Finance and Financial Management Commons^™

Consumers’ Misunderstanding Of Health Insurance, George Loewenstein, Joelle Y. Friedman, Barbara Mcgill, Sarah Ahmad, Suzanne Linck, Stacey Sinkula, John Beshears, James J. Choi, Jonathan Kolstad, David Laibson, Brigitte C. Madrian, John A. List, Kevin G. Volpp

Faculty Publications

We report results from two surveys of representative samples of Americans with private health insur-ance. The first examines how well Americans understand, and believe they understand, traditional healthinsurance coverage. The second examines whether those insured under a simplified all-copay insuranceplan will be more likely to engage in cost-reducing behaviors relative to those insured under a traditionalplan with deductibles and coinsurance, and measures consumer preferences between the two plans. Thesurveys provide strong evidence that consumers do not understand traditional plans and would betterunderstand a simplified plan, but weaker evidence that a simplified plan would have strong appeal toconsumers or change their …

A Structural Model Of Human Capital And Leverage, Ryan Pratt

Faculty Publications

I study the effect of human capital on firms' leverage decisions in a structural dynamic model. Firms produce using physical capital and labor. They pay a cost per employee they hire, thus investing in human capital. In default a portion of this human capital investment is lost. The loss of human capital constitutes a significant cost of financial distress. Labor intensive firms are more heavily exposed to this cost and respond by using less leverage. Thus the model predicts a decreasing relationship between leverage and labor intensity. Consistent with this prediction, I show in the data that high labor intensity …

The Effect Of Information Disclosure On Information Asymmetry, Chiraphol New Chiyachantana, Neeranuch Nuengwang, Nareerat Taechapiroontong, Pakpoom Thanarung

Research Collection Lee Kong Chian School Of Business

This study investigates the relation among information disclosure, firm characteristics and information asymmetry. The authors find evidence consistent with the notion that increasing corporate disclosure and transparency reduces the asymmetric information between informed and uninformed investors. The findings indicate a strong relation between firm characteristics and level of information disclosure. Larger firms, firms with high growth opportunity and superior performance are associated with higher level of information disclosure. With respect to type of information, large firms, firms with superior operating performance, high growth opportunity are likely to disclose the investment and structural change as well as legal and miscellaneous information. …

Reference Point Adaptation And Disposition Effect, Chiraphol New Chiyachantana, Zongfei Yang

Research Collection Lee Kong Chian School Of Business

This paper investigates the importance of reference point adaptation in the analysis of the disposition effect. We consider two exogenous factors pertinent to reference point adaptation: prior outcome and recent expectation of future outcome. We show that the incidence of the disposition effect varies in a manner consistent with reference point adaptation. Both prior outcome and recent expectation of future outcome affect the location of the reference point and have a large and significant impact on the incidence of the disposition effect. First, the disposition effect can largely be explained by investors’ inability to sufficiently adapt the reference point in …

An Empirical Study On Weak Market Efficiency Of Karachi Stock Exchange, Jaihan Zulqarnain, Syed Muhammad Amir Shah

Business Review

A lot of research has been conducted to check whether the Frontier and emerging markets show weak form of efficiency or follow a random walk. Karachi Stock Exchange, being a frontier market, was tested on the basis of daily closing values from 2006 to 2011. The study showed KSE to be a weak form inefficient market following non randomness. Three tests were applied on the data. KSE proved to have a unit root, the values in the series showed a strong correlation. Moreover, a Z-statistic value was far greater than 1.96 which proved KSE to be an inefficient market. Inefficient …

Not All That Glitters Is Gold: The Effect Of Attention And Blogs On The Investors' Investing Behaviors, Nan Hu, Yi Dong, Ling Liu, Lee J. Yao

Research Collection School Of Computing and Information Systems

This article investigates the relationship between a firm’s visibility in blogspaces, termed blog exposure, and the cross-sectional stock returns. We show that blog exposure is fundamentally different from the traditional media coverage, and securities with low blog exposure earn higher returns than stocks with high blog exposure. We further illustrate that such an effect is more prominent for stocks with low institutional ownership. Contrary to traditional media coverage, the return premium associated with blog exposure cannot be explained by either the illiquidity hypothesis or the investor recognition hypothesis based on the rational-agent framework. Instead, our results suggest that blog effect …

