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on Corporate Finance |
| By: | Favero, Carlo A; Giglio, Stefano W; Honorati, Maddalena; Panunzi, Fausto |
| Abstract: | In this paper, we study the performance of Italian listed family firms in the period 1998-2003. We measure their performance by using both accounting and market data. We first study the relative performance of family firms compared to widely held firms. Then we investigate whether performance is affected by the type of family firm (i.e., whether the CEO is a member of the family or is an outsider). We find that the data and the methodology used to measure performance strongly affect the results. When performance is measured by accounting data (ROA), using a static model, we find evidence in favour of a superior performance of family firms. Such evidence is not confirmed by the application of the same model to market measures of performance. However, we report statistical evidence that the correct econometric specification for market data is a dynamic model. The results of estimation of the dynamic model for the market measures of performance are more consistent with those based on the static model for the accounting measures of performance. |
| Keywords: | corporate performance; family firms; management style |
| JEL: | G32 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5786&r=cfn |
| By: | Cornelli, Francesca; Li, David Daokui |
| Abstract: | This paper highlights the trade-off between the need to restructure a company and the need to provide managers with appropriate incentives to run it after the restructuring. In order to provide incentives, it is optimal to let managers acquire equity in the firm. However, the expectations to be able to buy shares in the future may create ex-ante incentives to delay restructuring. This effect is particularly important for events where managers can acquire a substantial number of shares, such as privatizations or MBOs. In equilibrium, the shares are not underpriced, but the delay in restructuring which took place in the period before reduces the value of the company. We report empirical evidence on MBOs and privatizations consistent with the model in this paper. |
| Keywords: | management buy-outs; managers incentives; privatizations |
| JEL: | G34 J33 P34 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5821&r=cfn |
| By: | Foucault, Thierry; Gehrig, Thomas |
| Abstract: | We show that a cross-listing allows a firm to make better investment decisions because it enhances stock price informativeness. This theory of cross-listings yields a rich set of new predictions. In particular, it implies that the sensitivity of investment to stock prices should be larger for cross-listed firms. Moreover, the increase in value generated by a cross-listing (the 'cross-listing premium') should be positively related to the size of growth opportunities and negatively related to the quality of managerial information. The sensitivity of the cross-listing premium to the size of growth opportunities increases when holdings and trading become more evenly distributed between foreign and domestic markets. Last, we show that concentration of trading in the home market ('flow-back') can indeed increase the cross-listing premium for some firms. |
| Keywords: | cross-listing premium; cross-listings; flow-back; investment decisions; ownership; price informativeness |
| JEL: | G10 G14 G15 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5722&r=cfn |
| By: | Stanislav Anatolyev (NES) |
| Abstract: | We develop and evaluate sequential testing tools for a class of nonparametric tests for predictability of financial returns that includes, in particular, the directional accuracy and excess profitability tests. We consider both the retrospective context where a researcher wants to track predictability over time in a historical sample, and the monitoring context where a researcher conducts testing as new observations arrive. Throughout, we elaborate on both two-sided and one-sided testing, focusing on linear monitoring boundaries that are continuations of horizontal lines corresponding to retrospective critical values. We illustrate our methodology by testing for directional and mean predictability of returns in a dozen of young stock markets in Eastern Europe. |
| Keywords: | Testing, monitoring, predictability, stock returns |
| JEL: | C12 C22 C52 C53 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0071&r=cfn |
| By: | Gregory Connor; Oliver Linton |
| Abstract: | We introduce an alternative version of the Fama-French three-factor model of stockreturns together with a new estimation methodology. We assume that the factorbetas in the model are smooth nonlinear functions of observed securitycharacteristics. We develop an estimation procedure that combines nonparametrickernel methods for constructing mimicking portfolios with parametric nonlinearregression to estimate factor returns and factor betas simultaneously. Themethodology is applied to US common stocks and the empirical findings comparedto those of Fama and French. |
| Keywords: | characteristic-based factor model, arbitrage pricing theory, kernelestimation, nonparametric estimation. |
| JEL: | G12 C14 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stiecm:/2006/506&r=cfn |
| By: | Boone, Jan |
