao, Abhishek Varma

Faculty Publications – Finance, Insurance, and Law

Purpose – The purpose of this paper is to document and compare the characteristics of two student-managed investment funds at the University.

Design/methodology/approach – This study uses a case study approach to achieve this purpose.

Findings – Consistent with other studies, this study finds considerable differences in funding, oversight and the structure of the courses in which the students manage the portfolios. This is the case even though the portfolios are managed by students in courses offered by the same department at the same university.

Originality/value – This study presents different possible ways of obtaining funds and structuring courses in …

Distributed Evolution Of Spiking Neuron Models On Apache Mahout For Time Series Analysis, Andrew Palumbo

Annual Symposium on Biomathematics and Ecology Education and Research

No abstract provided.

Financial Conflict Messages And Marital Satisfaction: The Mediating Role Of Financial Communication Satisfaction, Samantha Josephine Shebib

Theses and Dissertations

The current study explores how methods of handling financial disagreements contribute to, or detracts from, marital satisfaction. In addition, satisfaction with communicating about financial obligations in marriage is predicted to contribute to marital satisfaction.

Mutual Funds’ Soft Dollar Arrangements: Determinants, Impact On Shareholder Wealth, And Relation To Governance, Yaman Ö. Erzurumlu, Vladimir Kotomin

Faculty Publications – Finance, Insurance, and Law

Mutual fund advisers either expense the cost of research and other services or pay for them with soft dollars. This study is the first to use actual soft dollar and total brokerage commission figures for a large number of funds and to examine how soft dollars are linked to mutual fund governance. Employing a survivorship bias-free sample of actively managed US mutual funds, we find that higher soft dollar and total brokerage commissions are associated with higher advisory fees but not with higher risk-adjusted fund returns. These findings suggest that mutual fund shareholders, on average, do not benefit from the …

Examining Social Desirability Bias In Measures Of Financial Behavior, Nicole L. Kelly

Theses and Dissertations

Surveys that investigate the financial lives of consumers consist of direct questions about financial behavior, with college students being a heavily surveyed and convenient sample (Gutter 2013). However, the subjective nature of survey data is not bias-free, indicated by the presence of disparities between the respondents' reported and actual behavior. Due to the fact that many students begin to acquire loans, establish credit, and initiate saving behaviors in college, it is important that we have a complete understanding the financial behavior of college students.

The goal of this study was to investigate the role of socially desirable responding (SDR) in …

Benefits Of Lending Relationships In Public Debt Markets: Empirical Evidence From The Commercial Paper Market, David W. Blackwell, Vladimir Kotomin, Drew B. Winters

Faculty Publications – Finance, Insurance, and Law

There is a large body of literature on the benefits of established lending relationships with banks, which is an intermediated debt market. We extend the literature by testing for benefits from direct lending relationships in the commercial paper market, which is a public debt market. Diamond (1991) suggests that firms access public debt markets when they have enough reputation to no longer require the close monitoring by banks. Using daily rate data for dealer-placed and directly placed commercial paper, we find that the year-end liquidity squeeze is less pronounced in the directly placed commercial paper than in the dealer-placed commercial …

Interest-Rate And Calendar-Time Effects In Money Market Fund And Bank Deposit Cash Flows, Vladimir Kotomin, Stanley D. Smith, Drew B. Winters

Faculty Publications – Finance, Insurance, and Law

We examine the sensitivities of aggregate balances of retail and institutional money market funds (MMFs) and their potential substitutes, bank deposits, to changes in short-term interest rates while controlling for calendar-time effects. We find that institutional MMF and time deposit cash flows are sensitive to recent changes in short-term interest rates. Institutional MMF investors appear to take advantage of arbitrage opportunities created by MMFs using the amortized cost technique. Retail MMF investors are much less responsive to changes in interest rates.

