Social and Behavioral Sciences Commons^™

The Zero-Leverage Policy And Family Firms, Pedram Fardnia, Maher Kooli, Sonal Kumar

Finance Department Faculty Journal Articles

Purpose – The purpose of the study is to examine the zero-leverage (ZL) phenomenon in family and non-family firms.

Design/methodology/approach – The authors consider three hypotheses and empirically test them using a sample of the largest US firms over the 2001–2016 period.

Findings – The authors find that, on average, 19.20% of family firms have zero debt vs 10.42% for non-family firms. The authors also find that family firms strategically choose to be ZL to maintain financial flexibility for future investments and exercise control over the decision-making process, consistent with the hypotheses of financial flexibility and control considerations. However, non-family …

Earnings Management: Are Men From Mars And Women From Venus?, Sonal Kumar, Rahul Ravi

Finance Department Faculty Journal Articles

Research on gender and finance finds that women chief executive officers (CEOs) are relatively risk-averse and more ethical than their male counterparts. These differences are often presented as reasons for lower earnings management by firms led by women. A strand of contrasting literature however finds the notions of women being risk-averse and ethical not necessarily true for women occupying top leadership positions as women successful in shattering the glass ceiling adopt behaviors like men. This study attempts to understand the differences between the ethical tendencies of the two genders by examining if CEO power impacts the relation between CEO gender …

War And Money In Ngram Viewer, Robert H. Mcfadden, William Zywiak, Ronald P. Bobroff, Gao Niu

Finance Department Faculty Journal Articles

The second and fourth authors have been inviting Intro to Applied Analytics and Statistics 1 students to use the Ngram Database to explore historical topics of their choosing. This is the first article derived from this exercise. The first author examined the historical relationship between war and money from 1775 to 2005 in the American English corpus. This is followed by an examination of the 3-gram “cost of war” in the American English and British English corpora. Specific to the analyses presented here several military and economic events are discussed. More specifically, both economies and wars are somewhat unpredictable, with …

Firm Performance During The Covid-19 Crisis: Does Managerial Ability Matter?, Sonal Kumar, Leila Zbib

Finance Department Faculty Journal Articles

Challenged by the Covid-19 crisis, CEOs must rethink about how to operate and exist in the new working environment. We examine if managerial ability of the CEO impacts firm performance during the crisis period. We find a positive and significant association between the CEO managerial ability and both the cumulative raw and abnormal returns. We also find that firms with better CEO managerial ability are more resilient and have higher ROE than their counterparts. We find that the CEOs with higher managerial ability have higher pre-pandemic liquidity which in part explains the better performance amid the Covid-19 crisis.

Coo2 Bhanga Munda Data, Asli Ascioglu, Padma Kadiyala

Finance Department Faculty Journal Articles

No abstract provided.

Does Student Performance In Introductory Economics And Business Courses Impact Ets Scores?, Peter J. Nigro, Laura Beaudin, David C. Ketcham, Michael A. Roberto

Finance Department Faculty Journal Articles

This study examines the impact of economics education on student performance on the Educational Testing Service Major Field Test in Business. We demonstrate that grades in introductory microeconomics and macroeconomics courses have a positive relationship with overall exam performance as well as sub-scores in most content areas of the test. Furthermore, we use a measure of “extranormal” ability in economics and demonstrate its positive relationship to test performance. “Extranormal” ability represents the portion of course grades that cannot be explained by prior academic achievement. Finally, we show that the relationship between “extranormal” ability and exam performance is much more limited …

Does Social Trust Affect International Contracting? Evidence From Foreign Bond Covenants, Paul Brockman, Sadok El Ghoul, Omrane Guedhami, Ying Zheng

Finance Department Faculty Journal Articles

Building on rational choice institutionalism theory and Williamson’s (J Econ Lit 38(3): 595–613, 2000) four-level social analysis framework, we investigate the influence of the informal institution of social trust on debt contract design in an international setting. Using a sample of non-U.S. firms that issue bonds in the U.S. debt market, we find that Yankee bond creditors impose fewer covenants on bond issuers domiciled in countries with a high degree of social trust. We further show that the inverse relationship between debt covenants and the informal institution of social trust is more pronounced for firms from countries with weak formal …

Social Responsibility Of A Stock Exchange: Corporate Governance At Borsa Istanbul, A. Can Inci

Finance Department Faculty Journal Articles

No abstract provided.

