bluuebunny/crossref_metadata_2025_split huggingface dataset:
The Relationship between Investment and Asset Life
Authors: Prezas Alexandros P. 
Published: March 2005

AbstractOptimal investment in an asset and its optimal life are shown to be interrelated through operating cash flows and depreciation allowance, as well as book and salvage values upon termination; thus they are determined simultaneously. Asset life and investment are positively (negatively) related if delaying abandonment increases (reduces) the benefit of marginal investment. If investment and asset life are positively related, increased debt financing or allowable depreciation positively impact on them; otherwise, the impact is ambiguous in sign. Further, investment in a zero salvage value asset and its holding period increase with depreciation or leverage when (1) its cash flows form an annuity or (2) the firm employing it is tax‐exempt.
A Comparative Analysis of Takeovers of Single and Dual Class Firms
Authors: Smith Brian F. , Amoako‐Adu Ben 
Published: March 2005

AbstractThis paper analyzes takeovers of dual class companies listed on the Toronto Stock Exchange over the period 1976 to 1989. It finds support for the hypothesis that despite the evidence that restricted shares sell at a discount compared to superior voting shares, takeover returns are the same for both classes of shares. Secondly, it tests the hypothesis that the classification of common equity into two classes confers differential takeover value on controlling shareholders and find that superior voting shares of dual class firms experience higher returns during takeovers than do shares of single class firms.
Regular Dividend Announcements and Future Unexpected Earnings: An Empirical Analysis
Authors: Aharony Joseph , Dotan Amihud 
Published: March 2005

AbstractPrevious studies have interpreted stock price reaction to dividend announcements as being consistent with the hypothesis that any changes are forecasts of future corporate profits. Recent studies seem to provide evidence to this effect. This study provides additional empirical evidence pertaining to the issue of whether quarterly cash dividend announcements convey useful information about a firm's future profitability, beyond that contained in contemporaneous quarterly earnings announcements. The association between unexpected changes in quarterly dividends and unexpected accounting earnings in subsequent quarters is examined, after controlling for information contained in past and current earnings series. The results, based on a large sample of regular quarterly cash dividend changes, indicate that firms that increased (decreased) their dividends realized, on average, greater (smaller) unexpected accounting earnings in subsequent periods than firms that did not change their dividends.
Financial Innovation, Investment Opportunities, and Corporate Policy Choices for Large Bank Holding Companies
Authors: Collins M. Cary , Blackwell David W. , Sinkey Joseph F. 
Published: March 2005

AbstractThis study determines the effects of agency costs on bank management by investigating the relationship between investment opportunities and corporate policy choices for large bank holding companies from 1977 to 1985. The financial innovations in this period resulted in numerous investment opportunities for banks and their holding companies. The market‐to‐book ratio, a proxy for these opportunities or growth options, reveals significant differences in the opportunity sets of regional and money center banks. Since the growth options are negatively related to both debt financing and dividend payout, a policy prescription for reducing bank holding company (BHC) leverage is to allow bank/BHC investment opportunities to expand through product and geographic deregulation.
Tax Policy and Shareholder Wealth: Some Evidence from the Tax Reform Act of 1986
Authors: Cox Raymond A. K. , Kleiman Robert T. , Stout R. Gene 
Published: March 2005

AbstractThis paper presents additional evidence regarding the stock market reaction to the Tax Reform Act (TRA) of 1986. A prediction model of the change in the profitability index for thirty‐three industry groups as a result of the TRA is developed. This prediction model is then tested by examining abnormal industry returns surrounding the announcement of the TRA. The authors find that the distribution of the abnormal returns is related to the distribution of the predicted changes in industry equity investment returns, which suggests that the stock market was efficient in the pricing of news related to the TRA of 1986.
Shareholder Wealth Responses to Bankruptcy Filing Announcements under the Chandler and Reform Acts
Authors: Rimbey James N. , Anderson Seth C. , Born Jeffery A. 
Published: March 2005

AbstractThis paper examines shareholder wealth responses to bankruptcy filing announcements between 1974 and 1989 to draw inferences about the impact of the adoption of the Bankruptcy Reform Act of 1978. The authors find that post‐Reform Act announcements are associated with more negative pre‐filing and announcement period returns to shareholders. Unlike prior research, this study finds that large firms and NYSE‐listed firms experience more negative returns. It also finds that the market can discriminate between firms that are ultimately worthless and those that may retain some value for shareholders.
The Impact of the Source and Sequence of Information in Primary Equity Offerings
Authors: Bonomo Vittorio A. , Johnson Dana J. , Thompson G. Rodney 
Published: March 2005

