nep-cfn New Economics Papers
on Corporate Finance
Issue of 2008‒05‒24
eight papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. A Study of the Provision of Environmental Information in Financial Analysts Reports By Cunningham, Gary; Hassel , Lars; Nilsson, Henrik
  2. How Bad is Bad News? Assessing the Effects of Environmental Incidents on Firm Value By Lundgren, Tommy; Olsson, Rickard
  3. Bank runs, liquidity and credit risk By Topi, Jukka
  4. A macro stress testing model with feedback effects By Mizuho Kida
  5. Mandatory Accounting Disclosure by Small Private Companies By Benito Arruñada
  6. No contagion,only globalization and flight to quality By Marie Brière; Ariane Chapelle; Ariane Szafarz
  7. Non-Parametric Analysis of Hedge Fund Returns: New Insights from High Frequency Data By Loriana Pelizzon; Monica Billio; Mila Getmansky
  8. Italian Equity Funds: Efficiency and Performance Persistence By Loriana Pelizzon; Roberto Casarin; Andrea Piva

  1. By: Cunningham, Gary (Umeå School of Business); Hassel , Lars (Umeå School of Business); Nilsson, Henrik (Umeå School of Business)
    Abstract: Reporting of environmental information along with financial information has become an important research topic. Research to date has focused on the nature of the information reported by companies. This study extends prior research by examining the inclusion of environmental information by financial analysts in their research reports of companies in the chemical and in the oil and gas industries. Both companies and the financial analysts are divided into subsets by geographic region, Europe and North America. Results show that only 35 per cent of financial analysts’ reports have environmental information. Those reports that do have such information have more environmental information for North American companies than for European companies and analysts tend to report more information for companies in their regions. The chemical industry receives more attention, especially for downside information.
    Keywords: Environmental information; financial analysts’ reports; equity valuation; content analysis
    Date: 2007–11–27
  2. By: Lundgren, Tommy (Umeå School of Business); Olsson, Rickard (Umeå School of Business)
    Abstract: Based on a formal model of how investments in corporate social responsibility act upon .rm value through goodwill, we derive the hypothesis that under uncertainty, bad news are detrimental to good-will, and subsequently have a negative impact on value. We examine by event study methodology whether bad news in the form of environmental (EV) incidents a¤ect .rm value negatively as measured by abnormal returns using a global data set. An EV incident is a company incident allegedly in violation of international norms on environmen-tal issues. We analyze 142 EV incidents 2003-2006. The incidents are generally associated with negative cumulative abnormal returns, but which are not statistically signi.cant, except for incidents for .rms in the EURO zone. The results are robust with respect to a number of variations in test methodology.
    Keywords: No; keywords
    Date: 2008–01–30
  3. By: Topi, Jukka (Bank of Finland Research)
    Abstract: In this paper, I develop a model that addresses the links between banks’ liquidity outlook and their incentives to take credit risk. Assuming that both bank-specific liquidity shocks and credit losses are necessary to provoke bank runs, the model predicts that a bank’s incentives to mitigate its credit risk by screening decrease if the probability of a bank-specific liquidity shock declines. This suggests that the benign liquidity outlook prevailing prior to the subprime crisis may have contributed to the lack of screening by banks that has been an important causal factor in the crisis.
    Keywords: liquidity; credit risk screening; bank runs
    JEL: G12 G21 G28
    Date: 2008–05–14
  4. By: Mizuho Kida (Reserve Bank of New Zealand)
    Abstract: Stress testing is a tool to analyse the resilience of a financial system under extreme shocks. In contrast to single-bank stress testing models, macro stress testing models attempt to analyse risk for the system as a whole by taking into account feedback – i.e. the transmission of risks – within the system or between the financial system and the real economy. This paper develops a simple model of macro stress testing, incorporating two types of feedback: one between credit and interest rate risks and another between the banking system and the real economy. The model is tested using hypothetical banking sector data. The results from the exercise highlight the importance of incorporating feedback effects for the assessment of total risks to the system, and of recognising more than one type of feedback effect in a model for a robust assessment of risks to financial stability.
    JEL: G21 G32
    Date: 2008–05
  5. By: Benito Arruñada
    Abstract: Computerised databases and the Internet have recently made publication of company accounts potentially less costly and more useful, thanks to electronic filing and universal online access to credit information systems. These developments advise against simplification policies that would reduce the scope of mandatory publication. Instead, they encourage policies pursuing a broader efficiency goal, achievable by reducing costs and enhancing value through administrative reforms of filing, archive and retrieval systems. Survey and registry evidence on how the information in the accounts is valued and used by firms fully supports these claims.
    Keywords: Financial disclosure, company accounts, credit registries, business simplification
    JEL: G32 K22
    Date: 2008–05
  6. By: Marie Brière (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.); Ariane Chapelle (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.); Ariane Szafarz (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and DULBEA, Brussels.)
    Abstract: In this article, tests for globalization and contagion are separated using an ex ante definition of crises, and contagion tests are neutralized with respect to globalization effects. A large database is constructed to study the stability of correlation matrices for four asset classes: equities, government bonds, and corporate bonds –investment grade and high yield – in four geographical zones. Overall, the results confirm the instability of correlations and point to a combination of globalization and flight to quality, while emphasizing that contagion on the equity markets appears as an artefact due to globalization.
    Keywords: contagion, globalization, flight-to-quality, international financial markets.
    JEL: G15 G11
    Date: 2008–05
  7. By: Loriana Pelizzon (Department of Economics, University Of Venice Cà Foscari); Monica Billio (Department of Economics, University Of Venice Cà Foscari); Mila Getmansky (Department of Finance and Operations Management Isenberg School of Management University of Massachusetts)
    Abstract: This paper examines four different daily datasets of hedge fund return indexes: MSCI, FTSE, Dow Jones and HFRX, all based on investable hedge funds, and three different monthly datasets of hedge fund return indexes: CSFB, CISDM and HFR which comprise both investable and non-investable hedge funds. Our study, based on standard statistical analysis, non-parametric analysis of the distribution and non-parametric regressions with respect to the S&P500 index shows that key data biases and disparate index construction methodologies lead to different statistical properties of hedge fund databases. One key variable that highly affects the statistical properties of hedge fund index returns is the “investability” of hedge funds
    Keywords: Hedge Fund, Risk Management, High frequency data
    JEL: G12 G29 C51
    Date: 2008
  8. By: Loriana Pelizzon (Department of Economics, University Of Venice Cà Foscari); Roberto Casarin (Department of Economics, University Of Brescia); Andrea Piva (GRETA Associati)
    Abstract: Have Italian mutual funds been able to generate “extra-return”? Were some of them able to persistently beat the competitors? In this paper we address these questions and provide a detailed and systematic performance and return persistence analysis of the Italian equity mutual funds. We show that, in general, fund managers have not been able to score extra-performances and only few managers had stock picking ability or market timing ability. This evidence is consistent with the market efficiency hypothesis. Moreover, concerning performance persistence, first, we cannot trace out the hot-hand phenomenon on raw returns. The no persistence effect is fairly robust to: the performance measure, the temporal lag and the different methodology employed for testing persistence. Second, there has not been long-run persistence on risk-adjusted returns (we find a weak evidence of the reversal effect). Finally, the past performance displays weak evidence of the hot-hand effect on risk-adjusted returns on four-month using cross-section tests. However, as soon as we analyse yearly intervals any evidence of persistence disappears.
    Keywords: Mutual funds, Performance evaluation
    JEL: G23 G21 G10 G12
    Date: 2008

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