bluuebunny/crossref_metadata_2025_split huggingface dataset:
REINCORPORATION: MOTIVES AND SHAREHOLDER WEALTH
Authors: Peterson Pamela P. 
Published: March 2005

ABSTRACTThis study provides evidence on the wealth effects of reincorporation and the association of these wealth effects with motives to change the state of incorporation. There are no wealth effects observed on the announcement of the change for shareholders of corporations that change as part of a set of measures to defend against a pending or possible hostile takeover. However, for corporations that reincorporate without stated antitakeover intentions, a positive reaction is observed at the announcement of the change. These results indicate that the defensive posture assumed by reincorporating may offset other positive effects of the change in corporate charters.
JOINT VENTURES IN CHINA: PROBLEMS AND SOLUTIONS
Authors: Ouyang Ling‐Nan 
Published: March 2005

ABSTRACTThe author reviews problems associated with joint ventures in China and discusses new regulations designed (1) to give more decision‐making rights to joint ventures, (2) to help reduce project expenses, and (3) to provide more loans for joint ventures' short‐term revoling funds. The author also suggests changes in labor management, raw materials management, financial management, and export orientation to ensure the success of joint ventures in China.
A NOTE ON BOND DEFEASANCE
Authors: Pari Robert , Caks John 
Published: March 2005

ABSTRACTThis paper provides an after‐tax cash flow analysis of insubstance defeasance versus open market debt repurchase under the current tax law. Depending upon interest rates, term to maturity, and the riskiness of the corporate bond issue that managers with to remove from the balance sheet, defeasance may be the cheapest restructuring alternative available. Managers must consider all these factors before reaching a decision that is consistent with the maximization of shareholder wealth.
TEXTBOOK INCONSISTENCIES IN GRAPHING VALUATION EQUATIONS: A FURTHER NOTE
Authors: Conine Thomas E. , Tamarkin Maurry 
Published: March 2005

ABSTRACTIn this note, the authors demonstrate that if a firm's leverage ratio is measured by debt‐to‐total value (debt‐to‐equity) in the pure capital structure rearrangement framework implicit in research reported by Modigliani and Miller (e.g., debt‐to‐equity exchanges), the market value of levered equity will be a concave (convex) function, and the market value of debt will be a convex (concave) function. These nonlinearities exist even without bankruptcy costs.
AN INVESTIGATION INTO THE ROLE OF THE MARKET PORTFOLIO IN THE ARBITRAGE PRICING THEORY
Authors: Born Jeffery A. , Moser James T. 
Published: March 2005

ABSTRACTThis paper investigates the role of the market portfolio in the arbitrage pricing theory (APT). We show that if the multifactor return‐generating process put forth in the APT is valid, then unexpected deviations in the return on the market portfolio must be completely explained by unexpected deviations in the underlying return‐generating factors. As well, market betas are developed as a combination of return‐generating factor sensitivity coefficients. These results lead us to conclude that an empirically significant “market factor’ is evidence of omitted return‐generating factors, rather than evidence that the market is a factor. Finally, results obtained when market betas are regressed against factor sensitivity coefficients are consistent with these insights. The results suggest that there are at least three return‐generating factors. This evidence does not rely on ex post pricing of estimated factors.
LOW PRICE, PRICE‐EARNINGS RATIO, MARKET VALUE, AND ABNORMAL STOCK RETURNS
Authors: Tseng Kuo C. 
Published: March 2005

ABSTRACTIn this research, the individual and net effects of low price, low price/earnings (P/E) ratio, and small size on the risk‐adjusted excess returns are investigated for the fourth quarter of 1975 to the fourth quarter of 1985. The entire sample is divided into quintiles, and the resulting portfolios are rebalanced at the end of each quarter. Low price, low P/E ratio, and small value portfolios did experience greater excess returns. By applying the experimental control technique, the net effect of stock price is significant after controlling the size. Similarly, the net effect of the market value is significant after the stock price is controlled. The net effect of the P/E ratio is insignificant after controlling either the stock price or the market value.
DISCOUNTED CASH FLOW WITH EXPLICIT REINVESTMENT RATES: TUTORIAL AND EXTENSION
Authors: McDaniel William R. , McCarty Daniel E. , Jessell Kenneth A. 
Published: March 2005

