Corporate Governance and Cost of Equity: Theory and Evidence
|
|
|
- Eileen Lester
- 7 years ago
- Views:
Transcription
1 Corporate Governance and Cost of Equity: Theory and Evidence Di Li Erica X. N. Li Finance Department J. Mack Robinson College of Business Georgia State University Finance Department Cheung Kong Graduate School of Business 2013 All Georgia Conference October 11, 2013
2 Motivation Facts Insight Preview Does Governance Affect Stock Returns? Origin: Gompers, Ishii, and Metrick (2003) Governance-return relation: Mixed findings Gompers, Ishii, and Metrick (2003): Positive, Core, Guay, and Rusticus (2006): Negative, Bebchuk, Cohen, and Wang (2013): None, post 2001 No coherent explanation for all these findings This paper: Alternative and coherent explanation Yes, governance affects cost of equity How? In a subtle way Procyclical relation Positive during booms Negative during busts Di Li (AGC 2013) Governance & Stock Returns October / 23
3 Motivation Facts Insight Preview Governance and Stock Returns A Quick Look Returns of Governance Hedge Porfolio :Sep 94:Sep 98:Sep 02:Sep 06:Sep Month Raw Ind. Adj. Concentrated in the end of 1990 s and the beginning of 2000 s Positive during the end of 1990 s Negative during the beginning of 2000 s Di Li (AGC 2013) Governance & Stock Returns October / 23
4 Motivation Facts Insight Preview Governance, Firm Values, and Risk Three elements of firm value Investment options (V g ): Call options, riskier Assets-in-place (V a) Divestiture options (V d ): Put options, less risky Governance mitigates investment distortion V g and V d increases in governance quality Strong vs. weak governance higher value of V g during booms higher value of V d during busts riskier during booms less risky during busts Vg Vd Va (a) Strong governance stock during booms Vd Vg Va Vd Vg Va (b) Weak governance stock during booms Vg Vd Va (c) Strong governance stock during busts (d) Weak governance stock during busts Di Li (AGC 2013) Governance & Stock Returns October / 23
5 Motivation Facts Insight Preview Preview of Empirical Findings Classify business cycles using Tobin s Q: Aggregate and industry level Methods: Portfolio & factors approach, characteristics regression Findings Strong governance stocks outperform during booms Weak governance stocks earn higher returns during busts Magnitude of differences: Dozens of basis points monthly More significant with more precise business condition classification Robust to regression methods, industry adjustment, business cycles classification, alternative governance measure, and alternative explanation for negative governance-return relation during busts Di Li (AGC 2013) Governance & Stock Returns October / 23
6 Settings Predictions Model Settings Real options model (Dixit and Pindyck, 1994) Assumptions Assets-in-place: N units of capital Cash flow per unit y t: dy t = πy tdt + σy tdz t π: constant drift; σ: std. dev.; dz t: standard Wiener process Return of assets-in-place (CAPM): r a = r f + φσρ ym r f : risk-free rate; φ: constant market price of risk; ρ ym: correlation Investment option: Invest I to increase cash flow to (N + 1)y Divestiture option: Sell one unit at I, reducing cash flow to (N 1)y Managerial agency and governance Personal benefits (costs) B per unit of investment/divestiture Empire building (B > 0) or shirking (B < 0) Governance quality decreasing in B, perfect alignment when B = 0 Di Li (AGC 2013) Governance & Stock Returns October / 23
7 Settings Predictions Model Predictions Lemma 1 Expected return increases (decreases) in the share of investment (divestiture) option in total firm value. where β 1 > 1 and β 2 < 0. [( ) Va r s = r f + φσρ ym + V ( Vg V ) β 1 + ( Vd V ) β 2 ], Lemma 2 V g and V d both decrease in B. Implications on governance-return relation When V g dominates (boom), returns increases in governance quality When V d dominates (bust), returns decreases in governance quality Hypothesis 1 Governance-return relation is procyclical, i.e., positive during booms and negative during busts. Di Li (AGC 2013) Governance & Stock Returns October / 23
8 Business Cycles Classifications Tobin's Q Tobin's Q Consumer non-durables High-tech business equipment Tobin's Q :1 1995:1 2000:1 2005:1 2010:1 Quarter 1990:1 1995:1 2000:1 2005:1 2010:1 Quarter 1990:1 1995:1 2000:1 2005:1 2010:1 Quarter (a) Aggregate Q (b) FF 10 Q (c) FF 48 Q Based on Tobin s Q of assets: Cutoffs Boom: Top 20% Bust: Bottom 20% Normal: Rest Both aggregate cycles and industry-level cycles Di Li (AGC 2013) Governance & Stock Returns October / 23
9 Data and Sample Main sample from RiskMetrics based on IRRC/ISS releases (eight volumes, Sept to Dec. 2007) Use G-index (Gompers, Ishii, and Metrick, 2003) and E-index (Bebchuk, Cohen, and Ferrell, 2009) as governance measures Monthly stock returns from CRSP Annual financial data from COMPUSTAT Di Li (AGC 2013) Governance & Stock Returns October / 23
10 Governance-Return along Business Cycles Returns of Governance Hedge Porfolio :Sep 94:Sep 98:Sep 02:Sep 06:Sep Month Returns of Governance Hedge Porfolio :Sep 94:Sep 98:Sep 02:Sep 06:Sep Month Raw Ind. Adj. Raw Ind. Adj. (a) Governance Hedge Portfolio : G-Index (a) Governance Hedge Portfolio : E-Index Return Diff. between Strong/Weak Gov. Stocks :Sep 94:Sep 98:Sep 02:Sep 06:Sep Month Return Diff. between Strong/Weak Gov. Stocks :Sep 94:Sep 98:Sep 02:Sep 06:Sep Month Raw Ind. Adj. Raw Ind. Adj. (c) Return Diff., Strong vs. Weak : G-Index (d) Return Diff., Strong vs. Weak : E-Index Di Li (AGC 2013) Governance & Stock Returns October / 23
