Finance and Financial Management Commons^™

Further Examination Of Equity Returns And Seasonal Depression, Steven D. Dolvin, Mark K. Pyles, Qun Wu

Scholarship and Professional Work - Business

Seasonal Affective Disorder (SAD) induces investors to shift resources away from risky investments (such as equity) and towards safer alternatives (such as fixed income) during the Fall, while stimulating the opposite action in the Winter. Existing studies, however, fail to account for the possibility that SAD could further motivate investors to shift exposure among different subsets of equity, rather than simply across broad asset categories. We explore this possibility by examining the impact of SAD on the returns of “safe” and “risky” equity sectors (i.e., industries), as well as on equity at different levels of market capitalization. We find the …

Procrastination Does Pay Sometimes: How The Delay In Implementing Basel Ii Reduced The Effect Of The Subprime Financial Crisis, Raymond Bart Simmons

Inquiry: The University of Arkansas Undergraduate Research Journal

Basel II, a major international regulatory capital revision, was supposed to have been implemented in the U.S. by 2004, but delays pushed it back more than five years. Basel II could have lowered minimum capital standards and made the largest banks even more vulnerable to the subprime financial crisis and economic downturn had it been adopted before its onset in 2007. Consequently, the procrastination in implementing Basel II made the banking industry more stable as it entered the financial crisis. In this study, the assets of the 11 largest bank holding companies at year-end 2006 were separated into broad asset …

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 …

The Impact Of Macroeconomic Uncertainty On Firms Changes In Financial Leverage, Atreya Chakraborty

Accounting and Finance Faculty Publication Series

We investigate the relationship between a firm’s measures of corporate gov- ernance, macroeconomic uncertainty and changes in leverage. Recent research highlights the role of governance in financing decisions. Previous research also indicates that macroeconomic uncertainty affects a firm’s ability to borrow. In this paper we investigate how both these channels of influence affects firms’ financing decisions. Our findings show that macroeconomic uncertainty has an important role to play, both by itself and in interaction with a measure of corporate governance.

Tunneling As An Incentive For Earnings Management During The Ipo Process In China, Jiwei Wang, Joseph Aharony, Hongqi Yuan

Research Collection School Of Accountancy

Using a sample of 185 Chinese IPO firms listed on the Shanghai Stock Exchange during the period 1999-2001, we show that related-party (RP) sales of goods and services could be used opportunistically to manage earnings upwards in the pre-IPO period. We also provide evidence that such behavior may be motivated by the prospect of tunneling opportunities in the post-IPO period, i.e., exploiting economic resources from minority shareholders for the benefit of the parent company. We provide evidence of one such opportunistic tunneling tool: non-repayment by Chinese parent companies of net outstanding corporate loans made to them by their newly listed …

Dual-Track Versus Single-Track Sell-Outs: An Empirical Analysis Of Competing Harvest Strategies, James C. Brau, Ninon K. Sutton, Nile W. Hatch

Faculty Publications

We investigate two non-traditional harvest strategies for selling a privately-held company. Dual-track private firms file for an IPO while also courting acquirers. These firms withdraw the IPO to be taken over. Dual-track public firms complete an IPO and are taken over shortly thereafter. Examining 679 takeovers from 1995–2004, we find private dual-track sell-outs earn a 22–26% higher premium and dual-track public sell-outs earn an 18–21% higher premium than single-track sell-outs. Larger, VC-backed, prestigious underwritten, and bubble-year firms have a higher propensity to take the dual-track path. The implication is that entrepreneurs may increase their harvest value by using a dual-track …

A Stakeholder Identity Orientation Approach To Corporate Social Performance In Family Firms, John B. Bingham, W. Gibb Dyer Jr., Isaac Smith, Gregory L. Adams

Faculty Publications

Extending the dialogue on corporate social performance (CSP) as descriptive stakeholder management (Clarkson, Acad Manage Rev 20:92, 1995), we examine differences in CSP activity between family and nonfamily firms. We argue that CSP activity can be explained by the firm’s identity orientation toward stakeholders (Brickson, Admin Sci Quart 50:576, 2005; Acad Manage Rev 32:864, 2007). Specifically, individualistic, relational, or collectivistic identity orientations can describe a firm’s level of CSP activity toward certain stakeholders. Family firms, we suggest, adopt a more relational orientation toward their stakeholders than nonfamily firms, and thus engage in higher levels of CSP. Further, we invoke collectivistic …

Asset Allocation For Retirement: Simple Heuristics And Target-Date Funds, Steven D. Dolvin, William K. Templeton, William Rieber

