bluuebunny/crossref_metadata_2025_split huggingface dataset:
THE CHANGING RISK PROFILE OF U.S.‐BASED MULTINATIONAL CORPORATIONS EXPOSED TO EUROPEAN COMMUNITY MARKETS
Authors: Chambliss Karen , Madura Jeff , Wright Francis W. 
Published: August 2014

AbstractIn this study we investigate the risk characteristics of U.S.‐based multinational corporations (MNCs) that conduct much of their business in the European Community. Specifically, we assess the efficacy of a multifactor return‐generating model that incorporates the influence of U.S. and European markets. Our results demonstrate that the European market is a significant factor in explaining the time‐series behavior of MNC returns, and that the European market influence is stronger since the adoption of the Single European Act. In addition, the reduction in the sensitivity of MNCs to the U.S. market since the Single European Act is cross‐sectionally associated with changes in their proportional levels of European sales. The results suggest that the returns of other MNCs expanding into increasingly integrated regional blocs may experience similar changes in their systematic risk profile.
THE WEALTH EFFECTS OF ANNOUNCEMENTS OF R&D EXPENDITURE INCREASES
Authors: Zantout Zaher Z. , Tsetsekos George P. 
Published: August 2014

AbstractWe examine the effect of announcements of plans to increase R&D expenditures on the stock price of rival firms. We test two alternative hypotheses: the first‐to‐innovate hypothesis versus the free‐rider of spillovers hypothesis. Analysis of 114 announcements of increases in R&D expenditures indicates that rival firms suffer a statistically significant negative abnormal return at announcement, which supports the first‐to‐innovate hypothesis. This result provides a rationale for the potentially costly voluntary disclosure of R&D expenditures. A cross‐sectional analysis of the abnormal returns to rival firms reveals that a highly credible announcement has some spillover effects, and that the rival firm earns a much smaller but positive abnormal return. An important implication is that it is always strategically beneficial for the firm to disclose its future R&D plan.
OPEN MARKET STOCK REPURCHASE PROGRAMS AND LIQUIDITY
Authors: Wiggins James B. 
Published: August 2014

AbstractIn this paper I examine the behavior of bid and ask spreads and depths around announcements of open market stock repurchase programs. For a sample of 195 announcements from 1988 to 1990, I find statistically significant evidence of a small decline in spreads and no evidence of a shift in depths following the announcement date. Results are similar for a subsample of firms experiencing post‐announcement declines in the number of shares outstanding. I conclude that open market repurchase programs as used recently do not adversely affect market liquidity.
VARIANCE, RETURN, AND HIGH‐LOW PRICE SPREADS
Authors: Lin Ji‐Chai , Rozeff Michael S. 
Published: August 2014

AbstractWe report three new findings that rely upon the high‐low price range as an estimate of stock return variance. The predictability of variance is associated with persistence in high prices and with correlated shocks to high and low prices. Excess stock returns are positively related to anticipated variance and inversely related to unanticipated variance. Lagged squared residuals in GARCH(1,1) models have no incremental explanatory power in the presence of forecasts of conditional volatility generated from high‐low price spread models.
THE VALUATION EFFECTS OF FREQUENT COMMON STOCK ISSUANCES
Authors: McDaniel Wm R , Madura Jeff , Akhigbe Aigbe 
Published: August 2014

AbstractPrevious empirical studies show that announcements of seasoned common stock registrations and issuances lead to significant reductions in common stock prices and shareholder wealth. Nevertheless, some firms issue common stock frequently. Our empirical study of nonutility firms that issued common stock four or more times within ten years shows that market reactions to announcements of offerings and to registrations are less unfavorable than typical reactions for infrequent issuers. A cross‐sectional analysis reveals no unique characteristics that distinguish frequent issuers from one‐time common equity issuers. In fact, the only detectable characteristic unique to the firms is that they issue common stock frequently.
THE INFLUENCE OF ORGANIZED OPTIONS TRADING ON STOCK PRICE BEHAVIOR FOLLOWING LARGE ONE‐DAY STOCK PRICE DECLINES
Authors: Peterson David R. 
Published: August 2014

