bluuebunny/crossref_metadata_2025_split huggingface dataset:
Managerial Self‐Interest, Pension Financial Slack and Corporate Pension Funding
Authors: Datta Sudip , Iskandar‐Datta Mai E. , Zychowicz Edward J. 
Published: March 2005

AbstractThis paper examines the impact of managerial self‐interest on corporate pension funding decisions. It is postulated that managers with no ownership stake in the firm will have incentives to maintain financial slack in the form of excess pension funding. Pension funding slack may be viewed as a managerial perquisite that decreases the probability of necessary future debt financing. Such a strategy may increase the value of undiversified human capital to the detriment of maximizing shareholder wealth. As managerial ownership increases, the incentives to consume such a perquisite will decrease since the interests of managers and shareholders become more aligned. The results presented in this study strongly support this proposition.
Industry Structure and Ripple Effects of Bankruptcy Announcements
Authors: Cheng Louis T.W. , McDonald James E. 
Published: March 2005

AbstractThe market structure of an industry plays an important role in determining the stock market performance of surviving firms during intra‐industry bankruptcy announcements. On evaluating the announcement effects of a survivor sample from each of two industries with very different market structures, namely the airline industry and the railroad industry, we find that the airline sample received significant abnormal returns (positive ripple) while the railroad sample experienced significant abnormal losses (negative ripple). Furthermore, the differences of the abnormal returns from the two samples also are statistically significant. These findings demonstrate support for the market structure hypothesis (MSH), but cast doubt on the contagion effect hypothesis (CEH).
A Generalized Simple Formula to Compute the Implied Volatility
Authors: Chance Don M. 
Published: March 2005

AbstractThis paper provides a direct method of obtaining an accurate estimate of the implied volatility of a call option. It adds a quadratic adjustment term to an already‐known formula for at‐the‐money calls, previously developed by Brenner and Subrahmanyam [3]. The adjusted formula is quite accurate for options no more than 20 percent in‐ or out‐of‐the‐money and is simple to program and compute.
Graphical Portfolio Analysis
Authors: Rodriguez Ricardo J. 
Published: March 2005

AbstractThis paper presents a new methodology for portfolio analysis based on the correspondence between the expression for the standard deviation of a two‐asset portfolio and the magnitude of the sum of two complex numbers. This approach offers a geometric alternative to traditional portfolio analysis. The pedagogical advantages of the new framework are illustrated by rederiving many efficient set mathematics results. A previously unrecognized fact is uncovered using the graphical technique that the sum of the maximum and minimum betas for efficient portfolios is 1, so knowledge of one extreme beta implies knowledge of the other.
Financial Distress Costs and Delayed Calls of Convertible Bonds: An Empirical Analysis
Authors: Krishnan V. Sivarama , Rao Ramesh P. 
Published: March 2005

AbstractTheoretical analysis implies that optimal call policy would be to call the bonds as soon as the conversion value equals the call price. Empirical studies, however, report that firms appear to systematically delay the call and the difference between the conversion value and the call price is large at the time of the call. This study examines convertible bond calls between 1977 and 1993, with a view to explain the large difference between the conversion value and the call‐price at the time of the call. A large majority of the firms calling the bonds have cash‐flow incentive to call the bonds in that the after‐tax interest payments are higher than the dividends on the converted shares. The large difference between the conversion value and the call price is positively related to the risk characteristics of the firm. Evidence seems to support the view that risk aversion and fear of potential financial distress may explain the large difference at the time of call between the conversion value and the call price.
A Test of the Debt‐Monitoring Hypothesis: The Case of Corporate R&D Expenditures
Authors: Zantout Zaher Z. 
Published: March 2005

AbstractStudies that test for shareholder wealth effects of announcements of plans to increase R&D expenditures find an average positive effect, but also a significant cross‐sectional variation. This study determines whether the effect can be predicted when the announcing firm's capital structure is considered. Results suggest a positive relation between the debt ratio and the R&D induced abnormal stock returns. These results are robust using different industry‐adjusted and unadjusted measures of capital structure and while controlling for several potentially influential variables. In addition, the gains to shareholders do not seem to be wealth transfers from bondholders. This evidence provides support to the debt‐monitoring hypothesis.
The Role of Default Risk in Determining the Market Reaction to Debt Announcements
Authors: Best Ronald W. 
Published: March 2005

AbstractThe stock price reaction to straight debt announcements is examined by differentiating firms on the basis of any subsequent change in their overall default risk. Results indicate that firms that will within six months of straight debt announcements undergo debt rating downgrades experience significant negative abnormal stock returns at the time of the new debt announcements, while firms with bond ratings that are later upgraded exhibit significant positive abnormal returns. Multiple regression analysis shows these results to be robust to the influence of filing size, tax shield effects, relative pre‐announcement long‐term debt levels, and subordination effects.
Regulation and Systematic Risk in the Electric Utility Industry: A Test of the Buffering Hypothesis
Authors: Davidson Wallace N. , Rangan Nanda , Rosenstein Stuart 
Published: March 2005