11 Summary Statistics Panel A: Aggregate Business Cycles Panel B: (FF 10) Industry-Specific Business Cycles G-Index E-Index G-Index E-Index Raw Ind. Adj. Raw Ind. Adj. Raw Ind. Adj. Raw Ind. Adj. Boom Periods r p S rw p r i S r i W Bust Periods r p S rw p r i S r i W Panel C: (FF 48) Industry-Specific Business Cycles G-Index E-Index Raw Ind. Adj. Raw Ind. Adj. Boom Periods r i S r i W Bust Periods r i S r i W Di Li (AGC 2013) Governance & Stock Returns October / 23
12 Portfolio & Factor Model Rt = α BM I BM t + α NM I NM t + α BT I BT t + β 1 RMRFt + β 2 SMBt + β 3 HMLt + β 4 UMDt + ɛt Panel A: Raw Returns G-Index E-Index (1) (2) (3) (4) (5) (6) α (0.26) (0.19) (0.24) (0.20) α BM (0.36) (0.37) α NM (0.22) (0.23) α BT (1.00) (1.04) p-value: α BM p-value: α BT Sample Years Panel B: FF 48 Industry-Adjusted Returns G-Index E-Index (1) (2) (3) (4) (5) (6) α (0.26) (0.18) (0.20) (0.17) α BM (0.33) (0.32) α NM (0.21) (0.20) α BT (0.92) (0.89) p-value: α BM p-value: α BT Sample Years Di Li (AGC 2013) Governance & Stock Returns October / 23
13 Discussion: Factor Model Summary of findings Positive abnormal returns during booms; large in magnitude and statistically significant Negative abnormal returns during bust: large in magnitude but statistically insignificant Problems with portfolio approach Portfolio approach based on aggregate business cycles; only two bust quarters (eight months) Does not control for other firm characteristics Alternative approach: Characteristics regression (Brennan, Chordia, and Subrahmanyam, 1998) Regression at the firm level Allow for variation of business condition among industries Control for firm characteristics Di Li (AGC 2013) Governance & Stock Returns October / 23
14 Implementation Control for cross-sectional dependence (Fama and MacBeth, 1973; Petersen, 2009) Main method: Clustered ordinary least squares ( ) ( ) ( r it = a + γ t + b BM G it I BM it + b NM G it I NM it + b BT G it I BT it Standard error clustered in time (month) Include time (month) fixed effects (γ t) Petersen (2009): Equivalent to Fama and MacBeth (1973) Compatible with aggregate business cycles classification Alternative method: Fama and MacBeth (1973) ( ) ( ) ( r it = a t + b BM,t G it I BM it + b NM,t G it I NM it + b BT,t G it I BT it Repeat for boom, normal, and bust months No power under aggregate business cycles classification ) + cx it + e it ) + c tx it + e it Di Li (AGC 2013) Governance & Stock Returns October / 23
15 Clustered OLS ( ) ( r it = a + γ t + b BM G it I BM it + b NM G it I NM it ) + b BT ( G it I BT it ) + cx it + e it Panel A: Raw Return G-Index E-Index (1) (2) (3) (4) (5) (6) Pool FF 10 FF 48 Pool FF 10 FF 48 SG Boom (0.39) (0.40) (0.34) (0.32) (0.30) (0.25) SG Bust (0.87) (0.37) (0.24) (0.52) (0.24) (0.15) p-value: b BM p-value: b BT Panel B: Industry-Median-Adjusted Return G-Index E-Index (1) (2) (3) (4) (5) (6) Pool FF 10 FF 48 Pool FF 10 FF 48 SG Boom (0.33) (0.29) (0.27) (0.21) (0.17) (0.14) SG Bust (0.67) (0.36) (0.23) (0.44) (0.21) (0.12) p-value: b BM p-value: b BT Di Li (AGC 2013) Governance & Stock Returns October / 23
16 Fama and MacBeth (1973) Method ( ) ( r it = a t + b BM,t G it I BM it + b NM,t G it I NM it ) + b BT,t ( G it I BT it ) + c tx it + e it Panel A: Raw Return G-Index E-Index (1) (2) (3) (4) FF 10 FF 48 FF 10 FF 48 SG Boom (0.44) (0.44) (0.25) (0.21) SG Bust (0.25) (0.24) (0.26) (0.13) p-value: b BM p-value: b BT Panel B: Industry-Median-Adjusted Return G-Index E-Index (1) (2) (3) (4) FF 10 FF 48 FF 10 FF 48 SG Boom (0.41) (0.42) (0.19) (0.16) SG Bust (0.27) (0.24) (0.21) (0.12) p-value: b BM p-value: b BT Di Li (AGC 2013) Governance & Stock Returns October / 23
17 Summary: Characteristics Approach Procyclical governance-return relation: Positive (negative) during booms (busts) Large in magnitude Statistically significant under finer business cycles classification Robustness Alternative business cycles classification criteria Alternative measure of governance Alternative explanation for negative relation during busts Di Li (AGC 2013) Governance & Stock Returns October / 23
18 Table 7 : Governance, Cycles, and Stock Returns Robustness with Different Classifications of Business Cycles This table presents the impact of business cycles on the effect of corporate governance on stock valuation under different classifications of business cycles. Panels A and B are in the same specification as in Table 5 implemented with clustered ordinary least squares regressions with monthly fixed effects using a sample from 1990 to 2007, Panels C and D are in the same specification as in Table 6 implemented with Fama and MacBeth (1973) method using a sample from 1990 to Other variables are omitted to save space. In Alternative Panels A and C, dependent variables Business are raw monthly returns, Cycles and in Panels B and D, Classification dependent variables are monthly returns adjusted by contemporaneous industry medians, all measured in percentage. In columns 1-4, business cycles are classified based on industry-specific Q following Fama and French 10- (FF 10) or 48-industry (FF 48) classification for a longer data range, from 1970 to 2012; in these columns, a quarter is boom (bust) if the industry Q is above (below) the historical 80th (20th) percentile. In columns 5-10, business cycles are classified based on aggregate (Pool) Q or industry-specific Q following Fama and