ABSTRACTThis article discusses and critiques yield‐based capital budgeting techniques that have arisen over the past 30 years. Some have theoretical inconsistencies, while some work well only for certain kinds of problems. A new method, the marginal return on invested capital, is presented. The method's application is general; it gives accept/reject signals and rankings consistent with the net present value method.
THE OVER‐THE‐COUNTER MARKET AND NEW YORK STOCK EXCHANGE TRADING HALTS
Authors: Fabozzi Frank J. , Ma Christopher K. 
Published: March 2005

ABSTRACTThis paper examines the over‐the‐counter (OTC) market activities for stocks temporarily suspended by the New York Stock Exchange (NYSE). Unlike previous studies, we use transaction‐to‐transaction data on the NASDAQ during NYSE trading halts to investigate the price adjustment process between market equilibria. The evidence indicates that while being halted by the NYSE, the same stocks have exhibited significantly greater volatility in the OTC market. Since the volatile price movement is mainly random and provides no arbitraging opportunities for the OTC market traders, we do not find support for the proposal that trading halts should be mandatory for all trading locations.
AN ECONOMETRIC ANALYSIS OF EQUITY COSTS AND RISK PREMIUMS IN THE ELECTRIC UTILITY INDUSTRY: 1971–1985
Authors: Shome Dilip K. , Smith Stepehn D. 
Published: March 2005

ABSTRACTThis paper develops a varying parameter econometric model that estimates the cost of equity of individual utility firms from 1971 to 1985. The equity costs estimated in this framework can be analyzed in terms of their statistical precision. The paper also examines, theoretically and empirically, the relationship between the econometric estimates of the equity risk premiums and the risk‐free interest rates. The data do not support the hypothesis that risk premiums are independent of interest rates. Also, the relationship appears to vary over time. These results invalidate the risk premium approach in which equity costs are estimated by adding a constant, historical average risk premium to the prevailing interest rates.
ILLEGAL INSIDER TRADING: IS IT RAMPANT BEFORE CORPORATE TAKEOVERS?
Authors: Gupta Atul , Misra Lalatendu 
Published: March 2005

ABSTRACTThis paper investigates the role of insider trading as an explanation for the observed pre‐announcement price run‐ups for takeover targets. We hypothesize that if insider trading is a significant contributor to such price run‐ups, then observed run‐ups should be smaller for takeovers occurring after May 1986 (the beginning of the “insider trading scandal”) relative to those occurring prior to May 1986. The evidence suggests that insider trading is not, on average, a significant contributor to pre‐announcement price run‐ups.
MULTIPRODUCT COST FUNCTIONS AND SCALE ECONOMIES IN BANKING
Authors: Cebenoyan A. Sinan 
Published: March 2005

ABSTRACTThis study provides new and efficient estimates of scale economies in banking. Recent criticism of the incorrect specification of homogeneity restrictions on the translog cost functions is addressed, and correct estimations are provided. The results indicate that such misspecifications do affect measures of scale economies. The study covers 1980 to 1983 for unit and branch banks. The estimation is further enhanced by introducing factor share equations invoking Shephard's lemma and using an iterative Zellner procedure. The results fail to indicate scale economies for the overall sample. Some evidence of small degrees of scale economies is observed in parts of the sample.
PRICE PERFORMANCE OF INITIAL PUBLIC OFFERINGS OF MASTER LIMITED PARTNERSHIP UNITS
Authors: Muscarella Chris J. 
Published: March 2005