AbstractEmpirical studies of the announcement effects of equity offerings have generally defined the event date as the earlier of the SEC registration date or the first mention in the Wall Street Journal (WSJ), the implicit assumption being that the two types of announcements are equally informative. This study examines whether the source of the event announcement might influence a study's results and whether subsequent announcements from other sources elicit a market reaction. Specifically, this paper investigates whether Dow Jones News Wire (DJNW) announcements that differ in timing from either of these information events elicit a market response and, more important, whether impacts from the DJNW announcements alter the validity of the widely used methodology. The results of the paper indicate that, for issues that are not mentioned in the WSJ Index, there is a negative and significant return on the registration date. However, no matter whether the registration occurs before or after its mention on the DJNW, the share price reaction is greater from mention on the DJNW than at registration. This finding leads to the conclusion that the DJNW should be used as the event date and that press coverage
The 1985 Ohio S&L Crisis: An Examination of S&L Stockholder Wealth Effects
Authors: Cooperman Elizabeth S. , Wolfe Glenn A. , Verbrugge James A. , Lee Winson B. 
Published: March 2005

AbstractThis paper examines the savings and loan (S&L) equity market reaction to the 1985 Ohio S&L Crisis. In contrast to the expectation of negative abnormal returns associated with contagion, the authors find, during the crisis period, significant positive abnormal returns that are larger for a portfolio of less solvent S&Ls, and a significant decline in systematic risk. The results are consistent with an insurance subsidy hypothesis whereby news of the FSLIC's inadequacy in conjunction with the crisis signaled greater future reluctance by regulators to close large federally‐insured S&Ls.
The Market Reaction to Canceled Equity Offerings
Authors: Jensen Marlin R. H. , Pugh William N. 
Published: March 2005

AbstractInvestors appear to respond to both an investment‐opportunity signal and a valuation signal when an equity offering is announced or canceled. While prices fall in response to equity offers and rise when offers are withdrawn, the price changes are greater for offers used to reduce debt than for offers used for capital expenditures. Consistent with asymmetry theory, offerings and withdrawals of convertible debt and utility stock cause less price change when compared to industrial stock offers. Finally, the reaction to cancellations made because of market conditions, indicating undervaluation, are similar to the reaction to cancellations made for other reasons.
Announcement and Publication Decisions and the Use of Prediction Errors in Cross‐Sectional Analysis: Evidence on Seasoned Equity Issues
Authors: Griggs Frank T. , Kim Dong Man , Smith Richard L. 
Published: March 2005

AbstractAn important concern for empirical analysis of market responses to public releases of information is whether the voluntary nature of announcement and publication decisions imparts a selectivity bias and, if so, how this bias affects empirical results. Using a database of SEC filings of equity issues, all related Wall Street Journal published announcements are identified. The published announcements are used to classify proposed issues into subsamples with homogeneous information structures. Announcement and WSJ publication decisions are found to be non‐random but, for industrial firms, not significantly related to firm size or exchange listing. Coefficients estimated without controlling for selectivity are found not to be significantly biased for either industrial or utility issues. However, for industrial issues, significance levels are considerably lower when selectivity bias is controlled. The hypothesis common to other studies of new issue announcement effects that observations from different information structures can be pooled, with coefficient estimates restricted to be equal across information structures, is rejected. The results have implications for the methods used to study cross‐sectional market responses
An Empirical Examination of the Ex Ante International Interest Rate Transmission
Authors: Fung Hung‐Gay , Lo Wai‐Chung 
Published: March 2005

AbstractUsing U.S. Treasury bill and Eurodollar futures to proxy for domestic and external interest rates, respectively, this study examines ex ante interest rate transmission across markets for the period 1982‐1991. The results indicate that these interest rates are cointegrated and that they Granger‐cause each other, implying that both domestic and offshore interest rates move together and that both markets are integrated. Interest rate transmission is found to be more rapid in recent years, a result supporting the idea that the international financial markets are becoming more integrated.
Information Asymmetry and Valuation Effects of Debt Financing
Authors: Alam Pervaiz , Walton Karen Schuele 
Published: March 2005

AbstractThis study demonstrates that under conditions of information asymmetry, shareholders earn positive returns around the shelf registration date of straight debt. The results provide evidence to support Miller and Rock's conclusion that new expected financing by firms can result in positive returns to shareholders and Blazenko's contention that positive returns around the announcement date of straight debt issuance may be found by studying firms with asymmetric information. Firms with reported research and development expenses are assumed to have a higher level of asymmetric information and a greater chance of requiring new outside financing. Research and development expense intensity and abnormal earnings in future periods are found to be significant in a cross‐sectional regression explaining abnormal returns for days surrounding the announcement period.
Executive Compensation and Agency Effects
Authors: Goldberg Lawrence G. , Idson Todd L. 
Published: March 2005

