Finance Commons^™

Small Business Lending And Social Capital: Are Rural Relationships Different?, Robert Deyoung, Dennis Glennon, Peter J. Nigro, Kenneth Spong

The Journal of Entrepreneurial Finance

We test whether rural versus urban location, and the amount of social capital present in those locations, influence the performance of Small Business Administration (SBA) 7(a) loans originated between 1984 and 2012. On average, we find that rural loans are about 11% less likely to default than urban loans, and that a standard deviation increase in social capital reduces default by about 5%. Surprisingly, these two effects are largely independent of each other, even though social capital is substantially higher in rural places than in urban places. Our findings advance the small business lending literature and offer insights for a …

Be Wary Of Black-Box Trading Algorithms, Gary N. Smith

Pomona Economics

Black-box algorithms now account for nearly a third of all U. S. stock trades. It is a mistake to think that these algorithms possess superhuman intelligence. In reality, computers do not have the common sense and wisdom that humans have accumulated by living. Trading algorithms are particularly dangerous because they are so efficient at discovering statistical patterns—but so utterly useless in judging whether the discovered patterns are meaningful.

The Chinese Real Estate Bubble, Gary N. Smith, Wesley Liang

Pomona Economics

China has seen extraordinary economic growth for the past two decades, coupled with a booming housing market. Following the 2008 financial crisis, however, observers began worrying that the Chinese real estate market had been gripped by a speculative bubble. We use residential rent and price data to assess whether these fears are justified. We conclude that residential real estate markets are bubbly in Beijing and Shanghai, with the Beijing housing market frothier than the Shanghai market.

Stock Splits: A Re-Evaluation, Gary N. Smith

Pomona Economics

In theory, stocks splits do not affect a firm’s aggregate market value. Yet, firms often split their stocks in order to keep the price in a desired trading range and, perhaps, to make the stock more affordable to individual investors. Past studies have been inconclusive about whether shareholder returns are affected and whether the effects, if any, are due to affordability or signaling. Using fresh data, all since the decimalization of prices, I find positive effects on shareholder returns, but not because splits make stocks more affordable. The more compelling argument is that corporate stock splits signal a board’s confidence …

International Finance, Paul A. Hayes

Open Educational Resources

No abstract provided.

The Effect Of Corporate Social Responsibility On Firm Value And Performance, Jennifer E. Maxey

Honors Undergraduate Theses

In this thesis, I test the effects of corporate social responsibility (CSR) on firm valuation and performance from the financial crisis of 2007 to year 2013. Prior research on CSR suggests that CSR is related to firm performance, but the results have not been consistent. My study focuses on the time period following the crisis since trust between firms and stakeholders may be more important following a negative shock. The components of CSR are broken out into environmental, human rights, diversity, community impact, employee relations, product, and corporate governance. I find evidence that at least some measures of firm performance …

Effects Of Sme Access To Capital On Country Economic Performance: Understanding The Differences Between The Developed And The Developing World, William B. Reed

Honors Undergraduate Theses

The intent of this thesis is to explore the effects of small-medium enterprises' (SME) access to capital on country economic performance and examine the differences between the developed world and the developing world. Specifically, two main questions are addressed: whether there are significantly higher barriers-to-entry through a lack of access to credit in developing countries as well as whether SMEs access to credit around the world has changed over time.

Using a sample of 46 countries and grouping them two different ways (developed vs developing and free-market vs non-free-market), I find a negative correlation between the SMEs access to capital …

Earnings Response Coefficient As A Determinant Of Dividend Policy: Testing Free Cash Flow Theory On Non-Financial Dividend Paying Firms In The Pakistan Stock Exchange, Hamid Ullah, Anjum Ihsan

Business Review

This study tests Jensen’s free cash flow theory which states that managers overinvest retained earnings in negative NPV projects. A data set of 238 firms listed on the Pakistan Stock Exchange for the period 1999 to 2016 is used. The results of the panel regression model show a significant positive association of the earnings response coefficient and dividend payout ratio, which supports the free cash flow theory in listed Pakistani firms. Moreover, the imposition of the capital gains tax and the financial crisis has further strengthened the positive relationship between ERC and dividend payout ratio.

