The Impact of Simple Institutions in Experimental Economies with Poverty Traps

We introduce an experimental approach to study the effect of institutions on economic growth. In each period, agents produce and trade output in a market, and allocate it to consumption and investment. Productivity is higher if total capital stock is above a threshold. The threshold externality generates two steady states – a suboptimal poverty trap and an optimal steady state. In a baseline treatment, the economies converge to the poverty trap. However, the ability to make public announcements or to vote on competing and binding policies, increases output, welfare and capital stock. Combining these two simple institutions guarantees that the economies escape the poverty trap

Do shareholders of acquiring firms gain from acquisitions?

We examine a sample of 12,023 acquisitions by public firms from 1980 to 2001. Shareholders of these firms lost a total of $218 billion when acquisitions were announced. Though shareholders lose throughout our sample period, losses associated with acquisition announcements after 1997 are dramatic. Small firms gain from acquisitions, so that shareholders of small firms gained$8 billion when acquisitions were announced and shareholders of large firms lost $226 billion. We examine the cross-sectional variation in the announcement returns of acquisitions. Small firm shareholders earn systematically more when acquisitions are announced. This size effect is typically more important than how an acquisition is financed and than the organizational form of the assets acquired. The only acquisitions that have positive aggregate gains are acquisitions of subsidiaries.

Semi-strong form efficiency of lowly capitalized firms : the case of the alternative investment market, (aim) UK : an investigation of event study based abnormal returns using the single index market model

A thesis submitted to, University of Luton, Luton Business School, in fulfilment ofthe requirements for the degree ofDoctor ofPhilosophy, FinanceThis thesis examines the impact of company announcements on the daily stock returns of lowly capitalised companies. A total of 105 companies comprise the sample and 1464 events are examined over the period 21110/97 to 03/0412000. The methodology employed is primarily, empirical in nature. Event studies are conducted to gauge the impact of company announcements on stock returns using the single index market model (SIMM) as the chosen equilibrium market model for modelling abnormal returns. The study professes three mam contributions to knowledge. The empirical evidence suggests that financial announcement have a more timely impact on stock returns than non-financial announcements. Secondly, there appears to be significant over-reaction and mean-reversion exhibited by lowly capitalised firms. Thirdly, the speed of adjustment of stock prices to new information is increased in cases where shareholder concentration is high while over-reactions appear inversely proportionate to shareholder concentration. This may be a consequence of smaller firms experiencing leakage of boardroom level information prior to public announcement days

Public Service Anouncements and the Fight Against AIDS: A Survey of Radio Broadcasters\u27 Attitudes and Policies

A pilot study surveyed radio broadcasters in Arkansas, Missouri, Oklahoma, and Texas to further an understanding of their role as gatekeepers for public service announcements (PSA) to educate audiences about AIDS and bring about safe behavior. A total of 300 stations were in the sample. Respondents were asked to provide information about their stations and their stations\u27 use of HIV/AIDS PSAs. Most broadcasters reported using HIV/AIDS PSAs (76.1%). About one-third of broadcasters who reported not using the PSAs claimed they had never been offered any such announcements to broadcast. Most respondents agreed that HIV/AIDS is a significant national and local public health threat (almost 70% reported knowing someone with HIV or AIDS). Yet many broadcasters expressed reservations about the ability of PSAs to effect necessary behavioral change in the audience. Statistically significant differences were found between broadcasters who use PSAs and those who do not, in five areas which relate to message content and acceptance by audiences. (Contains 33 references; appendixes list stations for survey (by market) and provide a breakdown of how the survey instrument addressed the questions. Survey instrument is also attached.) (Author/NKA

Upheaval in the Boardroom: Outside Director Public Resignations, Motivations, and Consequences

We investigate the motives and circumstances surrounding outside directors\u27 decisions to publicly announce their board resignations. Directors who leave quietly are in their mid-sixties and professional directors, i.e., retirees, who are retiring entirely from professional life. Directors who announce their resignation are in their mid-fifties and active professionals. Half the time they say they are leaving because they are busy. These directors leave from firms with some weakness in their performance, but with no overt manifestations of cronyism such as excessive compensation of either the CEO or directors. The other half of the time directors leave while publicly criticizing the firm. These directors are finance professionals who were members of the audit and compensation committees. They resign from firms with weak boards and financial performance with evidence that managers have manipulated earnings upwards. Public criticism appears to pressure these boards to make management changes associated with improved stock price performance. We conclude that while such public resignations are motivated by the reputational concerns of directors, they can act as a disciplining device for poor board performance