Ipos And The Slow Death Of Section 5, Donald C. Langevoort, Robert B. Thompson

Georgetown Law Faculty Publications and Other Works

Since its enactment, Section 5 of the Securities Act of 1933 has restricted sales-based communications with investors, but that effort is nearly dead even with respect to the most sensitive of offerings, the IPO. Our paper traces that devolution, which began almost as soon as the ’33 Act came into existence, though the SEC’s 2005 deregulatory reforms and Congress’ intervention in the JOBS Act of 2012. We show how much of this related to an embrace of “book-building” as the industry’s preferred method of price discovery, which requires private two-way communications between underwriters and potential sophisticated investors. But book-building (and …

Sb Ipos And Ipo Anomalies: An Empirical Analysis Of The Small Firm Uniqueness Hypothesis, James C. Brau, J. Troy Carpenter

Faculty Publications

The purpose of this paper is to provide a direct test of the small-firm uniqueness hypothesis advanced by Ang (1991). We do this by using the SB-IPO program of the SEC as our instrument to define a small firm. Having identified small firms, we test the three IPO anomalies to see if small firms differ from large firms along these dimensions. We find that SB IPOs experience the three anomalies; however, they do so in disparate ways than mainline IPOs do. In sum, we provide support for the small firm uniqueness hypothesis.

Essays On Credit Default Swaps And Debtor-Creditor Relationships, Cihan Uzmanoglu

LSU Doctoral Dissertations

Over the last decade, markets for credit insurance have developed dramatically and credit default swaps (CDS) have become the instrument of choice when it comes to hedging credit risks. The expanded hedging opportunities CDS provide and the allied benefits of better risk-sharing notwithstanding, concerns over the economic role of CDS arise from their ability to engender “empty” creditors – joint holders of the bond and CDS, and the role such creditors play in distress situations. Financially distressed firms often restructure their debt through out-of-court renegotiations with creditors to avoid formal default. In addition to the going concern value of the …

Testimonials Do Not Convert Patients From Brand To Generic Medication, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian, Gwendolyn Reynolds

Faculty Publications

Objectives—To assess whether the addition of a peer testimonial to an informational mailing increases conversion rates from brand-name prescription medications to lower-cost therapeutic equivalents, and whether the testimonial’s efficacy increases when information is added about an affiliation the quoted individual shares with the recipient.

Research Design and Methods—5,498 union members were randomly assigned to receive one of three different informational letters: one without a testimonial (No Testimonial Group), one with a testimonial from a person whose shared union affiliation with the recipient was not disclosed (Unaffiliated Testimonial Group), and one with a testimonial from a person whose shared union affiliation …

Simplification And Saving, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

The daunting complexity of important financial decisions can lead to procrastination. Weevaluate a low-cost intervention that substantially simplifies the retirement savings planparticipation decision. Individuals received an opportunity to enroll in a retirement savingsplan at a pre-selected contribution rate and asset allocation, allowing them to collapsea multidimensional problem into a binary choice between the status quo and the pre-selected alternative. The intervention increases plan enrollment rates by 10–20 percentagepoints. We find that a similar intervention can be used to increase contribution rates amongemployees who are already participating in a savings plan.

Two Essays On Politics And Finance, Incheol Kim

USF Tampa Graduate Theses and Dissertations

I examined how politics affects corporate policies and value in two dissertation essays. In my first essay, we investigate whether diversity in points of view within corporate boards, as captured by the diversity in political ideology of board members, can affect a firm's performance. We employ personal political contributions' data to measure political ideology distance among groups of inside, outside directors and the CEO. Our empirical evidence strongly supports the notion that outside directors' monitoring effectiveness is more likely to be enhanced when their viewpoints are distinct from those of management. We find that ideologically diverse boards are associated with …

Two Essays On Investor Distraction, Erdem Ucar

USF Tampa Graduate Theses and Dissertations

In theory, all relevant information is incorporated in stock prices timely and completely and therefore prices respond related news quickly in efficient financial markets. In today's information age, technological advances provide investors with fast access to a vast number of information resources. One can argue that these advances can help market efficiency due to easy and quick access to relevant information. On the other hand, these technological advances not only facilitate availability of relevant information but also facilitate availability of all types of information--both relevant and irrelevant information signals. In essence, one can argue that there is (over)exposure to information …

Two Essays On Politics In Corporate Finance, Xiaojing Yuan

USF Tampa Graduate Theses and Dissertations

I examine how political geography affects firms' cost of debt. Policy risk, measured by proximity to political power reflected in firms' position in the country's political map, is negatively related to corporate bond ratings and positively related to firms' cost of debt. I find firms' policy risk can be mitigated by engaging in corporate political strategies like making campaign contributions or lobbying. Consistent with the view that such political strategies effectively protect firms against uncertainty about future policies, I find policy risk has less of an impact on the cost of debt of firms that support more powerful and well-connected …