French 10- (FF 10) or 48-industry (FF 48) classification again for the data range from 1990 to 2012; Use in these columns, a quarter sample is boom of(bust) Q for if thebusiness aggregate Qcycles or industry-specific classification Q is above (below) the historical 70th (30th) percentile. Superscripts,, and indicate statistical significance for the two-sided test at 0.01, 0.05, and 0.10, respectively. A coefficient is in bold if it is statistically significant at least at 0.1 level for one-sided tests of the following Use hypotheses: alternative cutoffs: Top and bottom 30% for boom and bust Results are similar with Hypothesis Fama I: and A stockmacbeth with strong governance (1973) earns approach a positive return during boom periods. Hypothesis II: A stock with weak governance earns a negative return during bust periods. Cycles Based on Longer Sample Panel A: Raw Returns, OLS with Clustered Variance Cycles Based on Wider Range G-Index E-Index G-Index E-Index (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) FF 10 FF 48 FF 10 FF 48 Pool FF 10 FF 48 Pool FF 10 FF 48 SG Boom (0.32) (0.29) (0.25) (0.22) (0.33) (0.31) (0.27) (0.25) (0.24) (0.21) SG Bust (0.46) (0.42) (0.33) (0.25) (0.56) (0.19) (0.20) (0.27) (0.14) (0.11) p-value: Hypothesis I p-value: Hypothesis II Cycles Based on Longer Sample Panel B: Industry-Adjusted Returns, OLS with Clustered Variance Cycles Based on Wider Range G-Index E-Index G-Index E-Index (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) FF 10 FF 48 FF 10 FF 48 Pool FF 10 FF 48 Pool FF 10 FF 48 SG Boom (0.23) (0.23) (0.15) (0.13) (0.29) (0.23) (0.21) (0.16) (0.14) (0.12) SG Bust (0.50) (0.39) (0.24) (0.18) (0.46) (0.22) (0.22) (0.18) (0.14) (0.11) p-value: Hypothesis I p-value: Hypothesis II Continued on next page Di Li (AGC 2013) Governance & Stock Returns October / 23
19 Alternative Governance Measure Giroud and Mueller (2010, 2011) Use product market competition as alternative measure (HHI) Panel A: Cycles in Clustered OLS Fama and MacBeth (1973) (1) (2) (3) (4) Raw Ind. Adj. Raw Ind. Adj. SG Boom (0.15) (0.10) (0.19) (0.17) SG Bust (0.16) (0.10) (0.15) (0.10) p-value: b BM p-value: b BT Sample Years Panel B: Cycles in Clustered OLS Fama and MacBeth (1973) (1) (2) (3) (4) Raw Ind. Adj. Raw Ind. Adj. SG Boom (0.14) (0.08) (0.12) (0.11) SG Bust (0.21) (0.08) (0.13) (0.09) p-value: b BM p-value: b BT Sample Years Di Li (AGC 2013) Governance & Stock Returns October / 23
20 Alternative Argument for Findings during Busts Argument Governance-return relation is always positive Governance effectiveness reversed during busts Observed spurious negative relation during busts Testing idea: If so, strong governance stocks have lower Q than weak governance stocks Our model predicts strong governance stocks are always valued higher than weak governance stocks Implementation ( ) ( ) ( Q it = a + γ t + b BM G it I BM it + b NM G it I NM it + b BT G it I BT it ) + cz it + e it Di Li (AGC 2013) Governance & Stock Returns October / 23
21 Governance and Stock Valuation: Quick Look Q Diff. between Strong/Weak Gov. Stocks Q Diff. between Strong/Weak Gov. Stocks :3 94:3 98:3 02:3 06:3 Quarter 90:3 94:3 98:3 02:3 06:3 Quarter Raw Ind. Adj. Raw Ind. Adj. (a) Val. Diff. Strong vs. Weak : G-Index (b) Val. Diff. Strong vs. Weak : E-Index Di Li (AGC 2013) Governance & Stock Returns October / 23
22 Governance and Stock Valuaiton along Business Cycles Panel A: Tobin s Q G-Index E-Index (1) (2) (3) (4) (5) (6) Pool FF 10 FF 48 Pool FF 10 FF 48 SG Boom (0.15) (0.11) (0.11) (0.09) (0.06) (0.06) SG Normal (0.09) (0.10) (0.10) (0.05) (0.06) (0.05) SG Bust (0.10) (0.09) (0.10) (0.05) (0.05) (0.06) Panel B: Tobin s Q Adjusted by Industry Median G-Index E-Index (1) (2) (3) (4) (5) (6) Pool FF 10 FF 48 Pool FF 10 FF 48 SG Boom (0.15) (0.10) (0.11) (0.09) (0.05) (0.06) SG Normal (0.09) (0.10) (0.09) (0.04) (0.05) (0.05) SG Bust (0.09) (0.09) (0.09) (0.05) (0.05) (0.05) Strong governance stocks are always valued higher than weak governance stocks Our findings during busts are not driven by reversal of effective governance level Di Li (AGC 2013) Governance & Stock Returns October / 23
23 Conclustion We provide an alternative explanation for the existence (late 1990 s) and disappearance (post 2001) of governance-stock relation Governance-stock relation is procyclical During booms (late 1990 s): Strong governance is associated with higher returns During busts (early 2000 s): Strong governance is associated with lower returns Unconditional relation (pooling whole period): The relation might be insignificant We provide empirical evidence for the argument In general, consistent with our predictions More significant when business cycles are identified more precisely (industry-level) Robust to regression methods, industry adjustment, alternative criteria of business cycles, and alternative measure of governance Di Li (AGC 2013) Governance & Stock Returns October / 23
Corporate Governance, Product Market Competition, and Equity Prices
THE JOURNAL OF FINANCE VOL. LXVI, NO. 2 APRIL 2011 Corporate Governance, Product Market Competition, and Equity Prices XAVIER GIROUD and HOLGER M. MUELLER ABSTRACT This paper examines whether firms in
DOES IT PAY TO HAVE FAT TAILS? EXAMINING KURTOSIS AND THE CROSS-SECTION OF STOCK RETURNS
DOES IT PAY TO HAVE FAT TAILS? EXAMINING KURTOSIS AND THE CROSS-SECTION OF STOCK RETURNS By Benjamin M. Blau 1, Abdullah Masud 2, and Ryan J. Whitby 3 Abstract: Xiong and Idzorek (2011) show that extremely