Designing Student Projects In Finance: Structure, Technology, And Assessment, Jack W. Trifts, Laura Kohl

Finance Department Faculty Journal Articles

Student projects are a typical part of finance courses, but little has been written about their design. This article describes a five-year process of developing a web-based, semester-long, project in financial statement analysis and provides a road map for faculty members seeking to enhance learning. A key for any instructor is how to manage the trade off the benefits of individual projects and significant formative feedback with the time demands involved.

Corporate Social Responsibility And Likelihood Of Financial Distress, Ying Zheng, Yong Wang, Crystal Jiang

Finance Department Faculty Journal Articles

Does doing good to society make firms less likely to have financial trouble? This paper looks at the benefit of corporate social responsibility (CSR) and examines whether firms’ CSR engagement affects their chance of falling into financial distress. After analyzing a broad U.S. database spanning 25 years from 1991 to 2015, we find that CSR engagement indeed reduces the likelihood of firms falling into financial distress, and the results are statistically robust and economically significant. Further, we find the impact of CSR on the likelihood of financial distress is more pronounced in economic downturns and for firms with high levels …

Cryptocurrencies: Applications And Investment Opportunities, A. Can Inci, Rachel Lagasse

Finance Department Faculty Journal Articles

Purpose

This study investigates the role of cryptocurrencies in enhancing the performance of portfolios constructed from traditional asset classes. Using a long sample period covering not only the large value increases but also the dramatic declines during the beginning of 2018, the purpose of this paper is to provide a more complete analysis of the dynamic nature of cryptocurrencies as individual investment opportunities, and as components of optimal portfolios.

Design/methodology/approach

The mean-variance optimization technique of Merton (1990) is applied to develop the risk and return characteristics of the efficient portfolios, along with the optimal weights of the asset class components …

Flight To Quality For Large Financial Institutions, A. Can Inci, Hsi Li, Joseph Mccarthy

Finance Department Faculty Journal Articles

Local correlation analysis is used to investigate flight to quality among large financial institutions before, during, and after the financial crisis of 2008-2009. While standard correlation captures general overall linear association, local correlation analysis more accurately captures changes in the associations in response to changing market conditions. Using raw, market-adjusted, and industry-adjusted stock returns of individual banks, we investigate the performance of troubled banks and the change in investing behavior. Investors react to noisy information from the financial difficulties encountered by banking institutions. This reaction results in flight to quality. While the traditional Pearson correlations capture general overall linear association, …

Us-Swiss Term Structures And Exchange Rate Dynamics, A. Can Inci

Finance Department Faculty Journal Articles

In this study, a multi-country nonlinear model is constructed to simultaneously estimate the exchange rate dynamics and the term structure of interest rates in the US and in Switzerland. The model has better empirical performance compared to the earlier well-known affine international models. Risk premiums of bond yields vary between the two countries. The estimated state variables exhibit local characteristics. These conclusions imply the potential advantages of international diversification and demonstrate the Home Bias phenomenon. Exchange rate dynamics estimated by the models account for the Forward Premium Anomaly. Introduction of jump diffusions provides marginal improvement.

Impact Of Country Financial Development On The Firm: International Evidence, A. Can Inci

Finance Department Faculty Journal Articles

The impact of financial development of a country on the earnings, capital spending, and stock returns of the firms of that country is the subject of this study. There are two different financial development indices which are utilized. The first is based on Love (2003), and the second is based on Khurana (2006). Using 40 different countries, the causality relationships and cumulative impacts of the lags of earnings and lags of capital spending on subsequent earnings, capital spending, and returns are examined for the financially developed countries and financially non-developed countries. Earnings and capital spending Granger-cause stock returns in financially …

Historical Exchange Rate Risk Premiums In Currency Futures Markets, A. Can Inci

Finance Department Faculty Journal Articles

This paper examines the historical predictive power of future spot spread in estimating currency changes. Currency futures and spot rates over the last two decades are examined. results show that as forecast horizon of currency depreciation increases, the slope coefficients become less positive, first losing their significance, and eventually for 1-month regressions, becoming negative for the British pound, Swiss franc and Japanese yen (significantly negative for the yen) indicating risk premiums differ with forecast horizon. On the other hand, expectations hypothesis is validated when the forecast horizon is 1 day. These results hold for each decade separately, as well as …