ABSTRACTThis paper is the first to provide evidence on the pricing of initial public offerings of master limited partnerships (MLPs). A sample of fifty MLP offerings from January 1983 through July 1987 is analyzed. No significant underpricing (or overpricing) is found for the sample taken as a whole, although some slight overpricing is found for certain industry subsamples. These findings are in sharp contrast to the pervasive evidence from previous studies that document significantly positive initial returns for common stock initial offerings.
An Investigation into the Equilibrium Structure of the Commodity Futures Market Anomaly
Authors: Murphy J. Austin , Hilliard Jimmy E. 
Published: March 2005

AbstractCommodity futures contracts are shown to be characterized by indivisibility problems and tax disadvantages. An empirical test demonstrates that long futures investors were compensated for these drawbacks prior to the mid‐1970s. However, compensation for the investment disadvantages of commodity futures ceased to exist after 1974. The year 1974 is significant because barriers to institutional investment in the futures market were removed in that year.
Diversification of the Banking Firm
Authors: Rose Peter S. 
Published: March 2005

AbstractDiversification of banks and bank holding companies into nonbank product lines may reduce the risk to banking returns or cash flows provided appropriate portfolio conditions are satisfied. This study of bank and nonbank financial‐service firms and nonfinancial corporations over the 1966–1985 period finds evidence consistent with the proposition that individual banking firm risk may be reduced through selected product‐line diversification, particularly in the insurance and data processing fields. Moreover, there is evidence of less cash‐flow sensitivity of selected nonbank product lines to exogenous economic and financial‐market variables compared to banking firms. While public policy continues to insulate banking firms from most nonbank product and service lines, the potential benefits of risk reduction suggest that a careful review of current policy is needed.
The Rationality and Efficiency of Stock Price Relative to Money Announcement Information
Authors: Foote William G. 
Published: March 2005

AbstractRecent studies find that stock price reacts only to unanticipated changes in the money supply. These studies assume a joint hypothesis of rationality and efficiency in their tests. This paper formulates a model in which stock price depends both upon anticipated and unanticipated money supply forecasts. From this model, an econometric model that separates the hypotheses of rationality and efficiency is estimated. The results show that investors rationally incorporate forecasts of the weekly current money announcement into stock price during the pre‐October 6, 1979, sample period. However, efficiency with respect to money information cannot be corroborated in this period. Cross‐equation restrictions implied by rationality are rejected during the post‐October 6, 1979, period. In this period, efficiency again cannot be corroborated. Alternative money prediction specifications indicate the robustness of these results.
An Empirical Test of Ross's Cash Flow Beta Theory of Capital Structure
Authors: Sugrue Timothy F. , Scherr Fredrick C. 
Published: March 2005

AbstractThis paper empirically investigates Ross's cash flow beta theory of capital structure. Ross hypothesizes that, for firms of similar cash flow variance, there will be an inverse relationship between financial leverage and cash flow beta. This paper provides empirical support for Ross's theory, though the extent of the support depends upon the sample period and the leverage specification.
The Effect of Bankruptcy Laws on the Valuation of Risky Consumer Debt
Authors: Kon Stanley J. , Thatcher John G. 
Published: March 2005

AbstractIn a market setting with perfect information, a consumer recognizes that he can influence the state‐contingent returns, and hence the pric, of his risky debt by the decision variables that determine the collateral and promised payments. This paper examines the effect of bankruptcy laws on the feasible consumption opportunities of borrowers and lenders in order to determine the necessary requirements for the bilateral debt market to be perfectly competitive.
Deregulation, Deposit Markets, and Banks' Costs of Funds
Authors: Bundt Thomas P. , Schweitzer Robert 
Published: March 2005

AbstractDeposit interest rate deregulation and financial service innovation have led to dramatic changes in large banks' deposit composition. This paper presentes a statistical cost analysis of changes in unit costs faced by banks under comprehensive financial deregulation. The results of this paper show that the unit cost of retail deposits‐demand and passbook savings deposits‐has increased relative to wholesale deposits‐federal funds, certificates of deposit, and money market time deposits. We show, contrary to conventional wisdom, that changes in unit costs have been caused by processing costs rather than by interest expenses.
The Investment Performance of Common Stocks in Relation to Their Price–Earnings Ratios: An Update of the Basu Study
Authors: Johnson R. Stafford , Fiore Lyle C. , Zuber Richard 
Published: March 2005