A Test Of The M&M Capital Structure Theories Richard H. Fosberg, William Paterson University, USA
A Test Of The M&M Capital Structure Theories Richard H. Fosberg, William Paterson University, USA ABSTRACT Modigliani and Miller (1958, 1963) predict two very specific relationships between firm value
A Panel Data Analysis of Corporate Attributes and Stock Prices for Indian Manufacturing Sector
Journal of Modern Accounting and Auditing, ISSN 1548-6583 November 2013, Vol. 9, No. 11, 1519-1525 D DAVID PUBLISHING A Panel Data Analysis of Corporate Attributes and Stock Prices for Indian Manufacturing
Internet Appendix to. Why does the Option to Stock Volume Ratio Predict Stock Returns? Li Ge, Tse-Chun Lin, and Neil D. Pearson.
Internet Appendix to Why does the Option to Stock Volume Ratio Predict Stock Returns? Li Ge, Tse-Chun Lin, and Neil D. Pearson August 9, 2015 This Internet Appendix provides additional empirical results
Exchange Traded Contracts for Difference: Design, Pricing and Effects
Exchange Traded Contracts for Difference: Design, Pricing and Effects Christine Brown, Jonathan Dark Department of Finance, The University of Melbourne & Kevin Davis Department of Finance, The University
Golden Parachutes and the Wealth of Shareholders
Latest revision: October 2013 Golden Parachutes and the Wealth of Shareholders Lucian Bebchuk, Alma Cohen, and Charles C.Y. Wang Abstract Golden parachutes (GPs) have attracted substantial attention from
Empirical Evidence on Capital Investment, Growth Options, and Security Returns
Empirical Evidence on Capital Investment, Growth Options, and Security Returns Christopher W. Anderson and Luis Garcia-Feijóo * ABSTRACT Growth in capital expenditures conditions subsequent classification
The Stock Market s Reaction to Accounting Information: The Case of the Latin American Integrated Market. Abstract
The Stock Market s Reaction to Accounting Information: The Case of the Latin American Integrated Market Abstract The purpose of this paper is to explore the stock market s reaction to quarterly financial
Earnings Announcement and Abnormal Return of S&P 500 Companies. Luke Qiu Washington University in St. Louis Economics Department Honors Thesis
Earnings Announcement and Abnormal Return of S&P 500 Companies Luke Qiu Washington University in St. Louis Economics Department Honors Thesis March 18, 2014 Abstract In this paper, I investigate the extent
CHAPTER 6. Topics in Chapter. What are investment returns? Risk, Return, and the Capital Asset Pricing Model
CHAPTER 6 Risk, Return, and the Capital Asset Pricing Model 1 Topics in Chapter Basic return concepts Basic risk concepts Stand-alone risk Portfolio (market) risk Risk and return: CAPM/SML 2 What are investment
Why Does the Change in Shares Predict Stock Returns? William R. Nelson 1 Federal Reserve Board January 1999 ABSTRACT The stock of firms that issue equity has, on average, performed poorly in subsequent
On Existence of An Optimal Stock Price : Evidence from Stock Splits and Reverse Stock Splits in Hong Kong
INTERNATIONAL JOURNAL OF BUSINESS, 2(1), 1997 ISSN: 1083-4346 On Existence of An Optimal Stock Price : Evidence from Stock Splits and Reverse Stock Splits in Hong Kong Lifan Wu and Bob Y. Chan We analyze
Asian Economic and Financial Review THE CAPITAL INVESTMENT INCREASES AND STOCK RETURNS
Asian Economic and Financial Review journal homepage: http://www.aessweb.com/journals/5002 THE CAPITAL INVESTMENT INCREASES AND STOCK RETURNS Jung Fang Liu 1 --- Nicholas Rueilin Lee 2 * --- Yih-Bey Lin
THIRTY YEARS OF CORPORATE GOVERNANCE: DETERMINANTS & EQUITY PRICES
1 THIRTY YEARS OF CORPORATE GOVERNANCE: DETERMINANTS & EQUITY PRICES Martijn Cremers Allen Ferrell Yale School of Management Harvard Law School 203-436-648 617-495-8961 martijn.cremers@yale.edu fferrell@law.harvard.edu
Chapter 5 Risk and Return ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS
Chapter 5 Risk and Return ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS 5-1 a. Stand-alone risk is only a part of total risk and pertains to the risk an investor takes by holding only one asset. Risk is
THE NUMBER OF TRADES AND STOCK RETURNS
THE NUMBER OF TRADES AND STOCK RETURNS Yi Tang * and An Yan Current version: March 2013 Abstract In the paper, we study the predictive power of number of weekly trades on ex-post stock returns. A higher
Form of the government and Investment Sensitivity to Stock Price
Form of the government and Investment Sensitivity to Stock Price Abstract One of the important functions of the stock market is to produce information through stock prices. Specifically, stock market aggregates
B.3. Robustness: alternative betas estimation
Appendix B. Additional empirical results and robustness tests This Appendix contains additional empirical results and robustness tests. B.1. Sharpe ratios of beta-sorted portfolios Fig. B1 plots the Sharpe
Draft - Proof INVESTING IN WHAT YOU KNOW: THE CASE OF INDIVIDUAL INVESTORS AND LOCAL STOCKS. Mark S. Seasholes a and Ning Zhu b
JOIM Journal Of Investment Management, Vol. 11, No. 1, (2013), pp. 20 30 JOIM 2013 www.joim.com INVESTING IN WHAT YOU KNOW: THE CASE OF INDIVIDUAL INVESTORS AND LOCAL STOCKS Mark S. Seasholes a and Ning
Autoria: Eduardo Kazuo Kayo, Douglas Dias Bastos
Frequent Acquirers and Financing Policy: The Effect of the 2000 Bubble Burst Autoria: Eduardo Kazuo Kayo, Douglas Dias Bastos Abstract We analyze the effect of the 2000 bubble burst on the financing policy.