Two Essays On Mergers And Acquisitions, Dongnyoung Kim

USF Tampa Graduate Theses and Dissertations

In the first essay, we examine the link between CEOs political ideology - conservatism - and their firms' investment decisions. We focus on the effect of CEO conservatism on M&A decisions. Our evidence indicates that politically conservative CEOs are less likely to engage in M&A activities. When they do undertake acquisitions, their firms are more likely to use cash as the method of payment, and the target firms are more likely to be public firms and to be from the same industry. Conditional on the merger, CEO conservatism appears to have a significantly positive impact on long-run firm valuation. However, …

Social Entrepreneurship And Wealth-Building Plans: Creative Strategies For Working Class Americans, Wayne R. Curtis

Antioch University Dissertations & Theses

This study investigated how the elements of social entrepreneurship with wealth-building strategies can advance the creation of wealth and serve as a mechanism for social change. This research takes a modest first step toward demystifying social entrepreneurship, better understanding the phenomenon, and exploring the relevance of wealth-building in social entrepreneurial activity. Specifically, this exploratory study used a multiple case study design to understand how existing social entrepreneurial ventures include wealth-building strategies, such as employee stock ownership plans for working class Americans. The concept of social entrepreneurship is relatively new. There is general agreement that the concept combines a passion for …

Financial Services Innovation: Opportunities For Transformation Through Facial Recognition And Digital Wallet Patents, Debora S. Bartoo

Antioch University Dissertations & Theses

Bringing innovation to the marketplace for new products and services involves creativity, a culture in which change flourishes, and leadership that thrives on transformation and complexity. This study explored the potential for market disruption or change based on innovations involving patents granted to nonfinancial services organizations that could affect financial services, specifically consumer or retail bank products. It involved analyzing documents related to recently granted patents and completing a mixed methods survey integrating the Delphi research technique. This method required multiple iterations of a survey presented to expert panelists or industry thought leaders to attempt to gain consensus ("Consensus", 2011) …

The Response Of Commercial Banks To Credit Stimuli, Denise Williams Streeter

Theses and Dissertations in Business Administration

This dissertation calls upon the theory of financial intermediation (Diamond and Dybvig, 1983) and the credit channel theory of monetary policy effectiveness (Bernanke and Gertler, 1995) to show how commercial banks responded to the trillions of dollars of innovations to stimulate the credit markets during the 2008 global financial crisis. Specifically, loan-level data is used to conduct univariate, regression, and event-study analyses to address the research question of, "Did United States- and European Union-based commercial banks respond to credit stimuli with increased commercial lending during the stimulus period of October 1, 2007 through September 30, 2011 when compared to the …

Revenge Of The Steamroller: Abcp As A Window On Risk Choices, Carlos Arteta, Mark Carey, Ricardo Correa, Jason Kotter

Faculty Publications

We empirically examine financial institutions’ motivations to take systematic bad-tail risk in the form of sponsorship of credit-arbitrage asset-backed commercial paper vehicles. A run on debt issued by such vehicles played a key role in causing and propagating the liquidity crisis that began in the summer of 2007. We find evidence consistent with important roles for both ownermanager agency problems and government-induced distortions, especially government control or ownership of banks.

Who Says There Is A High Consensus Among Analysts When Market Uncertainty Is High? Some New Evidence From The Commercial Real Estate Market, James D. Shilling, C. F. Sirmans, Barrett A. Slade

Faculty Publications

This paper seeks to determine whether analyst consensus is a function of the level of price informativeness, and therefore attempts to gauge the extent to which analyst consensus is high when market uncertainty is high. There is the view that a small or declining volume of trading implies less information and lower quality information, and that a lower level of price informativeness will lead analysts to put more weight on their private information at the time of forecasting. We add to this view the notion that when uncertainty is high there might be a positive option value of waiting. In …

Planning Prompts As A Means Of Increasing Rates Of Immunization And Preventive Screening, Hengchen Dai, Katherine L. Milkman, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

Faculty Publications

Building on psychological insights about the way people make decisions, behavioral scientists have proposed various methods to increase behaviors that promote welfare without limiting freedom of choice (Thaler & Sunstein, 2008). Recently, researchers have begun exploring the power of such methods for encouraging people to engage in beneficial health-related behaviors, particularly those that are often put off or forgotten (Loewenstein, Brennan, & Volpp, 2007). For example, motivated by evidence of substantial inertia at the status quo, researchers have demonstrated that if people are automatically assigned an appointment to receive a flu shot (while retaining the right to change or cancel …