AbstractIn this study I examine the effect of organized options trading on stock price behavior immediately following stock price declines of 10 percent or more. A matched‐pair sample of National Market System option and nonoption firms are analyzed from June 1985 through December 1992. After controlling for the bid‐ask bounce, firm size, share price, return standard deviation, and beta, I find that three‐day cumulative abnormal returns for option firms are approximately 1.57 percent less than those for nonoption firms. Thus, options trading enhances stock market efficiency and/or liquidity. However, no profitable trading strategies are indicated.
DETERMINANTS OF PERSISTENCE IN RELATIVE PERFORMANCE OF MUTUAL FUNDS
Authors: Volkman David A. , Wohar Mark E. 
Published: August 2014

AbstractSimilar to previous studies, we investigate the relation between past and future fund performance. However, we deviate from previous studies by investigating the relation between persistent fund performance and four systematic factors: size, goal, load, and management fee. Results indicate no consistent relation between fund size and persistent fund performance. The existence of a sales charge does not affect persistent fund performance. The goal of a fund does affect persistent fund performance, with high‐risk maximum capital gain funds' demonstrating a strong positive persistence in abnormal returns. In addition, funds with low management fees demonstrate significantly positive persistent fund performance, while funds with high management fees demonstrate significantly negative persistent fund performance. Further research into the relation between persistent fund performance and maximum capital gain funds indicates persistent fund performance in both inferior‐ and superior‐performing funds. However, persistence in funds with low management fees occurs only in funds with superior past performance.
MACROECONOMIC VARIABLES AND SEASONAL MEAN REVERSION IN STOCK RETURNS
Authors: Gangopadhyay Partha 
Published: August 2014

AbstractIn this paper I investigate whether seasonal mean reversion in stock portfolio returns is related to common macroeconomic risk factors. I decompose excess returns into explained and unexplained returns using a multifactor pricing model. The explained excess returns exhibit January mean reversion; the unexplained excess returns do not. The mean reversion can be attributed to the components of return related to unexpected inflation, bond default premium, and market risk. The results do not depend on the time‐series properties of the portfolio betas. Bond default premia and excess market returns are mean reverting in January.
LEVERAGE, RISK‐SHIFTING INCENTIVE, AND STOCK‐BASED COMPENSATION
Authors: Harikumar T. 
Published: August 2014

AbstractOutstanding risky debt provides risk‐shifting incentives for managers fully aligned with stockholders. Earlier research shows that the risk‐shifting incentive can be eliminated by using a stock‐based compensation design to align managers' and stockholders' interests. I show that stock options as well as compensation designs that align managers' and bondholders' interests eliminate the risk‐shifting incentive. Although a stock‐based compensation design is not a unique mechanism to eliminate the pure risk‐shifting incentive, it is essential where managers of levered firms are known to consume a portion of the investment outlay as perquisites.
WEALTH EFFECTS OF ENFORCEMENT ACTIONS AGAINST FINANCIALLY DISTRESSED BANKS
Authors: Brous Peter A. , Leggett Keith 
Published: August 2014

AbstractWe examine the stock price reaction for a sample of commercial banks to the signing of cease‐and‐desist orders, written agreements, and formal agreements with bank regulators. These agreements restrict financially distressed institutions from certain activities that may be perceived by the capital markets as favorable or unfavorable. Our finding of a significantly negative mean signing‐day abnormal return suggests that these enforcement actions are not fully anticipated by the market and that, on average, these enforcement actions are perceived as being unfavorable for bank shareholders. Our cross‐sectional analysis suggests that at least part of the negative market reaction is caused by a reduction in the moral hazard problem associated with financially distressed federally insured commercial banks. Although these actions are beneficial to both the federal deposit insurer and ultimately taxpayers, we interpret the cross‐sectional findings as implying that regulators are not acting in a timely fashion to restore the financial health of these distressed “banks. Even though equity values fall, on average, when banks are faced with an enforcement action, our findings do not support the pre‐FIRREA policy not to publicly disclose the signing of enforcement actions because the enforcement action itself is not the source but is merely a reflection of the bank's problems.
WHO GAINS FROM CORPORATE ASSET SALES?
Authors: Datta Sudip , Iskandar‐Datta Mai E. 
Published: August 2014