Online Appendix to Impatient Trading, Liquidity. Provision, and Stock Selection by Mutual Funds
Online Appendix to Impatient Trading, Liquidity Provision, and Stock Selection by Mutual Funds Zhi Da, Pengjie Gao, and Ravi Jagannathan This Draft: April 10, 2010 Correspondence: Zhi Da, Finance Department,
Do Institutions Pay to Play? Turnover of Institutional Ownership and Stock Returns *
Do Institutions Pay to Play? Turnover of Institutional Ownership and Stock Returns * Valentin Dimitrov Rutgers Business School Rutgers University Newark, NJ 07102 vdimitr@business.rutgers.edu (973) 353-1131
The Determinants and the Value of Cash Holdings: Evidence. from French firms
The Determinants and the Value of Cash Holdings: Evidence from French firms Khaoula SADDOUR Cahier de recherche n 2006-6 Abstract: This paper investigates the determinants of the cash holdings of French
The Effect of Closing Mutual Funds to New Investors on Performance and Size
The Effect of Closing Mutual Funds to New Investors on Performance and Size Master Thesis Author: Tim van der Molen Kuipers Supervisor: dr. P.C. de Goeij Study Program: Master Finance Tilburg School of
Estimating firm-specific long term growth rate and cost of capital
Estimating firm-specific long term growth rate and cost of capital Rong Huang, Ram Natarajan and Suresh Radhakrishnan School of Management, University of Texas at Dallas, Richardson, Texas 75083 November
This article appeared in a journal published by Elsevier. The attached copy is furnished to the author for internal non-commercial research and
This article appeared in a journal published by Elsevier. The attached copy is furnished to the author for internal non-commercial research and education use, including for instruction at the authors institution
Institutional Investors and Equity Returns: Are Short-term Institutions Better Informed?
Institutional Investors and Equity Returns: Are Short-term Institutions Better Informed? Xuemin (Sterling) Yan University of Missouri - Columbia Zhe Zhang Singapore Management University We show that the
The impact of security analyst recommendations upon the trading of mutual funds
The impact of security analyst recommendations upon the trading of mutual funds, There exists a substantial divide between the empirical and survey evidence regarding the influence of sell-side analyst
The effect of real earnings management on the information content of earnings
The effect of real earnings management on the information content of earnings ABSTRACT George R. Wilson Northern Michigan University This study investigates the effect of real earnings management (REM)
Chapter 5. Conditional CAPM. 5.1 Conditional CAPM: Theory. 5.1.1 Risk According to the CAPM. The CAPM is not a perfect model of expected returns.
Chapter 5 Conditional CAPM 5.1 Conditional CAPM: Theory 5.1.1 Risk According to the CAPM The CAPM is not a perfect model of expected returns. In the 40+ years of its history, many systematic deviations
Access to Equity Markets, Corporate Investments and Stock Returns: International Evidence *
Access to Equity Markets, Corporate Investments and Stock Returns: International Evidence * Sheridan Titman McCombs School of Business University of Texas at Austin Austin, Texas 78712-1179 Tel: (512)-232-2787;
Do better educated investors make smarter investment decisions?
