Recently added articles from Financial Management:
Capital structure decisions: which factors are reliably important?
Mar 22, 2009; ... This paper examines the relative importance of many factors in the capital structure decisions of publicly traded American firms from 1950 to 2003. The most reliable factors for explaining market leverage are: median industry leverage (+ effect on leverage), market-to-book assets ratio ...
Information, selective disclosure, and analyst behavior.
Mar 22, 2009; ... This paper examines whether the prohibition of selective disclosures to equity research analysts mandated by Regulation FD alters the amount olin formation and the manner in which it is revealed to the market. We demonstrate that equity research analysts are more responsive to information ...
Liquidity: considerations of a portfolio manager.
Mar 22, 2009; ... This paper examines liquidity and how it affects the behavior of portfolio managers, who account for a significant portion of trading in many assets. We define an asset to be perfectly liquid if a portfolio manager can trade the quantity she desires when she desires at a price not worse ...
On the use of multifactor models to evaluate mutual fund performance.(Report)
Mar 22, 2009; ... In this paper, we evaluate the cross-sectional power of multifactor models to explain mutual fund returns and examine the consequences of using these models to evaluate mutual fund performance. First, we identify the extent to which professional money managers are able to capture the ...
The conditional beta and the cross-section of expected returns.
Mar 22, 2009; ... We examine the cross-sectional relation between conditional betas and expected stock returns for a sample period of July 1963 to December 2004. Our portfolio-level analyses and the firm-level cross-sectional regressions indicate a positive, significant relation between conditional betas ...
Corporate governance ratings and firm performance.
Mar 22, 2009; ... We examine the corporate governance ratings provided by three premier US rating agencies and find that summary scores are generally poor predictors of primary and secondary measures of future firm performance. However, some component sub-ratings that focus on the eight key dimensions of ...
Determinants of investment cash flow sensitivity.
Mar 22, 2009; ... I classify firms into groups of high, low, and negative sensitivity. I find that investment-cash flow sensitivity is nonmonotonic with respect to financial constraints, cash flows, and growth opportunities. Firms classified as negative cash flow sensitive have the lowest cash flows, ...
International evidence on financial derivatives usage.
Mar 22, 2009; ... Theory predicts that nonfinancial corporations might use derivatives to lower financial distress costs, coordinate cash flows with investment, or resolve agency conflicts between managers and owners. Using a new database, we find that traditional tests of these theories have little power ...
Managerial response to the May 2003 dividend tax cut.(Survey)
Dec 22, 2008; ... We survey 328 financial executives to determine the effects of the May 2003 dividend tax cut. We find that the tax cut led to initiations and dividend increases at some firms. However, executives say that among the factors that affect dividend policy, the tax rate reduction is less ...
How did the 2003 dividend tax cut affect stock prices?(Report)
Dec 22, 2008; ... We test the hypothesis that the 2003 dividend tax cut boosted US stock prices and thereby lowered the cost of equity capital. Using an event-study methodology, we attempt to identify an aggregate stock market effect by comparing the behavior of US common stock prices with that of foreign ...
The effect of fiduciary standards on institutions' preference for dividend-paying stocks.
Dec 22, 2008; ... Many researchers apparently believe that some institutional investors prefer dividend-paying stocks because they are subject to the "prudent man" (PM) standard of fiduciary responsibility, under which dividend payments provide prima facie evidence that an investment is prudent. Although ...
Asymmetric information and dividend policy.(Report)
Dec 22, 2008; ... We examine how informational asymmetries affect firms' dividend policies. We find that firms that are more subject to information asymmetry are less likely to pay, initiate, or increase dividends, and disburse smaller amounts. We show that our main results are not driven by our sample and ...
Stock splits as a manipulation tool: evidence from mergers and acquisitions.(Report)
Dec 22, 2008; ... We document that acquiring firms are more likely than nonacquiring firms to split their stocks before making acquisition announcements, especially when acquisitions are financed by stock and when the deals are large. Our findings support the hypothesis that some acquiring firms use stock ...
Do voting rights affect institutional investment decisions? Evidence from dual-class firms.(Report)
Dec 22, 2008; ... We examine whether, and to what extent, shareholder voting rights affect institutional investment decisions. We find that institutional ownership in dual-class firms is significantly lower than it is in single-class firms after controlling for other determinants of institutional ...
Does voluntary disclosure improve stock price informativeness?(Report)
Dec 22, 2008; ... According to theory, comovement in stock prices reflects comovement in the fundamental factors underlying the values of stocks. Recent theory contends that stock price comovement can be driven by information markets or the informational opacity of the firm. To the extent that voluntary ...
Foreign exchange volatility is priced in equities.(Report)
Dec 22, 2008; ... This paper finds that standard asset pricing models fail to explain the significantly negative delta hedging errors that occur as a result of the purchase of options on foreign exchange futures. Foreign exchange volatility does influence stock returns, however. The volatility of the ...
How much does expertise reduce behavioral biases? The case of anchoring effects in stock return estimates.(Report)
Sep 22, 2008; ... We use data from surveys involving 300 Scandinavian financial market professionals and 213 university students to conduct three controlled experiments in which we manipulate the background information given to subjects. We find a very large anchoring effect in the students' long-term stock ...
Corporate debt issuance and the historical level of interest rates.(Report)
Sep 22, 2008; ... Using a sample that comprises more than 14,000 new issues of corporate debt for the period 1970-2001, we examine the relation between debt issues and the level of interest rates relative to historical levels. Consistent with recent survey evidence, we find that companies issue more debt, ...
Earnings and equity valuation in the biotech industry: theory and evidence.(Report)
Sep 22, 2008; ... We examine how the price-earnings relation varies with the uncertainty about and the quality of a firm's investments. We develop a real option valuation framework to capture investment and abandonment options in the research-intensive biotechnology industry. We hypothesize that the ...
Does financial distress risk drive the momentum anomaly?(Report)
Sep 22, 2008; ... This paper brings together the evidence on two asset pricing anomalies--continuation of prior returns (momentum) and the market mispricing of distressed firms--using UK data. Our analysis demonstrates both these effects are driven by market underreaction to financial distress risk. In ...