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Articles 61 - 90 of 139
Full-Text Articles in Finance and Financial Management
(Wp 2012-01) Territorial Tax System Reform And Corporate Financial Policies, Matteo P. Arena, George Kutner
(Wp 2012-01) Territorial Tax System Reform And Corporate Financial Policies, Matteo P. Arena, George Kutner
Department of Finance Working Papers
We examine the effect of a permanent change to a country income repatriation tax system on a set of corporate financial policies. In 2009 Japan and UK switched from a worldwide system to a territorial system for the taxation of earnings repatriated by their multinational firms. Due to the relatively high corporate tax rate in Japan and UK, the new system effectively reduced the tax liabilities of most multinational firms when repatriating earnings. We find that after the change Japanese and UK firms accumulate less cash, pay out larger amounts to shareholders through dividends and share repurchases, and invest less …
Mortgage Product Substitution And State Anti-Predatory Lending Laws: Better Loans And Better Borrowers?, Raphael W. Bostic, Souphala Chomsisengphet, Kathleen C. Engel, Patricia A. Mccoy, Anthony Pennington-Cross, Susan M. Wachter
Mortgage Product Substitution And State Anti-Predatory Lending Laws: Better Loans And Better Borrowers?, Raphael W. Bostic, Souphala Chomsisengphet, Kathleen C. Engel, Patricia A. Mccoy, Anthony Pennington-Cross, Susan M. Wachter
Finance Faculty Research and Publications
Mounting foreclosures and disclosures of abusive lending practices led many states to adopt new anti-predatory lending (APL) laws. Researchers have examined the impact of such laws on credit flows and the cost of credit. This research extends the literature by examining whether the market responded to these laws by substituting different mortgage products for those restricted by APL provisions. The evidence indicates that the laws were effective in restricting loans with targeted characteristics, and that the market substituted other product types to maintain access to credit and affordability in the face of these restrictions. The laws reduced the involvement of …
Firm Location And Corporate Debt, Matteo P. Arena, Michael Dewally
Firm Location And Corporate Debt, Matteo P. Arena, Michael Dewally
Finance Faculty Research and Publications
This study examines the influence of a firm’s geographical location on corporate debt and provides evidence that the higher cost of collecting information on firms distant from urban areas has significant implications on a wide array of corporate debt characteristics. We find that rural firms face higher debt yield spreads and attract smaller and less prestigious bank syndicates than urban firms. Rural firms attempt to reduce their informational disadvantage by relying more on relationship banking. Our results on the effect of location on corporate debt are robust to the inclusion of an extensive set of firm and issue characteristics.
Accelerated Share Repurchases, Leonce Bargeron, Manoj Kulchania, Shawn Thomas
Accelerated Share Repurchases, Leonce Bargeron, Manoj Kulchania, Shawn Thomas
Finance Faculty Research and Publications
Accelerated share repurchases (ASRs) are credible commitments by firms to repurchase shares immediately. Including an ASR in a repurchase program reduces the flexibility that firms have to alter an announced program in response to subsequent changes in the price and liquidity of its shares, unexpected shocks to cash flow and/or investment, etc. Thus, we investigate whether firms’ decisions to include ASRs in their repurchase programs are associated with factors expected to influence the costs of lost flexibility and the benefits of enhanced credibility and immediacy. We find robust evidence consistent with the costs of lost flexibility and the benefits of …
The Corporate Choice Between Public Debt, Bank Loans, Traditional Private Debt Placements, And 144a Debt Issues, Matteo P. Arena
The Corporate Choice Between Public Debt, Bank Loans, Traditional Private Debt Placements, And 144a Debt Issues, Matteo P. Arena
Finance Faculty Research and Publications
The main purpose of this study is to examine the determinants of the corporate choice between different forms of debt financing. By analyzing the most comprehensive sample of U.S. corporate debt issues to date, I find that firms that issue 144A debt have significantly lower credit quality and higher information asymmetry than firms that issue traditional non-bank private debt. Further, the study shows that traditional private placements, rather than bank loans, are the favorite private debt source for firms with good credit quality. I also show that the firm characteristics of traditional private debt issuers have significantly changed after 1990 …
(Wp 2011-01) It Takes Two: The Incidence And Effectiveness Of Co-Ceos, Matteo P. Arena, Stephen P. Ferris, Emre Unlu
(Wp 2011-01) It Takes Two: The Incidence And Effectiveness Of Co-Ceos, Matteo P. Arena, Stephen P. Ferris, Emre Unlu
Department of Finance Working Papers