Modelling The Volatility-Timing Of Funds Under Cpf Investment Theme, X Shen, Albert K. Tsui, Zhaoyong Zhang

Research outputs 2013

The performance measure of funds has been an important topic in the past few decades. In recent years the conditional models on return and volatility have become popular in studying the funds’ performance measure, but most of these studies focus on the US funds and a few on the Asian-based funds. The purpose of this study is to examine the volatility-timing performance of Singapore-based funds under the CPF (Central Provident Fund) Investment Scheme and non-CPF linked funds by taking into account of the currency risk effect on internationally managed funds. The CPF investment scheme was introduced in 1986 by the …

Forecasting Singapore Economic Growth With Mixed-Frequency Data, A. Tsui, C.Y. Xu, Zhaoyong Zhang

Research outputs 2013

In this paper we intend to forecast the economic growth of Singapore by employing mixed frequency data. This study is motivated by the following observations: macroeconomic variables are the important indicators of the economic performance, but they are normally available at low frequencies, e.g. quarterly for GDP and monthly for inflation. In contrast, the financial variables such as stock returns are available at high frequency, and often the asset prices are forward-looking and believed to contain useful information about future economic developments (Stock and Watson 2003). It is therefore an interesting question to raise whether or not one can use …

Modelling The Term Structure Of Japanese Bond Yields With The Nelson-Siegel Model, A. Tsui, J.X. Wu, Zhaoyong Zhang

Research outputs 2013

The Nelson-Siegel (1987) (NS) model has been credited for its high efficacy in the in-sample fitting and out-of-sample forecasting of the term structures of interest rates. The term structure of interest rates, popularly known as the yield curve, is a static function that relates the time-to-maturity to the yield-to maturity for a sample of bonds at a given point in time. The conventional way of measuring the term structure is by means of the spot rate curve, or yield curve, on zero-coupon bonds. Yet in reality, the entire term structure is not directly observable, which gives rise to the need …

Interest Rate Sensitivities Of Externally And Internally Managed Australian Reits, Jaime L. Yong, Abhay Singh

Research outputs 2013

Real Estate Investment Trusts (REITs) in Australia experienced tremendous growth and investor interest following the crash of unlisted property funds in the 1990s. Since 2001, management structures have shifted from external property management to an internally advised model. The sector’s returns had been notably rewarding up till the Global Financial Crisis but rising costs of debt and years of aggressive borrowing to fund expansions have eroded the values of REITs. Externally managed trusts had relatively higher levels of debt than their internally managed counterparts thus increasing the sensitivities to interest rate risks. Yet internally managed REITs engage in a wider …

A Dynamic Credit Ratings Model, David E. Allen, Robert Powell, Abhay Singh

Research outputs 2013

The Global Financial Crisis (GFC) provided overwhelming evidence of the problems caused by inadequate credit ratings. Losses and problem loans experienced by banks over this period were staggering. Yet many of the securitized sub-prime parcels which were widely seen as an underlying cause of the GFC, as well as corporate obligors who experienced severe difficulties during the GFC, retained extremely strong external credit ratings. They may have had low perceived risk at the time of rating, but as circumstances changed, the ratings stayed static and became far removed from the underlying risk. A key problem is that the external credit …

The Relationship Between Personal Financial Wellness And Financial Wellbeing: A Structural Equation Modelling Approach, Paul Gerrans, Craig P. Speelman, Guillermo J. Campitelli

Research outputs 2013

We examined the construct of financial wellness and its relationship to personal wellbeing, with a focus on the role of financial literacy. Gender comparisons are made using a structural equation modeling analysis including personal wellbeing, financial satisfaction, financial status, financial behavior, financial attitude, and financial knowledge. Males ranked higher in financial satisfaction and financial knowledge whereas females ranked higher in personal wellbeing. Joo’s (2008) concept of financial wellness as multidimensional is supported though the result is improved when a causal model of sub-components is estimated. The relationship of all variables to personal wellbeing is mediated by financial satisfaction, with gender …

The Determinants Of Capital Structure: Evidence From Thai Banks, David E. Allen, Napaporn Nilapornkul, Robert Powell

Research outputs 2013

The aim of this study is to examine the determinants of the capital structure of Thai banks. The data spans a ten year period from 1999 – 2008. The differentiation point of this study is that, whereas most studies on capital structure focus predominantly on internal bank variables, this study, in addition to internal variables includes market-based risk variables. A range of market-based default and value at risk variables were considered which were then narrowed down to improve the model. Fixed effects panel data analysis is employed, with both market and book leverage used as dependent variables. The Thai bank …