Do better educated investors make smarter investment decisions? Petra Halling 1 University of Vienna February 15, 2009 Preliminary and incomplete I thank an Austrian online broker for providing the data
Compensation of Divisional Managers: Peer Effects inside the Firm
Compensation of Divisional Managers: Peer Effects inside the Firm Ran Duchin Amir Goldberg Denis Sosyura University of Washington Stanford University University of Michigan duchin@uw.edu amirgo@gsb.stanford.edu
Investor recognition and stock returns
Rev Acc Stud (2008) 13:327 361 DOI 10.1007/s11142-007-9063-y Investor recognition and stock returns Reuven Lehavy Æ Richard G. Sloan Published online: 9 January 2008 Ó Springer Science+Business Media,
Corporate governance, value and performance of firms: New empirical results from a large international database
Corporate governance, value and performance of firms: New empirical results from a large international database Abstract: Based on a large international database (2662 firms from 25 industries, operating
Broker-Dealer Leverage and the Cross-Section of Stock Returns 1
Broker-Dealer Leverage and the Cross-Section of Stock Returns 1 Tobias Adrian, Erkko Etula and Tyler Muir Federal Reserve Bank of New York and Northwestern University Bank of England, January -5, 11 1
LIQUIDITY AND ASSET PRICING. Evidence for the London Stock Exchange
LIQUIDITY AND ASSET PRICING Evidence for the London Stock Exchange Timo Hubers (358022) Bachelor thesis Bachelor Bedrijfseconomie Tilburg University May 2012 Supervisor: M. Nie MSc Table of Contents Chapter
Product Market Competition, R&D Investment and Stock Returns
Product Market Competition, R&D Investment and Stock Returns Lifeng Gu December, 2012 Abstract In this article, I consider the interaction between product market competition and investment in research
Do Private Equity Fund Managers Earn their Fees? Compensation, Ownership, and Cash Flow Performance
Do Private Equity Fund Managers Earn their Fees? Compensation, Ownership, and Cash Flow Performance July 15, 2011 Abstract Using a new database of the compensation terms, ownership structures (capital
From Saving to Investing: An Examination of Risk in Companies with Direct Stock Purchase Plans that Pay Dividends
From Saving to Investing: An Examination of Risk in Companies with Direct Stock Purchase Plans that Pay Dividends Raymond M. Johnson, Ph.D. Auburn University at Montgomery College of Business Economics
Risk and return (1) Class 9 Financial Management, 15.414
Risk and return (1) Class 9 Financial Management, 15.414 Today Risk and return Statistics review Introduction to stock price behavior Reading Brealey and Myers, Chapter 7, p. 153 165 Road map Part 1. Valuation
Firm Fundamentals and Variance Risk Premiums
Firm Fundamentals and Variance Risk Premiums Matthew R. Lyle and James P. Naughton August 2015 Abstract We develop and empirically test an accounting-based model that ties two firm characteristics, book-to-market
A Study of information asymmetry using Bid-Ask spread on firm value: evidence from Tehran Stock Exchange
International Research Journal of Applied and Basic Sciences 2013 Available online at www.irjabs.com ISSN 2251-838X / Vol, 4 (9): 2872-2876 Science Explorer Publications A Study of information asymmetry
Ankur Pareek Rutgers School of Business
Yale ICF Working Paper No. 09-19 First version: August 2009 Institutional Investors Investment Durations and Stock Return Anomalies: Momentum, Reversal, Accruals, Share Issuance and R&D Increases Martijn
The Effect of R&D Expenditures on Stock Returns, Price and Volatility
Master Degree Project in Finance The Effect of R&D Expenditures on Stock Returns, Price and Volatility A study on biotechnological and pharmaceutical industry in the US market Aleksandra Titi Supervisor:
Does Mutual Fund Performance Vary over the Business Cycle?
Does Mutual Fund Performance Vary over the Business Cycle? Anthony W. Lynch New York University and NBER Jessica A. Wachter University of Pennsylvania and NBER First Version: 15 November 2002 Current Version:
Business Ties and Information Advantage: Evidence from Mutual Fund Trading
Business Ties and Information Advantage: Evidence from Mutual Fund Trading Ying Duan, Edith S. Hotchkiss, and Yawen Jiao * January 2014 Abstract This paper examines whether ties to portfolio firms management
MULTIPLE REGRESSION AND ISSUES IN REGRESSION ANALYSIS
MULTIPLE REGRESSION AND ISSUES IN REGRESSION ANALYSIS MSR = Mean Regression Sum of Squares MSE = Mean Squared Error RSS = Regression Sum of Squares SSE = Sum of Squared Errors/Residuals α = Level of Significance
International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions
WP/13/234 International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions Rui Albuquerque, Luis Brandao-Marques, Miguel A. Ferreira, Pedro Matos 2013 International Monetary
Market Efficiency and Behavioral Finance. Chapter 12
Market Efficiency and Behavioral Finance Chapter 12 Market Efficiency if stock prices reflect firm performance, should we be able to predict them? if prices were to be predictable, that would create the
Seasonal Patterns in Canadian Financial Markets and the Impact of Professional Portfolio Rebalancing: Evidence of Profitable Opportunities
Seasonal Patterns in Canadian Financial Markets and the Impact of Professional Portfolio Rebalancing: Evidence of Profitable Opportunities George Athanassakos; Ben Graham Chair in Value Investing; Richard
EQUITY STRATEGY RESEARCH.
EQUITY STRATEGY RESEARCH. Value Relevance of Analysts Earnings Forecasts September, 2003 This research report investigates the statistical relation between earnings surprises and abnormal stock returns.
Concentrated Stock Diversification Analysis
Concentrated Stock Diversification Analysis Example analysis Three Harbor Drive, Suite 315 Sausalito, CA 94965 (415) 339-4300 www.aperiogroup.com Copyright 2013 Aperio Group LLC Aperio v. [Latin] to make
French Manufacturing Firms - Estimation andVariations of Different Organisations
Table 1: Parameter estimates (calibrating returns to scale, ) (1) (2) (3) (4) Method Unconstrained Unconstrained Unconstrained Unconstrained ( calibrated from Basu ( calibrated from ( calibrated at 0.5,
The Capital Asset Pricing Model (CAPM)
Prof. Alex Shapiro Lecture Notes 9 The Capital Asset Pricing Model (CAPM) I. Readings and Suggested Practice Problems II. III. IV. Introduction: from Assumptions to Implications The Market Portfolio Assumptions
Hedge Funds, Funds-of-Funds, and Commodity. Trading Advisors
Hedge Funds, Funds-of-Funds, and Commodity Trading Advisors Bing Liang Weatherhead School of Management Case Western Reserve University Cleveland, OH 44106 Phone: (216) 368-5003 Fax: (216) 368-4776 BXL4@po.cwru.edu
Compensation of Divisional Managers: Peer Effects inside the Firm
Compensation of Divisional Managers: Peer Effects inside the Firm Ran Duchin Amir Goldberg Denis Sosyura University of Washington Stanford University University of Michigan duchin@uw.edu amirgo@gsb.stanford.edu
Purchase Obligations, Earnings Persistence and Stock Returns
Purchase Obligations, Earnings Persistence and Stock Returns Kwang J. Lee Haas School of Business University of California, Berkeley Email: klee@haas.berkeley.edu. January 2010 Abstract This paper examines
Models of Risk and Return
Models of Risk and Return Aswath Damodaran Aswath Damodaran 1 First Principles Invest in projects that yield a return greater than the minimum acceptable hurdle rate. The hurdle rate should be higher for
Stock market booms and real economic activity: Is this time different?
