Corporate Finance and Econometric Analysis

Transcription

1 Version: April 20 th, 2006 Master / PhD in Finance Frankfurt University EMPIRICAL CORPORATE FINANCE Academic year: Professor: Steven Ongena Tilburg University Office: B 925 Tel: ongena@uvt.nl

2 1 COURSE OUTLINE I. Course objective The objective of this course is to read and understand scientific papers in empirical corporate finance. To accomplish this objective, emphasis will be placed on illustrating basic research methodologies used in corporate finance and learning the application of these methodologies to selected topics. The research methods that will be specifically discussed in the class are inter-temporal (event study) and cross-sectional research methods. The topics that will be covered are listed in the course schedule. It is evident that any empirical research should be based on theoretical foundations. All students are therefore expected to have an active interest in corporate finance theory. There will be opportunities offered during the course to explore selected theoretical models upon which empirical applications are based. II. Course organization The course is organized in May and June. Approximately each week, there will be classes of around three hours long. The rest of the course will count for the preparation of the class presentation and assignment. Students are strongly advised to read the required literature of each week in advance. This will help in better understanding of materials covered in the class and in useful participation in class discussions. With regard to the class presentation (made jointly by two to three students), students are expected to present either a selected theoretical corporate finance paper or an empirical application. A theory presentation should outline the research question, the key equations and especially the intuition in the model. An empirical presentation should contain the research question, methodology, and results. A presentation should last around 20 minutes (scheduled the last hour of each planned lecture). The precise timing and choice of the paper are to be determined jointly with the instructor. With regard to the class assignment, students are expected to write a short paper based on an empirical analysis performed jointly by two to three students. The purpose of the class assignment is to demonstrate the comprehension of the knowledge and skill acquired from this course. Each group will choose a research problem jointly with the instructor at the beginning of the course. One zipped file containing the completed class assignment (including all relevant material) should be ed by July 10 th, 2006 at 09:00 am to ongena@uvt.nl (1% discount / hour for late copies). With regard to the referee report, students are expected to attend an empirical corporate finance or banking seminar at the University, CFS, ECB, or Bundesbank in May or June (if possible) and to write a 2-page referee report of the presented paper highlighting the research question(s) being addressed and raising critical points about the methodology and results in the paper. Make sure to include a pdf of or link to the refereed paper with your report. A zipped file of the referee report and refereed paper should be ed by July 10 th, 2006 at 09:00 am to ongena@uvt.nl (1% discount / hour for late copies).

3 2 III. Course requirements Each student is expected to: (a) attend every session, (b) read the "required readings", (c) contribute to class discussions, (d) present an empirical corporate finance paper in class, (e) prepare the class assignment, (f) attend a finance seminar and write a 2-page referee report, and (g) appear in the final examination. IV. Readings Readings are classified into three types: Required Readings, Recommended Readings, and Other Readings. Required readings are compulsory for each student. Recommended readings are suggested for additional understanding and references. Other readings provide easy references. V. Course evaluation Each student will be evaluated on the basis of a class presentation (20%), a class assignment (40%), a referee report (10%), and a written examination (30%) that takes place in July (date to be determined). The written examination will be based on all materials covered in lectures and required readings and will be closed book. VI. Course schedule Session Date Hours Rm Topic :00-19:00 120c Introduction Discrete Choice and Application :00-12:00 120c Multinomial Logit and Application :00-12:00 120c Duration Analysis and Application :00-12:00 120c Simultaneous Equations and Application :00-16:00 120c Event Studies I and Application :00-12:00 120c Event Studies II and Application :00-12:00 120c Capital Structure :00-12:00 120c Financial Dependence :00-16:00 120c The Geography of Corporate Finance :00-12:00 120c Competition and Corporate Finance :00-16:00 120c Risk Management :00-12:00 120c Initial Public Offerings