Scholarship and Professional Work - Business

We examine common asset allocation strategies for retirement investing, considering both static and dynamic approaches, as well as those allocation policies used by leading target-date fund providers. We studied the average performance of each strategy over historical rolling periods (that is, bootstrapping), using actual annual returns starting in 1926. Then we applied the simulation method to review potential future results, as well as to provide additional insight into the structure and characteristics of each approach. We find that, over time, certain static approaches are essentially equivalent to dynamic strategies that reduce equity exposure through time. Further, we find that most …

Essays On Corporate Governance, Tih Koon Tan

Electronic Theses and Dissertations

This dissertation is composed by two essays that explore corporate governance issues in S&P firms. The first essay examines changes in corporate governance after a firm gets added to the S&P 500 index? Using firms added from 1994 to 2007, this paper examines how governance mechanisms change for these firms. Specifically, I look at both the overall governance and details on how each mechanism changes. I find that governance improves after being added to the index. Controlling for firm size, leverage, prior firm performance, and growth opportunities, the market reacts positively to governance improvements as a whole. In addition, changes …

Two Essays On Bidding In Multi-Unit Common Value Auctions, Minjie Shao

Electronic Theses and Dissertations

This dissertation consists of two essays on the topic of bidding in multi-unit common value auction. Essay one examines the role of capacity constraint on the auction results and bidding behavior. We consider a general case where bidders are unconstrained, and a second setting where bidders are capacity constrained. We document downward sloping demand curves for individual bidders. Bidders shade their bids by submitting quantity-price pairs and spreading their bids. The winner's curse is strong in the unconstrained treatment, but we find no evidence of the winner's curse when bidding constraints are imposed. Unconstrained bidders shade bids significantly more and …

Airline Bankruptcy: The Determining Factors Leading To An Airline's Decline, Jason Tolkin

CMC Senior Theses

The purpose of this study was to determine what the critical factors are to an airline’s financial turmoil, leading ultimately to a bankruptcy filing. Over the past decade, the airline industries’ performance has been dismal, leading to 20 bankruptcy filings. As competition increases, it is crucial for airlines to know which core business areas are essential to success. This paper identifies 8 specific industry metrics that are used to compare airlines, revealing where certain airlines falter and others shine. Some of these metrics are later applied to a case study examining Trans World Airlines (TWA) and American Airlines (AA), highlighting …

Determinants Of Implied Volatility Movements In Individual Equity Options, Christopher G. Angelo

Finance and Real Estate Dissertations - Archive

In this study, I introduce a parsimonious model that explains implied volatility time series for individual stock options. The current state of risk management for individual equity options still seems to lack the presence of pertinent exogenous variables. This study suggests a few easily observable variables that can be used to explain the changes in implied volatilities of stock options. These variables can be used in the risk models in order to more accurately manage option positions for individual stocks. The first chapter provides a motivation for the VIX as the primary explanatory variable for changes in implied volatility. It …

The Effect Of Age Upon Ceo Compensation: A Cross-Industry Study, Anthony Bouvier

CMC Senior Theses

The compensation of CEO’s has been at the forefront of the public’s mind for the past few years. During the recession, one could not go a day without hearing about the atrocious salaries and bonuses that executives were being paid. Although it only recently became an explosive topic, academics have been researching all aspects of compensation for many years. One of the earliest looked at the idea of pay for performance (Jensen and Murphy 1990), and the field has taken off from there. Many studies have been done on the determinants of compensation, and I was interested in how age …

Do Investors View Excess Capacity As A Determinant Of Mergers And Acquisitions In The Pharmaceutical And Biotechnology Industry?, Jennifer M. Volk

CMC Senior Theses

I examine investors’ reaction to the announcement of mergers and acquisitions in the pharmaceutical and biotechnology industry from 2002 to 2008. Over this period, investors anticipate the announcements, as demonstrated by the fact that the cumulative abnormal returns are not statistically significant. In addition, I test to determine the effect of excess capacity on investors’ reactions. From 2002 to 2004, investors do not recognize acquisitions as a response to excess capacity, as the excess capacity measures utilized have no effect on the size of the cumulative abnormal return. From 2005 to 2008, however, excess capacity measures have a positive effect …

Diversification Premium On Indian Adrs During The Financial Crisis, Rajat Gupta

CMC Senior Theses

Non-arbitrage asset pricing has been an avenue of unending interest to financial academics and practitioners alike. With increased capital outflow being permitted by developing economies, investors now have easy access to securities issued by foreign firms. The issue investigated in this research is concerned with the persistent presence of arbitrage opportunities between depository receipts and domestic stocks of Indian firms during the recent financial crisis. Instead of being priced in parity with one another during the crisis, ADRs of Indian firms were overpriced by as much as 70% for months on end. This thesis investigates the reasons giving rise to …