International Review of Economics and Finance 9 (2000) 387 415 Stock market booms and real economic activity: Is this time different? Mathias Binswanger* Institute for Economics and the Environment, University
Commonality in liquidity: A demand-side explanation
Commonality in liquidity: A demand-side explanation Andrew Koch, Stefan Ruenzi, and Laura Starks *, ** Abstract We hypothesize that a source of commonality in a stock s liquidity arises from correlated
Bond Fund Risk Taking and Performance
Bond Fund Risk Taking and Performance Abstract This paper investigates the risk exposures of bond mutual funds and how the risk-taking behavior of these funds affects their performance. Bond mutual funds
The Effect of Housing on Portfolio Choice. July 2009
The Effect of Housing on Portfolio Choice Raj Chetty Harvard Univ. Adam Szeidl UC-Berkeley July 2009 Introduction How does homeownership affect financial portfolios? Linkages between housing and financial
Investment-Cash Flow Sensitivity under Changing Information Asymmetry
Investment-Cash Flow Sensitivity under Changing Information Asymmetry Jaideep Chowdhury a Raman Kumar b Dilip Shome c Second Draft: December, 2011 a Department of Finance, College of Business, James Madison
Has the Propensity to Pay Out Declined?
Has the Propensity to Pay Out Declined? Gustavo Grullon Rice University grullon@rice.edu 713-348-6138 Bradley Paye Rice University bpaye@rice.edu 713-348-6030 Shane Underwood Rice University shaneu@rice.edu
The Costs of ETF Membership: The Valuation Effect of ETFs on Underlying Firms
The Costs of ETF Membership: The Valuation Effect of ETFs on Underlying Firms Kee-Hong Bae, Jun-Koo Kang, and Jin Wang * March 2013 * Bae is from the Schulich School of Business, York University, 4700
Credit Ratings and The Cross-Section of Stock Returns
Credit Ratings and The Cross-Section of Stock Returns Doron Avramov Department of Finance Robert H. Smith School of Business University of Maryland davramov@rhsmith.umd.edu Tarun Chordia Department of
Association between Accounting and Market-Based Variables A Canonical Correlation Approach with U.S. Data
1 Association between Accounting and Market-Based Variables A Correlation Approach with U.S. Data Timo Salmi, Ilkka Virtanen, Paavo Yli-Olli and Juha-Pekka Kallunki University of Vaasa P.O.Box 700 FIN-65101
Market Inefficiencies and Pricing Heuristics: Evidence from the PEG Ratio
Market Inefficiencies and Pricing Heuristics: Evidence from the PEG Ratio Stephan Fafatas *, Assistant Professor of Accounting Washington and Lee University Phil Shane, Professor of Accounting University
Table 4. + γ 2 BEAR i
Table 4 Stock Volatility Following Hedge Funds Reported Holdings This table reports the output from cross-sectional regressions of future excess volatility against aggregate hedge fund demand for holding
Online appendix to paper Downside Market Risk of Carry Trades
Online appendix to paper Downside Market Risk of Carry Trades A1. SUB-SAMPLE OF DEVELOPED COUNTRIES I study a sub-sample of developed countries separately for two reasons. First, some of the emerging countries
Appendices with Supplementary Materials for CAPM for Estimating Cost of Equity Capital: Interpreting the Empirical Evidence
Appendices with Supplementary Materials for CAPM for Estimating Cost of Equity Capital: Interpreting the Empirical Evidence This document contains supplementary material to the paper titled CAPM for estimating
Product Market Competition, Insider Trading. And Stock Market Efficiency
Product Market Competition, Insider Trading And Stock Market Efficiency Joel Peress INSEAD J. Peress Product Market Competition, Insider Trading and Stock Market Efficiency 1 Evidence Share turnover Insider
EVALUATION OF THE PAIRS TRADING STRATEGY IN THE CANADIAN MARKET
EVALUATION OF THE PAIRS TRADING STRATEGY IN THE CANADIAN MARKET By Doris Siy-Yap PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER IN BUSINESS ADMINISTRATION Approval
Sector Rotation Strategies
EQUITY INDEXES Sector Rotation Strategies APRIL 16, 2014 Financial Research & Product Development CME Group E-mini S&P Select Sector Stock Index futures (Select Sector futures) provide investors with a
The Month-of-the-year Effect in the Australian Stock Market: A Short Technical Note on the Market, Industry and Firm Size Impacts
Volume 5 Issue 1 Australasian Accounting Business and Finance Journal Australasian Accounting, Business and Finance Journal Article 8 The Month-of-the-year Effect in the Australian Stock Market: A Short
Momentum and Autocorrelation in Stock Returns
Momentum and Autocorrelation in Stock Returns Jonathan Lewellen MIT Sloan School of Management This article studies momentum in stock returns, focusing on the role of industry, size, and book-to-market
Life-Cycle Theory and Free Cash Flow Hypothesis: Evidence from. Dividend Policy in Thailand
Life-Cycle Theory and Free Cash Flow Hypothesis: Evidence from Dividend Policy in Thailand Yordying Thanatawee Lecturer in Finance, Graduate School of Commerce, Burapha University 169 Longhadbangsaen Road,
SEASONALITY IN VALUE VS. GROWTH STOCK RETURNS AND THE VALUE PREMIUM
SEASONALITY IN VALUE VS. GROWTH STOCK RETURNS AND THE VALUE PREMIUM George Athanassakos*, Ben Graham Chair in Value Investing Richard Ivey School of Business, The University of Western Ontario, London,
Impact of Corporate Governance on Corporate Financial Performance
IOSR Journal of Business and Management (IOSR-JBM) e-issn: 2278-487X, p-issn: 2319-7668. Volume 13, Issue 3 (Sep. - Oct. 2013), PP 01-05 Impact of Corporate Governance on Corporate Financial Performance
AN EMPIRICAL INVESTIGATION OF THE RELATIONSHIP AMONG P/E RATIO, STOCK RETURN AND DIVIDEND YIELS FOR ISTANBUL STOCK EXCHANGE
AN EMPIRICAL INVESTIGATION OF THE RELATIONSHIP AMONG P/E RATIO, STOCK RETURN AND DIVIDEND YIELS FOR ISTANBUL STOCK EXCHANGE Funda H. SEZGIN Mimar Sinan Fine Arts University, Faculty of Science and Letters
Individual Investor Trading and Stock Returns
THE JOURNAL OF FINANCE VOL. LXIII, NO. 1 FEBRUARY 2008 Individual Investor Trading and Stock Returns RON KANIEL, GIDEON SAAR, and SHERIDAN TITMAN ABSTRACT This paper investigates the dynamic relation between
Does the Number of Stocks in a Portfolio Influence Performance?