4 VII. List of readings 3 1. Introduction, Limited Dependent Variables, and Applications Greene, W. H., Econometric Analysis (Prentice Hall, Upper Saddle River NJ), Chapter 19. {ppt} {ppt} Ongena S. and D.C. Smith, 2000, What determines the number of bank relationships? Cross-country evidence, Journal of Financial Intermediation, 9, {copy} {ppt} Detragiache, E., P. G. Garella, and L. Guiso, 2000, Multiple versus Single Banking Relationships: Theory and Evidence, Journal of Finance 55, Multinomial Logit and Applications Greene, W. H., Econometric Analysis (Prentice Hall, Upper Saddle River NJ), Chapter 19. {ppt} Berger A.N., Q. Dai, S. Ongena and D.C. Smith, 2003, To what extent will the banking industry be globalized? A study of bank nationality and reach in 20 European nations, Journal of Banking and Finance, 27, {pdf} {ppt} 3. Duration Analysis and Applications Greene, W. H., Econometric Analysis (Prentice Hall, Upper Saddle River NJ), Chapter 20. Ongena S. and D.C. Smith, 2001, The duration of bank relationships, Journal of Financial Economics 61, {pdf} {ppt} Farinha, L. A., and J. A. C. Santos, 2002, Switching from Single to Multiple Bank Lending Relationships: Determinants and Implications, Journal of Financial Intermediation 11, Kiefer, N.M., 1988, Economic Duration Data and Hazard Functions, Journal of Economic Literature 26, Simultaneous Equations and Applications

5 4 Degryse H. and S. Ongena, 2001, Bank relationships and firm profitability, Financial Management, 30, {pdf} {doc} {ppt} Greene, W. H., Econometric Analysis (Prentice Hall, Upper Saddle River NJ), Chapter 16. Yosha, O., 1995, Information Disclosure Costs and the Choice of Financing Source, Journal of Financial Intermediation 4, Other readings: Gujarati, D. N., Basic Econometrics (McGraw-Hill International Editions, New York NY), Chapter 20. von Rheinbaben, J., and M. Ruckes, 2004, The Number and the Closeness of Bank Relationships, Journal of Banking and Finance 28, von Thadden, E. L., 2004, Asymmetric Information, Bank Lending, and Implicit Contracts: the Winner's Curse, Finance Research Letters 1, & 6. Event Studies and Applications Friedrich, L., and T. Gellrich (2003), Capital Market Reactions to Financial Services Outsourcing, Mimeo Frankfurt-am-Main, E-Finance Lab. {pdf} James, C. (1987), 'Some Evidence on the Uniqueness of Bank Loans', Journal of Financial Economics, 19, McWilliams, A. and D. Siegel, 1997, Event studies in empirical research: theoretical and empirical issues, Academy of Management Journal, 40, {pdf} {ppt} Beitel, P., D. Schiereck, and M. Wahrenburg (2004), 'Explaining M&A Success in European Banks', European Financial Management, 10, {pdf} Ongena S., D.C. Smith and D. Michalsen, 2003, Firms and their distressed banks: lessons from the Norwegian banking crisis ( ), Journal of Financial Economics, 67.1, {pdf} {ppt} Karceski J., S. Ongena and D.C. Smith, 2005, The impact of bank consolidation on commercial borrower welfare, Journal of Finance, Forthcoming. {pdf} {ppt} Beitel, P., and D. Schiereck (2001), Value Creation at the Ongoing Consolidation of the European