Private Equity Transaction Bankruptcy Risk Prediction, Lewis A. Corson

CMC Senior Theses

This study utilizes a sample of private equity backed acquisitions to test whether certain factors, evaluated and quantified on the date of transaction completion, serve as indicators of future transaction bankruptcy. The results of this paper suggest that the effective federal funds rate is significantly and positively correlated with the bankruptcy of private equity backed transactions. Other measured factors specific to the private equity sponsor, the target firm in the acquisition and the characteristics of the transaction are found to be insignificant. Analysis on the influence of these factors is performed using two types of binary-response models, which predict the …

Factors Affecting The Forecasting Ability Of Implied Correlation In Currency Options, Justin S. Eskind

CMC Senior Theses

Little research has been done into implied correlations, and the small literature grows even smaller when referring to currency options. The existing literature has established that implied correlation is a good if not the best forecaster of future realized correlation, and that this ability to forecast is not necessarily universal. This paper will establish that the forecasting ability of implied correlations in currency options varies across currency pairs, thus proving that not all implied correlations are created equal. Using two different proxies for the quality of the forecaster, the paper attempts to explain which characteristics of an option on a …

The Impact Of Ceo Compensation On Firm Performance In The Oil Industry, Christophe M. Bindert

CMC Senior Theses

Critics often cite poor executive compensation schemes as one of the leading causes of the recent credit crisis. This paper investigates whether compensation structures at the end of the 2006 fiscal year created incentives for Chief Executive Officers (CEOs) in the oil industry to take on excessive risk, which subsequently may have lead to weaker firm performance during the crisis. I find no evidence to support the argument that higher pay sensitivity through option and other incentive awards lead to worse firm performance. In fact, results do not provide any evidence that company performance during the crisis was related to …

The Secondary Market For Gift Cards And The Role Of Corporate Bankruptcy Risk, Kaitlyn A. Desai

CMC Senior Theses

The website, Plastic Jungle, is taking advantage of the rapidly growing gift card phenomena by creating a secondary market that enables consumers to buy, sell, and exchange gift cards online at a discount. This paper examines the relationship between this secondary gift card market and the corporate bankruptcy risk of companies with gift cards listed on the market. When a company issues a gift card, the card is unsecured debt and the cardholder becomes an unsecured creditor to the company. This paper investigates whether the cardholder acts similarly to other unsecured creditors or as someone who is merely holding another …

Comparative Analysis Of The Financial Performance Of Nonprofit Organizations: Focusing On The Franklin County Senior Activity Center, Shinwoo Lee

MPA/MPP/MPFM Capstone Projects

The Franklin County Senior Activity Center is a nonprofit organization founded in 1966 to provide services to help older residents lead independent lives. Cooperating with twelve board members, a staff of 24 people operates the Center and makes huge efforts to accomplish its mission. The mission of the Center is to contribute to and empower the quality of life of the aging citizens in Frankfort and Franklin County, Kentucky. The Center delivers various public services to them including opportunities for socialization, health promotion, benefit counseling, transportation service, home care service, recreation and exercise programs, adult day care, caregiver support, and …

A Study Of The Effects Of Budget-Balancing Practices And Fiscal Policies On State Fiscal Health, Candice Schultheis

MPA/MPP/MPFM Capstone Projects

During times of economic recessions, many states throughout the U.S. may experience budget pressures that impact their overall fiscal health. Kentucky, in particular, has been faced with structural budget imbalances, declining revenue receipts, and spending reductions. Although economic conditions greatly affect states’ abilities to maintain balanced budgets, other factors may contribute to the variation among states’ financial conditions. This study assesses the effect that budget-balancing strategies, processes, and policies have on states’ fiscal health, as measured by state fiscal peril scores reported by the Pew Center on the States and year-end budget balances as a percentage of expenditures estimated by …

Deposit Insurance Coverage, Ownership, And Banks' Risk-Taking In Emerging Markets, Apanard P. Angkinand, Clas Wihlborg

Business Faculty Articles and Research

We ask how deposit insurance systems and ownership of banks affect the degree of market discipline on banks' risk-taking. Market discipline is determined by the extent of explicit deposit insurance, as well as by the credibility of non-insurance of groups of depositors and other creditors. Furthermore, market discipline depends on the ownership structure of banks and the responsiveness of bank managers to market incentives. An expected U-shaped relationship between explicit deposit insurance coverage and banks' risk-taking is influenced by country specific institutional factors, including bank ownership. We analyze specifically how government ownership, foreign ownership and shareholder rights affect the disciplinary …

Crummer/Suntrust Portfolio: Analysis And Recommendations [2010], Kate Morgenier, Eric Bindslev, Chris Maclellan, Sean Warrington, Varun Kumar, Joshua Truitt, Tolu Odulesi, Richard Rankin, Beth Owens

Crummer Truist Portfolios

The team believes that a market-weighted portfolio is the most appropriate strategy for the Crummer/ SunTrust Endowment in the coming year. This is not the time for a more aggressive position because there still are monsters in the market’s closet capable of sending us back into the abyss. This economic and market outlook explains their reasoning.