Political Connectedness, Firm Performance And Corporate Risk Taking: Are Emerging Markets Different?, Augustine Tarkom

Electronic Theses and Dissertations

Existing literature exploring the effect of politically connected firms on their performance and risk-taking seems to offer decisive results for the emerging and the developed market. However, from professionals and anecdotal evidence, both markets do not exhibit similar characteristics. Considering these characteristics, instability of the government, lack thereof of adequate governance structure, I revisit the topic. This study comprises 27 advanced and 20 emerging economies for the years 1992 through 2016. I find that sound political environment drives risk-taking in advanced markets, while political connections drive corporate risk-taking in emerging markets. I also find that political institutions and political connections …

A Review Of Reasons For Failure In Applying Machine Learning To Financial Trading And An Experiment Investigating Combinatorial Purged Cross Validation’S Merit In Preventing The Most Prominent Of These Reasons, Multiple Testing Bias, Colin Fritz

Graduate Research Theses & Dissertations

The interest in applying machine learning to financial trading in the hedge fund industry has exploded in the last five years due to the massive success of a handful of ‘quantitative’ investment firms like Renaissance Technologies who has pioneered the use of machine learning techniques in investment since the 1980s. The failure rate of such firms attempting to deploy financial machine learning strategies is very high. This thesis reviews many of the causes for failure such as harmful correlations between examples in the dataset, redundant observations, improper data sampling paradigm, and multiple testing bias. Of these, multiple testing bias is …

The Determinant Of International Sovereign Bond Financing In Developing Countries, Thanatcha Varaputtanon

Chulalongkorn University Theses and Dissertations (Chula ETD)

Governments need to secure finance for their country’s public projects. There are various ways for governments to acquire funds, for example, through taxation, borrowing money from international banks, issuing government bonds, and so on. For developing countries, a government may consider issuing international sovereign bonds to meet the country’s financial needs. This thesis looks at the determinants of international sovereign bond financing by 36 emerging economies using data collected from the Bloomberg terminal on international sovereign bonds issued between 1996 and 2016. The thesis adopts the discrete choice logit-fixed effect model to empirically verify factors suggested by S&P (2014) that …

Three Essays On Corporate Bonds Issuance And Trading, Violetta Y. Davydenko

Electronic Theses and Dissertations

We explore the bond “clustering” phenomenon, using a sample of bond issuances in 2000-2015. Bond “clustering” is when the number of bonds issued that year exceeds three standard deviations above the mean number of issues for the firm over the sample period. We examine why firms opt for multiple issuances instead of a large one: exhaustion of debt capacity, refunding existing debt, timing favorable market conditions, managing working capital or financing profitable investment opportunities. Results indicate that firms do not cluster due to simply refinancing outstanding debt, but in order to manage their liquidity position and short-tern cash needs, to …

Implications Of Non-Tangible Assets And Macroeconomic Parameters On Long-Term Stock Performance, Leo Rajan Pereira

Walden Dissertations and Doctoral Studies

A rational long-horizon stock investment decision is a complex process due to uncertainty in supply and demand, competitive advantage, macroeconomic parameters and various perspectives of investors. Today, the '€˜non-tangible assets'€™ (NTA) that include goodwill and intangible assets are a significant part of corporate assets, but their role in stock performance has not well studied. The purpose of this research is to empirically analyze the implications of NTA and of gross domestic product (GDP) of the United States on the stock price. According to the efficient market hypothesis, stock price reflects all relevant information. The research question focused on the extent …

Adjusting The Momentum Strategy For Small Investors, Ulrich Roger Deinwallner

Walden Dissertations and Doctoral Studies

Researchers recommended investing according to the long only momentum (MOM) strategy to generate excess returns for private investors. The general problem of this study was that it was unclear when to enter and when to exit declining financial markets to avoid larger losses and to improve the overall performance with the MOM strategy. Therefore, it was important to understand the influence of a timing indicator on the MOM strategy. The purpose of this study was to examine the relationship between different moving average (MA) settings, the MOM strategy, and the performance of the returns from the construction of small U.S. …