| Abstract: | Theoretical IO models of horizontal mergers and acquisitions make the critical assumption of efficiency gains. Without efficiency gains, these models predict either that mergers are not profitable or that mergers are welfare reducing. A problem here is the empirical observation that on average mergers do not create efficiency gains. We analyze mergers in a model where firms cannot equalize marginal costs and marginal revenues over all dimensions in their action space due to constraints. In this type of model mergers can still be profitable and welfare enhancing while they create a loss in efficiency. The merger allows a firm to relax constraints. Further, this set up is consistent with the following stylized facts on mergers and acquisitions: M\&A's happen when new opportunities have opened up or industries have become more competitive (due to liberalization), they happen in waves, shareholders of the acquired firms gain while shareholders of the acquiring firms lose from the acquisition. Standard IO merger models do not explain these empirical observations. |
| Keywords: | constraints; deregulation; efficiency defence; merger waves; pro/anti-competitive mergers |
| JEL: | G34 K21 L40 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5744&r=cfn |
| By: | Bacchetta, Philippe; Mertens, Elmar; van Wincoop, Eric |
| Abstract: | There is widespread evidence of excess return predictability in financial markets. In this paper we examine whether this predictability is related to expectational errors. To consider this issue, we use data on survey expectations of market participants in the stock market, the foreign exchange market, and the bond and money markets in various countries. We find that the predictability of expectational errors coincides with the predictability of excess returns: when a variable predicts expectational errors in a given market, it typically predicts the excess return as well. Understanding expectational errors appears crucial for explaining excess return predictability. |
| Keywords: | excess returns; expectations survey; predictability |
| JEL: | F31 G12 G14 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5770&r=cfn |
| By: | Jurek, Jakub W; Viceira, Luis M |
| Keywords: | growth investing; intertemporal hedging; portfolio choice; risk and value |
| JEL: | G12 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5773&r=cfn |
| By: | Favero, Carlo A; Giglio, Stefano W |
| Abstract: | We study the relationship between the term structure of interest rates and fiscal policy by considering the Italian case. Empirical analysis has been so far rather inconclusive on this important topic. We abscribe such evidence to three problems: identification, regime-switching and maturity effects. All these aspects are particularly relevant to the Italian case. We propose a parsimonious model with three factors to represent the whole yield curve, and we consider yield differentials between Italian and German Government bonds. To take into account the possibility of regime-switching, we explicitly include a hidden two-state Markov chain that represents market expectations. The model is estimated using Bayesian econometric techniques. We find that government debt and its evolution significantly influence the yield of government bonds, that such effects are maturity dependent and regime-dependent. Hence when investigating the effect of fiscal policy on the term-structure it is of crucial importance to allow for multiple regimes in the estimation. |
| Keywords: | Bayesian estimation; fiscal policy; regime switching; term structure |
| JEL: | E0 G0 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5793&r=cfn |
| By: | Basak, Suleyman; Cass, David; Licari, Juan Manuel; Pavlova, Anna |
| Abstract: | This paper explores the role of portfolio constraints in generating multiplicity of equilibrium. We present a simple financial market economy with two goods and two households, households who face constraints on their ability to take unbounded positions in risky stocks. Absent such constraints, equilibrium allocation is unique and is Pareto efficient. With one portfolio constraint in place, the efficient equilibrium is still possible; however, additional inefficient equilibria in which the constraint is binding may emerge. We show further that with portfolio constraints cum incomplete markets, there may be a continuum of equilibria; adding incomplete markets may lead to real indeterminacy. |
| Keywords: | asset pricing; financial equilibrium; indeterminacy; multiple equilibria; portfolio constraints |
| JEL: | D52 G12 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5804&r=cfn |
| By: | Albuquerque, Rui; Bauer, Gregor H; Schneider, Martin |
| Abstract: | This paper studies international equity markets when some investors have private information that is valuable for trading in many countries simultaneously. We use a dynamic model of equity trading to show that 'global' private information helps understand US investors’ trading behaviour and performance. In particular, the model predicts global return chasing - positive comovement of US investors’ net purchases with returns in many countries - which we show to be present in the data. Return chasing in our model can be due to superior performance of US investors, not inferior knowledge or naive trend-following. We also show that trades due to private information are strongly correlated across countries: a common 'global' factor accounts for about half their variation. |