AbstractIn this paper, the relationship between the investment performances of equity securities and their price–earnings ratios is examined using an approach similar to the one employed by Basu in a 1977 paper. From the tests, we conclude that, from 1979 through 1984, there were some moderate excess rates of return earned by selecting stocks based on their price–earnings ratios but that these excess rates were not obtained from investing in low price–earnings stocks.
The Reconciliation of the Smith's and Jarrow and Rudd's Option Sensitivity Formulae: A Teaching Note
Authors: Choi Daniel F. S. , Ward Charles W. R. 
Published: March 2005

AbstractSmith and Jarrow and Rudd have presented different expressions for the same option sensitivities. With the mathematical derivations omitted, the apparent differences have never been explained before. This note points out that an important identity can reconcile the differences. The usefulness of the identity is further explored.
Investment Decision Making with Derivative Securities
Authors: Brooks Robert 
Published: March 2005

AbstractThis paper examines strategies employing stock options, index options, index futures options, and index futures contracts in an effort to establish under what conditions a portfolio manager should diversify into these derivative assets. The results show that futures option call writing and put buying were dominated by third‐order stochastic dominance when compared to similar index options. Thus, when covered call writing or protective put buying are being considered, index options appear to be the better choice.
An Analysis of Merger Financing
Authors: Murphy Austin , Nathan Kevin 
Published: March 2005

AbstractThis research analyzes a theory of merger financing that indicates that the terms of payment for target shares should be used to optimally influence the post‐merger liquidity and capital structure of the combined firm. In an empirical test on a large sample of mergers, the stock market reaction to the announcement of acquisition financing is support the theory. The empirical results also indicate that a large portion of the cross‐sectional return differences on acquirers' shares can be explained by financing theory.
The Impact of Taxes on Discount Bond Valuation and Risk
Authors: Bey Roger P. , Johnson Larry J. 
Published: March 2005

AbstractIf the effective tax rates on ordinary income and capital gains are identical, the assumption of independence or dependence between ordinary income and capital gains tax rates is shown to have no impact on discount bond valuation or risk. However, even if the effective tax rates are identical, the shape and the sensitivity of the bond valuation and risk functions with respect to taxes are not identical under the alternative assumptions. A mathematical and numerical analysis of the sensitivity of changes in the discount bond valuation and risk functions with respect to income tax rates is provided. Comparisons between the sensitivities of changes in the discount bond valuation and risk functions and taxes under conditions of dependence or independence between ordinary income and capital gains tax rates are made.
Dealers’ Adverse Selection Costs and the Evaluation of Alternative Measures of the Earnings Release Signal
Authors: Senteney David L. 
Published: March 2005

AbstractThis study investigates the relationship between over‐the‐counter dealers' adverse selection costs and alternative measures of the earnings release signal to evaluate the quality of the signal. The measure of the earnings release signal most associated with dealers' adverse selection costs is suggested as being the least noisy measure of the information impounded in security prices during earnings release periods. The results suggest that the seasonal Box‐Jenkins earnings expectation model known as the Brown‐Rozeff “premier” model generates the signal most consistent with the information impounded in security prices during earnings release periods.
Institutional Ownership and Distribution of Equity Returns
Authors: Aggarwal Raj , Rao Ramesh P. 
Published: March 2005

AbstractAlthough there is considerable evidence of the importance of skewness and kurtosis in equity returns, much less attention has been paid to their determinants. Recent theoretical and empirical advances in the literature suggest that the information structure and other market characteristics affect the nature of return distributions. One such characteristic is the degree of institutional ownership in the stock. This study hypothesizes and documents a significant inverse relationship between the degree of institutional ownership and the standard deviation, skewness, and kurtosis of equity returns.
Preferred Stock Returns, CreditWatch, and Preferred Stock Rating Changes
Authors: Wansley James W. , Elayan Fayez A. , Maris Brian A. 
Published: March 2005