This study examines the phenomenon of co-CEOs within publicly traded firms. Although shared executive leadership is not widespread, it occurs within some very prominent firms. We find that co-CEOs generally complement each other in terms of educational background or executive responsibilities. Our results show that firms most likely to appoint co-CEOs have lower leverage, a more limited firm focus, less independent board structure, fewer advising directors, lower institutional ownership and greater levels of merger activity. The governance structure of co-CEO firms suggest that co-CEOships can serve as an alternative governance mechanism, with co-CEO mutual monitoring substituting for board or external …
The Effect Of Taxes On Multinational Debt Location, Matteo P. Arena, Andrew H. Roper
The Effect Of Taxes On Multinational Debt Location, Matteo P. Arena, Andrew H. Roper
Finance Faculty Research and Publications
We provide new evidence that differences in international tax rates and tax regimes affect multinational firms' debt location decisions. Our sample contains 8287 debt issues from 2437 firms headquartered in 23 different countries with debt-issuing subsidiaries in 59 countries. We analyze firms' marginal decisions of where to issue debt to investigate the influence of a comprehensive set of tax-related effects, including differences in personal and corporate tax rates, tax credit and exemption systems, and bi-lateral cross-country withholding taxes on interest and dividend payments. Our results show that differences in personal and corporate tax rates, the presence of dividend imputation or …
The Termination Of Subprime Hybrid And Fixed Rate Mortgages, Anthony Pennington-Cross, Giang Ho
The Termination Of Subprime Hybrid And Fixed Rate Mortgages, Anthony Pennington-Cross, Giang Ho
Finance Faculty Research and Publications
Adjustable-rate and hybrid loans have been a larger component of subprime mortgage lending in the mortgage market than prime lending. The typical adjustable-rate loan in subprime is a hybrid of fixed and adjustable characteristics in which the first 2 years are fixed and the remaining 28 years adjustable. Hybrid loans terminate at elevated probabilities even before the first adjustment date. Hybrid loan terminations are sensitive to interest rates and teaser rates (payment shocks). Default probabilities increase dramatically when payment shocks are mixed with low or no equity in the home. This is the mixture of events that helped to trigger …
Pay-Performance Sensitivity And Firm Size: Insights From The Mutual Fund Industry, George D. Cashman
Pay-Performance Sensitivity And Firm Size: Insights From The Mutual Fund Industry, George D. Cashman
Finance Faculty Research and Publications
I examine the ex ante decision to make an agent's pay-performance sensitivity an inverse function of organization size. I focus on mutual funds and their decision to use compensation contracts that reduce the advisor's marginal compensation as the fund grows (a declining-rate contract) over the dominant contract type, where marginal compensation is unrelated to fund size (a single-rate contract). I find evidence consistent with the view that declining-rate contracts are a mechanism to keep marginal compensation in line with the advisor's declining marginal product. Specifically, I find that funds with greater exposure to diseconomies of scale are more likely to …
The Role Of Geographic Proximity And Industrial Structure In Metropolitan Area Business Cycles, Michael Hollar, Anthony Pennington-Cross, Anthony Yezer
The Role Of Geographic Proximity And Industrial Structure In Metropolitan Area Business Cycles, Michael Hollar, Anthony Pennington-Cross, Anthony Yezer
Finance Faculty Research and Publications
Measurement and prediction of aggregate economic fluctuations at the region, state, and metropolitan area level is a major challenge. As data quality and analytical techniques have improved, the analysis of coincident economic cycle indicators (CEI) has progressed from national to regional to state levels. This paper continues the trend of geographic disaggregation by constructing and analyzing CEI at the MSA level. The theoretical advantage of MSA level indexes is that they reflect labor market areas. Given lack of quarterly economic time series at the MSA level, we construct a new variable, the EPI (export price index). The EPI is an …
The Duration Of Foreclosures In The Subprime Mortgage Market: A Competing Risks Model With Mixing, Anthony Pennington-Cross
The Duration Of Foreclosures In The Subprime Mortgage Market: A Competing Risks Model With Mixing, Anthony Pennington-Cross
Finance Faculty Research and Publications
This paper examines what happens to mortgages in the subprime mortgage market once foreclosure proceeding are initiated. A multinomial logit model that allows for the interdependence of the possible outcomes or risks (cure, partial cure, paid off, and real estate owned) through the correlation of associated unobserved heterogeneities is estimated. The results show that the duration of foreclosures is impacted by many factors including contemporaneous housing market conditions, the prior performance of the loan (prior delinquency), and the state-level legal environment.