THE IMPACT OF STOCK SPLIT ANNOUNCEMENTS ON STOCK PRICE: A TEST OF MARKET EFFICIENCY

The purpose of this study is to test whether the investor can make an above normal return by relying on public information impounded in a stock split announcement. Using risk adjusted event study methodology, this study tests how and when public announcements of forward and reverse stock splits affect stock price. Stock split announcement samples include 38 two for one, 39 three for two, and 10 reverse splits. A total o f 36,714 observations for the announcement samples and the corresponding S&P 500 stock index were analyzed using standard risk adjusted event study methodology. Results suggest that the firms\u27 public stock split announcements did not affect stock price on the announcement day. Rather, for the two for one and three for two forward split samples, stock price exhibited a significant positive reaction up to 27 days prior to the announcement. For the reverse split sample, stock price exhibited a significant negative reaction up to 30 days prior to the announcement. Results support the semi-strong form efficient market hypothesis since stock prices adjust so fast to public information that no investor can earn an above normal return by trading on the announcement day. Investors greet forward stock split announcement with a positive sign, whereas they view reverse splits as bad news. Management may be using stock splits to adjust stock price to a more marketable range, downward with forward and upward for reverse splits. Evidence here suggests signs of insider trading activity up to twenty-seven days prior to the announcement of the stock split

Do banks really monitor? : Evidence from CEO succession decisions

The authors are grateful to Dick Davies, Paul Draper, Robert Faff, David Hillier, Ike Mathur (the editor), Katrin Migliorati, Krishna Paudyal, our anonymous reviewer, and to seminar participants at the 2nd International Conference of the Financial Engineering and Banking Society (London) and 2013 Midwest Finance Association Annual Meeting (Chicago) for helpful comments on earlier versions of this work. We also thank Martin Kemmitt for helpful research assistance on this project. All errors remain our own.Peer reviewedPostprin

Signaling power of open market share repurchases in Germany

This paper shows that abnormal stock price returns around open market repurchase announcements are about four times higher in Germany than in the US (12% versus 3%). We hypothesize that this observation can be explained by country differences in repurchase regulation. Our empirical evidence indicates that German managers primarily buy back shares to signal an undervaluation of their firm. We demonstrate that the stringent repurchase process prescribed by German law attributes a higher credibility to such a signal than lax US regulations and thereby corroborate our hypothesis

Public regulatory reform and management earnings forecasts in a low private litigation environment

We examine the impact of continuous disclosure regulatory reform on the likelihood, frequency and qualitative characteristics of management earnings forecasts issued in New Zealand’s low private litigation environment. Using a sample of 720 earnings forecasts issued by 94 firms listed on the New Zealand Exchange before and after the reform (1999–2005), we provide strong evidence of significant changes in forecasting behaviour in the post-reform period. Specifically, firms were more likely to issue earnings forecasts to pre-empt earnings announcements and, in contrast to findings in other legal settings, those earnings forecasts exhibited higher frequency and improved qualitative characteristics (better precision and accuracy). An important implication of our findings is that public regulatory reforms may have a greater benefit in a low private litigation environment and thus add to the global debate about the effectiveness of alternative public regulatory reforms of corporate requirements

News, liquidity dynamics and intraday jumps: evidence from the HUF/EUR market

We study intraday jumps on a pure limit order FX market by linking them to news announcements and liquidity shocks. First, we show that jumps are frequent and contribute greatly to the return volatility. Nearly half of the jumps can be linked with scheduled and unscheduled news announcements. Furthermore, we show that jumps are information based, whether they are linked with news announcements or not. Prior to jumps, liquidity does not deviate from its normal level, nor do liquidity shocks offer any predictive power for jump occurrence. Jumps emerge not as a result of unusually low liquidity but rather as a result of an unusually high demand for immediacy concentrated on one side of the book. During and after the jump, a dynamic order placement process emerges: some participants endogenously become liquidity providers and absorb the increased demand for immediacy. We detect an interesting asymmetry and find the liquidity providers to be more reluctant to add liquidity when confronted with a news announcement around the jump. Further evidence shows that participants submit more limit orders relative to market orders after a jump. Consequently, the informational role of order flow becomes less pronounced in the thick order book after the jump