How Different is Japanese Corporate Finance? An Investigation of the Information Content of New Security Issues

This paper studies the shareholder wealth effects associated with 875 new security issues in Japan from January 1, 1985 to May 31, 1991. The sample includes public equity, private equity, rights offerings, straight debt, warrant debt and convertible debt issues. Contrary to the U.S., the announcement of convertible debt issues is accompanied by a significant positive abnormal return of 1.05%. The announcement of equity issues has a positive abnormal return of 0.45%, significant at the 0.10 level, but this positive abnormal return can be attributed to one year in our sample and is offset by a negative issue date abnormal return of -1.01%. The abnormal returns are negatively related to firm size, so that for equity issues (but not for convertible debt issues), large Japanese firms have significant negative announcement abnormal returns. Our evidence is consistent with the view that Japanese managers decide to issue shares based on different considerations than American managers.

Business Groups and Tunneling: Evidence from Private Securities Offerings by Korean Chaebols

Using a comprehensive sample of equity-linked private securities offerings by Korean firms from 1989 to 2000, we examine whether such offerings can be used as a mechanism for wealth transfer between issuers and acquirers. For deals involving issuers and acquirers in the same business group (chaebol), the announcement returns for chaebol-affiliated issuers with good past performance are lower than those for other types of issuers if the price discount is larger. In contrast, this deal leads to more value creation for chaebol-affiliated acquirers than other types of acquirers. Furthermore, well-performing chaebol-affiliated acquirers experience a larger wealth loss than other types of acquirers if they buy securities from poorly performing issuers in the same chaebol. We also find that chaebol firms with good past performance tend to sell private securities at a low price to their member firms. This evidence is consistent with tunneling within business groups.

Estimates of the Harmonic Bergman Kernel on Smooth Domains

AbstractWe obtain optimal size estimates of the harmonic Bergman kernel and its derivatives on smooth domains. Based on these estimates we derive mapping properties of the harmonic Bergman projection on Lebesgue spaces and Lipschitz spaces

International Monetary Policy Analysis with Durable Goods

The dissertation studies a model of an economy which produces and exports durable goods. It analyzes the optimal monetary policy for such a country. Generally, monetary policy has a bigger economic effect on durable goods relative to non-durable goods because durable goods can be stored and households get utility from the stock of durable goods. This dissertation shows that, in Nash equilibrium, the central bank of a durable goods producing country can control changes of the price level with smaller changes in the monetary policy instrument. In the cooperative equilibrium, the monetary authority of the country which imports non-durable goods and exports durable goods should raise the interest rate by more, relative to the Nash case, in response to a rise in foreign inflation. On the other hand, the monetary authority of the country which imports durable goods and exports non-durable goods should raise the interest rate by less than the other country

How University Endowments Respond to Financial Market Shocks: Evidence and Implications

Endowment payouts have become an increasingly important component of universities’ revenues in recent decades. We test two leading theories of endowment payouts: (1) universities smooth endowment payouts, or (2) universities use endowments as self-insurance against financial shocks. In contrast to both theories, endowments actively reduce payouts relative to their stated payout policies following negative, but not positive, shocks. This asymmetric behavior is consistent with “endowment hoarding,” especially among endowments with values close to the benchmark value at the start of the university president’s tenure. We also document the effect of negative endowment shocks on university operations, including personnel cuts.

The Japanese market for corporate control and managerial incentives

We examine bidder returns in Japanese mergers from 1976 to 1990. Using a comprehensive sample of 104 Japanese acquiring firms, we find that shareholders of Japanese bidders experience a significant positive abnormal return of 1.41%. Bidder returns are higher when firms acquire targets in the same industry, when their managers performed well before the merger, and when their managers acquire relatively large targets. We also find that bidder returns increase with the bidder's leverage and the bidder's ties to financial institutions through borrowings. Our evidence is consistent with the view that managerial incentives affect a firm's investment decisions and therefore firm value, and that these incentives are affected by the internal governance mechanisms that control managerial discretion

Why is there a home bias? An analysis of foreign portfolio equity ownership in Japan

This paper uses data on foreign stock ownership in Japan from 1975 to 1991 to examine the determinants of the home bias in portfolio holdings. Existing models of international portfolio choice predicting that foreign investors hold national market portfolios or portfolios tilted towards nigh expected return stocks are inconsistent with the evidence provided in this paper. We document that foreign investors overweight shares of firms in manufacturing industries, large firms, firms with good accounting performance, firms with low unsystematic risk, and firms with low leverage. Controlling for size, there is evidence that small firms that export more have greater foreign owner-snip. Foreign investors do not perform significantly worse than if they held the Japanese market portfolio, however. After controlling for firm size, there is no evidence that foreign ownership is related to expected returns of shares. We show that a model with size-based informational asymmetries and deadweight costs can yield asset allocations consistent with our evidence