AbstractIn this paper, the authors test Peltzman's [19] buffering hypothesis—whether regulatory environment impacts systematic risk for regulated electric utilities. The paper differs from previous research in that an exogenously defined measure of regulatory environment, a large sample, and a method that controls for time‐series and crosssectional autocorrelation are used. The results are consistent with the buffering hypothesis but only in years of increasing input factor prices for the utilities. Using causality tests, the results also show that it is the regulatory environment that influences systematic risk and not vice versa.
Tobin's q‐Ratio and Market Reaction to Capital Investment Announcements
Authors: Blose Laurence E. , Shieh Joseph C. P. 
Published: March 2005

AbstractThere is a significant positive relation between Tobin's q‐ratio and the magnitude of stock market reaction to capital investment announcements. The findings have the following implications for capital investment theory: (i) The results provide evidence substantiating the link between the q‐ratio and real investment for industrial firms. For public utilities however, no such link exists, (ii) The study finds that average q and marginal q are correlated but the relation is somewhat more complicated than simple equality as assumed by numerous empirical studies. (iii) The findings suggest that investors can use average Tobin's q‐ratio to identify companies with profitable real capital investment opportunities.
Why Manufacture Offshore? An Empirical Analysis of Valuation Effects
Authors: Ojah Kalu , Seitz Neil E. , Rawashdeh Mufeed 
Published: March 2005

AbstractIn this study, announcements by U.S. firms of offshore joint venture manufacturing during the 1980s are used to provide more comprehensive evidence than past studies on the wealth effects of offshore joint ventures. Evidence shows that the target country's level of economic development and political stability, currency strength of the originating country (U.S. in this study) relative to that of the target country, U.S. firm's mode of entry, and the relative value of the U.S. firm's investment in the joint venture affect the wealth of U.S. firms which engage in offshore joint ventures. The target country's level of economic development, its political stability, and the currency strength of the originating country relative to the target country are shown to be the dominant economic factors. Of particular importance, evidence indicates that the target country's level of economic development is a more important determinant of excess returns than is its political stability.
Mutual to Stock Conversion, Information Cost, and Thrift Performance
Authors: Carhill Mike , Hasan Iftekhar 
Published: March 2005

AbstractIn the 1980s, a large number of thrifts converted from the mutual to the stock form of ownership. The literature has noted that investors in those conversions earned abnormally high short‐term returns. However, over the long run the converters earned very poor returns. The major reason for the poor returns was the extra noninterest operational costs associated with the stock form of ownership. Since those extra operational costs were predictable, the stock offerings may have been overpriced, ex ante as well as ex post.
The Effects of the Method of Payment and the Type of Offer on Target Returns in Mergers and Tender Offers
Authors: Suk David Y. , Sung Hyun Mo 
Published: March 2005

AbstractThis paper re‐examines the effects of the method of payment and type of offer on target abnormal returns around the takeover announcement, controlling for the target firm's institutional ownership. Previous studies suggest the difference in announcement‐period target returns between cash offers and stock exchange offers can be explained by the difference in capital gains tax liabilities of the target shareholders and/or the difference in the information effect of the method of payment. The empirical results indicate no relation between bid premiums (or target abnormal returns) and institutional ownership of the target firm in cash offers and a systematic difference in target returns between mergers and tender offers even after controlling for the method of payment. These results are inconsistent with both the tax hypothesis and the information effect hypothesis. The evidence suggests the likelihood of future competition might be higher in tender offers than in mergers.
Adverse Information and Dealer Spreads: Evidence from Dutch Auction Repurchases
Authors: Forjan James M. , McCorry Michael S. 
Published: March 2005

AbstractThe Dutch auction repurchase has become an increasingly popular alternative to open market repurchases and self‐tender offers for the distribution of earnings to shareholders. In a Dutch auction, the repurchase price is not determined by a managerial decision, but by shareholders. The extent to which a Dutch auction signals private information is tested by examining stock returns and bid‐ask spreads. Stock prices increase and bid‐ask spreads widen during the announcement of a Dutch auction; prices decrease and spreads narrow at expiration. Because of the uncertainty surrounding the final repurchase price, Dutch auctions initially increase the risk to which security dealers are exposed. As information asymmetry among managers, investors, and dealers is reduced at expiration, security dealers no longer need to protect themselves from information trades.
The Causality Effects of the Federal Reserve's Monetary Policy on U.S. and Eurodollar Interest Rates
Authors: Mougoué Mbodja , Wagster John 
Published: March 2005