Upheaval In The Boardroom: Outside Director Public Resignations, Motivations, And Consequences, Michael Dewally, Sarah Peck
Upheaval In The Boardroom: Outside Director Public Resignations, Motivations, And Consequences, Michael Dewally, Sarah Peck
Finance Faculty Research and Publications
We investigate the motives and circumstances surrounding outside directors' decisions to publicly announce their board resignations. Directors who leave "quietly" are in their mid-sixties and professional directors, i.e., retirees, who are retiring entirely from professional life. Directors who announce their resignation are in their mid-fifties and active professionals. Half the time they say they are leaving because they are "busy." These directors leave from firms with some weakness in their performance, but with no overt manifestations of cronyism such as excessive compensation of either the CEO or directors. The other half of the time directors leave while publicly criticizing the …
Locating Decision Rights: Evidence From The Mutual Fund Industry, George D. Cashman, Daniel N. Deli
Locating Decision Rights: Evidence From The Mutual Fund Industry, George D. Cashman, Daniel N. Deli
Finance Faculty Research and Publications
Mutual fund advisors make portfolio decisions for their funds on a daily basis. We examine the location of these portfolio decision rights on two dimensions. First, we consider the geographic location of the decision rights. Second, we consider whether the decision rights remain with an advisor or are allocated to an independent sub-advisor. We argue that the allocation of portfolio decision rights involves a tradeoff between the opportunity cost of not matching decision rights with specific knowledge, and the agency costs associated with moving the decision rights to the specific knowledge. The patterns in the location of decision rights are …
Effective Basemetal Hedging: The Optimal Hedge Ratio And Hedging Horizon, Michael Dewally, Luke Marriott
Effective Basemetal Hedging: The Optimal Hedge Ratio And Hedging Horizon, Michael Dewally, Luke Marriott
Finance Faculty Research and Publications
This study investigates optimal hedge ratios in all base metal markets. Using recent hedging computation techniques, we find that 1) the short-run optimal hedging ratio is increasing in hedging horizon, 2) that the long-term horizon limit to the optimal hedging ratio is not converging to one but is slightly higher for most of these markets, and 3) that hedging effectiveness is also increasing in hedging horizon. When hedging with futures in these markets, one should hedge long-term at about 6 to 8 weeks with a slightly greater than one hedge ratio. These results are of interest to many purchasing departments …
Predatory Lending Laws And The Cost Of Credit, Anthony Pennington-Cross, Giang Ho
Predatory Lending Laws And The Cost Of Credit, Anthony Pennington-Cross, Giang Ho
Finance Faculty Research and Publications
Various states and other local jurisdictions have enacted laws intending to reduce predatory and abusive lending in the subprime mortgage market. These laws have created substantial geographic variation in the regulation of mortgage credit. This article examines whether these laws are associated with a higher or lower cost of credit. Empirical results indicate that the laws are associated with at most a modest increase in cost. However, the impact depends on the product type. In particular, loans with fixed (adjustable) rates are associated with a modest increase (decrease) in cost.
A Face Can Launch A Thousand Shares—And An 0.80% Abnormal Return, Matteo P. Arena, John S. Howe
A Face Can Launch A Thousand Shares—And An 0.80% Abnormal Return, Matteo P. Arena, John S. Howe
Finance Faculty Research and Publications
In this paper we examine the market reaction—price and volume—to the appearance of a firm in the Who’s News column of The Wall Street Journal. We differentiate between those firms whose articles are accompanied by a picture of an executive and a control set of firms whose articles on the same day are not accompanied by a picture. The results show a more pronounced market reaction to the “cum picture” articles, consistent with the incomplete information theory of Merton [1987] and the heuristic-based familiarity hypothesis. There is no evidence of significant long-run abnormal performance for the sample firms.
