The 52-Week High And The January Effect

The predictive power of past returns for January reversal is compared with that of the nearness of current prices to the 52-week high.  When compared jointly, past returns lose their forecasting power for January returns and the nearness of current prices to the 52-week high assumes the dominant role in explaining the January reversal.  This suggests that tax-loss selling is not the primary factor explaining the January effect.  A behavioral explanation consistent with the window-dressing argument is proposed in that the 52-week high acts as an “anchor,” a highly visible reference price to fund holders, increasing fund managers’ incentives to window-dress by temporarily adding (removing) stocks that are perceived by fund holders as good (bad) investments, based on the nearness of these stocks’ current prices to the 52-week high

Foreign ownership restrictions and cross-border markets for corporate control

The paper investigates the link between host country laws restricting the ability of foreign bidders to conduct cross-border mergers and acquisitions (M&As) and the dynamics of domestic and foreign markets for corporate control. The results indicate that, as governments, especially governments of less wealthy, faster growing economies, relax their cross-border M&A laws, foreign bidders increase the number of cross-border M&As. The likelihood that foreign bidders establish cross-border M&As in which they obtain a controlling stake in the target is greater in host countries with less restrictive cross-border M&A laws. In such countries, foreign bidders are also more likely to use cross-border M&As than cross-border joint ventures as the means for entering the market. As host country cross-border M&A laws improve, foreign bidders are increasingly more likely to seek the types of entry modes that provide them with greater control over their investments.Cross-border M&As Cross-border JVs Law and investment Corporate control

The effect of investor protection on forms and ownership of FDI

This paper investigates the effect of investor protection, political stability, financial development, trade openness, education and legal openness of foreign direct investment (FDI) regimes on forms and ownership of FDI in host countries. Host countries with stronger investor protection, more political safety and more open rules for foreign investment attract greater FDI inflows. This result holds after controlling for the various forms foreign investors use to enter host countries. These factors are shown to have a positive impact on the number of cross-border mergers and acquisitions (M&As) and joint ventures (JVs) that host countries receive. Patterns of ownership in cross-border M&As reveal that foreign acquirers are less likely to hold outright majority control if the target company is located in a country with less political stability, weaker investor protection and restrictive FDI regimes.FDI inflows; foreign direct investment; investor protection; investments; political stability; financial development; trade openness; education; law; legal systems; company ownership; host countries; cross-border transactions; mergers; acquisitions; M&A; joint ventures; majority control; restrictive regimes; economics; business research.