AbstractThis study documents that sell‐offs, on average, are firm value enhancing, as both stockholders and bondholders gain from such transactions. Further, it reveals that sell‐offs can be wealth redistributing, value destroying, or value enhancing depending on the way the sale proceeds are distributed and the motive underlying the sell‐off. The wealth effects on stockholders and bondholders are not always symmetrical. Our results suggest that benefits from the sale of assets that do not strategically fit the firm's core business accrue primarily to stockholders, while benefits from distress‐related sell‐offs accrue to bondholders. Sell‐offs to thwart takeovers destroy firm value. We document that a significant proportion of sell‐offs results in wealth transfers between securityholders. Restrictive dividend covenants play an important role in protecting bondholders from wealth expropriation. Our analysis suggests that the relative size of the asset sale, the uses of the sale proceeds, and the degree of protection afforded bondholders via a dividend restriction may be relevant in explaining the direction of wealth transfer.
SKEWNESS AND KURTOSIS IN S&P 500 INDEX RETURNS IMPLIED BY OPTION PRICES
Authors: Corrado Charles J. , Su Tie 
Published: August 2014

AbstractThe Black‐Scholes (1973) model frequently misprices deep‐in‐the‐money and deep‐out‐of‐the‐money options. Practitioners popularly refer to these strike price biases as volatility smiles. In this paper we examine a method to extend the Black‐Scholes model to account for biases induced by nonnormal skewness and kurtosis in stock return distributions. The method adapts a Gram‐Charlier series expansion of the normal density function to provide skewness and kurtosis adjustment terms for the Black‐Scholes formula. Using this method, we estimate option‐implied coefficients of skewness and kurtosis in S&P 500 stock index returns. We find significant nonnormal skewness and kurtosis implied by option prices.
THE SURVIVAL OF INITIAL PUBLIC OFFERINGS IN THE AFTERMARKET
Authors: Hensler Douglas A. , Rutherford Ronald C. , Springer Thomas M. 
Published: August 2014

AbstractWe estimate an accelerated failure time (AFT) model to investigate the effects of several characteristics suggested as indicators of firm survival for initial public offerings (IPOs). The results indicate that the survival time for IPOs increases with size, age of the firm at the offering, the initial return, IPO activity level in the market, and the percentage of insider ownership, while the survival time decreases with increases in the general market level at the time of the offering and the number of risk characteristics. Additionally, the survival time is negatively affected if the IPO is in the computer and data, wholesale, restaurant, or airline industries and positively affected if the IPO is in the optical or drug industries.
THE VALUE OF A REGULATORY SEAL OF APPROVAL
Authors: Gupta Atul 
Published: August 2014

AbstractI investigate whether obtaining a regulatory seal of approval adds to firm value. For a sample of thirty‐four firms that acquired the insured deposits of failed banks, I find a significantly greater price response for firms that could benefit from obtaining a regulatory seal of approval than for firms that had recently obtained a similar form of approval. Further, abnormal returns to winning bidders are significantly larger when a regulatory seal of approval is likely to be more valuable, i.e., when the industry faces severe economic problems. In addition, bidder gains are significant only in markets where regulatory certification of a firm's health is important—markets that have recently experienced several bank failures. Finally, wealth transfers from the FDIC insurance fund may contribute to bidder gains. The evidence suggests that obtaining a regulatory seal of approval can positively affect firm value.
COGNITIVE DISSONANCE AND MUTUAL FUND INVESTORS
Authors: Goetzmann William N. , Peles Nadav 
Published: August 2014