Structural Analysis Of Affect In The Pre-Purchase Context, Rosemary R. Seva, Henry Been Lirn Duh, Martin G. Helander

DLSU Business & Economics Review

Previous studies on consumption related affect did not identify specific components in the pre-purchase context. This article reviewed theoretical bases of affect and its relationship to product judgment and determined the components and structure of pre-purchase affect. Field studies were conducted to gather an initial list of affect experienced before purchasing “highinvolvement” products. An initial list of 94 pre-purchase affect was identified and trimmed down to 18 after further statistical analysis. A second study was conducted to determine the structure of the pre-purchase emotion set (PES) derived from the first study. Multidimensional scaling was used and four clusters of emotion …

Higher Education And The 2007 Recession: Examining The Relationship Between State Agency Structure, Fiscal Support, And The State Fiscal Stabilization Fund, Christopher J. Crumrine

MPA/MPP/MPFM Capstone Projects

The United States public post-secondary education system varies in its reliance on state support. Some states have a historic predisposition to a private post-secondary education sector, while others have a tradition of strong public institutions. In all cases, public post-secondary relies on state revenue for their general operating and capital budgets. Effective operation in the current fiscal environment requires a clear understanding of different factors affecting a state’s funding level and the challenges presented in periods of slow economic growth.

Over the past six years, higher education, on average, saw positive growth in state support. However, impressive increases in support …

Aplikasi Al-Mudarabah Dan Al-Musyarakah Dalam Produk-Produk Perbankan Islam : Kajian Di Bank Muamalat Indonesia, Jakarta., Sarwedi Hasibuan

Student Works (2010-2019)

Abstrack

Peranan Perbankan Islam Dalam Pengembangan Industri Kecil Dan Sederhana Di Kota Pekanbaru, Riau: Analisis Terhadap Instrumen Murabahah., Masriadi -

Student Works (2010-2019)

Islamic banking in general defined as the conduct of banking operation in consonance with Islamic principles of mu‘amalat. The emergence of interest – free financial institutions especially in predominantly Muslim countries, has added a new dimension to economic models. This Islamic banks have organized financial intermedians including al-murabahah which operate in accordance with the principles Islamic transactions. This dissertation explains the rol and practice of Islamic banking in the financing of the small and medium enterprises in Kota Pekanbaru, Riau, Indonesia using the murabahah instrument. The research found that Islamic banks play the important role in the development of SME …

Operational Risk In Trading Platforms, M. Thulasidas

Research Collection School Of Computing and Information Systems

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events. A trading platform is a system, and therefore comes under the umbrella definition of operational risk.

Executive Compensation And The Maturity Structure Of Corporate Debt, Paul Brockman, Xiumin Martin, Emre Unlu

Department of Finance: Faculty Publications

Executive compensation influences managerial risk preferences through executives’ portfolio sensitivities to changes in stock prices (delta) and stock return volatility (vega). Large deltas discourage managerial risk-taking, while large vegas encourage risk-taking. Theory suggests that short-maturity debt mitigates agency costs of debt by constraining managerial risk preferences. We posit and find evidence of a negative (positive) relation between CEO portfolio deltas (vegas) and short-maturity debt. We also find that shortmaturity debt mitigates the influence of vega- and delta-related incentives on bond yields. Overall, our empirical evidence shows that short-term debt mitigates agency costs of debt arising from compensation risk.

Effectively Hedging The Interest Rate Risk Of Wide Floating Rate Coupon Spreads, Thomas Schröder, Kwamie Dunbar

WCBT Working Papers

Bond issuers frequently immunize/hedge their interest rate exposure by means of interest rate swaps (IRS). The receiving leg matches all bond cash-flows, while the pay leg requires floating rate coupon payments of form LIBOR + a spread. The goal of hedging against interest rate risk is only achieved in full if the present value of this spread is zero. Using market data we show that under a traditional IRS hedging strategy an investor could still experience significant cash flow losses given a 1% shift in the underlying benchmark yield curve.

We consider the instantaneous interest-rate risk of a bond portfolio …