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on Corporate Finance |
| By: | Jean-Pierre DANTHINE; Xiangrong JIN |
| Abstract: | Recent studies have found unmeasured intangible capital to be large and important. In this paper we observe that by nature intangible capital is also very different from physical capital. We find it plausible to argue that the accumulation process for intangible capital differs significantly from the process by which physical capital accumulates. We study the implications of this hypothesis for rational firm valuation and asset pricing using a two-sector general equilibrium model. Our main finding is that the properties of firm valuation and stock prices are very dependent on the assumed accumulation process for intangible capital. If one entertains the possibility that intangible investments translates into capital stochastically, we find that plausible levels of macroeconomic volatility are compatible with highly variable corporate valuations, P/E ratios and stock returns. |
| Keywords: | intangible capital; corporate valuation; stock return volatility |
| JEL: | D24 D50 G12 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:06.05&r=cfn |
| By: | Panayiotis Diamandis (Department of Business Administration, Athens University of Economics and Business); Georgios Kouretas (Department of Economics, University of Crete); Leonidas Zarangas (Department of Finance and Auditing, Technological Educational Institute of Epirus) |
| Abstract: | This paper provides an analysis of asset allocation using univariate portfolio GARCH models from the Athens Stock Exchange. We use daily data for the period January 1997 to February 2005. Our analysis adopts the methodology due to Manganelli (2004) and we are able to recover from the univariate approach the multivariate dimension of the portfolio allocation problem. Manganelli (2004) suggests that such a dual problem can be solved with the application of a variance sensitivity analysis which considers the change in the portfolio variance induced by an infinitesimal change in the portfolio allocation. Our main findings are based on the estimation of the variance sensitivity for a portfolio of two assets and the way sensitivity has been changing over time and this has implications for risk management. In addition we compute the second derivative of the estimated variance with respect to portfolio weights and this gives an indication of the benefits arising from diversification at any given point of time. |
| Keywords: | asset allocation, GARCH models, risk management, sensitivity analysis |
| JEL: | C53 G21 G28 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:crt:wpaper:0602&r=cfn |
| By: | Ji, Gang (BOFIT) |
| Abstract: | This study investigates the economic consequences of cross-listing on the Chinese stock market. We argue that by adopting a higher disclosure standard through cross- listing firms voluntarily commit themselves to reducing information asymmetry. As a result, cross-listed firms are able to benefit from growth opportunities with less appropriated cash flow and lower cost of capital. The empirical evidence shows that cross-listed firms indeed command higher valuations than their non-cross-listed counterparts, after controlling for certain firm-specific attributes. This lends support to the corporate governance hypothesis of cross-listing on the Chinese stock market. The study also argues that an overall upgrad-ing of accounting standards cannot substitute for the cross-listing mechanism. |
| Keywords: | corporate governance; listing; China |
| Date: | 2005–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2005_014&r=cfn |
| By: | Nicolai J. Foss; Ibuki Ishikawa |
| Abstract: | Over the last two decades the resource-based view (“RBV”) has become dominant in the strategic management field. It has often been observed that the RBV is lacking in the dynamic dimension. For example, processes of building competitive advantages by means of combining existing complementary resources in novel ways are not inquired into. We argue that the RBV may profitably draw on insights in entrepreneurship and capital theory, drawn from Austrian economists as well as Frank Knight, in order to strengthen its dynamic dimension. We link the RBV and Austrian ideas in the context of the theory of complex systems pioneered by Herbert Simon. We draw a number of implications for strategic management from this synthesis, notably into resource value and sustainability of competitive advantage. |
| Keywords: | Resource-based view; Austrian capital theory; complexity theory; entrepreneurs competitive advantage |
| JEL: | B53 D21 L23 M1 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:06-16&r=cfn |
| By: | Sudhir A. Shah (Delhi School of Economics) |
| Abstract: | We consider organizations with a single principal and many agents who interact in an environment with the following features -- (a) Nature im-perfectly informs the principal via a state-contingent signal, but not the agents, about the state of the world, (b) the principal selectively shares this information with the agents, thereby endogenously endow-ing them with private information that is coarser than his own, (c) the principal assigns action spaces to the agents, and (d) an agent’s control over the choice from his assigned action space is inalienable. Designing an organization involves specifying (c) and specifying an information dissemination system for implementing (b). Searching for an optimal design involves (1) deriving optimal performance from each design, and (2) comparing designs on the basis of their best performances. Our ex-istence results show the feasibility of performing Step (1) in a large class of cases. |
| Keywords: | Existence theorems, optimal design, team, organization, principal-agent model |
| JEL: | C62 D02 D23 D82 L23 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cde:cdewps:147&r=cfn |
| By: | Constantine Manasakis (Department of Economics, University of Crete) |
| Abstract: | This paper examines the shareholder wealth effects of mergers and acquisitions in the Greek banking industry from 1995 to 2001, using the “event study methodology”. The results suggest that targets’ shareholders earned significant abnormal returns upon the announcement of horizontal and diversifying deals. On the other hand, bidders’ shareholders had significant losses in cases of horizontal and zero effects in diversifying deals. Although mergers and acquisitions in the Greek banking industry are not found to be value-enhancing, they can be rationalized as an external growth strategy, whose goal was to strengthen the position of the participants in the domestic market and help them become more tenacious in a fiercely competitive international environment. |
| Keywords: | Mergers and Acquisitions; Banking; Valuation effects |
| JEL: | G34 G21 G14 |
| Date: | 2006–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:crt:wpaper:0612&r=cfn |