Investment Insights January 2015 Does the Number of Stocks in a Portfolio Influence Performance? Executive summary Many investors believe actively managed equity portfolios that hold a low number of stocks
Venture capital investment cycles: The impact of public markets $
Journal of Financial Economics 87 (28) 1 23 www.elsevier.com/locate/jfec Venture capital investment cycles: The impact of public markets $ Paul Gompers a,b, Anna Kovner a, Josh Lerner a,b,, David Scharfstein
Short-sellers, fundamental analysis and stock returns *
Short-sellers, fundamental analysis and stock returns * Patricia M. Dechow a, Amy P. Hutton b, Lisa Meulbroek b, Richard G. Sloan a a University of Michigan Business School, Ann Arbor, MI 48109 b Harvard
Evidence on the Contracting Explanation of Conservatism
Evidence on the Contracting Explanation of Conservatism Ryan Blunck PhD Student University of Iowa Sonja Rego Lloyd J. and Thelma W. Palmer Research Fellow University of Iowa November 5, 2007 Abstract
THE RELEVANCE OF PORTFOLIO MANAGEMENT CORE COMPETENCIES IN OUTSOURCING DECISIONS
THE RELEVANCE OF PORTFOLIO MANAGEMENT CORE COMPETENCIES IN OUTSOURCING DECISIONS DAVID MORENO, ROSA RODRIGUEZ AND RAFAEL ZAMBRANA University Carlos III- Department of Business Administration JEL-classification:
Introduction to Quantitative Methods
Introduction to Quantitative Methods October 15, 2009 Contents 1 Definition of Key Terms 2 2 Descriptive Statistics 3 2.1 Frequency Tables......................... 4 2.2 Measures of Central Tendencies.................
Stock Returns and Equity Premium Evidence Using Dividend Price Ratios and Dividend Yields in Malaysia
Stock Returns and Equity Premium Evidence Using Dividend Price Ratios and Dividend Yields in Malaysia By David E. Allen 1 and Imbarine Bujang 1 1 School of Accounting, Finance and Economics, Edith Cowan
Manager Compensation, Ownership, and the Cash Flow Performance of Private Equity Funds
Manager Compensation, Ownership, and the Cash Flow Performance of Private Equity Funds David T. Robinson Duke University and NBER Berk A. Sensoy Ohio State University June 13, 2011 Abstract Using a new
INCORPORATION OF LIQUIDITY RISKS INTO EQUITY PORTFOLIO RISK ESTIMATES. Dan dibartolomeo September 2010
INCORPORATION OF LIQUIDITY RISKS INTO EQUITY PORTFOLIO RISK ESTIMATES Dan dibartolomeo September 2010 GOALS FOR THIS TALK Assert that liquidity of a stock is properly measured as the expected price change,
Dividend Policy and Share Price Volatility: UK Evidence
Dividend Policy and Share Price Volatility: UK Evidence Khaled Hussainey Ain Shams University, Egypt Accounting and Finance Division Stirling Management School Stirling University Stirling FK9 4LA Email:
The Market Reaction to Stock Split Announcements: Earnings Information After All
The Market Reaction to Stock Split Announcements: Earnings Information After All Alon Kalay Columbia School of Business Columbia University Mathias Kronlund College of Business University of Illinois at
Does Mutual Fund Performance Vary over the Business Cycle?
Does Mutual Fund Performance Vary over the Business Cycle? Anthony W. Lynch New York University and NBER Jessica Wachter New York University and NBER Walter Boudry New York University First Version: 15
A Review of Cross Sectional Regression for Financial Data You should already know this material from previous study
A Review of Cross Sectional Regression for Financial Data You should already know this material from previous study But I will offer a review, with a focus on issues which arise in finance 1 TYPES OF FINANCIAL
Discussion of The Role of Volatility in Forecasting
C Review of Accounting Studies, 7, 217 227, 22 22 Kluwer Academic Publishers. Manufactured in The Netherlands. Discussion of The Role of Volatility in Forecasting DORON NISSIM Columbia University, Graduate
Momentum and Credit Rating
USC FBE FINANCE SEMINAR presented by Doron Avramov FRIDAY, September 23, 2005 10:30 am 12:00 pm, Room: JKP-104 Momentum and Credit Rating Doron Avramov Department of Finance Robert H. Smith School of Business
Trading Turnover and Expected Stock Returns: The Trading Frequency Hypothesis and Evidence from the Tokyo Stock Exchange
Trading Turnover and Expected Stock Returns: The Trading Frequency Hypothesis and Evidence from the Tokyo Stock Exchange Shing-yang Hu National Taiwan University and University of Chicago 1101 East 58
Paul Brockman Xiumin Martin Emre Unlu
Paul Brockman Xiumin Martin Emre Unlu Objective and motivation Research question and hypothesis Research design Discussion of results Conclusion The purpose of this paper is to examine the CEO s portfolio