AbstractPrevious studies argue that U.S. interest rates will become more sensitive to changes in eurodollar rates as international financial‐market integration increases. However, the empirical results of these studies are suspect because they select their subperiods in an ad hoc manner and ignore the different trading hours of the U.S. and London markets.This study adjusts for the markets' different trading hours and uses Goldfeld and Quandt's switching regression technique to show that the causal relation between U.S. CD rates and eurodollar rates is impacted by the Federal Reserve's monetary policy. Because the latest subperiod exhibits uni‐directional causality (i.e., U.S. interest rates cause changes in eurodollar rates), the results cast doubt on the implicit assumption made in the literature that interest‐rate causality is only affected by increasing levels of financial‐market integration.
International mutual fund selectivity and market timing during up and down market conditions
Authors: Kao G. Wenchi , Cheng Louis T. W. , Chan Kam C. 
Published: March 2005

AbstractThis study examines the selectivity and market‐timing ability of international mutual fund managers. Ninety‐seven international mutual funds with a minimum of five‐year return history selected from the Morningstar OnDisc database are analyzed. Our findings suggest that managers of international mutual funds possess good selectivity and overall performance. We also find weak evidence of poor market‐timing ability. Consistent with prior findings from domestic mutual funds, there is a negative correlation between the international fund managers' selection ability and market‐timing ability. Finally, managers for Europea funds show poorer performance than those managing the other three international fund groups.
Indirect tests of the Haugen‐Lakonishok small‐firm/January effect hypotheses: window dressing versus performance hedging
Authors: Lee Cheng‐few , Porter David C. , Weaver Daniel G. 
Published: March 2005

AbstractEquity mutual fund data from 1976–1993 is used to test hypotheses that distinguish window dressing from performance hedging. No significant difference is found pre/post 1983 in the number of funds choosing non‐December fiscal year ends or in the percentage of dollars invested when comparing December/non‐December fiscal year ends. Significant differences are found in both January returns for mutual funds with December/non‐December fiscal year ends and in one month returns for funds with/without a fiscal year end in the previous month. Therefore, if the small‐firm/January effect is portfolio manager related, performance hedging, not window dressing, is the more probable source for the “excess” returns.
Stock Returns in Thinly Traded Markets
Authors: Butler Kirt C. , Osborne Richard M. 
Published: March 2005

AbstractWe examine the share price behavior of thinly traded NASDAQ National Market System stocks during periods when financial markets are open but the individual stocks do not trade. The absence of trade allows us to isolate the effect of nontrading from that of market closure. We find that nontrading stocks have negative mean returns and lower variances regardless of whether markets are open or closed. Two‐day returns that include one nontrading day have a mean daily return of ‐0.226% compared to +0.164% for two‐day returns over consecutive trading days. Two‐day returns that include one nontrading day have only 3.8% higher variance than one‐day returns. We conclude that the relation between transaction arrival, mean returns, and volatility depends on whether a stock is trading and not simply on whether the market is open.
Stock Prices and the Secondary Dissemination of Information: The Wall Street Journal's “Insider Trading Spotlight”Column
Authors: Chang Saeyoung , Suk David Y. 
Published: March 2005

AbstractIn this paper we test whether a secondary dissemination of information affects stock prices. We examine stock price reactions to the publication of the “Insider Trading Spotlight”(ITS) column in the Wall Street Journal (WSJ). Since insider trades reported in the ITS column are initially disclosed to the public when insiders’ reports are filed with the Securities and Exchange Commission (SEC), the information contained in the WSJ is a secondary dissemination. Around the WSJ publication day, we find significant abnormal stock performance accompanied by a significant increase in trading volume. Our evidence suggests that a secondary dissemination of information can affect stock prices if the initial public disclosure attracts only limited attention by the market. In addition, we document how insider trading information is conveyed to the market.
Changes in Factor Betas and Risk Premiums Over Varying Market Conditions
Authors: Ahmed Parvez , Lockwood Larry J. 
Published: March 2005

AbstractWe show risk exposures and premiums associated with the Chen, Roll, and Ross (1986) risk factors change over time and depend on stock market and business cycle condition. Findings also indicate that factor risk premiums change sign between January and non‐January, especially during bull markets. These findings serve as a caveat for portfolio managers who allocate assets to match desired exposures to key macroeconomic risk factors.
Sufficiency Conditions For Inclusion of One Asset Over Another in Investment Portfolios
Authors: Trainor William J. 
Published: March 2005

AbstractBy extending Tsiang's (1972) analysis to encompass two risky assets, sufficiency conditions for including one asset over another in any investor's investment portfolio are derived. This derivation stems from the fact that any realistic utility function must have indifference curves with slopes less than one. Using this model's framework, it is found that short‐term Treasury bills in addition to cash balances cannot be a component of investor's investment portfolios. The results have implications for both the risk‐free rate used in portfolio analysis and provide a partial solution to Mehra and Prescott's (1985) equity premium puzzle.
An Examination of Cross‐Sectional Realized Stock Returns using a Varying‐Risk Beta Model
Authors: Howton Shelly W. , Peterson David R. 
Published: March 2005