AbstractThe separation of ownership from control in large corporations can cause agency problems. This study analyzes the effects of the dispersion of corporate ownership on the compensation of the top executives of Fortune 500 companies. The effects are estimated across the executive hierarchy and for different components of the compensation package in contrast to more limited previous studies. The results indicate that there is a significant agency effect on executive pay, though the magnitude is small relative to company size. The effects are greatest for the most liquid form of remuneration, salaries, and are nonuniform across executive categories, with the strongest effect found for the Chairman of the Board.
A Test of Stulz's Overinvestment Hypothesis
Authors: Klock Mark , Thies Clifford F. 
Published: March 2005

AbstractIn a world with agency costs and asymmetric information, managers will have difficulty raising external funds since they have incentives to overinvest. Stulz argues that this leads to an optimal level of debt since this is one way to bond cash flows and reduce managerial discretion. However, unexpected cash flows cannot be so easily bonded. Thus, an implication of the Stulz hypothesis is that investment will be affected more by unexpected cash flows. Additionally, Stulz's hypothesis is most compelling for firms with low q ratios. Support is found for Stulz's hypothesis, and the support is strongest for low q firms.
Rational Expectations and Security Analysts' Earnings Forecasts
Authors: Ackert Lucy F. , Hunter William C. 
Published: March 2005

AbstractThis paper investigates the rationality of security analysts' forecasts. The forecasts of analysts participating in Lynch, Jones, and Ryan's Institutional Brokers Estimate System (I/BE/S) data base are evaluated relative to past values of their own forecast errors, past values of forecasted earnings per share, and quarterly percentage changes in publicly available macroeconomic and financial time series. The publicly available series include the consumer price index, unemployment rate, oil prices, stock prices, gross national product, and corporate profits. The authors conduct a generalized orthogonality test and include only information available to analysts at the time the forecasts are made. The empirical results reject analyst forecast rationality, but not without exception.
The Relationship between Bankruptcy Model Predictions and Stock Market Perceptions of Bankruptcy
Authors: Dugan Michael T. , Forsyth Timothy B. 
Published: March 2005

AbstractThis study uses a cumulative sum technique to determine the point at which the stock market first perceives that a firm may file for bankruptcy. The study then attempts to identify information, whether from financial statements or from other sources, that may have influenced the market in its reassessment of the firm's prospects. The results indicate that the switching point of the mean and variance of stock returns appears to be related both to financial statement information (as measured by changes in bankruptcy model probability assessments) and the release of unfavorable news in the Wall Street Journal.
Stock Price Reactions to Securities Recommended in Business Week's “Inside Wall Street”
Authors: Mathur Ike , Waheed Amjad 
Published: March 2005

AbstractThe price behavior of stocks of firms that were favorably mentioned in the “Inside Wall Street” column in Business Week are studied. These firms have been the subject of rumors or have been recommended by analysts or brokerage houses and, therefore, their mention in Business Week constitutes dissemination of secondary information. Positive, significant excess returns are observed the day prior to the publication date, the publication date, and the two days after publication. Positive, significant excess returns are observed for long‐term holding periods prior to the publication date, while negative, significant excess returns are observed for the post‐publication holding periods. The observations appear to be consistent with the price performance of firms that might have been subject of either rumors or recent recom‐mendations by analysts or brokerage houses. The results suggest that secondary information is of value only to low transaction cost, short‐term traders. Investors who buy for the longer term based on secondary information generally receive below market rates of return.
Option Valuation with Information Costs: Theory and Tests
Authors: Bellalah Mondher , Jacquillat Bertrand 
Published: March 2005

AbstractIn this paper, the valuation of stock and index options is analyzed in the context of Merton's model of capital market equilibrium with incomplete information. It is possible to derive a partial differential equation for options in such a context. The derivation gives more understanding of the way an option's future payoff is discounted to the present. In order to estimate some of its parameters, the model is calibrated to market prices. It is tested using market prices and the authors' valuation formula. It is found that model prices are not significantly different from market prices, especially when out‐of‐the‐money and deep‐in‐the‐money options are considered.The model gives an explanation to the “strike bias” and the “smile effect.” Simulations of models based respectively on stochastic volatilities and gamma processes, are in accordance with the findings in this paper concerning biases in the Black and Scholes model, especially for pricing deep‐in‐the‐money and out‐of‐the‐money options. Even if the estimation method has its drawbacks, the costs of gathering and processing information regarding the option and its underlying asset play a central role in explaining the biases observed in the Black and Scholes model and help also the understanding of the U‐shaped curve known as the smile of volatilities.
A Comparison of the Power of Parametric and Nonparametric Tests of Location Shift for Event Studies
Authors: Chandra Ramesh , Rohrbach Kermit , Willinger G. Lee 
Published: March 2005