A Look Inside Amlf: What Traded And Who Benefited, Ozgur Akay, Mark D. Griffiths, Vladimir Kotomin, Drew B. Winters

Faculty Publications – Finance, Insurance, and Law

The Federal Reserve’s AMLF program was designed to provide liquidity to money market funds (MMFs). Between September 2008 and May 2009, the program made $217 billion in non-recourse loans to depository institutions and bank holding companies to purchase asset-backed commercial paper from MMFs. JP Morgan and State Street dominated the program, accounting for over 90% of all loans made. Our analysis suggests that JP Morgan exhibited more self-dealing behavior than State Street. We find that JP Morgan and State Street earned economically and statistically significant cumulative returns of 2.28% and 2.49% (respectively) over the first seven days of the program …

The Year-End Effect In Money Market Yields: Beyond One Month And Beyond The Crisis, Vladimir Kotomin

Faculty Publications – Finance, Insurance, and Law

U.S. money market yields up to one month have shown changes consistent with year-end liquidity preferences. I find that three- and six-month negotiable certificate of deposit (CD), Eurodollar deposit (ED), and banker’s acceptance (BA) yields are also affected by year-end liquidity preferences. Two- and three-month financial commercial paper (CP) yield changes are less pronounced. Banks – CD, ED, and BA issuers – have increased year-end liquidity needs, unlike finance companies – predominant CP issuers. The year-end effect disappears after the 2007-2008 crisis as depositories’ cash holdings increase. CD, ED, and CP yields diverge post-crisis, suggesting that investors no longer consider …

A Crisis Of Confidence: Understanding Money Markets During The Financial Crisis, Mark D. Griffiths, Vladimir Kotomin, Drew B. Winters

Faculty Publications – Finance, Insurance, and Law

The money markets are at the heart of the recent financial crisis and are the subject of substantial news coverage. However, much of what was reported showed a lack of understanding of money markets in general and, a specific lack of understanding as to why the financial crisis unfolded as it did in these markets. The purpose of this paper is to discuss what actually happened and why. Specifically, we discuss: (1) the economic role of the money markets, (2) the institutional features of the money markets central to the financial crisis and, (3) what actually happened in the various …

The Fed And The 2007-2009 Financial Crisis: Treating A Virus With Antibiotics? Evidence From The Commercial Paper Market, Mark D. Griffiths, Vladimir Kotomin, Drew B. Winters

Faculty Publications – Finance, Insurance, and Law

The two main explanations for the 2007-2009 financial crisis in the money markets are credit concerns and liquidity issues. These risks are intimately related, especially in the money markets, and either can lead to somewhat similar behavior by market participants. We study the U.S. commercial paper (CP) market to draw insights about the nature of the crisis which resulted in the amount of outstanding CP shrinking from the peak of $2.18 trillion in early August 2007 to $1.27 trillion in early July 2009. However, the CP market is not homogeneous in terms of credit quality, maturities and types of issues …

A Test Of The Expectations Hypothesis In Very Short-Term International Rates In The Presence Of Preferred Habitat For Liquidity, Vladimir Kotomin

Faculty Publications – Finance, Insurance, and Law

This study incorporates year-end and quarter-end preferences for liquidity and other calendar-time effects into the test of the expectations hypothesis (EH) in the very short-term LIBOR (maturities of one month and shorter) in seven major world currencies. The calendar-time effects are found to alter long-term relations between very short-term rates in these currencies. These effects alone are not responsible for the rejection of the EH in the data, as it is rejected in most of the cases even after appropriate controls are introduced. However, such effects are capable of causing the EH to be rejected and should be controlled for …

Economic Thinking And Risk Attitudes: An Empirical Study, Peter Slepcevic-Zach, Ph.D., Thomas Koeppel

International Journal for Business Education

In the light of the current economic crisis, which had its roots in high risk dealings in the international financial markets, the question how economically minded students are and what propensity towards risk they have, are essential to improving their financial literacy. In a broad survey including economic and non-economic schools 649 students aged 14 and 18 were questioned. In this paper results are presented and implications for classroom teaching and curricular development are derived.