Price Momentum And Idiosyncratic Volatility, Matteo P. Arena, K. Stephen Haggard, Xuemin (Sterling) Yan
Price Momentum And Idiosyncratic Volatility, Matteo P. Arena, K. Stephen Haggard, Xuemin (Sterling) Yan
Finance Faculty Research and Publications
We find that returns to momentum investing are higher among high idiosyncratic volatility (IVol) stocks, especially high IVol losers. Higher IVol stocks also experience quicker and larger reversals. The findings are consistent with momentum profits being attributable to underreaction to firm-specific information and with IVol limiting arbitrage of the momentum effect. We also find a positive time-series relation between momentum returns and aggregate IVol. Given the long-term rise in IVol, this result helps explain the persistence of momentum profits since Jegadeesh and Titman’s (1993) study.
The Impact Of State Anti-Predatory Lending Laws: Policy Implications And Insights, Raphael W. Bostic, Kathleen C. Engel, Patricia A. Mccoy, Anthony Pennington-Cross, Susan M. Wachter
The Impact Of State Anti-Predatory Lending Laws: Policy Implications And Insights, Raphael W. Bostic, Kathleen C. Engel, Patricia A. Mccoy, Anthony Pennington-Cross, Susan M. Wachter
Finance Faculty Research and Publications
The subprime mortgage market, which consists of high-cost loans designed for borrowers with weak credit, has grown tremendously over the past ten years. Between 1993 and 2005, the subprime market experienced an average annual growth rate of 26 percent. As this market emerged, so did allegations that subprime loans contained predatory features or were the result of predatory sales practices.3 In the worst cases, brokers deceived borrowers about the meaning of loan terms or falsely promised to assist them in obtaining future refinance loans with better terms. In other situations, borrowers entered into loans with low teaser rates, not aware …
Measuring The Drivers Of Metropolitan Growth: The Export Price Index, Michael Hollar, Anthony Pennington-Cross, Anthony Yezer
Measuring The Drivers Of Metropolitan Growth: The Export Price Index, Michael Hollar, Anthony Pennington-Cross, Anthony Yezer
Finance Faculty Research and Publications
The Export Price Index (EPI) is a measure of exogenous price shocks to a city’s export industries. Thus far the EPI has been used to estimate models of metropolitan statistical area employment demand and appears to capture exogenous demand shocks to the regional economy. This article explains the intuition behind and construction of the EPI. Glaeser (2008) has noted that because “the economic theory of cities emphasizes a search for exogenous causes of endogenous outcomes like local wages, housing prices, and city growth, it is unsurprising that the economic empirics on cities have increasingly focused on the quest for exogenous …
Teaching Business Ethics: The Departmental Perspective, David S. Krause, Sarah Peck
Teaching Business Ethics: The Departmental Perspective, David S. Krause, Sarah Peck
Finance Faculty Research and Publications
No abstract provided.
State And Local Anti-Predatory Lending Laws: The Effect Of Legal Enforcement Mechanisms, Raphael W. Bostic, Kathleen C. Engel, Patricia A. Mccoy, Anthony Pennington-Cross, Susan M. Wachter
State And Local Anti-Predatory Lending Laws: The Effect Of Legal Enforcement Mechanisms, Raphael W. Bostic, Kathleen C. Engel, Patricia A. Mccoy, Anthony Pennington-Cross, Susan M. Wachter
Finance Faculty Research and Publications
Subprime mortgage lending has grown rapidly in recent years and with it, so have concerns about predatory lending. In response to evidence of predatory lending, most states have enacted new laws or expanded existing laws to address abuses in the subprime home loan market. The effect of these statutes is a matter of debate. This paper seeks to improve the understanding of this increasingly important issue and pays particular attention to the role that legal enforcement mechanisms play in this context. The results of the analysis are consistent with the view that anti-predatory lending laws influence subprime lending markets and …
The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross
The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross
Finance Faculty Research and Publications
The lag between the time that a borrower stops making payments on a mortgage and the termination of the loan plays a critical role in the costs borne by both borrower and lender on defaulted loans. While the prior literature uses a multinomial logit approach, statistical tests indicate that we cannot accept the associated assumption of Independence of Irrelevant Alternatives (IIA). Using a nested logit specification our results suggest that the recipe for delinquency involves young loans to low credit score borrowers with low or no documentation in housing markets with moderately volatile and flat or declining nominal house prices.
Interest Rates In The Sub-Prime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross
Interest Rates In The Sub-Prime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross
Finance Faculty Research and Publications
No abstract provided.
