Finance and Financial Management Commons^™

Cross-Border Mergers And Acquisitions And Country Risk Ratings: Evidence From U.S. Financials, Halil Kiymaz

Faculty Publications

This study reports how country risk and macroeconomic conditions influence the wealth gains of U.S. financial firms involved in international mergers and takeovers. The findings suggest that U.S. financials experience weakly significant wealth gains around announcement date. The wealth gains are significant for takeovers in Latin America. There are also differences in wealth gains of subsector affiliations of financial firms. While banks experiencing wealth loss, both insurance and investment services firms having significant wealth gains. The country risk, including economic, political, and financial risk ratings, help to explain the wealth gains to financial bidders.

Uses And Misuses Of The Black-Litterman Model In Portfolio Construction, Ludwig B. Chincarini, Daehwan Kim

Finance

The Black-Litterman model has gained popularity in applications in the area of quantitative equity portfolio management. Unfortunately, many recent applications of the Black-Litterman to novel aspects of quantitative portfolio management have neglected the rigor of the original Black-Litterman modelling. In this article, we critically examine some of these applications from a Bayesian perspective. We identify three reasons why these applications may create losses to investors. These three reasons are: (1) Using a prior without "anchoring" the prior to an equilibrium model, (2) Using a prior and an equilibrium model that conflict with one another, and (3) Ignoring the implications of …

Exchange Rate Adjustment And Output In South-East Asia, Kamal P. Upadhyaya, Robert Ranish, Neetu Kaushik, Rabindra Bhandari

Finance Faculty Publications

This paper studies the effect of currency devaluation on aggregate output level in South- East Asian countries using panel data from Thailand, Malaysia, Indonesia and the Philippines for a period from 1980 to 2010. An empirical model that includes monetary, fiscal and exchange rate variables is developed. Two versions of the model, one with real exchange rate and another with nominal exchange rate and foreign-to-domestic price ratio are estimated. An error correction model is developed and the time series properties of the panel data are diagnosed before estimating the model. The estimated results suggest that currency devaluations are contractionary in …

Asset Pricing, Jump Risk, And China's B-Share Discount Puzzle, Haigang Zhou, John Qi Zhu

Business Faculty Publications

This study examines whether differential systematic risks, along with other competing explanations, account for cross-sectional variations in B-share discounts in China, using both cross-sectional and panel data analysis. Results show strong evidence that variations in A-share systematic risks are positively related to variations in B-share discount after controlling for various competing explanations. No evidence shows a correlation between variations in B-share systematic risks and variations in B-share discounts. These findings survive various robustness checks. The study further decomposes total systematic risk into continuous and jump components. Regression results indicate that variations in B-share discounts are explained mostly by variations in …

Capital Structure Deviation And Speed Of Adjustment, Tarun Mukherjee, Wei Wang

Business Faculty Publications

As a firm deviates from its target leverage, marginal bankruptcy costs change at a faster speed than marginal tax shield. This renders the speed of adjustment (SOA) of capital structure an increasing function of the starting deviation from the target. Adopting a bootstrapping-based estimation, we confirm the existence of such heterogeneity in SOA that is statistically significant and economically nontrivial. Typically, if Firm A is one standard deviation (about 17%) and Firm B is two standard deviations away from their leverage targets, then B’s SOA is 41% greater than that of A, and the half life of B’s leverage deviation …

Integrated Risk Study For Chinese Commercial Banks With Fuzzy Comprehensive Appraisal Method, Hongmei Li, Haigang Zhou

Business Faculty Publications

The Basel Capital Accord II proposes that commercial banks should supervise not only credit risk but also market risk, liquidity risk and operational risk. Using the fuzzy comprehensive appraisal method based on the Basel Capital Accord II, this paper measures the integrated risk of Chinese commercial banks. Our results indicate that the average values of the four types of risks are higher than the integrated risk of the four risks, indicating an overestimated whole risk. Our results illustrate the importance of considering the correlation between the different risk sources in order to efficiently allocate financial resources.

Aligning Financial Strategy With Customer Categorization Based On Environmental Scanning, Timothy Osita Anyiwe

2010-2016 Archived Posters

A qualitative multiple-case study about strategies needed to align financial strategy with customer oriented practices. Interview data from 30 personnel of 2 retail businesses were coded and analyzed. Emerging themes included planning, customer supremacy, viability, and clarity. Implications for positive social change included impetus for economic stability and prosperity of society.

Performance Prediction Of Commodity Prices Using Foreign Exchange Futures, Yisa Ajao

2010-2016 Archived Posters

In an experimental quantitative research design, data from the Futures Market for commodities and foreign exchange futures covering 1986-2011 were obtained and addressed. A General Regression Neural Network was overlaid on this data to deduce a time-series prediction model for wheat prices. Performance prediction error was only 4.42%.