When East And West Meet: An Essay On The Importance Of Cultural Understanding In Global Business Practice And Education, Sj Chang

Faculty Publications – Finance, Insurance, and Law

As today’s business decisions and choices are increasingly influenced by the diverse cultural backgrounds and perspectives of various corporate stakeholders, it is critical for business managers to have multicultural understanding. This motivates us to refine our business perspectives and approaches in global arena as well as our educational philosophies on global business management. Based on casual yet experiential discussions, this essay presents some cohesive points on comparative cultural understanding and business implications thereof between the “West” and the “East,” which is presupposed by the cultural contrasts between America and Korea. It can hopefully serve as a practically meaningful guideline for …

Inventory Management Effects, Isolated: Evidence From The Federal Funds Market, Yaman Ö. Erzurumlu, Vladimir Kotomin

Faculty Publications – Finance, Insurance, and Law

The federal funds market is highly competitive, has uniform information, and does not have most order-processing cost components of equity markets. Hence, it provides an opportunity to study the effect of inventory management on the bid-ask spread in an isolated fashion. Using a unique data set of daily borrowing and lending federal funds quotes posted by a large commercial bank, we find that the bank maintains a fairly constant bid-ask spread throughout a two-week reserve maintenance period. It acts similarly to a market maker facilitating flow of funds between depository institutions throughout the reserve maintenance period. The bank becomes more …

Year-End And Quarter-End Effects In The Term Structure Of Sterling Repo And Eurepo Rates, Mark D. Griffiths, Vladimir Kotomin, Drew B. Winters

Faculty Publications – Finance, Insurance, and Law

Griffiths and Winters (1997) find a year-end preferred habitat for liquidity for US repo rates, and, later, Griffiths and Winters (2005) find a similar preferred habitat for US money market instruments. Kotomin et al. (2008) document the preferred habitat in LIBOR for the major world currencies, excluding the British pound. We examine the robustness of these results using pound sterling and euro repo rates and find a year-end preferred habitat for liquidity in the euro repo rates. The British interest rates continue to behave differently, and we provide a possible explanation as to why this occurs.

Preferred Habitat For Liquidity In International Short-Term Interest Rates, Vladimir Kotomin, Stanley D. Smith, Drew B. Winters

Faculty Publications – Finance, Insurance, and Law

Risk-shifting window dressing and a preferred habitat for liquidity have been offered as possible explanations as to why U.S. money market rates are higher before the year-end than afterwards. The two hypotheses differ in the timing of the rate decline at the year-end and the evidence on the timing of the decline supports the preferred habitat hypothesis in U.S. money markets. This paper extends this line of research to the behavior of international short-term interest rates at year-ends and quarter-ends using London Interbank Offer Rates (LIBOR) for 11 different currencies. The results suggest that the behavior of LIBOR for five …

Fil News, Fall 2007, Illinois State University, Department Of Finance, Insurance, And Law

FIL News

Newsletter of the Department of Finance, Insurance, and Law

The Impact Of The Return To Lagged Reserve Requirements On The Federal Funds Market, Vladimir Kotomin, Drew B. Winters

Faculty Publications – Finance, Insurance, and Law

We examine the impact on the settlement Wednesday effect in daily fed funds rates following the change from contemporaneous reserve requirements (CRR) to lagged reserve requirements (LRR). The Federal Reserve changed from CRR to LRR, in part, to make it easier for banks to settle their reserve accounts. Our hypothesis is that the switch to LRR will reduce the demand for reserves on settlement Wednesdays, thus reducing the settlement Wednesday effect in fed funds rates. Our empirical results provide strong support for our hypothesis.

Quarter-End Effects In Banks: Preferred Habitat Or Window Dressing?, Vladimir Kotomin, Drew B. Winters

Faculty Publications – Finance, Insurance, and Law

Allen and Saunders (1992) document abnormal behavior of bank assets and liabilities at the turn-of-the-quarter and attribute it to window dressing by banks. Using different methods we re-visit bank turn-of-the-quarter balance sheet activity. We also examine quarter-end changes in the effective fed funds rates and fed funds rate standard deviations. We confirm the presence of turn-of-the-quarter activity on bank balance sheets and in the fed funds market. However, we conclude that the turn-of-the-quarter effects are more consistent with customer preferred habitats than window dressing.

No. 130 1997 November

International Journal for Business Education

SIEC Historical Documents