AbstractWe present evidence from questionnaire responses of mutual fund investors about recollections of past fund performance. We find that investor memories exhibit a positive bias, consistent with current psychological models. We find that the degree of bias is conditional upon previous investor choice, a phenomenon related to the well‐known theory of cognitive dissonance. Psychological and economic frictions in the mutual fund industry are examined via a cross‐sectional study of equity mutual funds. We find an unusually high frequency of poorly performing funds, consistent with investor “inertia.” We also examine the differential responses of investment dollars to past performance, controlling for survivorship. These show that the effect is confined to the top quartile. We find little evidence that the response to poor performance is unusual.
THE EFFECT OF FDICIA REGULATION ON BANK HOLDING COMPANIES
Authors: Carow Kenneth A. , Larsen Glen A. 
Published: August 2014

AbstractWe examine market reactions to legislative announcements surrounding the passage of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991. Research shows that bank regulation adversely affects shareholder wealth on the one hand, yet often provides government subsidies on the other. The removal of Federal regulators' discretionary authority and the imposition of mandatory regulations in the FDICIA have an overall negative effect on our sample of bank holding companies. The results are consistent with either the costly regulation hypothesis or the decreased subsidies hypothesis.
BANKING RELATIONSHIPS AND THE EFFECT OF MONITORING ON LOAN PRICING
Authors: Blackwell David W. , Winters Drew B. 
Published: August 2014

AbstractIn a sample of bank loans to small firms we find a positive relation between the bank's monitoring effort and the loan's interest rate. We also observe an inverse relation between the closeness of banking relationships and interest rates. Further, we see that banks less frequently monitor firms with whom they have closer relationships. We conclude that banking relationships are valuable because firms can significantly reduce their costs of capital by establishing and maintaining close ties to a particular bank. As firms successfully complete loan transactions with banks, banks monitor them less frequently and, ultimately, charge them lower interest rates.
OPTIMAL BIDDING FOR TENDER OFFERS
Authors: Khanna Naveen 
Published: August 2014

AbstractBy modeling tender offers as auctions in which bidders arrive sequentially, I show that the first bidder includes a high premium in its opening bid in an attempt to freeze out potential competitors. When expected competition goes up, the premium offered increases as does target shareholder welfare, while bidders suffer. Also, total synergy gains generated increase with competition. Including a premium in the opening bid remains optimal for the first bidder when target management is permitted to resist. Target management's ability to resist, though, benefits target shareholders even when resistance is not actually observed. When agency costs are introduced, the effect of managerial resistance on target shareholder welfare becomes ambiguous.
CHANGES IN MARKET PERCEPTION OF RISKINESS: THE CASE OF TOO‐BIG‐TO‐FAIL
Authors: Black Harold A. , Collins M. Cary , Robinson Breck L. , Schweitzer Robert L. 
Published: August 2014

AbstractIn 1984, the Comptroller of the Currency stated that the eleven largest banking firms were “too big to fail,” implying they would receive de facto 100 percent deposit insurance. The question is whether this announcement altered the market's perception of the riskiness of all banking organizations, not just those included in the Comptroller's statement. We address this question with two tests. First, through the examination of changes in institutional equity ownership from 1980 through 1988, we find that the announcement is associated with increases in institutional ownership at a time when a comparable set of nonfinancial firms saw reductions in institutional holdings. Second, through the examination of stock returns behavior of bank holding companies around announcements of dividend cuts and omissions from 1974 through 1991, we find that the Comptroller's 1984 announcement altered the market's reaction to dividend cuts and omissions by bank holding companies not specifically included in the Comptroller's statement.
INVESTMENT OPPORTUNITIES AND MULTINATIONALITY: EVIDENCE FROM CAPITAL STRUCTURE CHANGES
Authors: Rahman Manzur 
Published: August 2014

AbstractI examine shareholder valuation effects of capital structure changes for multinational (MNC) and domestic (DC) corporations. The internalization theory of foreign direct investment posits that MNCs create value by internalizing the market for their assets across national borders. If the financing decision is related to the rents from future investments, MNCs may have differential valuation effects to capital structure changes vis‐à‐vis DCs. I find that MNCs have lower (greater) excess returns for debt‐for‐equity (equity‐for‐debt) exchanges than DCs. The cross‐sectional analyses show that the valuation effects are differentially related to the investment opportunities of MNCs and DCs.
INTRA‐INDUSTRY EFFECTS OF BOND RATING ADJUSTMENTS
Authors: Akhigbe Aigbe , Madura Jeff , Whyte Ann Marie 
Published: August 2014