AbstractThis paper distinguishes between testing approach (parametric t, sign, cross‐sectional rank, and longitudinal rank) and test type (conventional, standardized, and weighted least squares). Similar tests (i.e., tests of the same type) are compared for each testing approach using constant and unequal shift models. Thus the results given here are free of confounding effects present in prior comparisons of dissimilar tests. While all the tests compared are sensitive to the underlying location shift model, if the shift is independent of the security standard deviation, then the weighted least squares longitudinal rank test is most. powerful.
Examination of the Equivalent Relationship between the Two Credit Policy Decision Approaches: The Opportunity Cost and NPV Approaches
Authors: Kim Sang‐Hoon , Feist William R. 
Published: March 2005

AbstractThe net benefits resulting from credit policy decisions can be evaluated based on either the opportunity cost approach or the net present value (NPV) approach. It is known that the two approaches are equivalent in that they provide the same accept/reject decision. Consequently, most text books cover the opportunity cost approach which is much simpler to formulate. This paper reexamines the equivalent relationship based on the NPV models formulated under a capital budgeting framework, and shows that the equivalent relationship only holds for very restrictive conditions. Also, the discount rate for the NPV models is examined along with other models.
Bond Yields, Taxes, and the Dimensions of Default Risk
Authors: Skinner Frank S. 
Published: March 2005

AbstractThis work develops and empirically estimates models of bond yields subject to default risk. Parameters for the probability of survival and the recovery rate subsequent to default are included in a model of corporate bond yields that allow a study of interactions among them. The municipal version of the model includes the tax rate as an additional factor. Empirical evidence is found that supports the notion that both dimensions of default, considered jointly, are related to bond quality. In addition, statistically significant differences in tax rates suggest that higher tax rates are associated with higher grade municipal bonds.
Convertible Bond Issues: Evidence from Security Markets
Authors: Mehta Dileep R. , Khan A. Qayyum 
Published: March 2005

AbstractA convertible bond (CB) is a hybrid security containing elements of both common stock and straight debt. Still, empirical investigations on CB issue announcements have failed to discern any pattern in the stock market reaction that is consistent with announcements of either common equity or straight debt issues. This study shows that (a) motives for issuing the CB and (b) its rating (and to a less extent the riskiness of the issuing firm) help explain the stock market reaction to CB issue announcements. Specifically, announcement of a CB issue with an explicitly stated motive for the use of proceeds, when coupled with a high (low) bond rating, generates a stock market response similar to a straight debt (common stock) issue. On the other hand, the preference of CB holders is dictated by the motive for the use of proceeds and the conversion premium. These findings highlight the critical importance of the motive of issue in determining reactions in both the stock and bond markets.
The Impact of Warrants and Convertible Securities on the Systematic Risk of Common Equity
Authors: Ehrhardt Michael C. , Shrieves Ronald E. 
Published: March 2005

AbstractThis paper addresses the relationship between the capital structure and the systematic risk of common equity for a firm whose capital structure includes convertible securities. Adding warrants to the capital structure reduces the systematic risk of equity, which is consistent with the fact that warrants dampen the volatility of equity by reducing the upside potential gains of existing stockholders. Expressions showing the impact of conversion features in debt and preferred stock on the systematic risk of equity are derived, and contrasted with the systematic risk effects of non‐convertible debt or non‐convertible preferred stock financing. Failure to incorporate conversion features may lead to serious errors in assessing the impact of financing alternatives on the risk of equity.
Tender Offers and Target Management Responses: Managerial Entrenchment Versus Stockholder Interest Revisited
Authors: Thosar Satish 
Published: March 2005

AbstractDefensive actions by managements facing hostile tender offers have generally been interpreted as entrenchment‐oriented behavior. In this paper, longitudinal wealth effects on target firm stockholders are examined for the 1978–1985 period. The sample of firms where target management resists the tender offer registers significantly higher post‐tender offer announcement gains as compared to the sample of firms where target management remains passive. The evidence appears to support the stockholder interest hypothesis.
Determinants of Managerial Stock Ownership: The Case of CEOs
Authors: Bathala Chenchuramaiah T. 
Published: March 2005

AbstractResearch on the determinants of managerial equity ownership in firms is scant. To a limited extent, prior researchers have examined the variations in insider ownership proportions by combining the officers and directors into one group. This paper differs from earlier studies by focusing on the CEO. The evidence suggests that agency costs, free cash flow, and potential non‐diversification losses and CEO attributes are important in explaining variations in CEOs' equity proportions in firms. Specifically, the paper finds that the proportion of CEO's ownership is related positively to the firm's debt level, diversification potential of the firm's common stock, free cash flows, and earnings volatility, and related negatively to the firm size.