When Managers Bypass Shareholder Approval Of Board Appointments: Evidence From The Private Security Market, Matteo P. Arena, Stephen P. Ferris
When Managers Bypass Shareholder Approval Of Board Appointments: Evidence From The Private Security Market, Matteo P. Arena, Stephen P. Ferris
Finance Faculty Research and Publications
This paper investigates the influence of managerial entrenchment on private placements by examining the firm's decision to appoint representatives of the private investors to the board without shareholder approval. By analyzing a sample of U.S. firms that appoint directors in combination with private offerings between 1995 and 2000, we find that firms with greater managerial entrenchment are more likely to bypass shareholder approval. Firms that bypass shareholders are less likely to appoint independent directors or to elect one of these directors as chairman. We also show that the market reacts more positively to the private offering announcement when the firm …
Subprime Refinancing: Equity Extraction And Mortgage Termination, Anthony Pennington-Cross, Souphala Chomsisengphet
Subprime Refinancing: Equity Extraction And Mortgage Termination, Anthony Pennington-Cross, Souphala Chomsisengphet
Finance Faculty Research and Publications
This article examines the choice of borrowers to extract wealth from housing in the high-cost (subprime) segment of the mortgage market and assesses the prepayment and default performance of these cash-out refinance loans relative to the rate of refinance loans. Consistent with survey evidence, the propensity to extract equity is sensitive to the relative interest rates of other forms of consumer debt. After the loan is originated, results indicate that cash-out refinances perform differently from non-cash-out refinances. For example, cash-outs are less likely to default or prepay, and the termination of cash-outs is more sensitive to changing interest rates and …
The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross
The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross
Finance Faculty Research and Publications
The lag between the time that a borrower stops making payments on a mortgage and the termination of the loan plays a critical role in the costs borne by both borrower and lender on defaulted loans. While the prior literature uses a multinomial logit approach, statistical tests indicate that we cannot accept the associated assumption of Independence of Irrelevant Alternatives (IIA). Using a nested logit specification our results suggest that the recipe for delinquency involves young loans to low credit score borrowers with low or no documentation in housing markets with moderately volatile and flat or declining nominal house prices.
The Varying Effects Of Predatory Lending Laws On High-Cost Mortgage Applications, Giang Ho, Anthony Pennington-Cross
The Varying Effects Of Predatory Lending Laws On High-Cost Mortgage Applications, Giang Ho, Anthony Pennington-Cross
Finance Faculty Research and Publications
Federal, state, and local predatory lending laws are designed to restrict and in some cases prohibit certain types of high-cost mortgage credit in the subprime market. Empirical evidence using the spatial variation in these laws shows that the aggregate flow of high-cost mortgage credit can increase, decrease, or be unchanged after these laws are enacted. Although it may seem counterintuitive to find that a law that prohibits lending could be associated with more lending, it is hypothesized that a law may reduce the cost of sorting honest loans from dishonest loans and lessen borrowers’ fears of predation, thus stimulating the …
The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross
The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross
Finance Faculty Research and Publications
Local authorities in North Carolina, and subsequently in at least 23 other states, have enacted laws intending to reduce predatory and abusive lending. While there is substantial variation in the laws, they typically extend the coverage of the Federal Home Ownership and Equity Protection Act (HOEPA) by including home purchase and open-end mortgage credit, by lowering annual percentage rate (APR) and fees and points triggers, and by prohibiting or restricting the use of balloon payments and prepayment penalties. Empirical results show that the typical local predatory lending law tends to reduce rejections, while having little impact on the flow (application …
The Value Of Foreclosed Property, Anthony Pennington-Cross
The Value Of Foreclosed Property, Anthony Pennington-Cross
Finance Faculty Research and Publications
This paper examines the expected price appreciation of distressed property and compares it to the prevailing metropolitan area appreciation rate. Whether due to individual property or local area heterogeneity in appreciation, the results show that foreclosed property appreciates less than the area average appreciation rate. The magnitude of the deviation is sensitive to loan characteristics, legal restrictions, housing market conditions and marketing time.
The Evolution Of The Subprime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross
The Evolution Of The Subprime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross
Finance Faculty Research and Publications
This paper describes subprime lending in the mortgage market and how it has evolved through time. Subprime lending has introduced a substantial amount of risk-based pricing into the mortgage market by creating a myriad of prices and product choices largely determined by borrower credit history (mortgage and rental payments. foreclosures and bankruptcies, and overall credit scores) and down payment requirements. Although sub prime lending still differs from prime lending in many ways, much of the growth (at least in the securitized portion of the market) has come in the least-risky (A-) segment of the market. In addition, lenders have imposed …