6 Banking Market, Working Paper 5, Witten/Herdecke, IMA. {pdf} 5 Campbell, J.Y., Lo, A.W., and MacKinlay, A.C., 1997, The econometrics of financial markets, Princeton University Press, Chapter 4: Event-study analysis. Strong, N., 1992, Modeling abnormal returns: a review study, Journal of Business Finance and Accounting, 19, Other readings: Chatterjee, S., and A. S. Hadi (1986), 'Influential Observations, High Leverage Points, and Outliers in Linear Regression', Statistical Science, 1, Ongena, S., 1999, Lending Relationships, Bank Default, and Economic Activity, International Journal of the Economics of Business 6, {copy} 7. Capital Structure Titman, S. and R. Wessels, 1988, The determinants of capital structure choice, Journal of Finance, vol. 43, pp {pdf} {ppt} McConnell, J.J. and H. Servaes, 1995, Equity ownership and the two faces of debt, Journal of Financial Economics, vol. 39, pp {pdf} Graham, J. R., and C. R. Harvey (2001), 'The Theory and Practice of Corporate Finance: Evidence from the Field', Journal of Financial Economics, 60, {pdf} {ppt} Rajan, R.G., and L. Zingales (1995), What Do We Know about Capital Structure? Some Evidence from International Data, Journal of Finance, 50, {pdf} Brounen, D., A. de Jong, and K. Koedijk (2004), 'Corporate Finance in Europe: Confronting Theory with Practice', Financial Management, 33, Financial Dependence and Growth: Cross-Country Studies Bound, J., D. A. Jaeger, and R. M. Baker, 1995, Problems with Instrumental Variables: Estimation When the Correlation between the Instruments and the Endogenous Explanatory Variable is Weak, Journal of the American Statistical Association 90, {pdf} Giannetti, M. (2003), Do Better Institutions Mitigate Agency Problems? Evidence from Corporate Finance Choices, Journal of Financial and Quantitative Analysis, 38, {pdf} {doc}

7 Giannetti, M., and S. Ongena (2004), Financial Integration and Entrepreneurial Activity: Evidence from Foreign Bank Entry in Emerging Markets, Mimeo, Stockholm School of Economics. {pdf} {ppt} Rajan, R.G., and L. Zingales (1998), Financial Dependence and Growth, American Economic Review, {pdf} {ppt: Corporate Finance Systems} 6 9 & 10. Competition, Geography, and Regulation of Corporate Finance in Europe Degryse, H., and S. Ongena, 2004, The Impact of Technology and Regulation on the Geographical Scope of Banking, Oxford Review of Economic Policy 20, {pdf} {ppt} Degryse, H., and S. Ongena (2005), 'Distance, Lending Relationships, and Competition', Journal of Finance, Forthcoming. {pdf} {ppt} Degryse, H., and S. Ongena (2005), Competition and Regulation in the Banking Sector: A Review of the Empirical Evidence on the Sources of Bank Rents, Mimeo Tilburg, Tilburg University. {doc} {ppt} Other readings: Degryse, H., and S. Ongena (2003), Distance, Lending Relationships, and Competition, Discussion Paper CES (r) & CentER , Tilburg, Center for Economic Studies - KU Leuven & CentER - Tilburg University. {pdf} Degryse, H., and S. Ongena (2004), The Impact of Competition on Bank Orientation and Specialization, Discussion Paper CES & CentER , Leuven & Tilburg, K.U. Leuven & Tilburg University. {pdf} {ppt} Kilkenny, M. (2002), Implications of the Spatial Decay of Trust, Presentation Ames IA, Iowa State University. {ppt} 11. Risk Management Tufano, P., 1996, Who manages risk? An empirical examination of risk management practices in the gold mining industry, The Journal of Finance, vol. 51, pp {pdf} {ppt} Loderer, C. and K. Pichler, 2000, Firms, do you know your currency risk exposure? Survey results, Journal of Empirical Finance, vol. 7, pp {pdf} Brown, G.W., 2001, Managing foreign exchange risk with derivatives, Journal of Financial Economics, vol. 60, pp {pdf} Bodnar, G.M., G.S. Hayt and R.C. Marston, 1998, 1998 Wharton survey of financial risk management

8 by US non-financial firms, Financial Management, vol. 27, pp {pdf} 7 Mian, S.L., 1996, Evidence on corporate hedging policy, Journal of Financial and Quantitative Analysis 31, {pdf} 12. Initial Public Offerings and Share Issue Privatizations Ritter, J., and I. Welch (2002), 'A Review of IPO Activity, Pricing, and Allocations', Journal of Finance, 57, {pdf} {ppt} {ppt} Loughran, T., J. Ritter and K. Rydqvist, Initial public offerings: international insights, Pacific-Basin Finance Journal, vol. 2, 1994, Pagano, M., F. Panetta and L. Zingales, Why do companies go public? An empirical analysis, Journal of Finance, vol. 53, 1998, pp Other All papers that were presented by students (see schedule and zipped file).