AbstractSeveral studies find that bond rating downgrades cause negative valuation effects. Other studies find that signals conveyed by earnings releases, earnings forecasts, bankruptcies, and stock offerings of individual firms can be transmitted to their corresponding industries. By combining the two sets of studies, we hypothesize that bond rating changes may contain relevant information not only about the firm, but also about the corresponding industry. We find significantly negative valuation effects for rating downgrades, which are transmitted throughout the industry. Furthermore, we find that intra‐industry effects depend on particular characteristics of the bond downgrade, the downgraded firm, and industry rivals. Specifically, the negative intra‐industry effects are more pronounced when (1) the downgraded firm experiences a more severe share price response to the bond rating downgrade, (2) the downgraded firm is dominant in the industry, (3) the downgraded firm is more closely related to its rivals in the industry, and (4) the downgrade is due to a deterioration in the firm's financial prospects.
THE MARKET REACTION TO STRAIGHT DEBT ISSUES: THE EFFECTS OF FREE CASH FLOW
Authors: Howton Shawn D. , Howton Shelly W. , Perfect Steven B. 
Published: August 2014

AbstractIn this paper we measure the market reaction to 937 straight debt issues between 1983 and 1993. We find a negative and significant market reaction to a straight debt announcement. In addition, we find that the market reaction to a straight debt issue is directly related to the issuing firm's level of existing cash and inversely related to the issuing firm's investment opportunities.
INFORMATION TRANSMISSION IN THE SHANGHAI EQUITY MARKET
Authors: Long D. Michael , Payne Janet D. , Feng Chenyang 
Published: August 2014

AbstractWe examine market efficiency and the price‐volume relation in Class A and Class B shares on the Shanghai exchange relative to the U. S. equity market. Variance ratios and runs tests for market efficiency support the hypothesis that both Class A and Class B markets follow a random walk. In addition, the augmented Dickey‐Fuller test supports the null hypothesis that the Shanghai market follows a random‐walk process with drift. We also find a significantly positive relation between changes in volume and absolute price returns in both Class A and Class B shares, which is consistent with studies on U.S. equity markets. However, when using signed returns, our results are stronger than most U.S. studies on price‐volume relations. We find no significant difference between the price‐volume correlations in Class A and Class B shares. However, the price‐volume correlations in both Class A and Class B shares are significantly stronger than the price‐volume correlation in the U.S. market. This suggests volume may be more important to information transmission in China than in the U. S. markets.
MAINBANKS AND INVESTMENT EFFICIENCY IN FINANCIAL DISTRESS
Authors: Reeb David M. , Kwok Chuck C. Y. 
Published: August 2014

AbstractWe explore the effects of mainbanks on investment efficiency in financial distress. The previous literature argues that firms with close financial relationships with banks have lower costs of financial distress because of a reduced underinvestment problem. Although benefits may accrue to such close relationships, we contend shortcomings are possible as well. A firm in financial distress without a mainbank may be forced to reduce investment or sell assets to a buyer who has a higher value. However, for a firm with a mainbank, this disciplinary force is weakened. To firms with poor investment opportunities, the presence of mainbanks may actually induce an overinvestment problem. The empirical findings reported here are consistent with this idea.JEL classification: G31, G33, G34.
REGULATORY THREATS AND POLITICAL VULNERABILITY
Authors: Bowman Robert G. , Navissi Farshid , Burgess Richard C. 
Published: August 2014

AbstractDuring the 1992 U.S. presidential campaign and immediately after, the pharmaceutical industry was subjected to regulatory threats. It was charged with high drug costs, high advertising expense, and insufficient expenditure on research and development (R&D) to develop better drugs. We examine whether firms' measures of political vulnerability (higher advertising expense and lower R&D expenditure) influence the equity value effects of the regulatory threats. We find negative announcement effects around three regulatory threats. We then extend the analysis and find evidence consistent with our hypotheses that measures of political vulnerability are associated with more negative abnormal returns in response to the regulatory threats.JEL classification: G18, L50, L65.