The Asymmetric Impacts Of Good And Bad News On Opinion Divergence: Evidence From Revisions To The S&P 500 Index, Jin Yu, Haigang Zhou

Business Faculty Publications

Motivated by the ambiguity theory of Epstein and Schneider (2003, 2008), we hypothesize that investors' beliefs on the prospects of firms converge upon the arrival of bad news, but do not converge - or even further diverge - on the arrival of good news. We expect firms with high divergence in opinions to experience lower stock returns around the announcements of bad news but not for good news. Using revisions to the S&P 500 index between 1962 and 2008 as information events, we find overwhelming support for the hypothesis. The results are robust to controlling for alternative hypotheses of price …

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 …

The Use Of Financial Statements To Predict The Stock Market Effects Of Systemic Crises, Mohammad Yahia Almakrami

CGU Theses & Dissertations

The financial crisis of 2007-2009 had divesting effects around the globe. Many financial institutions and government officials failed to see the build up of problems predicting the crisis and hence failed to take actions to keep the crisis from breaking out. Thus, it is important to see if the emerging problems could have been identified in advance in order to develop types of analysis that could help us avoid future crises. A full investigation of such possibilities will require many different studies taking different approaches. This dissertation contributes to that collective effort by investigating the extent to which balance sheet …

Walking Back From Cyprus, Lee C. Buchheit, Mitu Gulati

Faculty Scholarship

Last Friday, the European leaders trespassed on consecrated ground by putting insured depositors in Cypriot banks in harm’s way. They had other options, none of them pleasant but some less ominous than the one they settled on.

Farm Financial Performance Of Kentucky Farms, Tarrah M. Dunaway

Theses and Dissertations--Agricultural Economics

This study examines farm financial performance of Kentucky farms using Kentucky Farm Business Management data from 1998-2010. Logit models are used to estimate the likelihood of farm characteristics affecting whether financial ratios fall into critical zones or not. The results show that large farms in terms of total gross returns and total assets are less likely to experience repayment capacity problems. Total gross returns significantly affect all five financial measures. These findings will help farmers and lenders understand what factors influence farm financial performance. Profitability migration is tested to see if the migration probabilities differ across business cycles. Migration drift …

Teaching Business Law In The New Economy; Strategies For Success, Kamille Wolff Dean

Journal of Business & Technology Law

No abstract provided.

Investor Overconfidence And Option Trading, Han-Sheng Chen

Finance and Real Estate Dissertations - Archive

This study examines investor overconfidence theory in the options market. The theory suggests that investors who experience high returns become overconfident in their security valuation and trading skills, and therefore trade more often, even when the high returns are market wide. Given stock investors often trade in both stock and options market, I hypothesize similar patterns could be found in the options market as well. Controlling for market volatility and stock idiosyncratic risk, past market return is positively correlated with option trading turnover. In addition, past positive market return leads to higher call option turnover ratio and higher call-to-put ratio. …

The Impact Of Securitization On The Expansion Of Subprime Credit, Taylor Nadauld, Shane M. Sherlund

Faculty Publications

This paper investigates the relationship between securitization activity and the extension of subprime credit. The analysis is motivated by two sets of compelling empirical facts. First, the origination of subprime mortgages exploded between the years 2003 and 2005. Second, the securitization of subprime loans increased substantially over the same time period, driven primarily by the five largest independent broker/dealer investment banks. We argue that the relative shift in the securitization activity of investment banks was driven by forces exogenous to factors impacting lending decisions in the primary mortgage market and resulted in lower ZIP code denial rates, higher subprime origination …

Finance Newsletter, N01, Winter 2013, University Of Northern Iowa. Department Of Finance.

Department of Finance Newsletter

News about the activities of the Department of Finance

The Impact Of Prior Performance On Leadership Appointment In A Merger Of Equals, David A. Hirsch

CMC Senior Theses

Leadership appointment during mergers has a logical and established precedent when there is a clear target and acquirer. However, in the extraordinary case of Merger Of Equals (MOEs) – where this is relative equal ownership, board representation, earnings contribution etc - this process is much less defined and can often have serious consequences on the merger, both in closing negotiations as well as post-merger performance. Intuition assumes the better performing CEO should and will be appointed. In practice, however, that is often not the case. It is arguable that performance can be defined through objective means (financially & operationally), yet …

The Impact Of The Security Transaction Taxes On Stock Prices And Stock Liquidity; Evidence From The Nyse, Vedika Agarwal

CMC Senior Theses

Security Transaction taxes have been in place in many countries for many years now. Yet we do not fully know how these taxes effect prices, volumes, bid-ask spreads and volatility and in turn if they are good for the economy or not. This paper is an attempt to understand how security transaction taxes decrease volume of trading, decrease prices of stocks and increase bid-ask spreads. It analyses the effect the STTs implemented by the state and federal government in New York on June 1^st 1905 and December 1^st 1914 respectively, had on the stocks of the New York …