| Keywords: | asymmetric information; global private information; home bias; international equity flows and returns; portfolio choice; private information; return chasing |
| JEL: | F36 G12 G14 G15 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5819&r=cfn |
| By: | Fohlin, Caroline; Gehrig, Thomas |
| Abstract: | Based on daily prices (amtliche Kurse) we estimate effective spreads of securities traded at the Berlin Stock Exchange in 1880, 1890, 1900 and 1910. Several extensions of the Roll measure are applied. We find surprisingly tight effective spreads for the historical data, comparable with similar measures of the MDAX and DAX at the end of the 20th century. |
| Keywords: | effective spreads; market microstructure; price discovery |
| JEL: | D23 G14 N23 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5827&r=cfn |
| By: | Loncarski,Igor; Horst,Jenke ter; Veld,Chris (Tilburg University, Center for Economic Research) |
| Abstract: | This paper analyzes convertible bond arbitrage on the Canadian market for the period 1998 to 2004. Convertible bond arbitrage is the combination of a long position in convertible bonds and a short position in the underlying stocks. Convertible arbitrage has been one of the most successful strategies of hedge funds. This paper shows that the convertible arbitrage strategy has considerable effects on capital markets. First, there is a downward pressure on cumulative average abnormal returns of the underlying stocks between the announcement and the issuance dates of convertible bonds. Second, short sales of the underlying equity around the issuance dates strongly increase for equity-like convertibles. Third, convertible bonds are underpriced at the issuance dates. All effects are stronger for equity-like than for debt-like convertible bonds. Finally, we find that over a one-year period following the issue, equity-like convertibles earn a return that is more than 23 percentage points higher than the return of debt-like convertibles. In the last years of our sample, convertible arbitrage returns have strongly decreased. This seems to be related to a shift from equity-like to debt-like convertibles by the issuing companies. |
| Keywords: | convertible arbitrage;short sales;underpricing;convertible bonds;abnormal returns |
| JEL: | G12 G14 G24 G32 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200698&r=cfn |
| By: | Fernandez, Pablo (IESE Business School); Carabias, Jose M. (IESE Business School) |
| Abstract: | En este documento se cuantifica la creación de valor para los accionistas de Bankinter entre diciembre de 1991 y diciembre de 2005. En ese período, el aumento de la capitalización de Bankinter fue de 2.834 millones de euros, el aumento del valor para los accionistas fue de 4.120 millones de euros; y la creación de valor para los accionistas fue de 2.847 millones de euros (expresado en euros de 2005). La rentabilidad media anual para los accionistas de Bankinter fue del 17,3%, sensiblemente superior a la del IBEX35 (14,0%): cada euro invertido en acciones de Bankinter en diciembre de 1991 se convirtió en 9,38 euros en diciembre de 2005, mientras que 1 euro invertido en el IBEX35 se convirtió en 6,26 euros. La inflación media fue del 3,4%. La rentabilidad para los accionistas de Bankinter fue positiva en nueve de los catorce años analizados. La capitalización de Bankinter durante estos años osciló entre el 0,83 y el 1,6% de la capitalización del IBEX 35. En diciembre de 1991, Bankinter fue la 18ª empresa por capitalización del IBEX, mientras que en junio de 2006 fue la 22ª empresa. Bankinter fue el banco más rentable para sus accionistas (entre los 23 bancos internacionales analizados) en el período 2003-2005. |
| Keywords: | creación valor para accionistas; aumento valor para accionistas; rentabilidad para accionistas; |
| JEL: | G12 G31 M21 |
| Date: | 2006–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0646&r=cfn |
| By: | Gallo, Miguel A. (IESE Business School); Estape, Maria J. (IESE Business School) |
| Abstract: | El sector español de alimentación y bebidas tiene características que lo hacen muy significativo para el estudio de la evolución a lo largo del tiempo de las empresas familiares. En este proyecto se ha diseñado un modelo de análisis ecológico de la evolución de las empresas desde el Tratado de Adhesión de 1992 hasta el momento actual. El propósito de este estudio es conocer los índices de supervivencia y vitalidad de las Empresas Familiares, y de esta manera descubrir cómo se hacen fuertes y continúan posicionándose exitosamente en los mercados. Las cuestiones que se plantearán en esta investigación son cuántas empresas familiares habían en el sector en 1992, en un determinado nivel de facturación, y cuántas continúan como familiares en el año 2001. Cómo son las Empresas Familiares que continúan: fuertes con una posición consolidada o, por el contrario, se han debilitado, tiene previstos cambios, etc. En el caso de las empresas que han dejado de ser familiares, conocer las causas de su proceso de transformación, así como también estudiar cuáles son las empresas que han desaparecido del mercado. |
| Keywords: | Empresa Familiar; Ecología; Supervivencia; Alimentación y bebidas; |
| Date: | 2006–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0647&r=cfn |