AbstractUsing the dual‐beta model of Bhardwaj and Brooks (1993), this study examines the cross‐section of realized stock returns. Bull‐market betas are significantly positively related to returns and, except for some models in January, bear‐market betas are significantly negatively related to returns. These relationships are not lost even after other independent variables, including size, book‐to‐market equity, and an earnings‐price ratio, are added to the cross‐sectional regressions. Book‐to‐market equity is an important factor in bear, but not bull, markets. Size is important in January and in bear markets during February through December.
The Effect of Junk Bond Defaults on Common Stock Returns
Authors: Vu Joseph D. 
Published: March 2005

AbstractThis paper examines the effect of junk bond defaults on common stock returns. The evidence indicates that stockholders uncover the signs of financial distress long before the default date. Stock prices fall sharply at the time of the default announcement. Although stocks of fallen angel sample recover slowly and steadily after the default announcement, stocks of the original‐issue junk bond sample continue to decline. On average, bankrupt firms suffer larger negative stock returns than defaulted firms not only at the time of announcement, but also in both pre‐ and post‐event periods.
Pension benefits, wealth accumulation, and capital market equilibrium: a life cycle hypothesis‐based dynamic model
Authors: Lin Winston T , Chen Yueh H. 
Published: March 2005

AbstractThis paper examines the impacts of pension benefits on capital asset pricing in conjunction with wealth accumulation and retirement, and derives and tests a dynamic capital asset pricing model (CAPM) within the framework of a life cycle hypothesis‐based dynamic model. The life cycle hypothesis‐based dynamic model maximizes the expected utility of the individual's lifetime wealth in a continuous time process. An optimal solution of the individual's wealth path, incorporating the ages of retirement and death, is obtained and, based on the optimal wealth path, an analysis of comparative dynamics is pursued. The dynamic CAPM is then derived from the optimal wealth path; simulation and nonparametric tests are undertaken to evaluate the performance of the dynamic CAPM as compared to the traditional model which does not consider the impacts of pension benefits and the static model that incorporates the effects of pension benefits. The test results suggest that the proposed dynamic CAPM closely states the expected rate of return for a capital asset; that the new dynamic CAPM is preferable over the static model that is preferable over the traditional model; and that the three models considered are statistically distinguishable from one another.
Correlated interest rate risk and funding strategies for nonfinancial firms
Authors: McNulty James E. , Smith Stephen D. 
Published: March 2005

AbstractThis paper considers appropriate funding strategies for nonfinancial firms when operating cash flows are correlated with interest rates. An example expression is provided for the optimal funding position when the firm has a two‐period investment horizon. The conclusion is that matching will be the best strategy if the unbiased expectations hypothesis of the term structure holds and operating cash flows are uncorrelated with interest rates. Since the optimal funding position will be the minimum‐risk one if the expectations hypothesis holds, the properties of the minimum‐risk funding strategy are also investigated. The primary result is that maturity matching will not necessarily be the optimal funding strategy even when, on average, the cost of long‐ and short‐term funds is the same. Finally, some empirical estimates of minimum risk funding positions for nonfinancial firms are provided using data from the Quarterly CompuStat files. The data indicate that changes in corporate operating earnings are, on average, significantly positively correlated with changes in short‐term interest rates, but that there is substantial cross‐sectional variation across companies in our sample.
The relationship between mutual fund fees and expenses and their effects on performance
Authors: Dellva Wilfred L. , Olson Gerard T. 
Published: March 2005

AbstractFees charged by mutual funds include front‐end load charges, deferred sales charges that decrease over time, redemption fees that are imposed whenever shares are sold, and 12b‐1 fees. Fees may be justified if they allow the fund to lower other costs or improve performance. In this paper, we find that, on average, 12b‐1 fees, deferred sales charges, and redemption fees increase expenses whereas funds with front‐end loads generally have lower expenses. We also find that funds with 12b‐1 fees and redemption fees, on average, earn higher risk adjusted returns but funds with front‐end load charges earn lower risk adjusted returns.
The impact of option introduction on the conditional return distribution of underlying securities
Authors: St. Pierre Eileen F. 
Published: March 2005

AbstractThis paper combines several interesting econometric techniques to examine changes in the conditional return distribution of security returns following option introduction. An EGARCH model is used to characterize the return generating process. An intervention analysis is performed to determine whether the parameters of the EGARCH model shift following initial options listing. This paper finds that the conditional distribution of security returns is unaffected by option introduction. Estimation of a transfer function‐noise model also shows that option introduction has no effect on conditional volatility.