The Use Of Financial Data To Monitor Competing Models Of Firm Growth, Mohamed Rashwan, Tarek Ibrahim Eldomiaty

Business Administration

This paper examines three possible explanations for firm growth:

1 a firm grows according to the growth of sales revenues

2 a firm grows according to cost savings

3 a firms grows according to the two factors simultaneously

This paper introduces a new measure for firm growth based on sales-weighted growth of fixed assets. The estimation method uses the properties of the discriminant analysis to build three Z-score models, each of which discriminates low-growth firms from high-growth firms based on:

a sales ratios

b cost ratios

c sales and cost ratios together

The results show that the three discriminant models …

Success In Gateway Courses: What Matters And What Can We Do?, Thomas Berry, Lori Cook, Nancy Hill, Kevin Stevens

College of Business Faculty and Staff Works

No abstract provided.

The Stock Market’S Reaction To Accounting Information: The Case Of The Latin American Integrated Market Abstract, Mauricio A. Melgarejo, Eduardo Montiel, Luis Sanz

Scholarship and Professional Work - Business

The purpose of this paper is to explore the stock market’s reaction to quarterly financial statements. We focus our study in two countries that are participating in the Latin American Integrated Market (MILA): Peru and Chile. We find that the cumulative abnormal returns and the absolute value of the cumulative abnormal trading are explained principally by the quarterly earnings surprises around the financial statements release date. We find that these effects are more pronounced in small firms, confirming that due to the lower level of pre disclosure information accounting numbers are the main source of information. Key words: Accounting Information, …

The Impact Of The Proposed Format Of Financial Statements By Iasb And Fasb On Investors' Decisions, Francisco Villanueva

Open Access Theses & Dissertations

This dissertation investigates the impact of the proposed format of financial statements from the International Accounting Standard Board (IASB) and the Financial Accounting Standard Board (FASB) on investors' decisions. In particular, the research question of this study is whether the proposed format reduces the bias from the disposition effect. In 2008, the FASB in conjunction with the IASB published an exposure draft to modify the presentation of financial statements. The proposed format does not change the content of the financial information; it only modifies how information is presented in the financial statements. In other words, recognition of assets, liabilities, revenues, …

Implications Of Off-Farm Income For Farm Income Stabilization Policies, Simon Jette-Nantel

Theses and Dissertations--Agricultural Economics

This dissertation examines to what extent off-farm diversification may be an appropriate and accessible tool to mitigate the adverse effects from market failures and incompleteness in the crop and farm income insurance market. While the influence of the nonfarm sector has long been recognized as a primary force in shaping farm structure, off-farm income is rarely acknowledge as a risk management tool for operators and households of commercial farms. The dissertation develops a dynamic model that includes capital market imperfections, economies of scale in farm production, and the presence of adjustment costs in labor allocation decisions. The model provides a …

Essays On Elderly Asset Management The Role Of Medical Expenses And Housing, Li Li

Legacy Theses & Dissertations (2009 - 2024)

With baby-boomers approaching their retirement age, the financial security of elderly Americans has become increasingly crucial for both policy-makers and retirees themselves. Based on the data from the Health and Retirement Survey (HRS), this dissertation examines how healthcare costs and housing affect retirees' saving and investment decisions.

The Impact Of Ceo Duality On Firm Financial And Market Performance During The Period Of 2008 Through 2010 : A Period Of Financial Crisis, Samuel Eugene Ferrara

Legacy Theses & Dissertations (2009 - 2024)

ABSTRACT

Three Essays On Asset Allocation And Asset Pricing, Chen Cao

Legacy Theses & Dissertations (2009 - 2024)

This dissertation investigates several classical yet unsettled issues in asset allocation and asset pricing.

Teaching Amidst Transformation: Integrating Global Perspectives On The Financial Crisis Into The Classroom, Shruti Rana

Journal of Business & Technology Law

No abstract provided.

Teaching Note On The Treatment Of Noncontrolling Interests In Financial Analysis, Cost Of Capital And Valuation: A Case Study Of Verizon Communications, Bridget Lyons

WCBT Faculty Publications

A noncontrolling interest (NCI) arises when a firm fully consolidates subsidiaries that are not wholly owned by the parent. The existence of a noncontrolling interest complicates financial analysis and valuation. Failure to appropriately consider the NCI may lead to errors in equity valuation and share price since the NCI impacts equity value and implied share price of the parent firm. Return on equity calculations must be carefully constructed as there are several net income and equity values reported. Finally, the NCI can impact the weighted average cost of capital. Verizon Communications was selected as a case study based on the …