AbstractThis paper examines the announcement effects of CreditWatch placement and reratings upon a sample of preferred stock issues that were placed on CreditWatch and later rerated or affirmed by Standard & Poor's. Results indicate that CreditWatch provides information to market participants and may have reduced the surprise associated with subsequent reratings. CreditWatch placement may be an erroneous signal, however, since nearly 50 percent of the issues placed for negative reasons were not downgraded, but affirmed, upon removal from Credit Watch.
An Empirical Evaluation of the Friedman Hypothesis of Inflation on Capital Asset Pricing
Authors: Burnie David A. 
Published: March 2005

AbstractAn empirical model incorporating the Friedman inflation uncertainty hypothesis is evaluated on capital asset pricing in conjunction with the covariance effect of the Fisher inflation hypothesis. The Fisher‐Friedman capital asset pricing empirical model (FFCAPM) is compared to the capital asset pricing model (CAPM) and the Chen‐Boness (C‐B) model for explanatory power and significance over three periods. The FFCAPM performed better than the two competing models in explaining the variation in equity returns. The Friedman hypotheses of a positive economy‐wide inflation adjustment and a negative inflation uncertainty impact are supported. A firm‐specific inflation response of Fisher inflation covariance was also supported. These results indicate that empirical support for the Fisher effect may be limited given the normal testing procedure of simply adding an inflation term as in previous studies.
Issue Costs in Fisher's Two‐Period Model
Authors: Howe Keith M. , Gronewoller Paul L. 
Published: March 2005

AbstractThis paper analyzes the impact of issue costs on firm investment and dividend policies within the context of the two‐period Fisher model. Consistent with its pedagogical tone, the paper illustrates graphically the loss in value stemming from a high dividend payout by a firm subject to issue costs in its external financing. Two components compose the overall loss in value. The “substitution effect” results from a shift in the investment opportunity set, while the “wealth effect” stems from the loss in value owing to issue costs. The paper suggests that the firm, when increasing its dividend payout, must weigh the marginal loss in firm value against the offsetting benefits, which may take the form of reduced monitoring costs.
Interest Rate Futures Options and Interest Rate Options
Authors: Ho Thomas S. Y. , Lee Sang Bin 
Published: March 2005

AbstractThis paper derives pricing models of interest rate options and interest rate futures options. The models utilize the arbitrage‐free interest rate movements model of Ho and Lee. In their model, they take the initial term structure as given, and for the subsequent periods, they only require that the bond prices move relative to each other in an arbitrage‐free manner. Viewing the interest rate options as contingent claims to the underlying bonds, we derive the closed‐form solutions to the options. Since these models are sufficiently simple, they can be used to investigate empirically the pricing of bond options. We also empirically examine the pricing of Eurodollar futures options. The results show that the model has significant explanatory power and, on average, has smaller estimation errors than Black's model. The results suggest that the model can be used to price options relative to each other, even though they may have different expiration dates and strike prices.
Long‐Term Earnings Forecasts in the Electric Utility Industry: Accuracy and Valuation Implications
Authors: Chatfield Robert E. , Hein Scott E. , Moyer R. Charles 
Published: March 2005

AbstractThis paper integrates research on the accuracy of alternative long‐term earnings forecasts, the gain in accuracy achievable from combining various forecasts, and the power of different long‐term earnings forecasts to explain stock prices. The tests are performed on 82 electric utility firms because of the relative homogeneity of accounting data in that industry and because of the importance of the findings for the determination of the cost of capital in a regulatory proceeding. The results are consistent with earlier research findings that analyst forecasts of long‐term earnings growth are more accurate than forecasts from extrapolative models. Combined forecasts applied to out‐of‐sample data, however, did not result in markedly improved forecasting accuracy. Finally, valuation tests of alternative forecasting techniques offered strong evidence that investors place the greatest weight on forecasts from Value Line.