36 research outputs found
Negative Hedging: Performance Sensitive Debt and CEOsâ Equity Incentives (CRI 2009-014)
We examine the relation between CEOsâ equity incentives and their use of performance-sensitive debt contracts. These contracts require higher or lower interest payments when the borrower\u27s performance deteriorates or improves, thereby increasing expected costs of financial distress while making a firm riskier to the benefit of option holders. We find that managers whose compensation is more sensitive to stock volatility choose steeper and more convex performance pricing schedules, while those with high delta incentives choose flatter, less convex pricing schedules. Performance pricing contracts therefore seem to provide a channel for managers to increase firmsâ financial risk to gain private benefits
Learning Production Process Heterogeneity Across Industries: Implications of Deep Learning for Corporate M&A Decisions
Using deep learning techniques, we introduce a novel measure for production
process heterogeneity across industries. For each pair of industries during
1990-2021, we estimate the functional distance between two industries'
production processes via deep neural network. Our estimates uncover the
underlying factors and weights reflected in the multi-stage production decision
tree in each industry. We find that the greater the functional distance between
two industries' production processes, the lower are the number of M&As, deal
completion rates, announcement returns, and post-M&A survival likelihood. Our
results highlight the importance of structural heterogeneity in production
technology to firms' business integration decisions
Fiscal Policy, Consumption Risk, and Stock Returns: Evidence from US States
We find that consumption risk is lower in states that implement countercyclical fiscal policies. Moreover, firms with an investor base that is concentrated in countercyclical states have lower stock returns, along with firms that relocate their headquarters to a countercyclical state. Therefore, countercyclical fiscal policies lower the consumption risk of investors and, consequently, their required equity return premium. This conclusion is confirmed by smaller declines in market participation during recessions in countercyclical states. Overall, the location of a firmâs investor base enables state-level fiscal policy to influence stock returns
Negative Hedging: Performance Sensitive Debt and CEOsâ Equity Incentives
We examine the relation between CEOsâ equity incentives and their use of performance-sensitive debt contracts. These contracts require higher or lower interest payments when the borrower's performance deteriorates or improves, thereby increasing expected costs of financial distress
while also making a firm riskier to the benefit of option holders. We find that managers whose compensation is more sensitive to stock price volatility choose steeper and more convex performance pricing schedules, while those with high delta incentives choose flatter, less convex pricing schedules. Performance pricing contracts therefore seem to provide a channel for managers to increase firmsâ financial risk to gain private benefits
Industrial Electricity Usage and Stock Returns
The growth rate of industrial electricity usage predicts future stock returns up to 1 year with an R 2 of 9%. High industrial electricity usage today predicts low stock returns in the future, consistent with a countercyclical risk premium. Industrial electricity usage tracks the output of the most cyclical sectors. Our findings bridge a gap between the asset pricing literature and the business cycle literature, which uses industrial electricity usage to gauge production and output in real time. Industrial electricity growth compares favorably with traditional financial variables, and it outperforms Cooper and Priestleyâs output gap measure in real time
Lottery Tax Windfalls, State-Level Fiscal Policy, and Consumption
We find that lottery tax windfalls finance higher state-government expenditures on supplemental security income that increase consumption, but only during bust periods. Wealth transfers from lottery winners to low income households enable fiscal policy to stabilize consumption during bust periods
Negative Hedging: Performance Sensitive Debt and CEOsâ Equity Incentives
We examine the relation between CEOsâ equity incentives and their use of performance-sensitive debt contracts. These contracts require higher or lower interest payments when the borrower's performance deteriorates or improves, thereby increasing expected costs of financial distress
while also making a firm riskier to the benefit of option holders. We find that managers whose compensation is more sensitive to stock price volatility choose steeper and more convex performance pricing schedules, while those with high delta incentives choose flatter, less convex pricing schedules. Performance pricing contracts therefore seem to provide a channel for managers to increase firmsâ financial risk to gain private benefits
Design of a centrifugal compressor integrated with a hermetic motor for automotive airconditioners
Thesis: M.S., Massachusetts Institute of Technology, Department of Mechanical Engineering, 1993Includes bibliographical references (leaves 103-109).by Hayong Yun.M.S.M.S. Massachusetts Institute of Technology, Department of Mechanical Engineerin
The design and control strategies for automotive air conditioning systems using motor driven, variable speed centrifugal compressors
Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Mechanical Engineering, 1995.Includes bibliographical references (leaves 139-140).by Hayong Yun.Ph.D