Do Socially Conscious Etfs Match Their Active Counterparts?, Ryan Cultice

Undergraduate Honors Thesis Collection

Over the past decade, Socially Responsible Investing (SRI) has grown at a rapid pace and, by some estimates, now represents a quarter of the $48 trillion in assets under professional management in the United States. At the same time, investors have broadly shifted from active to passive investing strategies. While there is significant research in each of these respective areas, we believe that we are the first to examine whether a socially conscious investor can employ a passive approach or if the constrained nature of SRI necessitates active management. As such, we examine the performance of socially conscious ETFs versus …

Innovation, Ceos, And Ipos, Zhilu Lin

Electronic Theses and Dissertations

In Part 1, I study if CEOs with innovative ability impose a cost upon their firms. I find that while there is a positive effect of a CEO’s innovative ability on firm innovation, the benefit is only when CEO’s innovative ability is useful for the firm. Further, firms with innovator CEOs spend more on R&D projects but with lower efficiency and hold more cash but with lower cash value compared to firms with non-innovator CEOs. These results suggest that innovator CEOs create an overinvestment problem. In Part 2, I study the effects of talent cycling on IPO long-run performance and …

Less Is More: Beating The Market With Recurrent Reinforcement Learning, Louis Kurt Bernhard Steinmeister

Masters Theses

"Multiple recurrent reinforcement learners were implemented to make trading decisions based on real and freely available macro-economic data. The learning algorithm and different reinforcement functions (the Differential Sharpe Ratio, Differential Downside Deviation Ratio and Returns) were revised and the performances were compared while transaction costs were taken into account. (This is important for practical implementations even though many publications ignore this consideration.) It was assumed that the traders make long-short decisions in the S&P500 with complementary 3-month treasury bill investments. Leveraged positions in the S&P500 were disallowed. Notably, the Differential Sharpe Ratio and the Differential Downside Deviation Ratio are risk …

Are Cds Auctions The Tail Wagging The Dog? An Empirical Study Of Corporate Bond Return Volatility At The Time Of Default, Jennifer Mace

CMC Senior Theses

Over the past decade, numerous engineered credit events and cases of market participants manipulating bond prices to influence Credit Default Swap (CDS) auction payouts have occurred. These cases have become increasingly common, and the CFTC has stated they may constitute market manipulation and undermine not only the CDS market but also the credit derivative and default markets. Although there is a plethora of news and media coverage on publicized cases, there is no previous empirical research on evidence of these practices. This paper is motivated by the desire to determine if there is indirect evidence of bond price manipulation around …

The Fall Of The 10-K Report: Measuring The Impact Of Accounting Ratios On Financial Performance, Matthew Daruty

CMC Senior Theses

The annual 10-K report has historically been the most important aspect in assessing the position of a publicly held company. However, as the flow of information has increased with the dawn of new technologies, less and less attention has been paid to these audited financial statements. In order to assess if investors are still reacting to the information contained in the annual report, this paper examines the relationship between accounting ratios and stock price in banks traded on United States stock exchanges. By examining accounting ratios instead of simply looking at Earnings Per Share, new information was revealed regarding what …

What Drives Merger Waves? A Study Of The Seven Historical Merger Waves In The U.S., Katherine Ching

Scripps Senior Theses

Historically, merger and acquisition (or M&A) activity has occurred in cyclical patterns, forming what are known as “merger waves.” To date, there have been a total of seven waves. Though it is widely acknowledged that merger waves exist, there is no consensus on what drives these waves. Through both qualitative and quantitative analysis, this paper aims to determine the causes of merger waves and looks at those causes through two different lenses: the neoclassical view, which states that economic shocks cause merger waves, and the behavioral view, which states that increases in merger activity are due to managerial behavior and …