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on Corporate Finance |
| By: | Ghosh, Saibal |
| Abstract: | The paper examines the impact of firms exhibiting political connection on their stock market performance. The results appear to suggest that the performance of ‘political’ stocks has been significantly weak. This is apparent in simple univariate tests that compare the political stocks across various industry categories or even comparisons of political versus apolitical stocks. The regression analysis indicates that the returns on political stocks are on average, over 20% lower as compared to stocks without any political association. |
| Keywords: | political connection; buy-and-hold abnormal returns; India |
| JEL: | G32 P52 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33170&r=cfn |
| By: | Bo Becker; Henrik Cronqvist; Rüdiger Fahlenbrach |
| Abstract: | Large shareholders may play an important role for firm performance and policies, but identifying this empirically presents a challenge due to the endogeneity of ownership structures. We develop and test an empirical framework which allows us to separate selection from treatment effects of large shareholders. Individual blockholders tend to hold blocks in public firms located close to where they reside. Using this empirical observation, we develop an instrument – the density of wealthy individuals near a firm’s headquarters – for the presence of a large, non-managerial individual shareholder in a firm. These shareholders have a large impact on firms, controlling for selection effects. |
| JEL: | D31 G32 G34 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17393&r=cfn |
| By: | John R. Graham; Sonali Hazarika; Krishnamoorthy Narasimhan |
| Abstract: | We use firm-level data to study corporate performance during the Great Depression era for all industrial firms on the NYSE. Our goal is to identify the factors that contribute to business insolvency and valuation changes during the period 1928 to 1938. We find that firms with more debt and lower bond ratings in 1928 became financially distressed more frequently during the Depression, consistent with the trade-off theory of leverage and the information production role of credit rating agencies. We also document for the first time that firms responded to tax incentives to use debt during the Depression era, but that the extra debt used in response to this tax-driven “debt bias” did not contribute significantly to the occurrence of distress. Finally, we conduct an out of sample test during the recent 2008-2009 Recession and find that higher leverage and lower bond ratings also increased the occurrence of financial distress during this period. |
| JEL: | G0 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17388&r=cfn |